The Fall NAIC meeting was held in Austin, Texas from December 5, 2019, through December 10, 2019.
- The Statutory Accounting Principles Working Group met on Saturday, December 7, 2019. The group adopted various revisions that will be incorporated into the Accounting Practices and Procedures Manual. The only revisions made were non-substantive.
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 the Accounting Practices and Procedures Manual.
Adopted the following nonsubstantive revisions to statutory accounting guidance (effective upon adoption unless a date is specifically noted):
- SSAP No. 61R – Life, Deposit-Type and Accident and Health Reinsurance: The revisions provide new disclosures with an effective date of December 31, 2020 and add A-791 Q&As regarding contracts with medical loss ratios and group YRT with an effective date of January 31, 2021.
- SSAP No. 68 – Business Combinations and Goodwill: The revisions clarify that goodwill resulting from the acquisition of a subsidiary, controlled or affiliated (SCA) entity by an insurance reporting entity that is reported on the SCA’s financial statements (resulting from the application of pushdown) is subject to the 10% admittance limit based on the acquiring entity’s capital and surplus. The remainder of the addenda item was re-exposed to consider comments received on pushdown accounting and receive specific examples from interested parties.
- SSAP No. 68 and SSAP No. 97 – Investments in Subsidiary, Controlled and Affiliated Entities: Revisions reject ASU 2019-06, Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities. The alternative option permitted in this ASU is similar to the existing guidance for statutory filers in SSAP No. 68.
- SSAP No. 86 – Derivatives: Revisions clarify the recognition and measurement guidance for derivatives that do not qualify as hedging, income generation or replication transactions.
- Supplemental Investment Risk Interrogatory (SIRI): Revisions clarify that a look-through should only occur for non-diversified funds, and that investments within a diversified fund investment shall be excluded from an aggregation requirement to other equity investments. Revisions also expand the guidance to include SVO-Identified Bond ETFs and SVO-Identified investments with characteristics of fixed-income investments as specific exclusions from the listing. The Working Group directed a Blanks (E) Working Group proposal for 2020 year-end application.
- SSAP No. 103R – Transfers and Servicing of Financial Assets and Extinguishments of Liabilities: Revisions clarify that only wash sales that cross reporting period end-dates are subject to the wash sale disclosure.
- SSAP No. 97: Revisions clarify that nonadmittance is required when there is an unalleviated substantial doubt about an SCA’s ability to continue as a going concern identified in any part of the audit report, accompanying financial statements or notes to the financial statements.
- SSAP No. 100R – Fair Value: Revisions reject ASU 2019-05, Targeted Transition Relief, as the ASU provides optionality, allowing the utilization of a fair value measurement for certain assets.
- Appendix A – Excerpts of NAIC Model Laws: Revisions incorporate the updates from the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786) that incorporate the relevant provisions from the Covered Agreement. This is effective Immediately, but not in-force until the 2019 revisions to Model #785 and Model #786 have been enacted by the state of domicile for the ceding insurer.
- Appendix D – Nonapplicable GAAP Pronouncements: Revisions reject the following ASUs as not applicable to statutory accounting:
- ASU 2019-03, Updating the Definition of Collections.
- ASU 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made.
Adopted the following editorial revisions to statutory accounting:
- SSAP No. 62R: Revisions clarify wording in an existing disclosure.
- SSAP No. 86: Revisions reference the definition of a structured note in SSAP No. 26R – Bonds.
- SSAP No. 97: Revisions add two new suffixes for Securities Valuation Office (SVO) filings that have been carried over from the prior year.
Exposed the following substantive revisions to statutory accounting guidance:
- SSAP No. 32 – Preferred Stock: Exposed a revised issue paper and a draft substantively-revised SSAP as part of the Investment Classification Project.
- SSAP No. 105 – Working Capital Finance Investments: Exposed a draft SSAP to incorporate industry revisions to program requirements, as directed by the Working Group during the Summer National Meeting. The Working Group directed NAIC staff to draft an issue paper.