The XBRL Standard:

Road to Financial Data Freedom?


While most insurance companies have created their Web presence and begun to better understand how to leverage effectively the Internet and its endless possibilities for better, faster, cheaper communications and business processing, the world of financial reporting seems to have been left in the technology dark ages. At least that was the case before the introduction of the XBRL (eXtensible Business Reporting Language) standard, a variation of XML designed specifically for financial data.

Yes, just what we need in our already standards- and regulation-burdened insurance industryyet another standard. But, in the wake of the Sarbanes-Oxley Act and more stringent SEC requirements, an XBRL standard for insurance might be the welcomed lifeline that actually can make financial reporting easier and quicker.

We?ve all heard the lofty promises of technology before, often to be sadly disappointed in the actual benefits vs. the marketing hype. So, how do we in the insurance industry tread lightly with XBRL so as not to succumb to the usual pitfalls of the early marketing hype while also making sure we?re on the forefront of this new paradigm in financial reporting and exchange of financial information with peers, distribution channels, regulators, stockholders and our insured?

An XBRL Primer

The best place to start is always at the beginning with a basic understanding of XBRL. As mentioned earlier, XBRL is a variation of the popular XML (eXtensible Markup Language) standard but is specifically designed to transform financial data into smart data through a method of tagging or labeling the data utilizing a set of standards and taxonomies (common dictionary of terms). As an example, Figure 1 demonstrates how $10 million in preferred stock might be represented with XBRL tagging.

Since XBRL is dealing with financial data, many of the standard?s tags are based on commonly used accounting standards, including GAAP and statutory. Once in an XBRL format, financial data is easily available for exchange via the Internet, for an endless variety of reporting needs and for more extensive analysis.

XBRL is an open standard that has been and continues to be developed by a 170-member international consortium with representatives from accounting organizations, trade associations, professional services and consulting firms, financial institutions, information providers, software and other technology vendors, and not-for-profit and government entities. Additional information on XBRL International can be found at

The XBRL tagging of the financial data not only speeds up the financial reporting process but also offers a myriad of new opportunities to exchange financial information, easily reuse for additional purposes, and provide the data for more sophisticated analytics.

XBRL in Insurance

The emergence of XBRL in the insurance industry represents a huge breakthrough because XBRL is data-centric, rather that document-centric like the .PDF, Excel and HTML formats previously used for the electronic reporting and exchange of financial information. Unfortunately, when it came to the usability of the financial data, these formats served little more purpose than an electronic representation of a hardcopy document with no ability to extract and reuse the information.

Data in .PDF, Excel and HTML formats transmitted via e-mail may have helped to speed up the distribution of the financial information, but the automation ends there. If the financial data needs to be repurposed, there is no way to extract the information from these non-interchangeable electronic formats. The data essentially needs to be re-keyed or the user needs to turn to IT to develop and maintain additional financial reportsoffering no attractive or simple alternative to sharing of financial data.

With XBRL offering the potential to tag and format financial data in a reusable, interchangeable format, the possibilities for its application in the insurance industry are plentiful.

While the insurance industry does offer some guidelines for financial e-reporting which, in turn, provide some level of consistency to format, it is still not easy for insurers to share the information among their peers or consolidate financial reports should they need to. (For example, in the case of an insurer with multiple entities.) XBRL would make the sharing and consolidation options much more feasible.

Due to the easy financial data exchange offered through XBRL, insurers could readily Web post the information they deem suitable for sharing with peers, investors, financial analysts, etc. The XBRL formatted information could then be downloaded and imported into the user?s choice of tool for further manipulation, analysis, etc. With XBRL, rather than spending time preparing data for activities such as peer analysis, the insurance professional can be investing time performing peer analysisthe value-added activity instead of the value-draining activity.

XBRL ?labeled? data can be readily reused for a variety of reporting purposes beyond just financial reports, including credit reporting, new management reports, tax filings, etc.

Capital markets reporting prefers to present financials with a different spin (i.e., a more earnings driven perspective) than the insurance regulatory bodies. If the data is tagged via XBRL, it can be extracted and used for the regulatory reporting needs but just as easily purposed for capital markets reportingextracting, consolidating, and presented based on the insurer’s business model, that is, whether it prefers to summarize its financials by line of business, by geographic area, by subsidiary, consolidated at the parent company level, etc. XBRL essentially offers the flexibility to present and analyze the financial data in the format that is best suited for a specific financial report.

The cost and time savings alone are worth looking at when evaluating XBRL. There’s no more tedious re-keying of financial information, not to mention the likely possibility for human error in the highly tedious re-keying process.

In addition, being able to more readily meet the accelerated timeline for annual and quarterly statements imposed by the SEC should leave the insurer breathing a sigh of relief.

As an international standard that is rapidly gaining acceptance and support, XBRL is becoming increasingly pervasive. While it is not yet the panacea that would be the answer to all the financial reporting challenges in the insurance industry, XBRL will continue to evolve and mature to provide greater value and simplification to the reporting process over time.

So, what?s the best way to test the XBRL waters without jumping in over your head? As many of the major software vendors continue to incorporate XBRL into their products, insurers can start their own XBRL education and evaluate where the new standard can enhance their financial reporting. And, as with any new technology, it is always best to begin the introduction to your environment through a pilot project by choosing a less than critical financial report for XBRL implementation. This low-risk approach enables the IT staff to gain XBRL proficiency without any negative impact on the organization during this learning through experience exercise.

Needless to say, the industry will continue its migration from the old paper-pushing methods and continue to make financial reporting more electronic and Web-accessible while also making the financial data easily reusable. It may take a little time for our risk averse industry to embrace XBRL fully, but all signs indicate that XBRL will most certainly become the standard for financial reporting and sharing of financial data.

is senior principal with Highpoint Partners, LLC, Hartford, Conn., and a member of the Association of Certified Fraud Examiners. He can be reached at [email protected].

Reproduced from National Underwriter Edition, May 28, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.