Bank-centric Accounting Rule Makes Insurers Hike Loss Reserves

Insurance giants like Metlife Inc., American International Group Inc., and Prudential Financial Inc. are about to set aside higher reserves to cover credit losses under new accounting rules they must follow this quarter.

The increases under the new CECL standard—for current expected credit losses—make up a small part of insurers’ balance sheets. But the numbers, and how they fluctuate, can shine a light on something investors, analysts, and rating agencies care deeply about: how insurers manage risk.

“We want to see how strong the company’s risk management program is,” said George Hansen, senior research industry analyst at ratings agency AM ...