Convergence Of Gaap And Solvency Standards

2274 Words Mar 28th, 2015 10 Pages
To: CRO, The Greatest Life Insurance Company
Date: March 28, 2015

RE: Convergence of GAAP and Solvency Standards in the US, Canada and Europe

Executive Summary

There have been a number of proposed and upcoming changes to GAAP and solvency reporting standards in the US, Canada and Europe in recent years. In particular, significant efforts have been made to increase convergence between US GAAP and IFRS. The following report discusses the pros and cons of convergence between standards in different jurisdictions, as well as convergence between GAAP and solvency standards, in relation to insurance contracts. Here, the term ‘GAAP’ refers to financial reporting for investors, shareholders and creditors. Solvency standards refer to the regulatory requirements imposed on insurers. The jurisdictions discussed have been limited to those in which The Greatest Life Insurance Company operates in: namely, the US, Canada and Europe.

The Greatest Life Insurance Company should support the convergence of GAAP standards as well as the convergence of solvency standards in different jurisdictions. However, the Greatest Life Insurance Company should not support the convergence of GAAP and solvency standards:

• Distinct benefits exist in convergence of GAAP in different jurisdictions. Comparability between companies that operate in, or are listed in, different countries, will be significantly improved. Greater comparability leads to better information for investors, more efficient capital…

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