Ernst &Young Assesses Effects Of Attacks On Insurers

Currently, it appears that most insurance companies will not separately identify the losses from this event in their income statement, but would be permitted to do so, the report says.

Companies that report the loss separately probably will have to separately disclose, both now and in the future, the effect of this event in the various footnotes that contain loss data information. Also, companies that initially separate the amounts relating to this event will most likely have to continue to separately report the changes in the estimate in subsequent periods until the changes or insurance-related liabilities become immaterial to the company, the report says.

The huge losses resulting from the disaster will have a dramatic impact on the tax position of an insurance company. In many instances, companies will find themselves in loss carryover positions for the foreseeable future, or subject to the alternative minimum tax, the report says.

Such a change in tax position will necessitate a change in the company's tax strategy and the tactics used to implement that strategy?for example, a change from tax-exempt to taxable bonds, the report says.