Canadian life insurance companies are lobbying the federal government and regulatory bodies to move the reporting rules in their favour. In summary, they demand an amendment of IFRS which Canada agreed to put in use but wants to effect not before 2013. They believe that the new rules will implement radical volatility to the capital/equity indicators in year-to-year (quarterly) comparisons. Unfortunately, not only would this make the comparisons much more problematic, but it would also stop comparisons to statements prepared under the former standard.

I think the latter is a feeble reason though, as the insurers would most probably be asked to make new calculations for past few periods' results applying the brand new order exactly for the purposes of logical comparison, as is the situation with most alternations of the rules. Nonetheless, a new set of rules will definitely bring bigger amount of administrative costs in the time of the transition at the very least.

As to the volatility of capital, the Financial Post says that the the industry are requiring a two-layer accounting rules that permits capital to be assessed based on a different pack of standards than the International Financial Reporting Standards. This makes sense since the levels of capital backups are observed and controlled by the OSFI. Should there be too big volatility of capital reserves, the insurance companies may be needed to modify them more often which put off ideal capital management.

In extreme situations, substandard capital reserves may force OSFI to consider an insurer bankrupt. In these days, it is far from possible to describe the exact effects of International Financial Reporting Standards on capital and earnings volatility, as the new rules are still being developed by the International Accounting Standards Board. However, the insurance companies are expecting that a two-layer standards, which is valid in the US and the UK will erase any such beliefs.

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About Author
Brought to you by Lorne S. Marr, president of LSM Insurance, an independent brokerage company from Toronto, Canada.