Accounting rulemakers are planning a look at the insurance accounting rules that put American Insurance Group into trouble with securities regulators. The Financial Accounting Standards Board has issued an invitation to comment, looking for ideas on how companies should be required to break apart insurance contracts to better distinguish between true insurance and financing arrangements.
FASB says it’s concerned that existing accounting rules, written more for the benefit of insurance companies than their policyholders, don’t fully describe the level of risk that companies transfer when they buy into an insurance contract. While insurance contracts often contain varying elements of risk transfer intermingled with financing arrangements, current accounting rules don’t necessarily distinguish between the two.
