This slide deck was designed to accompany a video webcast that included an interactive discussion by a moderator and three panelists, held on 9 July 2014. The International Accounting Standards Board (IASB) is currently working on modifications to IFRS 4 Insurance Contracts after the Exposure Draft (ED) received extensive comments from those that prepared the modifications and industry practitioners. In recent deliberations following the receipt of comments, the IASB has reached tentative decisions about recognising the contractual service margin in profit or loss. Further tentative decisions have been reached concerning fixed-fee service contracts, significant insurance risk, portfolio transfers and business combinations. This webcast discussed the background to the ED and the current project status. Our panel reviewed the insurance industry’s responses to IFRS 4, and outlined the IASB’s path towards finalising the project, focussing on key issues, challenges and operational impacts, and on what the IASB expects from the insurance industry. You are welcome to join the on-demand version of this interactive discussion: http://www.ey.com/GL/en/Issues/webcast_2014-07-09-1400_ifrs4-insurance-contracts-update-on-key-issues This webcast is part of an ongoing series. Register for any webcast and you will be asked if you want to receive invitations to future webcasts.

1. IFRS 4 Insurance Contracts:
update on key issues
Hosted by the EY Global Insurance Center
9 July 2014

2. Page 2 IFRS 4 Insurance Contracts: update on key issues
Disclaimer
► This material has been prepared for general informational
purposes only and is not intended to be relied upon as
accounting, tax, or other professional advice. Please
refer to your advisors for specific advice.
► The views expressed by the presenters are not necessarily
those of EY.
► This presentation is © 2014 EYGM Limited. All Rights Reserved.
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3. Page 3 IFRS 4 Insurance Contracts: update on key issues
International Accounting Standards Board
(IASB) disclaimer
► Expressions of individual views by members of the IASB
and its staff are encouraged. The views expressed in this
webcast are those of the presenter. Official positions of
the IASB on accounting matters are determined only after
extensive due process and deliberation.

4. IFRS 4 Insurance Contracts: update on key issuesPage 4
Disclaimer: third party presenters
► The opinions expressed by third parties during this
webcast are not necessarily those of the global EY
organization or its member firms. Their opinions should
also be viewed in the context of the time they were
expressed.
► The opinions expressed by third parties are those of the
individual or individuals concerned, and not necessarily
those of their organisation or entity.

5. IFRS 4 Insurance Contracts: update on key issuesPage 5
Today’s moderator
David Foster
Ernst & Young LLP (UK)
Partner

6. IFRS 4 Insurance Contracts: update on key issuesPage 6
Today’s agenda
► Timelines
► IASB proposal
► Model for participating contracts
► What’s next?
Join today’s Twitter discussion:
#EY_Insurance

7. IFRS 4 Insurance Contracts: update on key issuesPage 7
Today’s presenters
Darrel Scott
IASB member
Kevin Griffith
Ernst & Young LLP (UK)
Partner
The information contained herein is a summary in nature. Viewers should consult their
own professional advisors to address their individual circumstances and concerns.
Harm van de
Meerendonk
ING Insurance

8. IFRS 4 Insurance Contracts: update on key issuesPage 8
Today’s agenda
► Timelines
► IASB proposal
► Model for participating contracts
► What’s next?
Join today’s Twitter discussion:
#EY_Insurance

9. Page 9 IFRS 4 Insurance Contracts: update on key issues
Timelines - New IFRS for insurance contracts
Expected to be mandatory 2018?
2010 2011 2012 2013 2015 2016 2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Ongoing FASB/IASB deliberations Implementation period Reporting
2014
Other considerations: Insurance project no longer jointly re-deliberated with FASB
IFRS 9 mandatory effective date – 2018
New EU Regulatory framework (Solvency II) - 2016
Potential
IASB Final
Standard
Potential
effective
date 1 Jan
2018
Potential first
annual
financial
statements
IASB
Re-exposure Draft
FASB Exposure
Draft
H1 2013
IASB
Exposure
Draft
FASB
Discussion
Paper
Potential start
of comparative
periods
2018

10. IFRS 4 Insurance Contracts: update on key issuesPage 10
Today’s agenda
► Timelines
► IASB proposal
► Model for participating contracts
► What’s next?
Join today’s Twitter discussion:
#EY_Insurance

11. IFRS 4 Insurance Contracts: update on key issuesPage 11
IASB proposal
Reminder on the ED
Expected value
of future cash
flows
Discount rate
Risk adjustment
Contractual
service margin
Reinsurance
Disaggregation
PresentationSeparation
Definition and
scope
Disclosure
BuildingBlockApproach
Regulatory Frameworks
Financial Instruments and other accounting changes
Transition
Simplified approach
BuildingBlockApproach

12. IFRS 4 Insurance Contracts: update on key issuesPage 12
IASB re-deliberations
Main tentative decisions
Targeted topics of the ED:
► Use of OCI for discount rate changes is no longer
mandated
► Accounting policy choice applied consistently to similar contracts
► Guidance on when a policy change is justified will be developed
► ‘Unlocking’ of Contractual Service Margin confirmed
► Unlocking will include changes in the risk adjustment
► CSM should be released on the basis of passage of time
► Use of insurance contracts revenue confirmed
► Remaining topics:
► Accounting for participating contracts and transition

13. IFRS 4 Insurance Contracts: update on key issuesPage 13
IASB re-deliberations
Main tentative decisions (cont’d)
Non-targeted topics:
► Principle for discount rate confirmed
► Additional guidance on how to determine discount rates when
there is a lack of observable data
► Level of aggregation clarified
► Contracts can be aggregated as long as the resulting
measurement is consistent with measuring individual contracts
► Onerous contracts cannot be combined with profitable contracts
when determining CSM
► Reinsurance contracts held treated symmetrically with
underlying direct contracts for subsequent measurement
► Option for fixed fee service contracts

14. IFRS 4 Insurance Contracts: update on key issuesPage 14
IASB proposal
Impact of re-deliberations
Key considerations for insurers:
► Optional OCI reduces the risk of accounting mismatches
with the mixed measurement model of IFRS 9
► Insurers need to determine what these decisions mean
for them and how to implement
► The devil may be in the detail: the final wording will be
critical to fully understand the Board’s intentions

15. IFRS 4 Insurance Contracts: update on key issuesPage 15
Today’s agenda
► Timelines
► IASB proposal
► Model for participating contracts
► What’s to do next?
Join today’s Twitter discussion:
#EY_Insurance

16. IFRS 4 Insurance Contracts: update on key issuesPage 16
Participating contracts
Background from the ED
Performance
reporting
Options &
Guarantees
Shareholder’s
share in
underlying items
Scope
Interest
expense in PL

17. IFRS 4 Insurance Contracts: update on key issues
Participating contracts
Key features of alternative proposal
Page 17
► Broad rejection in the comment letters of the ED's
mirroring approach, leading to an alternative proposal
► CFO Forum played an active role in the development, but
principles are also supported by others as an alternative
to mirroring
► Alternative proposal contains agreed key-principles;
certain details are to be further elaborated
► The alternative proposal is designed to accommodate:
► the building block approach for all contracts
► a single measurement basis without “mirroring-exception”
► a current fulfilment value balance sheet combined with P&L
based on allocation of total contract profit to the period
► the proposed mixed-measurement model for assets in IFRS 9

18. IFRS 4 Insurance Contracts: update on key issues
Participating contracts
Key features of alternative proposal (cont’d)
Page 18
► Key principles of the alternative proposal:
► Scope includes all contracts where liability cash flows depend
significantly on the performance of underlying items
► No bifurcation of cash flows – one discount rate curve for all
cash flows
► Interest expense recognised in P&L using an updated book yield
when FVOCI is applied
► Unlocking of the CSM for all changes that impact expected
future profit – including performance of underlying items
► Options/guarantees treated consistently with all other cash
flows – not mandatory FVPL; accounting should reflect hedging of
options and guarantees to avoid accounting mismatches

19. IFRS 4 Insurance Contracts: update on key issues
Participating contracts
Status of IASB discussions
► Board is considering how the general building block
approach could be adapted to participating contracts
► Board held educational discussions in May and June
► Key themes emerging from these sessions:
► Board would consider unlocking CSM for shareholder share only
if circumstances indicate it is an implicit asset management fee
► Board would consider using book yield for determining the
interest expense in profit or loss only if:
► Application can be restricted to limited circumstances
► Mechanics of the approach can be better understood and clearly
articulated
► Discussions also included bifurcation, options and guarantees
and allocation of CSM
Page 19

20. IFRS 4 Insurance Contracts: update on key issues
Participating contracts
Status of IASB discussions (cont’d)
► Staff will develop papers based on board tentative
leanings
► Board understands this is a complex area and is taking
its time to ensure ramifications of decisions are fully
considered
► Board will continue to explore the mechanics of an OCI
approach at meeting in July
► Decision making meetings will occur after August break
Page 20

21. IFRS 4 Insurance Contracts: update on key issuesPage 21
Participating contracts
Key debates and challenges
► Comment letters clearly point towards an alternative to
mirroring
► An adaptation of the general building block model to participating
contracts seems to be inevitable
► Alternative is developed within the insurance industry
► Can a compromise be found?
► Insurers need to carefully plan how to address accounting
mismatches
► Implementation challenges
► Some complexity will always remain, regardless of the ultimate
solution

22. IFRS 4 Insurance Contracts: update on key issuesPage 22
Today’s agenda
► Timelines
► IASB proposal
► Model for participating contracts
► What’s next?
Join today’s Twitter discussion:
#EY_Insurance

23. IFRS 4 Insurance Contracts: update on key issuesPage 23
What’s next
► Resolving the issue of participating contracts will be key to
get the Insurance project completed
► It is likely middle ground needs to be found for some key
areas
► Will the timing of the final standard allow for alignment
with the proposed IFRS 9 effective date (2018)
► Preparation and implementation- operational impact will
be huge:
► Systems, models and data
► Reporting framework
► Explaining the results

24. IFRS 4 Insurance Contracts: update on key issuesPage 24
Contact us
David Foster
Kevin Griffith
Richard Lynch
Hans van der Veen
+44 (0)20 7951 5687
dfoster@uk.ey.com
+44 20 7951 0905
kgriffith@uk.ey.com
+1 212 773 5601
richard.lynch@ey.com
+31 88 40 70800
hans.van.der.veen@nl.ey.com
Follow us on Twitter: @EY_Webcasts

25. IFRS 4 Insurance Contracts: update on key issuesPage 25
Resources
► Global Insurance website
www.ey.com/insurance
► IFRS Insurance Insights
www.ey.com/insuranceifrs
► Solvency II
www.ey.com/solvencyii

26. Thanks for participating!
IFRS 4 Insurance Contracts:
update on key issues
Hosted by the EY Global Insurance Center
9 July 2014