In May 2002, the IASB agreed to split the insurance contracts project into two phases, so that some components of the project can be put in place by 2005 without delaying the rest of the project. The first phase will address the application of existing IFRSs to companies that issue insurance contracts. The Board discussed whether each of the following issues should be identified as matters to be addressed in the first phase:

1. Agree on a definition of insurance contracts. The existing definitions in IAS 32 and IAS 39 are not consistent with those in IAS 37 and IAS 38, and also are not consistent with certain aspects of the definition of insurance contracts used in US GAAP.

2. Presentation and disclosure, including consideration of how insurers might give the disclosures about measurement assumptions proposed by the Improvements Project to be added to IAS 1.

3. Implementation guidance for applying IAS 39 to those contracts issued by insurers (as well as other financial institutions) that do not qualify for the insurance contracts scope exclusion of IAS 39 -- particularly guidance with respect to embedded derivatives such as renewal options and participation features.

4. Provide guidance on identifying and measuring derivatives that are embedded in insurance contracts, including guidance on which such derivatives are 'closely related' to their host insurance contract.

5. Elimination of a limited number of existing practices that are incompatible with the IASB Framework, for example, the elimination of catastrophe and equalisation provisions that do not represent liabilities as defined in the Framework.

6. A review of the implications to insurance entities of the hierarchy of pronouncements that an entity is required to consider in the absence of an IFRS. The IASB has proposed to add that hierarchy as part of its improvements to IAS 8.

7. Derecognition -- guidance on applying the proposed 'no continuing involvement' derecognition approach to insurance contracts.

8. Guidance on accounting by policy holders.

Individual Board members suggested that certain of the foregoing matters (particularly items 3 and 7) may be too broad -- and, therefore, too time consuming -- to be included within the scope of the first phase of the insurance contracts project. However, after discussion, the Board did not object to further staff research on all of them as potentially within the first phase.

The Board does not intend to exempt insurers from existing IFRSs beyond the scope exemptions that already exist in IAS 18, IAS 32, IAS 37, IAS 38, and IAS 39.