The National Association of Mutual Insurance Companies has gone on record as being in strong disagreement with an International Accounting Standards Board (ASB) proposal that would cause mutual insurers’ mergers to be accounted for like those of investor-owned insurers.
The NAMIC said that while it recognized “the indirect but growing influence of international developments on U.S. insurance industry regulation” and the need to represent the interests of its European members, mutual insurers should remain exempt from the IASB standard.
The bulletin pointed out that the proposed regulation “would end for mutual insurers subject to international accounting the exemption from provisions of International Financial Reporting Standard (IFRS) 3 that basically prohibit ‘pooling-of-interests’ accounting by which mutual insurers simply combine their balance sheets. With closure of the exemption mutual insurers that are combining would have to recognize one or another as the acquirer and others as acquirees.”
The NAMIC also indicated that while “mutual insurers domiciled in the United States are not subject to international accounting,” international standards “are expected to affect accounting used by insurers and other businesses in the United States.”
William Boyd, NAMIC’s financial regulation manager explained that the proposal, “issued in the form of an ‘Exposure Draft,’ would in essence cause mutual insurers subject to international accounting to regard the ‘acquirer’ as simply having made a purchase of assets and liabilities and measuring their value against a purchase price, imputing good will for any difference.” Boyd stressed that this “is inconsistent with the facts of ownership of mutual companies, which is not divisible or traded. The exemption should be maintained for mutual insurers.”
NAMIC said it had offered its comments “in response to the IASB’s Exposure Draft-Amendments to IFRS 3 Business Combinations-“Combinations by Contract Alone or Involving Mutual Entities.” That standard also includes cooperative entities. European Union countries are expected to be subject to international accounting standards at the beginning of 2005.
The full text of NAMIC’s comment letter can be read on the organization’s website, NAMIC Online, at: http://www.namic.org/pdf/040730IASBExposureDraft.pdf.
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