IFRS should not affect insurance ratings, says Fitch

Fitch Ratings said it did not expect to take any ratings actions on insurance companies as a result of the move to International Financial Reporting Standards (IFRS).

But it warned that the new accounting regime could have a medium-term rating impact for some companies depending on the response of management and investment markets to the new standards.

In addition, Fitch said it could not rule out the possibility that the additional disclosure and information specified under the IFRS would not lead to rating changes due to a more accurate view of the financial status of a company.

Fitch Insurance Group associate director Andrew Murray said: “Although the new accounting standard for insurance contracts (IFRS4) has significant limitations, we believe that it is an important step in the right direction with greater consistency between insurers and enhanced disclosure.

“However, the ultimate goal of fair value accounting for both assets and insurance liabilities remains a long way off and the biggest challenges remain.”

The company said it welcomed the efforts made by the International Accounting Standards Board to improve insurance company reporting through IFRS.

Phase one of the IFRS for insurance is due to be implemented in 2005. Once this is completed, the second phase of the new regulations will be introduced, but this is not expected to be complete before 2007.

A full report containing the rating agency's view on the IFRS is available at fitchratings.com.