Insurance Companies Oppose International Financial Reporting Standards (IFRS)

Canadian life insurance companies are persuading the Canadian government and regulatory

bodies to move the accounting principles and reporting requirements in their favour. In summary, the industry would like an amendment of International Financial Reporting Standards which Canadian government is prepared to put in use but plans to effect not before 2013.

They argue that the new order will prepare way for tremendous volatility to the c/e ratio in annual (quarterly) comparisons. The problem is, not only would this make the comparisons more problematic, but it would also stop comparisons to results calculated under the former rules.

LSM Insurance believes the latter is weedy plea though, as the the industry would most likely be needed to make new calculations for previous few periods' statements using the fresh rules precisely for the purposes of logical benchmark, as is the case with most alternations of the standards. However, a shift of regulations will absolutely come with more administrative power costs in the time of the change at the bottom end.

As to the volatility of capital figures, the FP says that the the industry are requiring a two-tier accounting system that lets capital to be assessed based on a various set of rules than the IFRS. This does make sense because the amounts of capital reserves are surveyed and regulated by the Canadian regulatory body - OSFI. Should there be over the limit volatility of capital, the insurance companies may be force to re-check them more often so that foil optimal capital management.

In extreme cases, insufficient capital may prompt OSFI to consider an insurer bankrupt. Now, it is far from possible to determine the exact effects of IFRS on c/e volatility, as the new regulations are still being prepared by the International Accounting Standards Board (IASB). Nevertheless, the insurance companies are believing that a two-tier rules, which is in place in the US and the UK will erase any such concerns.

Insurance Companies Oppose International Financial Reporting Standards (IFRS)

By: Lorne Marr

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