Accounting rules snare insurers in SOFR discounting switch

Re-couponing swaps to reduce discount risk could have adverse accounting consequences for insurers

Complex accounting rules are dissuading some insurance companies from re-couponing legacy swaps ahead of the ‘big bang’ discounting switch at clearing houses in October. These firms had been expected to reduce the discount risk in their books by monetising deeply in-the-money positions. But some are discovering this can have adverse accounting consequences for their business.

“We are re-couponing in portfolios where we can, but there are some portfolios where the business unit is more sensitive