Insurers, Auditors Back Tweak to New Insurance Accounting Laws

Insurance companies, trade groups, and the Big Four audit firms have returned the proposal to the US accounting rulemaker, which aims to reduce the frustration of the head when companies are preparing for new insurance accounting rules.

The an ideaissued in July, allows insurers that recently sold life, annuity, or other long-term insurance business lines to skip compliance with the Financial Accounting Standards Board’s new rules when the rules go into effect next year.

“We agree that such contracts no longer apply to the company’s continuing operations, future operations, and overall business assets,” the American Council of Life Insurers. he wrote support system.

Publicly traded insurers that sell to long-term customers such as life and annuities must comply with the FASB’s new rules in 2023, but the rules apply to contracts that were in effect as of January 1, 2021.

This means that some insurers, including Allstate Insurance Co. The companies asked the FASB for help, and the board agreed to provide limited guidance to the portion of the new accounting policy that is consistent with the companies’ transition to the new rules.

FASB’s insurance accounting standards are expected to change the way insurers report their financial health and create uncertainty in their benefits. It calls on insurers that offer long-term policies to change the information they provide about the promises they make to customers and what they use to compare premiums.

Absent the FASB’s proposed changes, insurers that recently sold or disposed of long-term policies may have to reclassify a portion of previously recognized gains or losses as a result of adopting the new accounting standard, the FASB said. Comments on the proposal were due on August 8.

Cigna, MetLife, Wells Fargo

The opinion of the company Cigna Corp. he wrote in support of the plan, saying that it will benefit from it. The company in July sold its Hong Kong, New Zealand, Indonesia, South Korea, Taiwan, and Thailand life, casualty, and ancillary businesses to Chubb INA Holdings Inc. The $5.4 billion transaction includes insurance coverage under new FASB accounting rules. , the company said.

Not having to worry about the company’s accounting could save the company time and money and avoid confusion, Cigna said. “The idea of ​​adjusting previously recognized profit or loss to account for the change/implementation of a new accounting standard may be confusing for investors and not a useful idea for financial users,” the company wrote.

Some companies have asked the FASB to change or extend the break. Opinions of the company MetLife Inc. he asked for flexibility in choosing who would take advantage of the aid. Some insurers may have already created contracts that were previously written off using the new accounting rules, the company said, and it may take additional work to settle the account.

“For example, we will need to allocate time and resources to improve ledgers, update test plans and update group databases, if possible,” MetLife said. The operational burden will “outweigh the perceived benefits,” it said. Accounting firm Deloitte & Touche LLP did the same request for flexibility in his letter.

Wells Fargo & Co. he went further, standing as the only letter writer asking to expand the proposal to include a different type of business. The bank, which owns an insurance company, asked if the FASB could apply the relief provided to the so-called reinsurance products. Reinstatement returns some or all of the risk transferred to the borrower, the bank said.

“From the point of view of the reinsurer, the situation in which the original ceant recovers 100% of the insurance contract from the borrower has the same economic and financial consequences as a contract that is not recognized for sale or loss,” the bank said.