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A PDF version of this publication is attached here: Insurance contracts guide - May 2022 (PDF 6mb)
PwC is pleased to offer our updated Insurance contracts guide addressing accounting by insurance and reinsurance entities for insurance contracts.
This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification (the Codification). It also provides our insights and perspectives, interpretative and application guidance, illustrative examples, and discussion on emerging practice issues. The PwC guides should be read in conjunction with the applicable authoritative accounting literature.
References to US GAAP
Definitions, full paragraphs, and excerpts from the Financial Accounting Standards Board’s Accounting Standards Codification are clearly labelled. In some instances, guidance was cited with minor editorial modification to flow in the context of the PwC Guide. The remaining text is PwC’s original content.
References to other PwC guidance
This guide provides general and specific references to chapters in other PwC guides to assist users in finding other relevant information. References to other guides are indicated by the applicable guide abbreviation followed by the specific section number. The other PwC guides referred to in this guide, including their abbreviations, are:
  • Business combinations and noncontrolling interests (BCG)
  • Derivatives and hedging (DH)
  • Equity method investments and joint ventures (EM)
  • Fair value measurements (FV)
  • Financial statement presentation (FSP)
  • Foreign currency (FX)
  • Loans and investments (LI)

Summary of significant changes
The following is a summary of recent noteworthy revisions to the guide. Additional updates may be made to future versions to keep pace with significant developments.
Revisions made in May 2022
IG 5, Long duration contract liabilities
  • Question IG 5-28 was clarified and IG 5.6.1 was updated to provide further details related to defining the terms of market risk benefits.

IG 6, Mortgage insurance, financial guarantee insurance, and guaranty funds
  • IG 6.1 was added to provide guidance on mortgage insurance.
  • IG 6.2 was added to provide guidance on financial guarantee insurance.

IG 9, Long-duration reinsurance
  • IG 9.8 was updated to address considerations related to defining the terms and derecognition of ceded market risk benefits.

IG 10, Presentation and disclosure
  • Footnotes in Figure IG 10-2 were enhanced to provide more detailed explanations of the components of the policyholders’ account balances rollforward.
  • IG 10.5 and IG 10.6 were added to address the presentation and disclosure for short-duration contracts.

IG 11, Effective date and transition
  • IG 11.3.3 was updated to address situations where management historically used a practical expedient to determine the deferred profit liability.
  • IG 11.3.9 was updated to clarify the transition impacts to the profits followed by losses liability for universal life-type contracts.

Revisions made in November 2021
IG 2, Classification of insurance contracts
  • Question IG 2-1, Question IG 2-2, Question IG 2-3, Question IG 2-4, and Question IG 2-5 were added, and Question IG 2-6 was clarified, to address recent questions regarding the scoping of market risk benefits.
  • Figure IG 2-1 Part 2 was updated to clarify that limited payment contracts cannot be participating.
  • Figure IG 2-1 Part 3 was updated to clarify the process of evaluating whether market risk benefits and/or embedded derivatives exist, and the subsequent evaluation of the appropriate accounting framework for the remaining host contract.
  • Figure IG 2-2 was updated to reflect current developments on specific product classification.

IG 5, Long duration liabilities
  • Question IG 5-9 was added to address the treatment and disclosure of AOCI related to the liability for future policy benefits.
  • Question IG 5-19, Question IG 5-20, and Question IG 5-21 were added to address questions related to establishing cohorts for nonparticipating traditional life contracts.
  • Figure IG 5-3 was added to address the aggregation of additional contract features, such as riders or conversion features on nonparticipating traditional life contracts to respective cohorts.

IG 7, Loss recognition (premium deficiency)
  • IG was updated and Question IG 7-2 was added to address whether market risk benefits are included in the premium deficiency analysis for universal life contracts.

IG 9, Long duration reinsurance
  • IG was updated to further describe the calculation of the ceded net premium ratio.
  • Example IG 9-2 was added to illustrate the calculation of the reinsurance recoverable using the “net cost” method.
  • Question IG 9-1 was added to address reinsurance of limited-payment contracts.
  • The order of certain sections of IG 9.9.1 was rearranged, certain content was retired, and sections were combined for clarity.

IG 10, Presentation and disclosure
  • Question IG 10-2 was updated to clarify the disclosure requirements for a company that elects to include the DPL in its liability for future policy benefits rollforward.

IG 11, Effective date and transition
Question IG 11-9 was updated to clarify the impacts to changes in assessments for additional liabilities for death or annuitization benefits.
This publication has been prepared for general informational purposes, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this publication was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees, and agents shall not be responsible for any loss sustained by any person or entity that relies on the information contained in this publication. Certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are therefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretative guidance.
The FASB Accounting Standards Codification material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and is reproduced with permission.

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