Insurer CFOs Say U.S. Will Adopt Global Accounting Standards
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The life insurance industry may have dodged a bullet this year when the International Accounting Standard Phase I was adopted without mandating a fair value reporting. But that relief is only temporary, executives believe, according to new survey results recently published by New York City-based Tillinghast.
A total of 81% of North American life insurance company CFOs believe the United States and Canada will eventually join Europe in adopting a global accounting standard for insurance within the next 10 years.
But only about 28% believe it will happen within the next 5 years.
Two-thirds (66%) of the CFOs think that fair value is highly likely to become the accepted industry standard in their country, regardless of whether the global standard is adopted.
The remaining third believe the new standard will include some aspects of fair value accounting, but not necessarily in full.
Jack Gibson, managing principal for the North American Life Insurance and Financial Services Practice at Tillinghast, said all that remains uncertain at present is the exact methodology and time frame, now that the International Accounting Standards Board has spoken.
"Fair value will likely prevail as the accepted standard to some degree for the insurance industry going forward, but no one expects it anytime soon," Gibson said. "With an accepted industry standard in North America not expected within the next 5 years, U.S. GAAP and statutory reporting methods will continue to fill the void in the short termbut companies will have to start addressing differences between GAAP, statutory and fair value accounting much sooner."
