Proposals for new financial reporting rules are a "huge risk" developed with "no understanding" of insurance, warned Norwich Union (NU) chief executive Patrick Snowball.

His sharp criticism of the ...

Proposals for new financial reporting rules are a "huge risk" developed with "no understanding" of insurance, warned Norwich Union (NU) chief executive Patrick Snowball.

His sharp criticism of the draft International Accounting Standard (IAS) follows widespread concern that it will create huge volatility in insurers' accounts.

Snowball said: "The proposals put through have been done with no consultation, no roadtesting and no understanding of the impact on our business. That is a huge risk to run with one of the biggest industries in Europe.

"We are working on some alternative proposals to give transparency and we want a measured introduction of these standards over a period of time."

The scene is set for disagreement between some of the industry's most powerful figures over IAS and its rules on financial instruments that impact heavily on insurers, known as IAS 39.

The ABI is understood to share Snowball's concerns about managing the change to IAS, due to be introduced by 2005.

It is preparing to respond to the IAS board by October and is known to support the controversial principle of disclosing the fair value of insurance assets and liabilities, although it has reservations over the impact on the life industry.

Steven Brice, head of IAS at accountancy firm Mazars, said insurers' profits could become volatile, driving away investors and increasing the cost of capital. He said: "A move towards wholesale fair valuing of assets and liabilities may only serve to add a further layer of complexity, cost and confusion."

Julian Hance, group finance director of Royal & SunAlliance, was part of the advisory committee that developed the proposals.

He gave broad support, but voiced concern on rules aimed at boosting transparency. He said: "We think the IASB needs to focus on the practicalities. Some of it isn't going to be easy from a practical point of view and will almost undermine what they are trying to do."

The standard also has qualified support from analysts, who see it as a step towards greater transparency.

Rob Jones, credit analyst with Standard & Poor's, said IAS had "many positive aspects" but added: "It will be expensive, a lot of change will be required as a result and the financial statements will look very different."

The proposals include scrapping catastrophe and equalisation reserving which Jones said was an "unquestionably good thing."

But he warned: "The consistency and transparency would be really helpful. The devil will be in the detail and it depends on what the disclosures will be - they haven't really been defined yet."