The Indonesia Accounting Board has issued new accounting standard (PSAK 36) on Life Insurance Contract which adopted the Phase-1 of IFRS 4. This standard is required to be effectively used by multinational companies in Indonesia at the end of year 2012. Under PSAK 36 an insurance company is required to calculate the liabilities of future benefits using Gross Premium Valuation (GPV) method. The new reserving method will replace Net Level Premium method that has been used by Indonesia actuaries since more than 20 year ago. In addition, the Indonesia Minister of Finance (MoF) has just recently issued a decree on the solvency of Insurance companies in Indonesia which will be effectively on 1st January 2013. This decree also requires a life insurance company to calculate the statutory reserve on policy with more than one year term using GPV. The new method of valuation will not only impact the reserve but also impact the product pricing,  policyholder’s dividend, Financial Report, and company’s strategic planning in the long-run. The Society of Actuaries of Indonesia (PAI) has been aware that the new valuation method will have significant impact to the actuarial practices in Indonesia. Therefore, PAI, along with MoF and the Life Insurance Association, has hold a series of workshop to discuss the implementation of this new method. At the time of writing of this proposal, PAI also has issued draft technical guidelines of GPV which is still open for further discussion. The more complex GPV needs in-house development software which involves internal comprehensive review and more people with good technical skill in actuarial software. Experience Study must be conducted regularly and continuously so an actuary can determine the best-estimate assumptions used in the valuation. Consequently, GPV requires more responsibilities and roles of the actuaries. The actuaries should have a very good understanding of economic trends and any other factors that impact future interest rates.

That’s why the implementation of GPV will be a new era for the Indonesian actuaries.