Insurers were among the biggest fallers on global equity exchanges on Thursday after new accounting rules for the industry raised fears of lower profits and higher costs.
The new standards, launched on Thursday, but unveiled by the International Accounting Standards Board on Wednesday night have been nearly two decades in the making and promise greater transparency in insurers' hitherto complex financial reporting.
“This standard represents the most significant change to insurance accounting requirements in 20 years,” said Martin Bradley, Ernst & Young’s global insurance finance, risk and actuarial leader, in a statement.
Aimed at providing greater consistency in financial reporting, the IFRS 17 regulations will change the way in which insurance liabilities are measured and require insurers to provide higher levels of disclosure than existing financial reporting processes.
The new standard will have a lengthy introduction period to allow the industry to adapt to the rules – ending at the close of 2021 – and will require firms to start reporting using current values instead of historical costs.
Concerns in the market surrounded the likely costs of implementing the changes, which are expected to be significant, while the extensive data gathering required to run the IFRS 17 standards is seen resulting in additional, recurring costs.
Bradley's statement added: "These changes will potentially bring more volatility in reported profit.”
Global shares lower
By midday on Thursday, insurers were among the worst performers on European equity indices. Britain's Aviva lost 1.9% to 518p, while Prudential shed 1.8% to £17.
In Germany, Allianz shed 1% to €168.60 and in France Axa lost 2.1% to €23.33.
During Asian trade China Life fell 1.8% to HK$24.10 in Hong Kong and Ping An Insurance slid 1.5% to HK$46.10.