IDEAS home Printed from https://ideas.repec.org/a/pal/gpprii/v34y2009i1p47-55.html
   My bibliography  Save this article

IFRS* Phase II and Solvency II: Key Issues, Current Debates

Author

Listed:
  • Denis Duverne

    (AXA, Avenue Matignon 25, Paris 75008, France)

  • Jacques Le Douit

    (AXA, Avenue Matignon 25, Paris 75008, France)

Abstract

The paper discusses key issues and reflects the current debates around two important regulatory projects: Solvency II and International Financial Reporting Standards (IFRS) Phase II. The Solvency II project is based on an economic balance sheet and proposes an economic valuation of insurance liabilities that is very close to the European industry position on assessment of risks and solvency requirements based on how the business is managed. One key element is still under debate: diversification across portfolios. The industry considers that the entity's own diversification must be reflected in the valuation of the insurance liabilities while the Committee of European Insurance and Occupational Pensions Supervisors’ has referred to an empty undertaking. IFRS Phase II can appear to be an approach similar to Solvency II, but actually is based on fundamental flaws, excluding future cash flows, and insurers actions, referring to a theoretical market participant efficiency instead of the entity's specific data for expenses, unbundling artificially insurance and financial components, taking into account insurer's own credit standing and adding a service margin to the risk margin. The diverging timetables of IFRS and Solvency II lead to a risk that IFRS and solvency could be non-aligned and increase the danger that IFRS for insurance may be distant from the economics of the business. A consensus within the industry is therefore crucial to facilitate the progress of the international standard for insurance accounting, which would give a true and fair presentation of the economics of the business. The Geneva Papers (2009) 34, 47–55. doi:10.1057/gpp.2008.42

Suggested Citation

  • Denis Duverne & Jacques Le Douit, 2009. "IFRS* Phase II and Solvency II: Key Issues, Current Debates," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 34(1), pages 47-55, January.
  • Handle: RePEc:pal:gpprii:v:34:y:2009:i:1:p:47-55
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/gpp/journal/v34/n1/pdf/gpp200842a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/gpp/journal/v34/n1/full/gpp200842a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:34:y:2009:i:1:p:47-55. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.palgrave-journals.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.