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Update: Enhanced Disclosure Requirements for Insurance Companies

Update: Enhanced Disclosure Requirements for Insurance Companies

Are you an insurance broker or agency? This update may affect you and your business. On May 21, 2015, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-09 Financial Services – Insurance (Topic 944): Disclosures about Short-Term Contracts. The update applies to all insurance entities that issue short-duration contracts (typically one year or less).

The update enhances disclosure requirements from existing GAAP pertaining to the liability for unpaid claims and claim adjustment expenses to increase transparency, improve comparability, and provide additional information to facilitate analysis.

Tables displaying incurred claims and allocated claim adjustment expenses (net of reinsurance) and cumulative paid claims and allocated claim adjustment expenses (net of reinsurance) for up to 10 years will be required as well as a reconciliation of those tables to the liability reported for unpaid claims and claim adjustment expenses. Additionally, the tables will display IBNR and expected development on reported claims by year as well as number of claims reported by year and an additional disclosure of the average annual percentage payout of incurred claims by age (net of reinsurance).

Insurance entities will also be required to disclose information about significant changes in methodologies and assumptions used to calculate the liability for unpaid claims and claim adjustment expenses, including the reasons for the change and the effects on the financial statements, as well as a rollforward of the liability for unpaid claims and claim adjustment expenses.

The ASU is effective for public business entities for annual periods beginning after December 31, 2015 and interim periods within annual periods beginning after December 31, 2016. The ASU is effective for all other entities for annual periods beginning after December 31, 2016 and interim periods within annual periods beginning after December 31, 2017. Early application is permitted.

For more information, see the ASU on FASB’s web site:

https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176166047247&acceptedDisclaimer=true

The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals.

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