Lloyd’s has made another big step towards moving to modern financial accounting by deciding to adopt the generally accepted accounting principles from January 1, 2005. Finance Director Andrew Moss says the market will eventually adopt international accounting standards 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 will finally close the three-year accounting system Lloyd’s has used since 1788, under which all premiums, claims and associated expenses are related to the underwriting year in which the policy is incepted. The determination of the underwriting result is deferred until the year of account is closed at the end of three years.

As the market has moved closer to the mainstream financial services system, the three-year rule has been increasingly seen as clumsy and unsatisfactory.