Insurance: Accounting change would put pressure on insurers - Emily Chasan and Lilla Zuill
The tricky practice of placing value on a company's illiquid holdings has been responsible for many of the multibillion-dollar write-downs that have hobbled the U.S. banking industry in the past year and threatens to do the same to insurers' balance sheets. Under a proposal for an international accounting standard, insurers may have to change the way they value insurance contracts, a move that could strike at the overall value of the carriers. While it is unclear when, or even if, U.S. companies will have to comply with rules being crafted by the International Accounting Standards Board, which is based in London, the possible convergence of U.S. and international rules has left insurance companies fearing the worst.
Financial services companies faced unprecedented volatility in their financial statements after valuing illiquid mortgage-linked securities this year, leading to some $300 billion in write-downs and credit losses by companies like Citigroup, the world's biggest bank, and American International Group, the biggest global insurer.
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