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FRS 103 Insurance Contracts

FRS 103 Insurance Contracts consolidates existing financial reporting requirements and guidance for insurance contracts. The requirements within it are based on IFRS 4 Insurance Contracts, the previous standard, FRS 27 Life Assurance and elements of the Association of British Insurers’ SORP.

Published: 20 March 2014. Effective for accounting periods beginning on or after 1 January 2015.

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FRS 102 provides the definition of an insurance contract, however it does not set out the accounting required for such a contract; FRS 103 has been issued to provide the specific accounting requirements for such contracts.

FRS 103 combines existing guidance on insurance contracts found elsewhere and broadly allows entities to continue with their current practices (subject to certain additional considerations). In addition, it allows them to take advantage of ‘improvement options’ similar to those available to entities that apply IFRS 4, provided that such options continue to comply with existing legal and regulatory requirements and are either more relevant to the users’ economic decision making and no less reliable or more reliable and no less relevant. Improvements that are permitted (but not required) include:

  • Allowing remeasurement of designated insurance liabilities to reflect current market interest rates through profit or loss, and
  • Allowing remeasurement of liabilities for recognised but unrealised gains and losses where realised gains and losses on assets affect the valuation of insurance liabilities. The related adjustment to the liability is recognised through OCI if and only if the unrealised gains or losses are recognised through OCI.

New entrants to the insurance market which have no existing policies are advised to start with FRS 103 guidance based on FRS 27 / the ABI SORP before deciding whether to implement the improvements.

The standard contains disclosure requirements that:

  • Identify and explain amounts arising from insurance contracts issued by an entity and reinsurance contracts held by an entity.
  • Relate to the financial strength of entities with a long-term insurance business
  • Help users understand cash flows associated with those insurance contracts.

Who should apply the standard?

FRS 103 is applied by companies that apply FRS 102 and:

  • Issue insurance (and reinsurance) contracts
  • Hold reinsurance contracts
  • Issue financial instruments with a discretionary participation feature.

Which version of the standard?

Annual period starts 1 January 2019

Annual period starts 1 January 2016 - 31 December 2018

Annual period starts on or after 1 January 2015


  1. Early adoption is permitted provided that FRS 102 is applied from the same date.
  2. The FRC has issued Implementation Guidance to accompany FRS 103 Insurance Contracts as issued in March 2014, February 2017 and March 2018.
  3. FRS 103 Insurance Contracts (March 2014) does not include the amendments.
  4. FRS 103 Insurance Contracts (February 2017) includes amendment 1.
  5. FRS 103 Insurance Contracts (March 2018) includes amendments 1 and 2.

Recent amendments

1. Amendments to FRS 103 – Solvency II

The Financial Reporting Council (FRC) has issued Amendments to FRS 103 – Solvency II, effective for accounting periods ending on or after 1 January 2016. These are limited amendments which update a number of definitions for changes in the regulatory framework, following the introduction of Solvency II.

2. Amendments to FRS 102 – Triennial Review 2017

The amendment is effective for accounting periods beginning on or after 1 January 2019, with early application permitted as long as all amendments are applied at the same time.

As a result of amendments made to FRS 102 in the 2017 Triennial Review, a number of amendments are made to FRS 103. Several of these are editorial in nature, and in addition:

  • It is clarified that the standard sets out requirements rather than provides guidance for selecting and applying accounting policies and making disclosures.
  • Within the Glossary the definition of financial institution is amended and definition of FRS 103 is deleted.

Current proposals

The IASB concluded its Insurance Contracts project in May 2017 with the issue of IFRS 17. Now that this standard has been issued, FRS 103 is likely to be revisited.

Other resources

More information on the new financial reporting regime, including the full range of resources, is available on the new UK GAAP section of our website icaew.com/newukgaap

This page was last updated on 17 April 2018.