United States

Additional disclosures required for short-duration insurance contracts

FINANCIAL REPORTING INSIGHTS  | 

The Financial Accounting Standards Board recently issued Accounting Standards Update (ASU) 2015-09, Financial Services – Insurance (Topic 944): Disclosures about Short-Duration Contracts, to make targeted improvements to disclosure requirements for insurance companies that issue short-duration contracts. In such contracts, insurance coverage is provided for a fixed period of short duration. Examples of short-duration insurance contracts subject to the enhanced disclosure requirements include auto, homeowners, renters and catastrophe insurance.

Among other required disclosures, the ASU requires an insurance company to:

  • Provide tables on a disaggregated basis illustrating the amount of insurance claims that have been incurred, as well as the amount the insurance company has paid out on these claims
  • Reconcile the claims development tables to the amount of the liability presented on the balance sheet
  • Disclose, for each accident year presented in the claims development tables, the total of incurred claims that have yet to be reported, plus expected development on reported claims included in the liability for unpaid claims and claim adjustment expenses, accompanied by a description of reserving methodologies (as well as any changes to those methodologies)
  • Provide disaggregated information about the frequency of reported claims, unless obtaining this information is impracticable
  • For all claims except health insurance claims, provide disaggregated history of claims duration, presented as the average annual percentage payout of incurred claims by age

ASU 2015-09 is effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016 for public companies. For private companies, the ASU is effective for annual periods beginning after December 15, 2016, and interim periods within annual periods beginning after December 15, 2017.