New accounting rules a bigger threat to rates than class actions, says PWC
The new International Financial Reporting Standards (IFRS) regime could result in a rise in rates for directors and officers' (D&O) insurance in the UK in 2005, according to PricewaterhouseCoopers (PWC).
Forensic services partner at PWC Andrew Gordon, who specialises in the D&O market, said the switch to IFRS in 2005 is the biggest single issue likely to impact upon D&O rates for listed UK companies.
From January 2005 listed companies throughout the EU must report according to the International Accounting Standards Board's new rules.
Gordon said that directors opened themselves up to an increase in D&O claims if they have not sought an effective implementation of the rules in order to meet the deadline.
A PWC survey released last week found that although 75% of listed European companies have taken the first step towards converting to IFRS, only 11% have embedded IFRS and are using it for internal management reporting.
The survey, conducted in the first quarter of 2004, also revealed that just 10% of respondents were sure they had the right people and skills to complete the change in time. Financial services companies were the most prepared for the upcoming change, closely followed by technology, communications and entertainment companies. Public sector businesses were the least prepared.
Gordon said while UK companies with US exposures are being increasingly targeted with US class actions against directors, impacting on D&O rates for specific companies, he did not expect the trend to be replicated within the UK.