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FASB Releases Updated Guidance on Long-Term Insurance Policies

The Financial Accounting Standards Board’s (“FASB”) latest amendments impact companies that sell long-term insurance products such as life and disability insurance. Accounting Standards Update (“ASU”) No. 2018-12 – Financial Services —Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, changes how insurers and underwriters assess liabilities for long-term policies. Underwriters are now required to frequently update their assumptions to estimate payouts to customers and apply a standardized discount rate to calculate liabilities. When underwriting a customer’s policy, insurers previously had to lock in assumptions regarding a customer’s life expectancy or missed payments. The guidance meant liability estimates for long-term. Read More.

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Insurers Seek Extension of Insurance Standard’s Effective Date

Principal Financial Group and the American Council of Life Insurers want the Financial Accounting Standards Board (“FASB”) to delay the effective date of its proposed insurance standard by at least one year. In separate letters to the FASB, the insurance companies argue a lack of resources and the need to overhaul existing systems will prevent them and other insurers from implementing the accounting changes before the projected 2021 effective date for public companies. The FASB is currently reviewing the delay request. In the meantime, the board is targeting an August release for its final amendments to guidance concerning insurance company-issued long duration contracts . Based on a proposed Accounting Standards. Read More.

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FASB Discusses Improvements to Insurance Company-Issued Long-Duration Contracts

Deliberations continued last week on the Financial Accounting Standards Board’s (“FASB”) proposed Accounting Standards Update, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The proposal aims to improve financial reporting for long-duration contracts issued by insurance companies. In discussing the proposed standard, the FASB focused on the discount rate reset upon initial adoption, affecting the liability for future policy benefits for traditional and limited-payment contracts. The FASB decided to update the modified retrospective transition method discount rate, by which as of the transition date, an insurance company would maintain the discount rate assumption for calculating net premiums. Read More.

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