FASB issued new disclosure requirements for insurance companies, which are designed to provide more information about liabilities related to short-duration contracts, which typically last one year or less.
Accounting Standards Update (ASU) No. 2015-09, Financial Services—Insurance (Topic 944): Disclosures About Short-Duration Contracts, requires insurance companies to provide additional information for financial statement users.
The ASU's five main provisions require an insurance company to:
- Provide tables on a disaggregated basis illustrating the amount of insurance claims that have been incurred, as well as the amounts the insurance company has paid out on these claims.
- Reconcile the claims development tables to the amount of the liability presented on the balance sheet.
- Disclose, for each accident year presented in the claims development tables, the total of incurred claims that have yet to be reported, plus the company's estimate of whether reported claim amounts will increase.
- Provide disaggregated information about the frequency of reported claims, unless obtaining this information is impracticable.
- Provide a disaggregated history of claims duration, presented as the average annual percentage payout of incurred claims by age.