Accounting changes aimed at banks impact on insurers

Chief financial officer at Hannover Re, Roland Vogel, has warned that International Accounting Standards Board (IASB) changes to how companies value investments could hurt European insurers, the FT reports.

The IASB launched proposals to force banks and insurers to use fair value – often called market value – for their holdings of financial instruments.

Insurance specialists are concerned that in tackling the financial crisis at banks, standards setters have overlooked a greater potential impact on insurers.

Vogel said it seemed “contradictory ... to move even more towards fair value accounting, rather than in the other direction that would take us away from pro-cyclicality. “It would mean higher volatility for the P&L, which does not provide the basis for consistent valuations for banks and insurers. It would keep potential investors away, which cannot be the aim of regulators, governments or other stakeholders.”

UK affect is different

An executive at a big UK insurer said: “This debate has been dominated by the banking fraternity and issues related to the financial crisis, whereas actually insurers are among the biggest investors in financial instruments on a long-term basis.”

Phil Smart, a partner at KPMG in London, said: “Among European insurers, there are currently differences in valuation practices. The new proposals could mean they see less volatility on their balance sheets, but potentially more volatility through the income statement.”