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Insurers unlikely as source of next accounting scandal.

Article Excerpt
The high-profile accounting frauds that recently have roiled corporate America also could erupt among property/casualty insurers, but industry analysts and other observers say it's not very likely.

Even though insurers' reserves are an area ripe for mismanagement, most observers agree that the industry's regulation and other factors, such as statutory accounting requirements, make a major accounting scandal in the insurance industry unlikely.

In the wake of Enron Corp.'s collapse in 2001, a string of other large companies-including WorldCom Inc., Merck & Co., Xerox Corp. and Tyco International Ltd.-have all revealed accounting irregularities.

Perhaps the most spectacular of the recent scandals involves Clinton, Miss.-based telecommunications giant WorldCom, which reported more than $3.8 billion in everyday expenses as capital expenditures. Such accounting, which financial reporting standards do not allow, permitted the company to spread those expenses out and falsely boost reported profits.

``I think it's fair to say that it certainly is possible that this kind of thing could hit the insurance industry as well,'' said Jack Gibson, life sector leader for North America for Tillinghast-Towers Perrin in New York, discussing the entire industry. ``When you look at the kinds of problems that have...