The International Accounting Standards Board (IASB) has come under attack from insurers.

The Geneva Association has warned that the IASB's plans for a new standard for insurance contracts could increase the cost of capital for insurers.

Accountancy KPMG said that, if adopted, IASB rule 39 would mean that premiums received would not be booked to the profit and loss account, and therefore would decline significantly.

It told the FT: "As a consequence, financial stability is likely to be affected. Given the fact that insurance companies are long-term investors, it will also have a negative impact on equity markets."

But IASB chairman Sir David Tweedie has hit back, saying insurers have escaped accounting regulation until now." It has been difficult for outsiders to understand what is going on within an insurance firm, he claimed.

The IASB is also proposing:

  • The elimination of tax-sheltered catastrophe provisions, which have been used to smooth fluctuations in profits from year to year.

  • Insurance liabilities can not be offset against assets.

  • Disclosures in notes to accounts would be required about the market values of liabilities.

    Hitesh Patel, a partner with KPMG, said: "These changes are the beginning of a revolution - many will say a much needed one - in insurance accounting. The new disclosure requirements may not be easy for insurers to implement, but it will ultimately improve the transparency and openness of insurance accounting."