Members of the Financial Accounting Standards Board have given up on a controversial proposal to ask insurers and policyholders to split reporting for the risk transfer and financing components of insurance policies.
In a request for comments released in May, staff members at FASB, Norwalk, Conn., had suggested that the reporting split proposal, or “bifurcation” proposal, might apply to everyday products such as group life insurance and health insurance as well as to more controversial products, such as finite reinsurance arrangements, that have drawn regulators’ attention to insurance accounting rules.
FASB received 63 comments about the bifurcation proposal, and most commenters opposed bifurcation.
“They asserted bifurcation would be too costly, complex and arbitrary,” FASB officials report.
FASB members complained during a regular meeting that the commenters had misunderstood the intent of the bifurcation proposal.
The FASB staff was really trying to emphasize the difficulty of coming up with rules that can distinguish the fundamental characteristics of financial reinsurance from those of ordinary group life insurance, let alone from those of ordinary reinsurance, FASB members said, according to an audio recording of the meeting posted on the FASB Web site.
FASB members concluded that they still were sure how to set practical rules that insurers and others could use to distinguish financing components of insurance from risk transfer components.