FASB redeliberates proposed ASU on long-duration insurance contracts

KPMG reports on the FASB’s redeliberations on targeted improvements for long-duration insurance contracts. The Board made decisions on the reserving model for nonparticipating traditional and limited-payment insurance contracts.

Applicability

Proposed ASU on ASC 944

• Insurance entities that issue long-duration contracts
• Not applicable to policyholders of long-duration contracts
• Not applicable to non-insurance entities

Relevant dates

• September 29, 2016 – FASB issued exposure draft
• August 2, 2017 – FASB redeliberated exposure draft

Key impacts

• Insurance entities would be required to update cash flow assumptions at least annually, and remeasure the liability for future policy benefits using a catch-up method
• Upper-medium grade, fixed income instrument yield would be used to discount future cash flows
• Insurance entities would apply a prospective transition approach, but would have an option to use a retrospective transition approach

Report contents

• Applicability
• Key facts and impacts
• Updating cash flow assumptions used in measuring the liabilities
• Discount rate used in measuring the liability
• Transition
• Next steps

Related content

• Issues & Trends: Proposed ASU – Targeted improvements for long-duration insurance contracts