New accounting proposals, designed to clarify insurance financial reports, may result in more investment into the industry, experts said.
The proposals, put forward by the International Account-ing Standards Board (IASB), aim to improve the quality, transparency and comparability of financial reporting in the insurance industry.
Alex Finn, a partner at PricewaterhouseCoopers said active capital markets always supported transparent financial reporting.
He told Insurance Times: "The insurance industry probably has one of the more opaque forms of accounting internationally.
"The move towards some form of consistency must in the long run improve the ability of the industry to raise capital."
Finn added that the changes would enable the sector to raise capital at a lower cost.
"A lack of understanding by the market is usually compensated for by the market demanding a higher return on their investment.
"As markets understand the performance of the industry more clearly they should demand a lower risk premium, therefore it will be cheaper for insurance companies to raise finance," he said.
Finn warned that the very nature of transparency means that "problem companies" may be exposed.
"The nature of improved financial reporting means that, potentially, companies which have not been as strong, and covered up by the fact that accounts have not been transparent, suddenly get exposed."
A six-month, public consultation period on the IASB proposalsnow begins and firm proposals will be outlined in a draft to be published towards the end of 2008.
The IASB expects the new standard to be in place in 2010.
