A set of international accounting principles for the non-life insurance industry has been proposed by a group of major North American insurance companies.

The Group of North American Insurance Enterprises said it has developed 13 principles and will submit them for consideration by the International Accounting Standards Board.

The IASB is now in the final discussion stages of drafting a paper on accounting for insurance contracts.

The European CFO Forum has submitted a set of non-life principles that contain many similarities to the GNAIE proposal, but also significant differences.

In particular, GNAIE said its principles would not permit the discounting of claim reserves. Under the GNAIE principles, non-life insurers would be required to hold the amount of reserves to their full value and not adjust them for each reporting period based on predictions of interest rates.

"Discounting post-claims liability is inappropriate due to the highly unpredictable payment patterns of most claims," said the GNAIE paper.

The GNAIE principles address an accounting model for non-life contracts that meets the definition of insurance for accounting purposes.

GNAIE's principles do not attempt to define either insurance or risk transfer considerations to determine whether or not a contract should be defined as insurance for accounting purposes. Nor does the paper address the unique characteristics of reinsurance contracts, GNAIE said.

The 13 principles cover non-life products such as automobile insurance, property insurance, personal and business liability, and coverages that typically are for a six-to-12-month period and are contracts of indemnity.

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