Regulators are being pressured to add a new layer of rules forcing companies to be more transparent, but they must first find a way to cut through the complexity and confusion inherent in the current approach.
Amid the global capital market turmoil, demands by investors, rating agencies, customers and employees for greater transparency are both warranted and necessary. When confidence is knocked, it’s only right that we look to executives to provide a reassuring hand on the shoulder.
It is heartening to see the response from Bermuda’s re/insurers. Evidence of the willingness to detail more about what they do can be seen in our survey of leading chief financial officers. Their considered responses (page 14) give a valuable insight into how they are approaching some of the toughest financial times since the Great Depression.
As the people charged with delivering that greater transparency, CFOs are at the forefront of reshaping the information we will see. But, they are rightly concerned about how that process is being managed.
In the rush to force change, regulators around the world are coming under increasing pressure to be more prescriptive. Accounting bodies are racing to usher in new rules. CFOs are rightly concerned about the value and adequacy of the changes they are likely to be asked to make.
What we all want is a clearer picture of how a company makes its money and the risks it takes to do that. However, the trend in the past decade has been away from this. Increasingly, time-consuming and costly accounting rules are forcing companies to detail and record often meaningless changes that benefit few, if any, people.
What both the re/insurers and the market want, is a uniform, easy-to-apply system that allows a typical investor to see through the smoke and mirrors to relatively quickly take the pulse of a company’s performance.
Is it too much to ask that life is made easier, rather than harder, for those that work and play in the markets.
Growth lines
The fallout from the financial crisis will clearly have an impact on one of the fastest-growing areas of the market, excess & surplus lines (page 24). With market leader American International Group eating US Government cash like a shredder, Bermuda re/insurers smell blood in the water. Many now are looking to and see signs that prices are at last beginning to harden.
While the full impact of the crisis is still to be seen, all agree that the E&S market is one to watch. And, as actor Jimmy Stewart once said: “One man’s sunset is another man’s dawn.”
