Updates for the Insurance Industry: Statutory Accounting Principles


By Jason Lindstrom, CPA

Updates from the Statutory Accounting Principles Working Group (SAPWG)

Insurance industry professionals should be aware of the latest updates in Statutory Accounting Principles. The Statutory Accounting Principles Working Group (SAPWG) met on August 10, 2022 in Portland, Oregon. The group adopted one New SAP Concept and several SAP clarifications that will be incorporated into the Accounting Practices and Procedures Manual.

New SAP Concept

The SAPWG adopted the following new SAP concepts to statutory accounting guidance:

  1. SSAP No. 86 – Effective Derivatives – ASU 2017-12 – Revisions result with a new Exhibit A, replacing both Exhibit A and Exhibit B of SSAP No. 86 – Derivatives that adopts with modification U.S. GAAP guidance in determining hedge effectiveness, and measurement guidance for excluded components. This new SAP concept is effective January 1, 2023 with early adoption permitted.

SAP Clarifications

The SAPWG adopted the following SAP clarifications to statutory accounting guidance:

  1. Preamble and SSAP No. 4 – Conceptual Framework – Updates - Revisions incorporate updates from FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting – Chapter 4, Elements of Financial Statements, which updates the definitions of an asset. Also adopted Issue Paper No. 166 – Updates to the Definition of an Asset to document the revisions. This clarification is effective immediately. 
  2. SSAP No. 48 – Alternative Valuation of Minority Ownership Interests – Revisions clarify that the audit of an entity utilizing the U.S. tax basis equity valuation exception shall occur at the investee level. This clarification is effective immediately.
  3. SSAP No. 24 – ASU 2021-10, Government Assistance – Revisions incorporate certain disclosures from ASU 2021-10, Government Assistance, Disclosures by Business Entities about Government Assistance regarding terms and provisions of assistance received. This clarification is effective immediately.
  4. SSAP No. 22R – ASU 2021-09, Leases, Discount Rates for Lessees – Revisions reject ASU 2021-09, Leases Discount Rate for Lessees That Are Not Public Business Entities for statutory accounting. This clarification is effective immediately.    
  5. SSAP No. 104R – ASU 2021-07, Compensation – Stock Compensation – Revisions incorporate the practical expedient from ASU 2021-07, Compensation – Stock Compensation, Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards for the current price input, a required component for option-pricing models utilized in determining fair value for share-based payments. This clarification is effective immediately.
  6. SSAP No. 47 and SSAP No. 68 – ASU 2021-08, Business Combinations – Revisions reject ASU 2021-08, Business Combinations, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers for statutory accounting. Revisions in SSAP No. 68 also note that rejection does not impact the determination of U.S. GAAP book value in an acquired entity. This clarification is effective immediately.   

How the Updated SSAP Affect Insurance Organizations

While the changes from the August SAPWG meeting that are effective immediately are just SAP clarifications, we would be happy to address any questions you have regarding how these changes will specifically affect your organization. We will continue to monitor development from the SAPWG when additional meetings are held. The next meeting of the SAPWG is scheduled for December 13, 2022, as part of the Fall 2022 National Meeting of the NAIC in Tampa, FL.

In this challenging business environment, it’s important to stay compliant and make informed decisions. Get in touch to find out how these SAP updates may affect your organization.

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