Canadian Insurers are asking the Canadian government to move the reporting rules in their favour. In summary, insurance companies demand an amendment of IFRS which Canadian government is prepared to comply with but wants to effect no sooner than 2013.

The industry state that the new rules will implement tremendous instability to the c/e ratio in year-to-year (or quarter-to-quarter) comparisons. The problem is, not only would this make period-to-period comparisons significantly more challenging, but it would also prevent comparisons to results calculated under the old standard.

LSM Insurance think the the second one is weedy excuse though, as the the industry would most probably be asked to make new calculations for recent few periods’ statements applying the new order precisely for the aim of logical comparability, as is the situation with most amendments of the rules. Nonetheless, a adjustment of standards will absolutely mean bigger amount of administrative expenses in the time of the shift at the very least.

As to the instability of capital, the FP reports that the insurance industry representatives are pledging for a 2-layer accounting system that allows capital to be calculated based on a different pack of standards than the International Financial Reporting Standards. This sure does make sense because the amounts of capital backups are checked and regulated by the Office of the Superintendent of Financial Institutions. Should there be huge instability of capital, the the companies may be needed to re-check the reserves more often so that foil optimal capital management.

In extreme situations, malnourished capital reserves may prompt OSFI to consider an insurance company bankrupt. Now, it is unworkable to describe the exact result of International Financial Reporting Standards on c/e instability, as the new standards are still before final completion by the International Accounting Standards Board (IASB). However, the insurers are expecting that a 2-layer regulations, which is in place in the Anglo-Saxon countries will downgrade any such worries.