GAAP for Lloyd's

Lloyd's insurers won a breathing space from having to adopt the most controversial parts of the International Accounting Standards (IAS).

The market said last week it would move to UK Generally Accepted Accounting Principles (GAAP) from 1 January 2005.

Lloyd's had indicated it would move to IAS on the same date, but was forced to delay adoption until there was "more clarity on the proposed standard".

There was exasperation among market figures at the continuing confusion over crucial details in IAS.

One said: "How on earth can we adopt it when it's still just theory?"

Accountants greeted the move to UK GAAP as good news for insurers.

Neil Coulson of Littlejohn Frazer said: "IAS is looking very uncertain at present as to its final format. Therefore, for Lloyd's to try to change to a moving target would be difficult and make its transition all the more difficult."

For insurers, the most controversial aspects of IAS were contained in its proposed second phase, which had been intended for adoption in 2007.

A spokesman for the International Accounting Standards Board admitted: "2007 would be pretty difficult to hit at this stage."

He hoped for implementation of phase two by 2008.

Coulson said Lloyd's syndicates would find only a "modest" difference between UK GAAP and the first phase of IAS, but that its second phase would "probably cause a fundamental shift in the way insurance is accounted by all types of insurer."

Robin Oakes of Mazars said Lloyd's decision was "good news for syndicates".

But he added that there was still uncertainty over when Names would be able to withdraw profits from the market- traditionally they have had to wait three years.

"It isn't clear whether Names will be able to get their money out earlier than that," he said.