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Fair Valuation of Liabilities

Published online by Cambridge University Press:  10 June 2011

C.J. Hairs ,
D.J. Belsham ,
N.M. Bryson ,
C.M. George ,
D.J.P. Hare ,
D.A. Smith  and
S. Thompson
C.J. Hairs
Affiliation:
15 Waldegrave Road, Bickley, Bromley, Kent BR1 2JP, U.K. Tel: +44(0)20 8467 0378; Fax: +44(0)20 8285 0002; E-mail: [email protected]
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Abstract

A project to develop an Accounting Standard for Insurance, with the aim of enhancing understandability, relevance, reliability and comparability of general purpose financial reporting for insurance worldwide, is being progressed by the International Accounting Standards Board. The basis of the proposals is that assets and liabilities be shown at fair values (market values for quoted instruments). This paper, prepared by a Working Party established by the Life Board of the United Kingdom actuarial profession, summarises and comments upon a number of the principal features of the proposals, as they have emerged up to September 2001. The paper goes on to consider how a system of reporting for prudential regulatory purposes might be built upon a fair value general reporting base, summarising the thinking of a number of other bodies, proposing certain principles and suggesting lines of development. The appendices to the paper discuss a number of issues in further depth and present some illustrative results of some investigations into applying fair value methods in practice. The emphasis of the paper is on reporting for life assurance business, although many of the principles apply equally to general insurance.

Keywords

Fair ValueEntity SpecificFinancial ReportingMarket Value MarginReplicating PortfolioRisk-Based CapitalStatutory Solvency ReportingStochastic MethodsDeflatorsWith-Profits
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 8 , Issue 2 , 01 June 2002 , pp. 203 - 299
Copyright
Copyright © Institute and Faculty of Actuaries 2002

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