The revised ED retains key features of the insurance contracts accounting model that was exposed by the IASB in 2010.  However, to address constituent’s concerns, a large number of modifications were made to the 2010 ED which the IASB sought feedback on in June 2013.   

The ABI proposed improvements include: 

• Removal of the mandatory requirement to use other comprehensive income (OCI).  The ABI comment that “this change would enable the profit and loss account to reflect all related movements in assets and liabilities, and avoid significant accounting mismatches”.
• Removal of the “mirroring” approach which treats participating contracts separately from other contracts and is “difficult to understand and complex to apply”.
• Recognising participation in asset returns “as a form of service provision”.  The ABI say that “this should be reflected in adjustments to the contractual service margin that is fully unlocked to reflect changes in future estimates concerning the provision of service, as for other insurance contracts”.
• Removing a mandatory requirement to take changes in all options and guarantees to profit or loss and “expanding the unlocking of the contractual service margin to include changes in the risk adjustment for future cash flows relating to future services”.
• Removing the requirement to present earned premium revenue. 

The ABI has also expressed concerns over “over-burdensome and potentially misleading disclosure requirements” and comment that before the standard is finalised, “a form of due process is needed”.  This could take the form of a staff or review draft being placed on the IASB’s website reflecting all the Board’s re-deliberations in the light of ED responses.  The ABI say that any comment received should then be considered “to ensure that the final IFRS is workable”. 

Please click for the final response, including full responses to the questions raised in the ED, on the ABI’s website