U.S. life insurers may soon need the ability to make regular changes in the assumptions underlying accounting for in-force products.

Partners at PricewaterhouseCoopers L.L.P., New York, today gave that assessment during a Webcast on the future of insurance accounting.

The Financial Accounting Standards Board (FASB), Norwalk, Conn. – a body that sets accounting standards for U.S. companies – and the International Accounting Standards Board (IASB), London – a body that helps set international accounting standards – are working on insurance contract accounting efforts.

IASB and FASB hope to expose a draft of insurance contract reporting standards to public comments sometime in the next few weeks. The boards last week held a joint meeting on insurance contracts that covered topics such as risk adjustment, initial measurement of reinsurance assets and rules for deciding when to require separate reporting for components within a product that happen to be easy to separate.

Details could change, but, if IASB and FASB end up adopting something like the proposals they are considering, the new standards will transform life insurance company income statements, according to Donald Doran, a partner in the PricewaterhouseCoopers insurance practice.

Life insurers would, for example, stop reporting premium revenue and investment income in their income statements and instead report figures on lines with labels such as “risk adjustment,” “residual margin,” “insurance margin” and “experience adjustments.”

The traditional premium revenue figures would end up in the footnotes, Doran says.

At this point, “there’s no grandfathering,” Doran says. “The entire in-force [business] is going to have to be re-done.”

Dave Rogers, another PricewaterhouseCoopers partner, says variable annuity accounting might not change all that much, but that insurers would have to account for the balance and cash flows from universal life policies separately.

Sellers of traditional life insurance, who may not have had to re-set the assumptions used in their policy pricing and administration systems since the 1970s, may have to have the practical physical ability to re-set the assumptions quarterly, Rogers says.

Today, many older computer systems are set up in such a way that users must make changes in many separate places to update assumptions, Rogers says.