Proposed changes to International Financial Reporting Standards (IFRS) would change the way unpaid claim liabilities are measured, from a point estimate of the unpaid claim to the discounted value of the expected cash flow payments plus an explicit risk margin. Over time, other financial reporting standards, such as U.S. GAAP, may follow suit. In addition, insurance companies today increasingly seek to quantify the potential variability of the losses in their portfolios, both for individual lines of business and for each company as a whole.
Our sophisticated stochastic modeling tools can help calculate items such as discounting, risk margins, and the correlation between different lines of business for the preparation of financial statements in accordance with such accounting changes. We communicate concepts in a clear, concise, and informative manner to help companies make more informed business decisions.
Client Example: Field Testing
Milliman assisted a major worldwide personal lines insurer with a field testing project for the International Accounting Standards Board (IASB), the accounting board that promulgates IFRS. The field testing exercise required complex statistical calculations as outlined in an IFRS exposure draft. Milliman helped the insurer prepare data for input into our Reserve Variability Modeling™ software, estimate risk margins using each of the methods outlined in the IFRS exposure draft, and understand the potential impact of the proposed accounting changes and management selection of specific risk margin assumptions on the income statement over the long term. Our capabilities and expertise were instrumental to the company’s successful completion of the field testing in a timely and comprehensive manner.