Insurance Accounting Proposals are "Flawed and Unworkable," Says Trade Group

The current set of insurance accounting proposals now under consideration by international accounting standards setters are fatally flawed and unworkable, a representative of the North American insurance industry said last week.

Speaking at the AICPA/IFRS Foundation Conference in Boston, Jerry de St. Paer, executive chairman of the Group of North American Insurance Enterprises (GNAIE) said the current proposals and timelines advanced by the International Accounting Standards Board (IASB) contain fatal flaws that will introduce “significant non-economic volatility for long duration life contracts and will obscure underwriting results for the property/casualty insurance business.”

In particular, he pointed out that the proposals affecting long-duration life insurance contracts do not reflect economic reality and results will be much less transparent to users.

De St. Paer added that the Financial Accounting Standards Board (FASB) and investors do not support risk margins for short duration property/casualty insurance contracts.

Further, he said, the overwhelming majority of investors do not support the introduction of discounting to the non-life measurement model.

“Discounting mixes underwriting and investing and reduces the comparability and understandability of financial statements,”  he said.