New Accounting Rules Could Affect Insurers - 4/10/2009 - insurancenewsnet.com
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Business Insurance April 6, 2009
311 words
New accounting rules could affect insurers
JUDY GREENWALD
Excerpts:
Two new accounting standards approved last week were primarily developed with the banking industry in mind, but could impact insurers as well, observers say.
One new measure approved by the Norwalk, Conn.-based Financial Accounting Standards Board changes mark-to-market accounting under generally accepted accounting principles.
Under the new standard, it will be easier for insurers to avoid ``other than temporary impairment'' charges for securities that have not experienced credit deterioration, which benefits their income statement.
For securities that have experienced credit deterioration, the new standard allows companies to bifurcate ``other than temporary impairment'' charges into the income statement—for the portion of the charge attributable to credit deterioration—and into ``other comprehensive income'' for the portion of the charge attributable to noncredit factors.
This also will help insurers because it means some of the impairment charges no longer will impact the income statement as much as they had previously, said Wallace Enman, vp and senior accounting analyst at Moody's Investors Service in New York.
In addition, under a second provision related to fair market measurement, insurers ``will have more leeway to ignore, or to adjust, transactions that they deem distressed,'' which could result in a higher fair value for securities ``and thereby an increase to equity,'' said Mr. Enman.
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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
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