Julie Dickson spoke against the IFRS Exposure Draft on Insurance Contracts in a speech at the 2010 Life Insurance Invitational Forum:
On the “positive side”, the new approach might better capture financial risks of companies, particularly equity and interest rate risks, and thus provide more early warnings of risks. On the “negative” side, the discount rate change could potentially lead to extreme earnings volatility especially given the large blocks of long-duration guaranteed product liabilities on the books of Canadian insurance companies. As such, we think the proposals may go too far in terms of capturing short-term interest rate movements on long-term exposures. Consequently, we are working on options to help deal with this issue.
In fact we are encouraged by recent developments in this regard. One such development is that the IASB’s Insurance Working Group is meeting later this week to discuss possible ways to minimize the effects of any inappropriate volatility. This group’s objective is to analyze accounting issues relating to insurance contracts. The group brings together a wide range of interests and includes senior financial executives who are involved in financial reporting. Other developments closer to home are discussions by the Canadian Accounting Standards Board’s Insurance Accounting Task Force and the Canadian Institute of Actuaries group to develop their comment letters to the IASB. Both these groups are discussing the volatility issue.
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OSFI is committed to continuing to work with industry and other international stakeholders as we complete our response to the IASB, which is due November 30th. We encourage the industry to contribute to this work; the more that we work together, the better the result will be.
See also the Canada Life and Health Insurance Association comment letter, discussed briefly in the post SLF Coy on Capital Rule Changes.