Bifurcation of insurance and reinsurance contracts separating those elements entailing risk transfer is not needed now, one ratings agency declared last week.
In a letter to the Financial Accounting Standards Board, Fitch Ratings Service said that overall it is satisfied with the current principles-based accounting and does not feel bifurcation is warranted for insurance contracts containing finite-risk elements.
The bifurcation effort came about as a result of well-publicized use by some primary and secondary reinsurers of finite policies that did not actually transfer risk, but were used primarily to manipulate financial reporting figures. (See NU, Sept. 4, pages 16 and 34.)
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