Insurers Huddle With FASB Over Standards

Insurers are weighing in on discussions of international accounting standards that will impact how they account for insurance contracts on their financial statements.

Representatives of the carriers are attending joint roundtable discussions of the Financial Accounting Standards Board and the International Accounting Standards Board being held today in the Norwalk, Conn., office of the FASB.

That discussion focuses on the development of a conceptual framework on measurement of assets and liabilities. It affects both property-casualty and life insurers.

The effort is part of a project to develop a common framework using the U.S. system and the international system, explained Doug Barnert, executive director with the Group of North American Insurance Enterprises, New York.

GNAIE is concerned with the predisposition to use a fair value measurement in all cases, he said. Fair value offers a measure of what an asset or liability is currently worth.

There are elements of fair value that do not work, particularly for property-casualty insurance, according to Mr. Barnert. There are times when a company's own information is unique enough that entity-specific values are warranted, he continued.

Alan Close, representing the committee on accounting policy for the American Council of Life Insurers, Washington, said that for insurers fair value may not be the best measurement. What may be a better measurement is a mixed model that could encompass a number of different accounting methods such as amortized cost, fair value, historical cost or depreciated cost.

Today's meeting in Connecticut follows a meeting of the IASB in London on Jan. 23-25. On Jan. 25, the schedule included a review of insurance contracts.

The discussion focused on participating contracts and whether contracts that offer the possibility of the contract holder participating in a dividend or some other sort of bonus should be considered a liability.

GNAIE's Mr. Barnert said that if liabilities are not reported with assets, there is no consistency and insurers could report a huge gain at the issue of a contract.

Steve Broadie, vice president-financial legislation and regulation with the Property Casualty Insurers Association of America, Des Plaines, Ill., said that all insurers will be impacted by an IASB insurance contracts paper scheduled to be released in March.