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Insurance – CFO Forum's alternative proposals

Insurance – CFO Forum's alternative proposals

European CFO Forum tables proposals for accounting for participating contracts under IFRS.



KPMG AG Wirtschaftsprüfungsgesellschaft


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The Forum believes that the nature of participating contracts is not adequately reflected by the IASB’s current proposals.

Key concerns of European insurers

The European CFO Forum, which represents 21 of Europe’s largest insurance companies, has presented alternative proposals for participating contracts to the IASB.

The Forum believes that the IASB’s 2013 exposure draft and current redeliberations do not provide an appropriate basis to explain the performance of an insurance business to investors or adequately reflect the nature of long-term insurance contracts, particularly participating contracts.


“We believe the Board needs to clearly define an overall principle for accounting for contracts with participating features, and would support a measurement and presentation approach that is more aligned with the principles of the building-block model and with the new revenue recognition standard.”


The proposals were presented at an education session and, although the Board asked the representatives from the Forum a number of questions about the alternative proposals, no decisions were taken and no direction was given to the IASB staff.

The IASB is expected to make decisions on accounting for contracts with participating features as a whole in a future meeting.

Summary of alternative proposals

The alternative proposals include the following key principles, which the Forum believes are interconnected and should be considered together as an integrated package.


Topic  Alternative proposals
  • Applicable to all participating contracts – i.e. contracts that give policyholders a right to receive, as a supplement to the guaranteed benefits, a variable return either contractually or at the discretion of the issuer.
Full unlocking of the contractual service margin (CSM)
  • Unlocked for all assumption changes that impact expected future profits and that relate to future services, including reinvestment assumptions.
  • Disclosure of the components of the CSM and how the CSM develops over the reporting period.
Release of the CSM
  • Represents unearned profit, including projected future allocation of asset returns, at initial recognition and throughout the life of the contract.
  • Released in accordance with fulfilment of the contract as services are provided.
  • Service driver(s) depend on the nature of services provided by the contract.
Presentation of interest expense in profit or loss
  • Where underlying assets are classified as at amortised cost, FVOCI or subject to a mixed measurement model, determined using current portfolio book yield.
  • Where underlying assets are classified as at FVTPL, determined using the current discount rate used to measure the insurance contract liability.
Single measurement basis
  • Cash flows from options and guarantees treated consistently with all other elements of the insurance contract liability.
  • Single yield curve applied to all cash flows – i.e. no need to bifurcate cash flows.
Non-mandatory use of OCI
  • Accounting policy choice to present the effect of changes in the discount rate in OCI or in profit or loss


More detail on the Forum’s alternative proposals is available on the IASB’s website.

Next steps for the project

We will continue to report on the latest developments in the IASB's insurance contracts project. Visit our IFRS – Insurance hot topics page.

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