U.S. insurers should be working to shape and preparing to accommodate new European insurance accounting rules.

Insurance accounting experts made that case in discussions of a recent announcement that the U.S. Securities and Exchange Commission might let foreign companies issue securities in the United States without requiring the companies to reconcile their financial statements with U.S. generally accepted accounting principles.

“This is a wakeup call to insurers,” says Mark Freedman, a principal in the New York office of Ernst & Young. “The industry ought to consider the impact of where the U.S. is headed.”

Comments on the SEC proposal to let foreign issuers follow foreign accounting rules are due Sept. 24.

Both the International Accounting Standards Board, London, and the Financial Accounting Standards Board, Norwalk, Conn, are requesting comments on whether and how they should go about bringing harmony to the world’s insurance accounting rules.

As early as 2010, European companies might have to start responding to the changes proposed by the IASB, Freedman says.

Insurers would need at least 2 years to get ready to accommodate the accounting changes, Freedman says.

Freedman suggests, for example, that one move discussed by the IASB – shifting to fair value accounting – would interfere with insurers’ efforts to match liabilities with assets. That could increase the volatility of balance sheets and make some products, such as variable annuities that are not “fair valued” too volatile to offer, Freedman says.

Hedging could help, but hedging is not a perfect process, Freedman says.

Another expert,, Doug Barnert, executive director of the Group of North American Insurance Enterprises, New York, says shifting to a fair value approach could affect accounting measurement, deferred acquisition costs, classification of assets and liabilities, and treatment of gains and losses.