Accounting standard setter proposes temporary fix for insurers

Friday, 25 September 2015 00:00 - - {{hitsCtrl.values.hits}}

LONDON (Reuters): A global accounting standard setter has proposed a temporary fix for insurers caught in the crosshairs of a new bookkeeping rule aimed mainly at forcing banks to recognise losses on loans earlier.

While the new loan-loss rule does not come into force until 2018, work on a new, related standard for insurance contracts has yet to be completed.

Insurers worry that if they have to apply the loan-loss rule from 2018 until the new insurance standard comes into force their earnings could become volatile.

The International Accounting Standards Board (IASB), a London-based body that sets bookkeeping rules used in more than 100 countries, including the European Union, decided on Wednesday to consult on temporary fixes to the current accounting rule used by insurers.

The aim is to shield them from the loan-loss rule until the new insurance rule comes into force.

Companies whose business model is predominantly to issue insurance contracts could defer the effective date of applying the loan loss rule to 2021, the IASB said in a statement.

The IASB said it aimed to complete the new insurance rule in 2016 and then decide on its implementation date. The new insurance rule would replace the existing one and the temporary fixes being added.