Lessons Learned from the Financial Crisis: Recent Developments … · 2019-11-21 · Lessons...

IASA Northeastern Chapter 56th Annual Conference

NORTHEASTERN CHAPTER

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Peter AustinVice President, Accounting Pol icy

The Travelers Companies, Inc.

NOVEMBER 21, 2019MYSTIC, CT

Statutory Accounting & Reporting Update


Agenda Learning Objectives

Items Adopted by the Statutory Accounting Principles Working Group (SAPWG) and the Blanks Working Group (BWG)

SAPWG and BWG items to Consider for 2019 Annual Reporting and Beyond

Appendix A: Overview of SAPWG, the BWG, and the standard setting process

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Learning Objectives

Key SAPWG and BWG changes effective for 2019 financial statement reporting and beyond

SAPWG and BWG exposures currently under consideration

Overview of the SAPWG, BWG, and the NAIC accounting standard setting process

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Adopted Statutory Accounting & Reporting Guidance

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Adopted revisions to SSAP No. 21R, Other Admitted Assets to incorporate accounting guidance for structured settlement income streams acquired by insurers as investments

The revisions exclude securitizations within the scope of SSAP No. 43R, Loan-Backed and Structured Securities and provide for the classification of a structured settlement as either a period-certain or a life contingent structured settlement

Period certain structured settlements are classified as an admitted asset to the extent it has been legally acquired in accordance with all state and federal requirements

Life contingent structured settlements are classified as a nonadmitted asset

Issue Paper No. 160, Structured Settlements Acquired as Investments was also adopted to reflect the substantive revisions to SSAP No. 21R

Effective December 31, 2018

Ref # 2018-17, Structured Settlements

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Adopted revisions to add a reference for structured settlements acquired by a reporting entity as an investment and where the company has the legal right to receive payments

This change reflects the revisions to SSAP No. 21R, Other Admitted Assets for structured settlements to the Schedule BA General Instructions

Effective with 2019 Annual Reporting and First Quarter 2020 Reporting for L, A&H/F, P, H, and T Companies

BWG 2019-06, Schedule BA General Instructions

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BWG 2019-06, Schedule BA General Instructions

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Adopted guidance for SSAP No. 26R, Bonds for situations where the consideration received from a callable bond is less than par

In these situations, the reporting entity shall separately allocate the consideration received between investment income and realized gain/loss

The portion of consideration received that represents prepayment penalties and/or acceleration fees shall be reported as investment income

The new guidance only requires prepayment penalty classification for reporting entities which have a process in place to identify explicit prepayment penalty or acceleration fees, and clarifies that if consideration received was less than the book/adjusted carrying value, the entire difference is reported as investment income

Effective Immediately

Ref # 2018-32, Prepayment Penalties

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9

Before the clarifying guidance was adopted:



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Added instructions for determining the gain(loss) reported in Column 18 and the prepayment penalty and/or acceleration fee amount in Column 20 on Schedule D to reflect the adopted changes for SSAP No. 26R, Bonds where the consideration received from a callable bond is less than par

Effective with 2019 Annual Reporting and First Quarter 2020 Reporting for L, A&H/F, P, H and T Companies

BWG 2019-10, Prepayment Penalties

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Adopted revisions to SSAP Nos. 2R, Cash, Cash Equivalents, Drafts, and Short-Term Investments; 26R, Bonds; 43R, Loan-Backed and Structured Securities; and 86, Derivatives that require structured note investments, except for mortgage-referenced securities, to be reported as derivatives in accordance with SSAP No. 86

A structured noted is an investment which resembles a bond, but the holder assumes a risk of principal loss based on an underlying component unrelated to the credit risk of the issuer.

A referral was made to BWG for AVR and RBC revisions for structured notes

A new agenda item was also introduced to consider inclusion of fair value accounting guidance in SSAP No. 86 for “other” derivatives for instances where the reporting entity’s state of domicile permits admittance under the state investment laws

Effective with December 31, 2019 Reporting

Ref# 2018-18, Structured Notes

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Adopted changes to modify the instructions to reflect changes adopted to SSAP No. 26R, Bonds and SSAP No. 43R, Loan-Backed and Structured Securities and SSAP No. 86, Derivatives

Added reference to include U.S. Special Revenue and Special Revenue Category


BWG 2019-09, Structured Notes

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IASA Northeastern Chapter 56th Annual Conference 14

BWG 2019-09, Structured Notes


This interpretation is issued to provide a limited scope exception to SSAP No. 26R, Bonds and prescribe guidance in SSAP No. 43R, Loan-Backed and Structured Securities for securities under the Freddie Mac Single Security Initiative

Under this initiative, reporting entities will be permitted to exchange existing “45-day securities” to “55-day securities” without any material change to the securities, or to the loans that back the securities

The security received under the exchange would not be recognized at the fair value of the security surrendered or received


Ref # 2019-02, INT 19-02 – Single Security Initiative

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Adopted a revised issue paper and substantive revisions to SSAP No. 30R, Unaffiliated Common Stock

Revisions include a revised common stock definition to include non-publicly traded or restricted common stock, as well as closed-end funds and unit-investment trusts

Effective January 1, 2019

Ref # 2017-32, Investment Clarification Project

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Adopted revisions to add new categories (Unit Investment Trust and Closed-end Funds) to the common stock categories on Schedule D and the Summary Investment Schedule


BWG 2018-31, Common Stock

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BWG 2018-31, Summary Investment Schedule

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Adopted revisions to SSAP No. 30R, Unaffiliated Common Stock to clarify that assets pledged to a Federal Home Loan Bank (FHLB), on behalf of an affiliate, are treated as a nonadmitted asset

This guidance is restricted to insurers that are FHLB members

For instances where a transaction is entered into on behalf of an affiliate, but structured to exclude the affiliate, this transaction would be accounted for as a related-party transaction, and would be accounted for in accordance with SSAP No. 25, Affiliates and Other Related Parties


Ref # 2018-33, Pledges to FHLBs

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Adopted revisions to SSAP No. 30R, Unaffiliated Common Stock to explicitly permit foreign open-end mutual funds to be in scope and be reported as common stock investments

The SAPWG sponsored annual statement BWG proposals to:

1) Capture a new code on the common stock schedule to identify foreign mutual funds;

2) Incorporate revisions to the Supplemental Investment Risk Interrogatory to clarify what should be included in line 2, the 10 largest exposures; and

3) Capture a new disclosure on diversified and non-diversified investments with fund managers

Effective with January 1, 2019 Reporting

Ref # 2018-34, Foreign Mutual Funds

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Added a code for foreign mutual funds and instruction to include foreign open-end investment funds to be included as mutual funds

These changes incorporate the changes to SSAP No. 30R, Unaffiliated Common Stock

Effective with 2019 Annual Reporting and First Quarter 2020 Reporting for L, A&H/F, P, H and T Companies

BWG 2019-12, Foreign Mutual Funds

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BWG 2019-12, Foreign Mutual Funds

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This item modifies the instructions for Question 2 of the Supplemental Investment Risks Interrogatories to exclude diversified foreign mutual funds and adds disclosure of top 10 fund managers

Effective with 2019 Annual Reporting for L, A&H/F, P, H, and T Companies

BWG 2019-13, Supplemental Investment Risks Interrogatories

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BWG 2019-13, Supplemental Investment Risks Interrogatories

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Adopted guidance to SSAP No. 37, Mortgage Loans, to clarify that while direct mortgage loans are included within the scope of SSAP No. 37, securities and funds are excluded with a reference to bundled mortgage loans are not within the scope of this SSAP

The guidance permitting a “participation agreement” was adopted in 2017, and was intended to allow ownership in a single mortgage loan agreement with a sole borrower when the insurer is not named on the original mortgage loan agreement


Ref # 2018-22, Participation Agreement in a Mortgage Loan

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Adopted revisions to SSAP No. 100R, Fair Value, which adopts, with modification for statutory accounting, the amendments to ASU 2018-13, Changes to the Disclosure Requirements for Fair Value for U.S. GAAP

The revisions include the disclosure objective, and eliminate the disclosure of information between Level 1 and Level 2 of the fair value hierarchy (for items reported and measured at fair value) and eliminate the disclosure of the reporting entity’s policy for determining when transfers between levels have occurred

The changes also incorporate disclosures related to the calculation of net asset value


Ref # 2018-36, Changes to Disclosure for Fair Value

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Modified the instructions for Note 20, Fair Value to reflect changes adopted for SSAP No. 100R

These revisions do not change any of the disclosure templates


BWG 2019-07, Changes to SSAP No. 100R

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Adopted revisions to SSAP No. 103R, Transfers and Servicing of Financial Assets and Extinguishments of Liabilities to reduce the disclosure requirements for repurchase and reverse repurchase transactions

Specifically, the changes eliminate the “minimum” and “average daily balance” disclosures, as well as information on counterparties

Information of defaults would no longer be captured in the data template – disclosure in the narrative would be made if a default were to occur


Ref # 2019-05, Repurchase Disclosures

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Modified the instructions and table illustrations for Notes 5F, 5G, 5H and 5I to reflect changes made to SSAP No. 103R, Transfers and Servicing of Financial Assets and Extinguishment of Liabilities



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Adopted revisions to SSAP No. 43R, Loan-Backed and Structured Securities to eliminate the modified filing exempt process in determining the final NAIC designation for securities rated by a NAIC Credit Rating Provider rating

The proposal allows for early adoption for December 31, 2018 reporting, provided that the early adoption is applied on an all or nothing basis

Effective January 1, 2019 with early adoption permitted

Ref # 2018-19, Elimination of Modified Filing Exempt

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Adopted revisions to SSAP No. 43R, Loan-Backed and Structured Securities to permit the reporting of multiple-designations as a single item in the aggregate using the worst NAIC designation for instances where a security may have multiple NAIC designations or separately by lot

This item had previously been deferred until agenda item 2018-19 was addressed


Ref # 2018-03, Reporting NAIC Designations as Weighted Averages

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Adopted revisions to SSAP No. 86, Derivatives to include provisions of ASU 2017-12, Derivatives and Hedging from U.S. GAAP into statutory accounting for hedge effectiveness documentation

The revisions are intended to reduce the cost and complexity of applying hedge accounting by simplifying how the assessments of hedge effectiveness may be performed: (i) allow qualitative subsequent effectiveness test if certain conditions are met; (ii) permit more time for the initial hedge effectiveness assessment; and (iii) clarify that companies may apply the “critical terms match” method for a group of forecasted transactions if the derivatives mature within the same 31 day period or fiscal month

Effective January 1, 2019 with early adoption permitted as of December 31, 2018 (if the entity is a GAAP filer, early adoption must be made for both GAAP and statutory accounting)

Ref # 2018-30, Hedge Effectiveness Documentation

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Adopted new SSAP No. 108, Derivatives and Hedging Variable Annuity Guarantees and related Issue Paper No. 159 to provide specific accounting guidance for derivatives meeting specific requirements

These derivatives are used to hedge interest rate risk for variable annuity products which provide a guarantee for interest rate risk due to sensitivity and would not qualify for effectiveness in accordance with SSAP No. 86, Derivatives

The specialized accounting permits specialized “macro-hedging” applied to a portfolio of variable annuities – hedging effectiveness must still be made on an on-going basis

Effective January 1, 2020 with early adoption permitted as of January 1, 2019

Ref # 2016-03, Derivative Hedging Variable Annuities

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This item modified the instructions and illustration for Note 8, Derivatives for disclosures adopted by SSAP No. 108, Derivative Hedging Variable Annuity Guarantees and also adds categories for Variable Annuity Guarantees to the instructions for Schedule DB, Parts A & B, and a new general interrogatory


BWG 2019-14, Illustration for SSAP No. 108

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BWG 2019-14, Illustration for SSAP No. 108

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This item modified the instructions and illustration for Note 8, Derivatives for disclosures adopted by SSAP No. 108, Derivative Hedging Variable Annuity Guarantees for quarterly disclosures that were not included in BWG 2019-14 when adopted

Effective with First Quarter 2020 Reporting for L, A&H/F, P, H, and T Companies

BWG 2019-23, SSAP No. 108 Quarterly Disclosures

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Adopted revisions to SSAP No. 86, Derivatives to reflect the updated benchmark interest rates permitted under ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities for U.S. GAAP, the Securities Industry and Financial Markets Association (SIPFMA) Municipal Swap Rate was added

ASU 2018-16, Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as Benchmark Interest Rate for Hedge Accounting Purposes, the SOFR OIS was added for U.S. GAAP

These revisions to the benchmark rates for hedge accounting purposes are made due to concerns about the sustainability of LIBOR (London Inter-Bank Offered Rate)


Ref # 2016-46, Derivative Benchmark of Interest Rates

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Adopted revisions to SSAP No. 48, Joint Ventures, Partnerships and Limited Liability Companies to add disclosures to capture information when a reporting entity’s share of the investee’s losses exceeds the carrying value of the investment

This item clarifies the accounting and reporting guidance for SSAP No. 48 entities in a loss position and the applicability of the SSAP No. 97, Investments in Subsidiary, Controlled and Affiliated Entities guidance (i.e., Agenda item 2018-09) to SSAP No. 48 entities

These new disclosures apply to SSAP No. 48 investments in which the reporting entity is subject to SSAP No. 97 accounting and reporting guidance


Ref # 2018-27, Entities’ Loss Tracking

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Adopted exposed revisions to SSAP No. 97, Investments in Subsidiary, Controlled and Affiliated Entities to remove a conflict of guidance as adopted by agenda item 2018-27 to require the loss tracking disclosures for entities in accordance with No. 48, Joint Ventures, Partnerships and Limited Liability Companies

This update clarifies that the new disclosures apply to SSAP No. 48 investments in which the reporting entity is subject to SSAP No. 97 accounting and reporting guidance


Ref # 2018-47EP, NAIC Accounting Practices and Procedures Manual Editorial & Maintenance Update

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Adopted changes to reflect changes to SSAP No. 48 to include the loss tracking disclosures


BWG 2018-30, Entities’ Loss Tracking

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Adopted revisions to SSAP No. 68, Business Combinations and Goodwillto clarify that “statutory mergers” include instances where a reporting entity cancels its ownership of the common stock of a subsidiary, a controlled or an affiliated entity (SCA), resulting in the parent directly reporting the SCA’s assets and liabilities in its financial statements

With adoption, the SAPWG confirmed that these scenarios are subject to the statutory accounting restatement guidance


Ref # 2018-23, Business Combinations and Goodwill

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Adopted revisions to SSAP No. 16R, Electronic Data Processing Equipment and Software to allow for the capitalization of implementation costs from a cloud hosting service contract as non-operating software (i.e., to be classified as a nonadmitted asset) with depreciation not to exceed the lesser of the hosting arrangement term or five years

For cloud hosting arrangements that are not service contracts, an operating or non-operating system software asset shall be recognized for the costs incurred for the software license in accordance with SSAP No. 16R

If the reporting entity has a hosting arrangement that includes both the acquisition of a software asset and an ongoing hosting arrangement, the ongoing hosting arrangement shall be accounted for in accordance with SSAP No. 22, Leases


Ref # 2018-40, Implementation Costs Incurred in a Cloud Arrangement that is a Service Contract

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Adopted revisions to SSAP No. 55, Unpaid Claims and Loss Adjustment Expenses to clarify the treatment for interest paid on accident and health claims

Interest paid to claimants should be reported as Adjusting and Other Loss Adjustment Expenses

Interest paid to regulators should be reported as regulatory fines and fees


Ref # 2018-39, Interest on Claims

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Adopted guidance to SSAP No. 61R, Life, Deposit-Type and Accident and Health Reinsurance and SSAP No. 62R, Property and Casualty Reinsurance to address some issues raised by regulators related to the application of risk transfer as provided within SSAP No. 61R and to determine if the U.S. GAAP requirements for risk transfer are a higher threshold than the risk transfer requirements for statutory accounting

SSAP No. 61 R - Modifications to SSAP No. 61R propose disclosures and updates to Appendix A-791 Q&A to address “excessive” YRT premiums related to the risk transfer. Not Finalized – still in process

SSAP No. 62R – Clarifying U.S. GAAP guidance was adopted to directly incorporate the guidance on multiple-year retrospectively rated contracts and other interpretive U.S. GAAP guidance into the SSAP

This guidance was previously incorporated by reference

Effective date for SSAP No. 62R is effective immediately

Ref # 2017-28, Reinsurance Risk Transfer

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The working group clarified that the adoption of Agenda Item 2017-28 for property and casualty contracts is to be applied to contracts in effect as of January 1, 2019

If a change is required to prior application, it is reported as a change in accounting principle

Effective January 1, 2019

Ref # 2019-11, Property and Casualty Reinsurance

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Adopted revisions to SSAP No. 15, Debt and Holding Company Obligations to reference existing guidance in SSAP No. 72, Surplus and Quasi-Reorganizations in instances where there has been forgiveness of a debt owed


Ref # 2018-20, Debt Forgiveness Between Related Parties

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Adopted guidance to SSAP No. 72, Surplus and Quasi-Reorganizations to clarify that a reporting entity shall classify a distribution that is a return of capital as a charge to gross paid-in and contributed surplus

Gross Paid-in and Contributed Surplus

Ref # 2018-21, Surplus and Quasi-Reorganizations

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Unassigned Funds (Surplus) par 13:

Ref # 2018-21, Surplus and Quasi-Reorganizations

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Adopted revisions to SSAP No. 25, Affiliates and Other Related Parties to clarify the continued application of SSAP No. 25, as well as an “affiliated” classification, when a transaction is in substance a related party transaction in instances where there may be a non-related intermediary

Revisions were also made to SSAP No. 26R, Bonds, SSAP No. 32, Preferred Stock and SSAP No. 43R, Loan-backed and Structured Securities to identify that investment transactions involving related parties are subject to the provisions of SSAP No. 25


Ref # 2019-03, Affiliate Transactions

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Adopted revisions to SSAP No. 26R, Bonds and SSAP No. 72, Surplus and Quasi-Reorganization to clarify the accounting for bonds received as capital contributions in non-economic and economic transactions


Ref # 2019-07, Bonds Received as Dividends or Distributions

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Modified the “Actual Cost” Column to reflect changes to SSAP No. 26R, Bonds


BWG 2019-15, Bonds Received as Dividends or Distributions

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Adopted revisions to SSAP No. 92, Postretirement Benefits Other Than Pensions and SSAP No. 102, Pensions which adopts, with modification for statutory accounting the amendments to ASU 2018-14 for U.S. GAAP

The revisions eliminate the disclosure of the amounts in unassigned funds expected to be recognized as a component of net periodic benefit cost in subsequent fiscal years, as well as the amount and timing of any plan assets expected to be returned to the employer during the 12-month period that follows the most recent annual statement of financial position

Effective Immediately upon adoption (May 29, 2019 Conference Call)

Ref # 2018-37, Changes to Disclosure for Defined Benefit Plans

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Modified the instructions for Note 12, Retirement Plans, Deferred Compensation and Compensated Absences and Other Postretirement Benefit Plans to reflect changes adopted for SSAP No. 92 and SSAP No. 102


BWG 2019-08, Changes to SSAP No. 92 & No. 102

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Adopted a substantively revised SSAP No. 22R, Leases, which incorporates certain guidance and language from the new GAAP guidance of ASU 2016-02, Leases

Consistent with previous exposures, and reflecting a departure from the new GAAP guidance, the revised SSAP No. 22R rejects the recognition of a right-to-use lease asset and the associated lease liability and instead considers all leases to be operating leases


Ref # 2016-02, Leases

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Rejected for statutory accounting ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts

It was noted that the rejection of the U.S. GAAP for statutory accounting (i.e., SSAP No. 50, Classifications of Insurance or Managed Care Contracts; SSAP No. 51, Life Contracts; SSAP No. 52, Deposit-Type Contracts; and SSAP No. 56, Separate Accounts) guidance would not impact disclosures for Other Comprehensive Basis of Accounting issues

Other edits may need to be made for other SSAPs (i.e., losses, policy acquisition costs)


Ref # 2019-06, Long Duration Contracts

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ASU 2015-08, Business Combinations – Pushdown Accounting, Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115 (ASU 2015-08) was issued to provide Securities and Exchange Commission (SEC) guidance specific to pushdown accounting for Topic 805, Business Combinations

The guidance in ASU 2015-08 is specific to SEC registrants (U.S. GAAP)

SSAP No. 68, Business Combinations and Goodwill and SSAP No. 97, Investments in Subsidiary, Controlled and Affiliated Entities provides statutory accounting guidance and the permissibility of pushdown accounting for statutory accounting

This item was rejected for statutory accounting – Agenda Item 2019-12, ASU 2014-17, Business Combinations – Pushdown Accounting, a Consensus of the FASB Emerging Issues Task Force is currently exposed for comment

Effective immediately

Ref # 2019-16, Pushdown Accounting

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Other Reporting Changes

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Adopted a change to facilitate the identification of mutual fund investments that have been assigned an NAIC Designation by the SVO

This change is part of a broader effort to align treatment for funds that only or predominately hold fixed income assets across schedules, as well as a referral from the Capital Adequacy Task Force to integrate RBC treatment


BWG 2019-03, Schedule D NAIC Designation

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BWG 2019-03, Schedule D NAIC Designation

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Adopted revisions to add new instructions and illustration (to be data captured) to Note 21, Other Items incorporate changes to SSAP No. 21R, Other Admitted Assets (i.e., Note 21H for Property/Casualty and Title; Note 21I for Life/Fraternal and Health)


BWG 2019-05, Note 21 – Other Items

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BWG 2019-05, Note 21 – Other Items

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Adopted a change to add a NAIC Designation Modifier to the NAIC Designation column for Schedule D, DL and BA to accommodate the NAIC Designation Category granularity framework adopted by the Valuation of Securities (E) Task Force on June 11, 2018

Effective with First Quarter 2020 Reporting and Annual 2020 Reporting for L, A&H/F, P, H, S/A, Protected Cell and T Companies

BWG 2019-18, NAIC Designation Framework

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Adopted a change for unaffiliated certificates of deposit to Schedules D, DA, DL and E

Unaffiliated certificates of deposit usually do not have a CUSIP and may be identified and eliminated from validation processes that highlight missing or invalid CUSIPs

Effective with First Quarter 2020 Reporting and Annual 2020 Reporting for L, A&H/F, P, H, S/A, Protected Cell and T Companies

BWG 2019-19, Unaffiliated Certificates of Deposit

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BWG 2019-19, Unaffiliated Certificates of Deposit

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The Casualty Actuarial and Statistical (C) Task Force proposes addition of “Qualification Documentation” so the Appointed Actuary would be required to maintain workpapers explaining how the actuary meets the definition of “Qualified Actuary”

Effective with 2019 Annual Reporting for P Companies

BWG 2019-20, Qualified Actuary Definition

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Exposed Statutory Accounting Guidance

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SSAP No. 61 R - Modifications to SSAP No. 61R propose disclosures and updates to Appendix A-791 Q&A to address “excessive” YRT premiums related to the risk transfer. Not Finalized – still in process

Ref# 2017-28, Life and Health Reinsurance Credit

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The FASB issued ASU 2016-13, Financial Instruments—Credit Losses, to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments on June 16, 2016

The SAPWG exposed a draft concept paper on the application of the new GAAP guidance to statutory accounting. The concept paper was unclear and resulted in industry drafting an interpretation of staff’s intent. Staff agreed with industry’s interpretation of the intent and industry submitted a comment letter on the intent in early November

Currently, NAIC staff is working on a draft issue paper for exposure

Ref# 2016-20, Credit Losses

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Exposed Blanks Proposals

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Change in Blanks Working Group Procedure

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This proposal is to modify the Blanks Procedures to reflect that the Blanks Working Group will be conducting its business exclusively through conference calls and will not be meeting at the National Meeting in the foreseeable future


APPENDIX

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NAIC Working Group Structure

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Plenary & Executive Committee

Financial Condition (E) Committee

Accounting Practices & Procedures Task Force

Statutory Accounting Principles Working

Group (SAPWG)

Blanks Working Group (BWG)

NAIC Working Group Structure

Only SAPWG is Authorizedto Modify the AP&P Manual

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Overview of SAPWGThe SAPWG is responsible for developing and adopting substantive, non nonsubstantive and interpretative revisions to the NAIC Accounting Practices and Procedures Manual

Substantive statutory accounting revisions introduce original or modified accounting principles. Substantive revisions can be reflected in an existing Statement of Statutory Accounting Principles (SSAP) or a new SSAP

Nonsubstantive statutory accounting revisions are characterized as language clarifications that do not modify the original intent of a SSAP

SSAPs are the highest level (i.e., level 1) in the statutory accounting hierarchy

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Overview of SAPWGAn interpretation to an existing SSAP may be developed to provide timely application, interpretation or clarification guidance. Revisions classified as an interpretation shall not amend, supersede or conflict with existing, effective SSAPs

Interpretations are considered the second highest authority (i.e., Level 2) in the statutory accounting hierarchy

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Overview of BWGThe BWG is responsible for the consideration of improvements and revisions to the various annual/quarterly statement blanks to:

1) conform these blanks to changes made in other areas of the NAIC to promote uniformity in reporting of financial information by insurers;

2) develop reporting formats for other entities subject to the jurisdiction of state insurance departments;

3) conform the various NAIC blanks and instructions to adopted NAIC policy;

4) oversee the development of additional reporting formats within the existing annual financial statements as needs are identified; and

5) monitor and improve the quality of financial data filed by insurance companies by recommending improved or additional language for the Annual Statement Instructions.

The NAIC Annual Statement Instructions are Level 3 in the statutory accounting hierarchy

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NAIC Accounting Change ProcessSubstantive Changes1) Form A exposed in SAPWG for new or revised

SSAPs2) Comments received, issue paper exposed, first

public hearing3) Comments received SSAP exposed w/effective

date, second public hearing4) Vote for adoption (simple majority)5) Up the chain: SAPWG -> AP&P TF -> FCC

Nonsubstantive Changes1) Form A exposed in SAPWG2) Comments received, issue paper exposed/re-

exposed, 3) At least one public hearing4) Vote for adoption (multiple items sometimes

adopted together)5) Usually effective upon adoption (but can have

effective date)

Interpretations1) Questions related to application, interpretation of

existing SSAPs2) Effective 1/1/2016, handled in SAPWG. Used to be

separate working group (EAIWG)3) Two public hearings required4) Supermajority vote to adopt (2/3)5) Interpretations eventually incorporated into SSAPs

Coordination w/other NAIC Groups1) New disclosures often followed by referral to

BWG, sometimes concurrent exposures2) Not uncommon for SAPWG and BWG exposures to

be effective in different years. Disclosures often free-formed initially then data captured once BWG exposure adopted

3) Issues can cross multiple groups (VOSTF for investments, CATF for RBC most common)

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Sources for SAPWG Updates


Sources for BWG Updates


Questions

Lessons Learned from the Financial Crisis: Recent Developments … · 2019-11-21 · Lessons...

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