The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Breaking Views: Insurers close ranks against fair value

Source: is Europe's leading financial commentary service

Date: September 2003

By Christopher Hughes

After the spate of rights issues and dividend cuts that Europe's insurers have inflicted on shareholders over the past year, one might have thought the industry would be a little modest about its predictive powers. Not a bit of it. Insurers are fighting tooth and nail against new accounting rules that would limit their ability to manipulate or, in industry parlance, "smooth" their numbers.

These changes, they argue, will be detrimental to their business, and thus to the shareholder's interest.

The International Accounting Standards Board (IASB) wants to toughen the accounting rules for insurers in a move that could see the demise of the embedded-value method of calculating insurance profits that has dominated the industry in Europe for the past 20 or so years.

Accounts prepared on an embedded-value basis are effectively made up by the insurer itself, because it estimates the value of its own book of business. And while it discloses some of the assumptions it uses in reaching a value, it isn't easy for investors to replicate the calculation themselves.

Insurers make no bones about having used embedded value to smooth profits by twiddling the assumptions.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree