Adopts internationally compatible accounting standard
Lloyd's, the global insurance market, today announced a significant step in moving to annual accounting as its statutory reporting regime, by deciding to adopt UK Generally Accepted Accounting Principles (GAAP) from 1 January 2005.
Although Lloyd's will initially adopt UK GAAP, it plans to adopt International Accounting Standards (IAS) when there is more clarity on the proposed standard on accounting for insurance contracts. This should minimise the impact to the Lloyd's market in terms of costs and new systems.
The move is in line with the commitment by the Lloyd's Franchise Board for syndicate accounts to be more transparent and comparable with the accounts of their global industry peer group.
Andrew Moss, Director of Finance, said:
"It makes sense to adopt UK GAAP as a first step. Our current intention is to move to IAS when further clarity emerges.
"Moving to annual accounting from three-year accounting, which has been unique to this market, will make it easier for the industry to compare Lloyd's performance to our peers. It is a positive step in line with Lloyd's commitment to create greater transparency. We will continue to work closely with the market and the accounting profession to ensure the change is implemented smoothly, and we are grateful for their positive input to date."
Simon Sperryn, Chief Executive Officer of the Lloyd's Market Association (LMA), said:
"Having worked with Lloyd's to develop the proposal to adopt UK GAAP, we are pleased with the Franchise Board's decision. We believe that the use of UK GAAP will significantly improve the understanding of the market's performance."
In the coming months, Lloyd's and the LMA will work closely towards achieving full implementation.
Notes to editors:
1. In September 2002, the members of Lloyd's voted to adopt a set of reforms outlined by the Chairman's Strategy Group (CSG), including a proposal to move the main market reporting regime from three-year accounting to annual accounting.
2. The move to adopt UK GAAP will mean that Lloyd's will move from the current three-year accounting system for both syndicates and the Lloyd's global accounts to annual accounting for its statutory reporting.
3. The move to UK GAAP is also a first step along the road towards eventual adoption of International Accounting Standards (IAS) at the appropriate time.
4. Under the annual basis of accounting, the result is determined at the end of the financial year reflecting the profit or loss of providing insurance cover during that year, i.e. in relation to premiums earned during that period (including the anticipation of losses arising on cover to be provided in subsequent periods in respect of commitments entered into prior to the end of the financial year) and any adjustments to the profit or loss of providing insurance cover during earlier financial years.
5. Under the three year accounting basis, all premiums and claims and associated expenses are related to the underwriting year in which the policy incepts and the determination of the underwriting result is deferred until the year of account is closed at the end of three years.
For further information, please contact Lloyd's:
Lloyd's is the world's leading insurance market with a capacity to accept insurance premiums of more than £14.4 billion in 2003. It is the world's second largest commercial insurer and sixth largest reinsurance group. In 2003, 71 syndicates are underwriting insurance at Lloyd's, covering all classes of business from more than 120 countries worldwide. Approximately five per cent of world reinsurance is placed at Lloyd's which also accounts for half of the London market's international insurance premiums.
