Accounting is a pertinent topic for all insurance companies and therefore also for AMICE’s membership, cooperative and mutual insurers. According to IAS Regulation (EC) 1606/2002, all listed companies registered in Europe are obliged to apply the International Financial Reporting Standards (IFRS, formerly IAS) for their consolidated financial statements since 2005.

As entities that are not listed (unless they have issued debentures that are admitted to trading on a regulated market), mutual and cooperative insurers are not immediately concerned by this Regulation. Some Member States, however, took the option of extending the requirements of the IAS (= IFRS) Regulation to solo accounts and/or to unlisted undertakings. Therefore, some mutual and cooperative insurers are therefore already now (voluntarily or on the basis of national legislation) applying the IFRS; many others are getting ready to do so in the future. A recent overview of the current requirements as to the application of the IFRS by each Member State can be downloaded from the respective Commission website.

Moreover, the introduction of Solvency II, where the initial balance sheet which is needed to calculate the SCR is, in principle, based on IFRS, makes it even more necessary to monitor these accounting standards.

The IFRS are drafted by the International Accounting Standards Board (IASB), an independent international body headquartered in London, charged with developing a single set of high quality, global accounting standards. The IASB is currently reviewing the issues raised in its 2013 Revised Exposure Draft for an IFRS for insurance contracts which it is expected to adopt in 2015 with application of the standard approximately 3 years later.

The European Commission’s responsibility is to endorse the standards (i.e. accepting them for integration into European law) after seeking advice from EFRAG, the European Financial Reporting Advisory Group, and the Accounting Regulatory Committee (ARC), which is composed of representatives of Member States. AMICE holds an observer seat at the Insurance Accounting Working Group of EFRAG.

Within AMICE, the work on IFRS is carried out in the Accounting working group of the Advocacy Commission. The accounting  working group cooperates, where appropriate, with Insurance Europe.

Finally, it should be noted that all work on accounting by insurance undertakings is also closely connected to the Solvency II project, particularly in the context of the valuation of assets and liabilities (pillar I) and reporting (pillar III).

Capital maintenance

Mutual and cooperative insurers pursue a fundamentally different approach when it comes to financing their business. By definition, they do not have shareholders and do therefore not cover their capital needs on the equity market. Most of them are also generally hesitant to raise capital through the issuance of bonds – they just do not want to use their surpluses to pay for external capital. Moreover, many mutual insurers are small to medium-size undertakings for whom the capital markets are commonly not or not easily accessible.

In a nutshell, mutual and cooperative insurers have restricted opportunities to finance their activities and their growth: they can retain their surpluses and some may, in extremis, raise supplementary capital from their members. Ploughing back surpluses into reserves, however, is not always and everywhere treated on a level playing field with the distribution of profits by joint-stock companies.

AMICE has a working group to work on collating, comparing and developing  sustainable capital solutions which respect mutual and cooperative values for the benefit of mutual/cooperative insurers’ member-policyholders.

In the first phase of its work, this meant looking at existing capital (including hybrid) instruments currently in use by our members in the EU and EFTA, exploring promising capital instruments that are in use or under development in the banking sector and deciding which of these capital instruments merit follow-up by AMICE.


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