The insurance industry is urging international insurancesupervisors to take a number of steps as they develop globalinsurance standards including looking at what it would take tofulfill a contract rather than assign a fair value tosecurities.

The Group of North American Insurance Enterprises, New York,made its case during Wednesday's meeting of the InternationalAssociation of Insurance Supervisors' insurance contractssubcommittee in Basel, Switzerland.

The International Accounting Standards Board, London, and theFinancial Accounting Standards Board, Norwalk, Conn., are workingon a joint effort to come to consensus on the issue. The accountingbodies are expected to consider the issue during the week of Feb.15.

Jerry de St. Paer, the group's executive chairman, told the IAIScommittee that there is a movement away from the fair valueapproach.

Mr. de St. Paer said, however, that GNAIE believes that for lifeinsurance contracts future rights should be treated by including abest estimate of future incomes and discounting the time value ofmoney.

Similarly, GNAIE said that a present value of bothconsiderations and obligations should be calculated and then asingle margin used to achieve no gain or loss at issue.

And Mr. de St. Paer recommended that the expected costs andrights in a contract addressed in an insurance revenue recognitionstandard be re-measured regularly.

Such a requirement differs from a requirement to valuesecurities at fair value, according to Doug Barnert, GNAIE'sexecutive director. Regular re-measurement would be done only whenthere is a substantial change, he explained. Fair value accountingof assets would have to be reported every quarter, Mr. Barnertadded.

He said if a security is really in trouble then its fair valueshould be reported. However, he added, if a security is performingproperly and is generating cash flows then companies should not berequired to report them at fair value.

The reason, said Mr. de St. Paer, is that external factors suchas the government deciding to value troubled securities at a muchlower value than a company's assets are being reported at couldresult in a markdown.

The concern is that while the focus has been on banks' assetimpairments, fair value accounting would also impact insurersbecause of the securities that they hold in their portfolios.