Discussion: “Fair Value Accounting for Property-Liability Insurers and Classification Decisions under FAS 115”

Abstract

Godwin, Petroni and Wahlen, henceforth, GPW, have presented us with the results of an interesting study of the impact of FAS 115 and the 1995 one-time option to alter the reporting of investment securities of property-liability insurers. But, like all good papers this one raises as many new questions as it answers old ones. The center of the study is how and why these insurers changed their investment asset reporting in light of the introduction of the three FAS 115 categories for investment securities of “trading securities,” “available-for-sale,” and “held-to-maturity.” The authors have meaningfully contributed to the literature in this area, as the reader learns much about the change in investment accounting over the period 1991–1995 in the earlier descriptive section of the paper, and the empirical portion sheds new light on the reasons for these changes.