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The Supervisor of Insurance Yadin Antebi on Monday published a circular, which for the first time will impose standards for financial disclosure on insurance companies.
"The new directives will significantly increase the ability to assess financial reports, understand the operations of insurance companies and their sources of profit," Antebi said.
The circular will demand that insurance companies provide more detailed information in their financial statements regarding insurance contracts and liabilities as well as the credit and interest risks they are facing. The disclosure requirements will be effective starting with financial statements filed for 2005.
"Until now, there was no proper order or standard of disclosure and presentation has been poor," an official at the Ministry of Finance told The Jerusalem Post. Insurance companies are very complicated entities involved in many markets facing many risks. Lack of proper disclosure makes it difficult for investors to assess the company's risk exposure or its products."
The need for disclosure for insurance companies coincided with the introduction of the International Financial Reporting Standards 4 in March 2004 by the International Accounting Standard Board to provide interim guidance on accounting for insurance contracts. The Standard is the result of the first phase of the IASB's project to develop an international accounting standard to address the many complex and conceptual problems in insurance accounting.
"We will closely watch the next phase of the Standard and adapt it accordingly for Israeli insurance companies," the ministry official said.
The circular by Antebi will request that insurance companies disclose information in their financial statements on the profits they are making from their life insurance business, providing disclosure on each product. Insurance companies, for example, will be obliged to provide details on their secured and non-secured assets and include the ratings they receive in Israel and abroad.
"In 2006, we are likely to see additional standards to improve financial disclosure. We also expect to enforce the Sarbanes-Oxley 302 Section, which demands corporate responsibility for financial reports, for Israeli insurance companies," said the official.
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