Federation Of Finnish Financial Services' Comments On The Revised Exposure Draft: Insurance Contracts.pdf

The Federation of Finnish Financial Services expresses gratitude to the International Accounting Standards Board (IASB) for the revised Exposure Draft on Insurance Contracts (ED), offering constructive feedback on the proposed standard. While appreciating the progress made in addressing asset-liability reporting, they highlight several critical concerns:

- They advocate for optionality regarding Other Comprehensive Income (OCI) treatment of changes in discount rates for liabilities, suggesting a comprehensive approach to Fair Value through Profit or Loss (FVPL) and OCI for both assets and insurance liabilities.

- The "mirroring approach" is deemed complex; they request improvements to ensure its applicability to all participating contracts, including those with discretionary participation features, highlighting variations between Finnish and international insurance contracts.

- While supporting the presentation of insurance contract revenue and expenses in profit or loss using the earned premium approach, they do not foresee additional application guidance being necessary.

- Regarding interest expense in profit or loss, they welcome the introduction of FVOCI but argue for optionality, advocating for both FVOCI and FVPL environments to accommodate diverse business models, especially in Finland where insurance liabilities and assets are not associated. They caution against mandatory FVOCI, predicting potential accounting mismatches and economic distortions.

- Finally, they express concern about comparability and transparency if the proposed IFRS 4 standard remains unchanged, suggesting that consistent application of IFRS 4 and IFRS 9 can lead to useful presentations, but mandatory FVOCI could hinder disaggregated results in P&L and OCI.