Accounting Expert: Free Rate Guarantees in Jeopardy

International efforts to update insurance accounting rules could be especially hard on providers of products that offer free interest rate guarantees.

The Financial Accounting Standards Board (FASB), Norwalk, Conn., has been trying to revise the Generally Accepted Accounting Practices (GAAP) that apply to insurers, both to reflect changing times and to reflect changes being considered by the International Accounting Standards Board (IASB), London.

Mark Freedman, a principal in the financial services office at Ernst & Young L.L.P., New York, says one proposed GAAP change could create a method for valuing the minimum interest guarantees provided by interest-sensitive products.

Today, GAAP rules do not require insurers to value the guarantees, Freedman says.