Insurance Accounting Training Services

He earned a BS in accounting at Binghamton University and an MS in statistics and operations research at New York University. Laura is a principal and actuarial practice leader for KPMG LLP in the United States. She is also global head of actuarial at KPMG, where she provides services to insurers in both an audit and advisory capacity, with an emphasis How to Start a Bookkeeping Business on IFRS and US GAAP, as well as actuarial modernization and risk management. Previous employment includes actuarial roles at Canada Life, Confederation Life, and EY and as principal owner of Marietta Actuarial Services. Laura was a contributing author to International Financial Reporting for Insurers and previously served on the American Academy of Actuaries’ Financial Reporting Committee. At EY, Mark assisted major US and global insurers with financial management and reporting issues, mergers and acquisitions, and financial modeling.

• These methods help determine premium pricing and ensure the company has sufficient reserves to cover future healthcare costs.
• These standards ensure consistency and transparency, which are essential for stakeholders in assessing an insurance company’s financial health.
• These financial statements provide insight into an insurer's profitability, financial position, and cash flows.
• Ideally, companies should consider these changes and their related effects on their people, processes and systems holistically.
• To protect insurance company policyholders, state insurance regulators began to monitor insurance company solvency.
• While the specific accounting standards may vary depending on the investment, many investments are measured at fair value.

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Properly calculating these reserves ensures that the company can meet future liabilities without jeopardizing its financial stability. Without effective insurance accounting, companies may under- or overestimate their reserve needs, leading to potential financial crises. The insurance industry is inherently risk-intensive, with the need to balance premium income against the costs of claims and policyholder benefits. Accurate accounting helps companies assess and manage risks, such as unexpected increases in claims or fluctuations in investment returns. This allows insurance businesses to make informed decisions that minimize financial volatility.

Financial Accounting Standards Board (FASB)

The guidance also extends to reinsurance arrangements—both assumed and purchased—highlighting its comprehensive reach within the industry. This change will require dual reporters to maintain at least two different sets of financial reporting records upon adoption of IFRS 17, due to the different accounting models. IFRS 17 has a significant impact on US companies, particularly those that are dual reporters. They will need to maintain at least two different sets of financial reporting records upon adoption of IFRS 17. When implementing IFRS 17, it's essential to understand the level of aggregation required for insurance contracts. A successful implementation effort will need cross-functional collaboration between IT, actuarial, finance, accounting, and operations.

Getting Started with Insurance Accounting

Insurance companies set aside reserves to cover future claims based on actuarial calculations, which are recorded as a liability on the balance sheet. Proper bookkeeping practices are essential to maintain financial accuracy, transparency, and compliance throughout the claims process. Proper bookkeeping also helps in tracking the claims process and ensures that financial statements reflect the true status of claims liabilities.

• Debbie’s passion for her work is evident in her active participation at NetVu conferences and company meetings, where she continues to expand her knowledge and share it with others.
• As the insurance landscape continues to evolve, adherence to IFRS will remain crucial for compliance and effective communication in the sector.
• These changes are all about improving clarity and consistency across the industry.
• This uniform framework leads to greater transparency in financial statements, aiding stakeholders in understanding the insurer's financial performance and risk exposure.
• Such an approach aligns with matching principle accounting—expenses are recorded during the period they contribute to earning revenue—providing a more accurate picture of financial performance over time.

Outsource your insurance accounting needs to VJM Global and focus on growing your business with confidence. Schedule a demo today to learn how we can help you achieve regulatory compliance in the world of insurance. Transitioning to a proper insurance accounting system requires not only setting up the right tools but also ensuring that your team is well-equipped to handle the new processes and software. Establish strong internal controls to prevent fraud and ensure the accuracy of financial records.

Principles of Accounting

Discount rates determined under IFRS 17 (the top-down or bottom-up approach) will differ from current US GAAP application. An explicit risk adjustment is required as part of measurement under IFRS 17, but not under US GAAP. And US companies are likely measuring their insurance contracts using groupings that do not meet the IFRS 17 grouping requirements.

Solutions to Overcome Accounting Challenges

Generally, this will result in the grouping of contracts for presentation purposes below the portfolio of insurance contracts level as some companies may do now. When considering cash vs. accrual accounting, it can be tempting to lean toward cash-basis accounting because of its simplicity. Statutory financial reports, including the Annual Statement and other specialized filings, are required for regulatory purposes. These reports provide a detailed picture of an insurance company's financial health. To avoid common mistakes, it's crucial to regularly reconcile financial statements, including the balance sheet, income statement, and cash flow statement. Businesses CARES Act sometimes record insurance claim payments as revenue rather than as reimbursements for losses, which can inflate the company's revenue figures.

This includes setting up transaction approval processes, conducting regular audits, and using secure systems for economic data. A simplified approach for short-duration contracts, generally used for non-life insurance. Fixed-fee service contracts, such as roadside assistance programs and certain financial guarantee contracts, may meet the definition of an insurance contract. However, when certain specified conditions in IFRS 17 are met, a company may exclude such contracts from the scope of IFRS 17. It then accounts for fixed-fee service contracts like other service contracts with customers and financial guarantee contracts under the financial instruments standards.

• Unearned premium reserves represent the portion of the premium that corresponds to the unexpired part of the policy period.
• Power your high-volume business's revenue compliance and reporting needs with one platform.
• Being able to group contracts to apply the general measurement model may require significant effort and changes in how insurance contracts are measured and how their results are reported to users.
• With our expertise, you can avoid costly surprises, improve operational efficiency, and ensure your agency is always positioned for stability and success in an ever-changing market.
• Unlike traditional businesses that portray income upon delivering goods or services, insurance companies initially record premiums as liabilities.
• Insurance claim payments often compensate for losses or damages, and these must be matched against the expenses incurred.

Insurance Accounting Fundamentals Course

He previously served on the American Academy of Actuaries Board as vice president of risk management and financial reporting. He earned a master’s degree in theoretical physics from Lancaster University in the United Kingdom. Since 2019, he has been responsible for the accounting and related financial reporting for all of MetLife’s US operations. Prior to his current role, Steve held various finance leadership roles, including global head of accounting policy at MetLife and AIG.