Rating agency Standard & Poor's believes that European insurers will find the introduction of International Financial Reporting Standards prolonged and painful, but that the market is likely to profit in the long term from greater transparency.

In a market report published last month, S&P credit analyst Rob Jones says: 'The cost burden of implementing the proposed IFRS will be significant, and the new standards will lead to greater reported earnings volatility in the market. Ultimately, however, both the capital markets and policyholders will reward insurers for their improved transparency, rather than penalising them for their less predictable results.'

The International Accounting Standards Board's insurance contracts proposals have been lambasted by the industry. In this magazine's August issue (p84) the CFO of insurance giant Allianz criticised the proposals as inconsistent and set to trigger complex system adjustments.

S&P's Jones, however, concludes: 'Insurers' balance sheets have been viewed with substantial mistrust in the recent past, but with high quality disclosure, IFRS could ultimately result in lower volatility in stock prices.'

•   IFRS: burning issues, p78.