FRS 103 summary and timeline

A summary of FRS 103 Insurance Contracts, including information on who should apply the standard, current proposals and a timeline of past amendments, announcements, exposure drafts and consultations.

Summary

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 Insurance Contracts, 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.
• 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 Other Comprehensive Income (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 Life Assurance/ the Association of British Insurers’ 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.

Current proposals

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

Timeline

Date	Update
31 January 2022	January 2022 editions of accounting standards reflect amendments made since the previous editions were issued in 2018 as well as changes in Irish company law.
21 December 2020	Amendments to accounting standards – UK exit from the EU Amendments to FRS 100, 101, 102, 103, 104 and 105 issued by the FRC to ensure consistency with UK company law and to update legal references and terminology used in the standards, reflecting changes in legislation as the EU exit transition period ends.
28 March 2018	March 2018 editions of accounting standards reflect triennial review amendments Press notice issued by the FRC on 28 March 2018 announcing the publication of new editions of all UK and Ireland accounting standards.
13 February 2017	Revised edition of FRS 103 Insurance Contracts Press notice issued by the FRC on 13 February 2017 announcing the publication of a revised FRS 103 addressing Solvency II issues.
26 May 2016	FRC issues amendments to FRS 103 to update it for changes in the regulatory framework for insurers Press notice issued by the FRC on 26 May 2016 announcing limited amendments to the standard following the introduction of Solvency II.
11 December 2015	FRC proposes limited amendments to FRS 101 and FRS 103 Press notice issued by the FRC on 11 December 2015 announcing amendments that reflect changes in the regulatory framework following the introduction of Solvency II.
20 March 2014	FRC issues new accounting standard for insurance contracts Press notice issued by the FRC on 20 March 2014.
29 July 2013	FRC proposes updates to UK GAAP for insurance Press notice issued by the FRC on 29 July 2013 announcing the publication of ‘FRED 49: Draft FRS 103 Insurance Contracts’.
29 October 2010	The Future of Financial Reporting in the UK and the Republic of Ireland Press notice issued by the FRC on 29 October 2010, announcing proposals for a three-tier reporting framework and a simplified UK standard based on the IFRS for SMEs with publication of ‘FRED 43: Application of Financial Reporting Requirements’ and ‘FRED 44: Financial Reporting Standard for Medium-sized Entities’.