Insurers are still adapting to the new accounting, financial and reporting standards that took effect in January 2016 as a consequence of the financial and accounting aspects of the Solvency II-type regime.
The initial reports filed for the first quarter of 2016 are still being tested and restated by many insurers, as the models that the regulator provided have undergone additional changes. Further, the Solvency II accounting and reporting standards deviate dramatically from the prior reporting standards, which makes it difficult and impractical for insurers to issue financial statements that can be appropriately compared with similar statements for 2015. In light of this, the National Insurance and Bonding Commission recently issued an amendment to the Sole Regulations on Insurance and Bonding, acknowledging that it is impractical for regulated entities to issue comparative financial statements during 2016.
To such end, revelation notes issued by insurers must include financial statements that show:
- the actual effects arising from the adoption of the new Solvency II accounting and reporting standards;
- the insurer's 2016 transactions; and
- the insurer's actual results for 2016.
Revelation notes must also include a detailed analysis of the new Solvency II regime's effects.
Finally, the amendment recognises that the 2016 financial statements will not be comparable with those of 2015, as such a comparison could lead to incorrect conclusions with respect to actual results and the performance of insurers.
The change comes after several insurers complained because they had to compare financial statements of results stemming from two different sets of standards, thus creating substantial confusion and uncertainty among investors.
Investors and regulators will be able to compare results using accurate information from 2017.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
