IFRS, UK GAAP and Solvency II Barnett Waddingham Kim Durniat 15 November 2012
Agenda • Update on where we are with these • What we expect to happen in 2013 and beyond • Discussion on implications
UK GAAP • The future of UK GAAP • New UK GAAP – 1 January 2015 • Mind the Gap published in January 2012 • Introduction of SII will render current UK GAAP obsolete • At time of publishing IFRS was expected after SII but now who knows? • Short term solution • Long term solution • ED expected in 2013
IFRS - Insurance Contracts • ED in H1 2013 • Full text of standard • Limited questions and do not intend to revisit other aspects after exposure
Core Proposal – Measurement of insurance contract liability • Quantifies the unearned profit arising from the contract Residual margin that the insurer expects to earn as it fulfils the contract • Quantifies the difference between the certain and Risk adjustment uncertain liability Time value of • An adjustment that reflects the time value of money money Total liability • The amounts the insurer expects to collect from premiums and pay out as it acquires, services and Cash flows settles the contract, estimated using up-to-date information
Changes since July 2010 ED • Presentation • Volume information and changes in discount rate • Measurement • Unlocking the residual margin • Participating contracts • Transition
IFRS - Timelines • H1 2013 Publish targeted exposure draft • Q4 2013 begin redeliberations • H2 2014 publish IFRS Proposed effective date 1 January 2018? • Early adoption permitted and restate comparatives
Where is Solvency II? Some definitions: • “Omnibus II” – a piece of European legislation that amends the Solvency II directive • The “Trilogue” – The European Parliament, European Commission and European Council. They must agree Omnibus II • “Long-Term Guarantees Assessment” (LTGA) – a quantitative impact study carried out by the larger European insurance companies 8
Where is Solvency II? • 28 January 2013: LTGA launched by EIOPA • 31 March 2013: Participants in LTGA to submit information • 14 June 2013: EIOPA to report results of LTGA to the European Commission • 12 July 2013: EC to report to the rest of the trilogue • 10 June 2013: European Parliament vote on Omnibus II 9
Long-Term Guarantees Assessment • Report balance sheet (Assets, technical provisions, own funds, SCR, MCR) • 13 scenarios in total covering: • Different methods for extrapolating swap rates • Different matching adjustments • Different counter-cyclical premiums • Different transitional measures • YE 2011 • YE 2009 (“during” the financial crisis) • YE 2004 (“normal” market conditions) 10
Questions • Which do you think will be first - Solvency II or IFRS? • Have your firms been focusing on IFRS? Is it on the board’s agenda? • What will the implications be on data, systems and processes? • What do you need to be doing now?
Contact us Please contact us: • Kim Durniat 020 7776 3885 kim.durniat@barnett-waddingham.co.uk
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