The federation stressed the importance of avoiding personal estimations and biases in fair value estimation and measurement.
Mr. Alaa El Zohairy, Chairman of the Insurance Federation of Egypt - File Photo
The Egyptian Insurance Federation has urged for more measures to be taken to enhance the practice and application of current fair value requirements. The federation also called for the determination of fair value in inactive or illiquid markets.
In its weekly report issued on Saturday, the federation stressed the importance of avoiding personal estimations and biases in fair value estimation and measurement, and to consider the fair value's relationship with future cash flows, especially when investments are held until maturity.
The federation's report also addressed the concept of fair value and its impact on measuring financial investments in insurance companies, as investment activity is considered a crucial and primary activity for insurance companies due to the returns generated by these investments, which contribute to covering any losses that may occur in insurance activity or to support profits, leading to high financial confidence in insurance companies and their clients' confidence in their financial position.
The federation highlighted that the definition of fair value is still a subject of controversy among accountants and professional organizations concerned with the accounting profession, as there is semi-consensus between them about the importance of using fair value to provide the needs of financial statement users, but there is no agreement on a unified definition of fair value or the indicators used to express fair value.
Regarding the importance of using fair value accounting in measurement, the report noted that it provides more accurate and appropriate information than historical cost, as it measures the entity's optimal allocation of resources and their conservation.
It also helps investors to evaluate the investment strategies of the entity and its ability to meet its obligations, making fair value accounting an essential tool for assessing the financial health of insurance companies.
The insurance industry in Egypt has witnessed steady growth in recent years, thanks to the government's support and the introduction of new insurance products that meet customers' needs.
The insurance sector has shown resilience during the COVID-19 pandemic, with insurers adapting quickly to the new circumstances and expanding their digital capabilities to reach customers remotely.
