The Discussion Paper Preliminary Views on Insurance Contracts proposed three building blocks for use in measuring insurance liabilities. One of those building blocks is a risk margin. The presenters performed an analysis on determining such a margin from a financial reporting and a regulatory (capital requirements) perspective and presented the Board a summary of their results (the presentation can be downloaded from the IASB's Website).

As this was an education session, no decisions were made.

The representatives of the audit firm preparing the analysis on behalf of the Group of North American Insurance Enterprises (GNAIE) explained the importance of risk margin/market value margins and presented one of the most widely supported approach, the cost of capital method. Board members showed particular interest in the variations of this approach and especially in the underlying assumptions, the parameters employed and the calibration of the respective models.

One Board member noted that all variations presented seem to include changes in the reporting entity's own credit risk. The presenters did not disagree with this statement.

The presenters stated that proper consideration of tax effects is necessary. One Board member said the approach taken in the presentation would not appropriately reflect this.