GIM2040 - Accounting framework: Association of British Insurers (ABI): Statement of Recommended Practice (SORP)

The IAD and Schedule 9A CA 1985 set out the legislative framework for accounting for general insurance business in the UK. Accounting standards in the UK are set by the Accounting Standards Board [ASB], which issues Financial Reporting Standards [FRSs]. These standards are of general application in the UK, and, where they are relevant, they apply to insurance companies' accounts in the same way as to those of any other concern. The ASB does not itself produce guidance that is related to specific industries. Guidance on accounting for insurance business is, however, published by the Association of British Insurers (ABI). This guidance is contained in the Statement of Recommended Practice (SORP) on Accounting for Insurance Business. The ABI SORP reflects the interplay between general accounting practice, the requirements of Schedule 9A and detailed regulatory requirements.

SORPs are recommendations on accounting practices for specialised industries and sectors. Although they are non-mandatory, their status in UK GAAP was enhanced by FRS 18 ‘Accounting Policies’, which is effective for accounting periods ending on or after 22 June 2001. FRS 18 states that if accounting practices set out in a SORP are generally followed in an industry, they will be particularly persuasive in the selection of the most appropriate accounting policies by entities in that industry.

The ABI issued SORPs in 1990 and 1998, 2003 and most recently in December 2005. GIM2050 summarises the key changes between the SORPs.