bklynboy
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For my 100th post I thought I would share some general accounting theory around insurance products as this is an industry I have worked in for 20 years and I know does not get much focus in the accounting industry. It is a specialized accounting model that even to this day the IFRS and US GAAP can not agree on how this model works and have delayed any real guidance on this area for the past 5 years with the expectation it will take at least 2 more years to come up with a standard.
This is a huge industry that has significant obligations and is a major player in helping grow economies, with a saturation that is much lower than the expected need. Most of the companies are highly solvent due to a focus on the balance sheet and not earnings and also heavy government oversight but there are real challenges due to the low interest rate environment (which does not allow us to invest at attractive returns to offer the crediting rates we provide on our policies), aggressive pricing of products and features that did not adequately reflect the risk in these products (such as LTC, no lapse guarantees and indexed products) and increased intervention by governments that put at risk the tax free build up of our products.
If any one has any interest in this discussion I would be glad to provide more color. Here is a link that addresses many of the ongoing developments.
Insurance Accounting Newsletter ? Issue 26, August 2012 ? IAS Plus
This is a huge industry that has significant obligations and is a major player in helping grow economies, with a saturation that is much lower than the expected need. Most of the companies are highly solvent due to a focus on the balance sheet and not earnings and also heavy government oversight but there are real challenges due to the low interest rate environment (which does not allow us to invest at attractive returns to offer the crediting rates we provide on our policies), aggressive pricing of products and features that did not adequately reflect the risk in these products (such as LTC, no lapse guarantees and indexed products) and increased intervention by governments that put at risk the tax free build up of our products.
If any one has any interest in this discussion I would be glad to provide more color. Here is a link that addresses many of the ongoing developments.
Insurance Accounting Newsletter ? Issue 26, August 2012 ? IAS Plus