Australian insurers will have to revalue their insurance contracts when the International Financial Reporting Standards (IFRS) accounting guidelines on insurance contracts come into force.

At present the timeline for implementation of the standard is 2015, but the IFRS board is working to release the final document in June this year.

PricewaterhouseCoopers Australia partner Scott Fergusson says the process to develop the standards has been a long time coming.

“The first project on insurance contracts started in 1999, but the IFRS is now trying to get the global standard finalised by June 30 this year,” he told the Financial Services Council Life Insurance Conference in Sydney last week.

“The committee is now meeting fortnightly to meet this deadline, which is unusual for a global body.”

The new standard will cover the reporting of all issued insurance contracts and any reinsurance contracts for both general and life insurance companies.

Mr Fergusson says insurers will have to include current unbiased probability weighted estimates of the contracts as well as a time value of money and risk adjustment.

“It will be margin reporting rather than income statement-type reporting,” he said.

“The key impact for Australian insurers will be more volatility as they will have to provide estimates of future cashflows as actual results will flow straight through to the profit figures.”

Mr Fergusson says other implications will see insurers reduce net assets and there will be more upfront costs to meet the new standards.

“There will also be some tax implications as well as regulatory changes,” he said. “Insurers will also have to develop new valuation and margin models.”

The IFRS accounting standard will arrive at the same time as the insurance industry is facing Solvency II, US consumer protection reforms and European restructuring of the regulatory framework reforms.