The Research on Asset-liability Accounting-Mismatch of Life Insurance Companies under the New Accounting Standards

After the implementation of the New Accounting Standards in the insurance industry,the fair value method is introduced into therecognition and measurement of assets and liabilities of life insurance companies. In practice,nearly 40% of life insurance companies' assets are at fair value measurement,but the liability is still accounted at face value. When the capital market interest rate and life insurance liability reserve rateschanges in the reverse direction,life insurance company's assets-liabilitiesmismatch problemwill emerge. We analyzed the impacts of interest rate changes on China Life's balance sheet,usingthe yields of one-year treasury note and the 750- day moving average yields of treasury bond during the period of January 2010- September 2014,and then further analyzed the impacts of the accounting mismatch on net profit and solvency adequacy ratio. The key to solving this problem is to extendthe fair value measurement toliabilities. Under the current accounting standards and regulatory framework,life insurance companies should increase the proportion of traditional protection-oriented products,improve on actuarial accuracy,increase disclosure of reserve accounting methods and accounting assumptions.