Conning Research: Life Industry Faces Challenge of Implementing Upcoming Accounting and Regulatory Changes

(Hartford, CT) February 5, 2009 – Upcoming accounting and regulatory changes will present an operational risk and add to an already significant number of challenges the life insurance industry faces, according to a new study by Conning Research and Consulting. The U.S. and European Union accounting regimes are converging and moving to a principles-based structure. At the same time, insurance regulations-including capital solvency testing-are becoming more risk-focused and will include sophisticated stochastic modeling.

“The transition to a new accounting regime will present a large operational risk to life insurance companies. Insurers must prepare for the coming changes so that they not only comply with the new accounting regime, but also gain a strategic advantage from the transition and resulting structure,” said Stephan Christiansen, director of research at Conning. “For those companies that successfully implement the new accounting regime through a comprehensive ERM framework, management will have the opportunity to take a broader view of risks, and take appropriate actions to help control the risks. The resulting measurements can be more risk sensitive, leading to better business planning and a more efficient use of capital.”

The Conning Research study, Upcoming Life Industry Regulatory and Accounting Changes: Implementing Through ERM, examines the upcoming changes in accounting and regulations and views them as an operational risk, in context with all the other risks insurance companies face. Yet, insurance companies can use the upcoming changes as a catalyst to create a comprehensive ERM management framework that will help them thrive in a financial environment that will be fundamentally different because of the credit crisis.

“U.S. and European Union life insurance accounting and regulations are undergoing a transformation. The final form of the resulting accounting regimes are not yet finalized, and the current credit crisis may well affect that final form. However, most are confident that it will be principles-based,” said Terence Martin, analyst at Conning Research & Consulting. “The move to a principles-based regime will increase the complexity of many accounting and regulatory functions. Some stakeholders have voiced concerns about that complexity, and there are clearly implementation challenges.”

Upcoming Life Industry Regulatory and Accounting Changes: Implementing Through ERM is available through subscription from Conning Research & Consulting by calling (888) 707-1177 or by visiting the company’s web site at

About Conning Research & Consulting

Conning Research & Consulting provides insurance industry analysis to insurers and industry stakeholders. Its published research includes market coverage of 30 segments of the industry in addition to industry forecasting and identification and analysis of major strategic issues. As a result of its wealth of experience and intimate knowledge of the insurance industry, Conning understands industry challenges and opportunities and provides in-depth analyses on a wide range of industry products and issues. The Conning name has represented excellence in independent insurance industry research for 50 years. Conning Research & Consulting is a division of Conning, a provider of asset management and insurance industry research and consulting services to insurers. Conning is headquartered in Hartford, CT.

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