We examine whether accounting rules can influence gains trading activities in financial institutions. Gains trading occurs when managers strategically sell invested assets to affect earnings. We focus on the U.S. insurance industry, where Life insurers are subject to a rule that requires them to amortize realized capital gains and losses over the remaining maturity of the bond sold. This rule dilutes the impact of realized capital gains and losses on earnings, as only a portion can be recognized immediately as income. We find that the rule is effective in its design – even though managers of Life insurers make trades to offset operational losses, they do not significantly affect reported income. The rule imposes greater costs on managers with fewer near-maturity bonds, and we document more extreme gains trading in those situations. Our study contributes to the literature on gains trading among financial institutions, showing the impact of a unique accounting rule which significantly influences the real activities of managers.