The Financial Accounting Standards Board has issued FASB Statement No. 163, "Accounting for Financial Guarantee Insurance Contracts."
Statement 163 clarifies how an earlier Statement 60, "Accounting and Reporting by Insurance Enterprises," applies to financial guarantee insurance contracts issued by insurance enterprises, including the recognition and measurement of premium revenue and claim liabilities.
The statement requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after Dec. 15, 2008, and all interim periods within those fiscal years, except for disclosures about the insurance enterprise's risk management activities.
Disclosures about the company's risk management activities are effective the first period after issuance of the statement.
The statement is intended to clear up inconsistencies in practice that have made it difficult for investors to compare information about insurers' claim liabilities.
Statement 163 requires that an insurance enterprise recognize a claim liability prior to a default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also requires disclosure of the risk management activities used by an insurer to evaluate credit deterioration in its insured financial obligations, and its surveillance or watch list.
