Accountants Tell FASB To Go Slow On Risk Transfer

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.