The ABI has today issued an exposure draft of a Statement of RecommendedPractice(SORP) on accounting for insurance business.

The draft SORP, which incorporates earlier guidance on insurance accountingissued bythe ABI in December 1995, now for the first time also includes proposalson accountingfor investment return. Investment return is a major component of insurers'income and todate the industry has adopted a range of accounting practices. The mainfeature of thenew proposals is that all investment return (including realised andunrealised investmentgains/losses) should be included in the profit and loss account.

At the same time, the opportunity has been taken to provide guidance on anumber ofadditional non-investment accounting issues, not covered in the earlierguidance.

Commenting on the draft SORP, Mark Boléat, ABI's Director General, said:

"Publication of the draft SORP represents a major advance ininsurance company financial reporting. It is intended to reduce the range ofaccounting treatments currently adopted by insurers. This will improve the quality ofinformation provided to investors, analysts and indeed all those with an interest ininsurers' financial statements. It will also assist insurers by providing guidance ona number of difficult aspects of insurance accounting. In particular I believethat the progress we have made on accounting for investment return will be widelywelcomed".

The exposure draft has been issued for a consultation period ending onTuesday 28 April1998.

Subject to final ABI approval and clearance from the Accounting StandardsBoard (ASB),it is hoped to publish the SORP as soon as possible after the conclusionof theconsultation period. This will enable insurers to apply it to financialstatements foraccounting periods ending on or after 31 December 1998.

Notes

1. Copies of the SORP are available from Deryck Wright at the ABI, 51Gresham Street, London EC2V 7HQ.



2. Comments on the exposure draft should be forwarded to Deryck Wright(fax: + 44 020 7696 8997).



3. The draft does not include recommendations on accounting forshareholders' profits from long-term (life) insurance business. In 1996 the ABI issueddraft proposals for an achieved profits method to address this. Following theincreasing adoption of this method to provide supplementary information, the ABI intendsto develop these proposals further during 1998.



4. Further enquiries to:




Deryck Wright + 44 020 7217 7635




5. For radio broadcasts, an ISDN line is available.