Implications of IFRS for the European Insurance Industry - Insights from Capital Market Theory

Post, Thomas; Gründl, Helmut; Schmidl, Lisa; Dorfman, Mark S.

doi:10.2139/ssrn.906089

Cited by 9 publications

(8 citation statements)

References 56 publications

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“…Fair valuation strives to best represent economic reality underlying the transactions accounted for. In contrast, the accounting approach previously taken within the insurance industry has rather been based on historical values (see, e.g., Post et al, 2007).…”

Section: Regulatory and Reporting Frameworkmentioning

confidence: 93%

Comparison of Stakeholder Perspectives on Current Regulatory and Reporting Reforms

Wagner¹,

Zemp²

2012

Risk Manage Insurance Review

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In the European insurance industry, regulatory and reporting frameworks are currently subject to far-reaching reforms. We focus on four of these frameworks, namely the Solvency II framework, insurance guaranty systems, the proposed IFRS 4 Phase II international accounting standards, and Market Consistent Embedded Value reporting. We present these frameworks, analyze them from the insurance company's management, investors, and policyholder perspectives, and compare them. Our analysis implies that the four frameworks need to be considered jointly, due to various interrelations and interactions. We argue that a coordinated introduction will be necessary to ensure that the regulatory burden is reduced and synergies can be utilized in the event of all four frameworks being implemented as planned. Furthermore, we analyze the challenges of a holistic, comprehensive approach to insurance reporting and regulation and its implementation in order to achieve the goals set by the frameworks.

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Section: Regulatory and Reporting Frameworkmentioning

confidence: 93%

Comparison of Stakeholder Perspectives on Current Regulatory and Reporting Reforms

Wagner¹,

Zemp²

2012

Risk Manage Insurance Review

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“…These set of accounts are also used for calculating the tax liability of the insurers, and value assets and liabilities at, or close to, their 'fair' market values. However, this accounting treatment can induce volatility in period earnings, claim reserves, tax liabilities, and capital adequacy calculations (Post et al, 2007). The amount recoverable under a reinsurance treaty is, however, independent of common valuation parameters, such as interest rates.…”

Section: Institutional Backgroundmentioning

confidence: 99%

Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market

Upreti

Adams

Jia

2021

The European Journal of Finance

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We investigate the effect of risk management (reinsurance) on the corporate cost of equity using panel data drawn from the United Kingdom's (UK) non-life insurance industry. Our results show that use of reinsurance lowers the cost of equity but that the relation is non-linear. We find that the rate of reduction declines as the level of premiums ceded relative to total gross premiums written increases. We also find that the reinsurance-cost of equity relation is moderated by the risk of financial distress/bankruptcy. This moderating relation is robust to the use of three alternative measures of financial distress and bankruptcy risk.

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“…In this regard, several studies have been conducted on the "Insurance" and "Banking" industries (Firoz et al, 2011;Agostino et al, 2011;Post et al, 2007;Helfenstein et al, 2004;Bischof, 2009); other studies analyzed the companies in the "Manufacturing" industry (Colwyn and Luther, 2005). Currently few researches are focused on the impact of the adoption of IAS/IFRS on earnings management in the "Telecommunications" and "Utilities" industries.…”

Section: Literature Reviewmentioning

confidence: 99%

Does the IFRS 15 impact earnings management? Initial evidence from Italian listed companies

Tutino¹,

Regoliosi²,

Mattei³

et al. 2019

Afr. J. Bus. Manage.

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The purpose of the present work was to gauge the extent of the impact on earnings management derived from the adoption of International Financial Reporting Standards (IFRS) 15 as well as detecting whether the impact will be similar in different industries. To provide empirical evidence that earnings management is more frequent in some industries and less frequent in others by means of a statistical analysis, a sample of Italian listed companies in the period 2001-2017 was observed. Specifically, companies belonging to two sectors were selected: "Telecommunications" and "Utilities". The Jones Model was applied. The statistical analysis brought to light that earnings management practices are "commonly adopted" in the "Telecommunications" industry, which is consequently highly impacted by the introduction of IFRS 15. That being said, the lesson learned from this study is that the implementation of the new principle, written to discipline the accountancy of revenues, and its consequences, must be carefully analyzed and monitored by the regulators, as well as correctly adopted by managers, as the determined revenues could have an impact on the pre-existing earning management practices. The scientific contribution of the present research also concerns the predictions on the behavior of managers that can be foreseen considering the agency theory; therefore, knowing ex-ante in which industries earnings management has a high impact, provides the option to foresee the hypothetical moves of the managers in the implementation of IFRS 15.

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Implications of IFRS for the European Insurance Industry - Insights from Capital Market Theory

Cited by 9 publications

References 56 publications

Comparison of Stakeholder Perspectives on Current Regulatory and Reporting Reforms

Comparison of Stakeholder Perspectives on Current Regulatory and Reporting Reforms

Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market

Does the IFRS 15 impact earnings management? Initial evidence from Italian listed companies

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