| 2.2 | Paragraphs 2.3 to 2.11 apply both to changes made by an insurer that already applies this FRS and to changes made by an insurer adopting this FRS for the first time. |
| 2.3 | As an exception to paragraph 10.8 of FRS 102 an insurer may change its accounting policies for insurance contracts if, and only if, the change makes the financial statements more relevant to the economic decision-making needs of users and no less reliable, or more reliable and no less relevant to those needs. An insurer shall judge relevance and reliability by the criteria in paragraph 10.4 of FRS 102 and the qualitative characteristics of information in financial statements set out in Section 2 Concepts and Pervasive Principles of FRS 102. |
| 2.3A | One basis for changing accounting policies might be to enable them to be more consistent with the rules under the Solvency II Directive for the recognition and measurement of technical provisions. In doing so an entity shall make appropriate adjustments to the Solvency II rules to meet the requirements of paragraph 2.3. [AMD 3] |
| 2.4 | To justify changing its accounting policies for insurance contracts, an insurer shall show that the change brings its financial statements closer to meeting the criteria in paragraph 10.4 of FRS 102, but the change need not achieve full compliance with those criteria. The following specific issues are discussed below: |
| (a) | current market interest rates (paragraph 2.5); |
| (b) | continuation of existing practices (paragraph 2.6); |
| (c) | prudence (paragraph 2.7); |
| (d) | future investment margins (paragraphs 2.8 to 2.10); and |
| (e) | shadow accounting (paragraph 2.11). |
| AMD 3 Amendment Paragraph 2.3A added by Amendments to FRS 103 Insurance Contracts Solvency II (issued May 2016) Effective date 01/01/2016 |
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