The Spring NAIC meeting was held in Orlando, Florida from April 6, 2019, through April 9, 2019.
- The Statutory Accounting Principles Working Group met on Saturday, April 6, 2019. The group adopted various revisions that will be incorporated into the Accounting Practices and Procedures Manual. There was one substantive revision that became effective for year ending 2018.
- The Statutory Accounting Working Blanks Group met on Saturday, April 6, 2019, and made various revisions to the Quarterly and Annual Statement Blanks.
The following is a summary of key takeaways from the latest meeting:
Statutory Accounting Principles Working Group (SAPWG)
The SAPWG adopted the following revisions for incorporation into Accounting Practices and Procedures Manual.
Adopted the following substantive revisions to statutory accounting guidance:
- Issue Paper No. 160—Structured Settlements Acquired as Investments: Adopted the issue paper, which documents the substantive revisions adopted to Statement of Statutory Accounting Principles (SSAP) No. 21R—Other Admitted Assets for structured settlements. The changes became effective for year ending 2018.
Adopted the following nonsubstantive revisions to statutory accounting guidance (effective upon adoption unless a date is specifically noted):
- SSAP No. 2R—Cash, Cash Equivalents, Drafts and Short-Term Investments, SSAP No. 26R—Bonds, SSAP No. 43R—Loan-backed and Structured Securities, and SSAP No. 86—Derivatives: Revisions, effective December 31, 2019, clarify the accounting and reporting for structured notes. A structured note is defined as an investment that is structured to resemble a debt instrument, where the contractual amount of the instrument to be paid at maturity is at risk for other than the failure of the borrower to pay the contractual amount due. Structured notes reflect derivative instruments (e.g., put option or forward contract) that are wrapped by a debt structure. The adopted revisions include the following:
- SSAP No. 2R: Derivative instruments shall not be reported as cash equivalents or short-term instruments regardless of their maturity date.
- SSAP No. 26R: Structured notes are explicitly excluded from the scope of SSAP No. 26R.
- SSAP No. 43R: Structured notes that are mortgage-referenced securities are in scope of SSAP No. 43R.
- SSAP No. 86: Structured notes, excluding those in scope of SSAP No. 43R, are considered derivative instruments and shall be captured in scope of SSAP No. 86.
- SSAP No. 16R—Electronic Data Processing Equipment and Leasehold Improvements: Revisions adopt with modification ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, allowing the capitalization of implementation costs from a cloud hosting service contract as nonoperating system software with amortization not to exceed five years. Adopted revisions also clarify the accounting for cloud hosting arrangements that are not service contracts. Revisions are effective January 1, 2020, with early adoption permitted. The adoption shall occur either prospectively to all implementation costs incurred after the date of adoption, or as a change in accounting principle under SSAP No. 3—Accounting Changes and Corrections of Errors.
- SSAP No. 30R—Unaffiliated Common Stock: Revisions clarify that assets pledged to a Federal Home Loan Bank (FHLB) on behalf of an affiliate shall be nonadmitted pursuant to SSAP No. 4—Assets and Nonadmitted Assets, and clarify that transactions entered into on behalf of an affiliate, but that are structured to exclude the affiliate shall be considered a related party transaction under SSAP No. 25—Affiliates and Other Related Parties.
- SSAP No. 30R—Unaffiliated Common Stock: Revisions explicitly capture foreign open-end fund investments in scope with a January 1, 2019 effective date. Changes will be made to the Supplemental Investment Reporting Interrogatory (SIRI) to clarify what should be captured in Line 2 (top 10 issuers), to add a new disclosure for investments with fund managers and will consider revisions to Line 13 of SIRI (10 largest equity interests).
- SSAP No. 55—Unpaid Claims, Losses and Loss Adjustment Expenses: Revisions clarify the reporting of interest on accident and health claims, with a January 1, 2020, effective date, with early adoption permitted.
- SSAP No. 86—Derivatives: With adoption of the exposed revisions, all of the following will be considered U.S. benchmark interest rates for hedge accounting:
- Interest rates on direct Treasury obligations of the U.S. government
- London Interbank Offered Rate (LIBOR) Swap Rate
- Fed Funds Effective Rate Overnight Index Swap Rate
- Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate
- Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
- SSAP No. 92—Postretirement Benefits Other than Pensions and SSAP No. 102—Pensions: Revisions adopt with modification the disclosure amendments in ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans.
- SSAP No. 95—Nonmonetary Transactions and SSAP No. 104R—Share-Based Payments: Revisions adopt with modification ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, eliminating the section for nonemployee awards and including guidance for nonemployees with the guidance for employees.
- SSAP No. 100R—Fair Value: Revisions adopt with modification the disclosure amendments in ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement and clarify prior actions on U.S. generally accepted accounting principles (GAAP).
- Appendix B—Interpretations of Statutory Accounting Principles:
- Adopted INT 19-01—Extension of Ninety-Day Rule for the Impact of California Camp Fire, Hill Fire and Woolsey Fire, to provide a temporary extension to the 90-day rule under SSAP No. 6—Uncollected Premium Balances, Bills Receivable for Premiums, and Amounts Due from Agents and Brokers. INT 19-01 will be automatically nullified April 24, 2019.
- Adopted INT 19-02—Single Security Initiative, to incorporate a limited-scope exception to SSAP No. 26R and prescribe guidance for SSAP No. 43R securities exchanged under the Freddie Mac Single Security Initiative.
- Appendix D—Nonapplicable GAAP Pronouncements: Revisions reject the following ASUs as not applicable:
- ASU 2017-13, Amendments to SEC Paragraphs
- ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
- ASU 2018-04, Debt Securities and Regulated Operations
- ASU 2018-05, Amendments Pursuant to SEC Staff Accounting Bulletin No. 118
- ASU 2018-06, Financial Services – Depository and Lending
Adopted the following editorial revision to statutory accounting:
SSAP No. 97—Subsidiary, Controlled and Affiliated Entities: Revisions clarify that investments in scope of
SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies are not required to complete
SSAP No. 97 disclosures unless directed under SSAP No. 48.
Exposed the following substantive revisions to statutory accounting guidance:
- SSAP No. 22—Leases: Exposed a substantively revised SSAP No. 22R and corresponding Issue Paper No. 16X—Leases to incorporate guidance from ASU 2016-02, Leases, but maintain the operating lease concept.
- Issue Paper 16X—Property and Casualty Reinsurance Credit: Exposed the issue paper to document for historical purposes the adopted revisions to SSAP No. 62R—Property and Casualty Reinsurance.
Statutory Accounting Blanks Working Group (SABWG)
The SABWG adopted the following revisions for incorporation into the statutory accounting annual and/or quarterly blank instructions:
- 2018-23BWG – Add questions 34.1 and 34.2 to the General Interrogatories, Part 2 for fraternal benefit societies only, along with instructions regarding 34.2.
- 2018-24BWG – Adjust asset valuation reserve (AVR) factors in the life, accident & health/fraternal blank for those where the related risk-based capital (RBC) factors have changed due to the federal Tax Cuts and Jobs Act of 2017 (TCJA).
- 2018-25BWG – Modify the reinsurance ceded code list in the health and life, accident & health/fraternal quarterly Schedule S to match the list used for annual statement reporting. Add an additional column and associated instructions for type of business ceded.
- 2018-27BWG – Add reference to reporting separate account or protected cell to the instructions for Note 5L(4). Modify the illustrations to include additional lines for separate accounts or protected cells in addition to the general account, with a notation indicating which lines apply to the general account and which lines apply to separate accounts or protected cells.
- 2018-28BWG – Add instructions to Note 9, Income taxes for new disclosures; Note 9H, Repatriation Transition Tax (RTT); and Note 9I, Alternative Minimum Tax (AMT) Credit. An illustration will be added for Note 9I and will be data captured.
- 2018-29BWG – In the separate accounts blank, remove line 5, Contract Loans, from the separate accounts asset page and renumber the remaining lines.
- 2018-30BWG – Modify instructions and illustration Note 10O, Subsidiary, Controlled or Affiliated (SCA) Loss Tracking to include references to SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies and SSAP No. 48 entities.
- 2018-31BWG – Add to new categories (unit investment trusts and closed-end funds) to the common stock categories on Schedule D. Add the new categories to the Summary Investment Schedule. Add definition of “unit investment trusts” and “closed-end funds” to the Investment Schedules General Instructions and modify the definition of “mutual fund.” Add categories for “unit investment trusts” and “closed-end funds” to Schedule DL, Part 1 and Part 2.