A recent Deloitte survey which hinged on the need for increased financial reporting transparency, has led to more insurers calling for a single global accounting framework.

The new survey of insurance finance executives conducted on behalf of Deloitte, by the Economist Intelligence Unit (EIU) found that nearly half of insurers want to see a convergence of the two main accounting regimes used by global insurance companies.

Also, 47 per cent of respondents said they want the United States to abandon its national accounting standards in favour of International Financial Reporting Standards (IFRS).  However, a complete set of IFRS rules for insurance liabilities does not exist yet and US Generally Accepted Accounting Principles (US GAAP) on the same subject has been earmarked for a radical reform since 2008.

Already, proposals to address this situation and substantially re-write accounting standards commonly used by insurers for liabilities and investments are being finalised jointly by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB).

The report noted that despite significant progress, the boards have struggled to reach an agreement on all issues.  This has resulted in a slip in timetable for implementation of what could be heralded as the first set of global accounting rules for insurance companies.

The survey further revealed that given the potential consequences these rules will have on insurance companies, more than half of respondents rated the uncertainty around the timeframe for implementation of the new IFRS for insurance contracts (IFRS 4 Phase II) (51 percent) and for financial instruments (IFRS 9) (52 percent) as their biggest concern.

However, many insurers are stuck in a ‘wait and see’ mode, with 56 percent saying they will wait until the standards are final before starting their projects to implement the new rules.

In a related development, Francesco Nagari, global IFRS insurance leader at Deloitte, said: “The extended uncertainty surrounding the completion of a converged insurance project has hampered insurers’ desire to prepare for this major implementation challenge.  Several insurers in our survey said they will be able to look at the business impact of the standards only from next year. This implementation will be a considerable undertaking in terms of IT systems and processes, not to mention the effect on investors’ perception of insurers’ profitability.”