The International Accountancy Standard will not work in our industry, says Jason Woolfe

The silence from the insurance industry was deafening. The government let it be known last Friday that all British companies will be able to use International Accounting Standards (IAS) from January 2005.

Hardly surprising, IAS will be mandatory for listed companies from the same date.

But the extension, announced by Jacqui Smith, Minister for Industry and the Regions, makes clear just how seriously the UK is taking this particular stride towards international collaboration.

And the silence from the insurance industry makes clear how many companies are woefully unprepared.

One of the principles of IAS is that all items on a company's balance sheet should be given a fair value. Like a market value.

Sounds reasonable enough?

Let's explore the idea a little bit. For a company selling cars, say, based out of an office full of PCs, it will be easy. It's not difficult to figure out either the value of a car or a PC. The same process would go for all the liabilities on its balance sheet, too.

But for insurance companies it may be a little trickier.

If we imagine an insurance company that wrote £100m of policies a few years ago, it probably wouldn't dream of writing the same policies for the same price now. In today's market, they could be worth £200m or even £500m.

Whoopee - if it stopped there.But the value of its liabilities would be said to have increased, too.

With liabilities increasing at such a rate, it would be like the asbestosis crisis hitting every class of business at the same time. Bad news, and probably the end of the road for some.

Conversely, at a time of softening markets, the value of insurers' liabilities would fall rapidly. This would be great for profits, of course.

And what would happen then?

Faced with the prospect of making a killing in insurance, our friends the venture capitalists would pull their trick of flooding the market with capital, sending rates even lower and sparking a never-ending downward spiral.

It's easy to see how underwriters may start changing the periods covered by their policies and the effects that would have on brokers.

So please, shouldn't we be demanding an insurance standard that makes sense? The clock is ticking.