The Financial Accounting Standards Board may require financial reports to show whether insurance contracts are financing vehicles rather than vehicles for transferring insurance risk.
The move comes in the aftermath of companies such as American International Group Inc. being hit with civil fraud actions for improperly accounting for transactions that authorities said were listed as finite reinsurance deals, when in fact they were loans.
FASB is looking into “bifurcating,” or splitting, contract reporting because of stories about some companies using “finite reinsurance” arrangements to dress up financial statements without actually transferring ordinary forms of insurable risk, such as the risk of dying or the risk of suffering from a catastrophic illness, the FASB said.
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