Accountants, bond analysts and company financial executives say the Financial Accounting Standards Board should shelve a proposal that could require insurers to split, or “bifurcate,” reporting of insurance policy insurance risk transfer and investment risk.

Opposition to the bifurcation proposal surfaced in response to FASB’s latest annual Financial Accounting Standards Advisory Council priorities survey.

The council, an arm of FASB, Norwalk, Conn., based the survey report on responses from 31 current council members, 7 FASB board members and 35 other constituents.

Most of the report has to do with general financial reporting issues, but a number of respondents discussed concerns about the bifurcation proposal.

FASB came up with the proposal while looking into the issue of finite reinsurance reporting.

FASB suggested in May, in an “invitation to comment” on insurance accounting rules, that insurers probably should split reporting of risk transfer components from investment components for many types of insurance products, including ordinary group life policies.

One survey respondent, E. Anson Thrower, managing director of the S-Curve Group L.L.C., Greenville, S.C., says FASB ought to shelve the bifurcation proposal for now because it has been so controversial.

But, “the approach is conceptually correct,” Thrower says.

Other survey respondents have given the bifurcation proposal harsher reviews.

The bifurcation proposal “would make wholesale changes to a model that is well established and understood by many,” says Colleen Cunningham, the outgoing president of Financial Executives International, Florham Park, N.J.

John Morse Jr., chief financial officer of The Washington Post Company, Washington, says he looked at the bifurcation proposal and “came away wondering why the board is trying so hard to make something more complex when it seemed to be relatively simple and understood in its present form.”

“The current direction of the project could introduce potentially significant changes to the basic insurance model,” warns Vincent Colman, a partner at PricewaterhouseCoopers L.L.P., Florham Park, N.J. “We are not supportive of such a broad-scope project.”

Colman and several other respondents say FASB ought to wait for the International Accounting Standards Board, London, to complete work on its own insurance model before continuing with any major insurance reporting projects.

Survey respondents also talked about several other insurance issues that they think FASB should address in the future.

Julie Burke, a managing director in the Chicago office of Fitch Ratings, says she thinks the organization ought to look at accounting for the guarantees and options embedded in life insurance policies.

“We do not believe there is currently adequate disclosure of the risks and how these policies may perform in various economic and investment environments,” Burke says.

James Brown, an executive at Crowe Chizek and Company L.L.C., Indianapolis, says FASB should review treatment of company-owned life insurance asset amounts when a policy has redemption restrictions.

Georgene Palacky, a senior policy analyst at the CFA Centre for Financial Market Integrity, Charlottesville, Va., says FASB ought to study reporting of environmental issues, such as insurers’ vulnerability to severe changes in weather patterns.