February 2004, Atlanta—A new disclosure-based regulatory model is on the horizon for the insurance and financial services industry. Market discipline is the goal of the new model that is designed to encourage prudent financial management by implementing increased regulation. This model poses significant challenges for insurers in the financial reporting process due to the need for increased disclosure.

Author Jean Gora, FLMI, Manager of Research LOMA, indicates that "Much insurance financial reporting rests on assumptions about the future for example how long people will live, what interest rates will be. Because no one can know the future, these assumptions are essentially subjective. This situation poses challenges for insurers in a time of aggressive disclosure regulation."

The report, Insurer Transparency in an Era of Aggressive Financial Disclosure Regulation, details the evidence of this model and the challenges it poses for both insurers and bankers.

Topics in the report include:

• Expanded regulation and enforcement of financial reporting in the US capital market including the Sarbanes-Oxley Act of 2002 following the accounting scandals of 2002.

• The movement toward a common set of international accounting standards due to the globalization of the current financial markets.

• Increased auditing and disclosure of industry accounting assumptions and risk based capital requirements. How market discipline is created because companies who disclose their assumptions are less likely to engage in risky business ventures giving regulators less reason to intervene in their affairs.

The 110-page LOMA report is written for chief financial officers, treasurers, auditors, controllers, and line accounting managers who are interested in current financial disclosure developments in the insurance and financial services industry.

The report is free for downloading by employees of LOMA member companies who are registered with the Members Only section of this site. A paper copy of the report is available for US$ 125 (members) and US$ 375 (nonmembers). For more information, telephone 770-984-3784 or e-mail membrel@loma.org.