In general we welcome the fact that draft FRS 103 is based on IFRS 4 Insurance Contracts and comment that “the incorporation of many of the requirements of FRS 27 Life Assurance and elements from the existing Association of British Insurers Statement of Recommended Practice on Accounting for Insurance Business (ABI SORP) will help to ensure that existing practices are largely preserved under the new regime pending the completion of the IASB’s project on insurance accounting”.

However, we have raised a number of comments in relation to paragraphs 2.2-2.11 of draft FRS 103 which, in line with IFRS 4, “provide a more flexible regime for voluntary changes of accounting policy relating to insurance contracts”.  We believe that the improvement options from IFRS 4 “should not form part of the final FRS 103”. 

We comment: 

Whilst this flexibility is helpful in jurisdictions without a comprehensive basis of accounting for insurance contracts, this is not the case in the UK where the law, the ABI SORP and FRS 27 provide such a comprehensive basis.  Furthermore, allowing greater latitude in the selection of insurance contract accounting policies would reduce comparability between UK entities.  Given that there are already constraints on this flexibility arising from UK law, we believe that the benefits of comparability to both shareholders and regulators outweigh the limited benefits this change would bring.

Further comments and full response to all questions raised in the invitation to comment are contained within the full comment letter.