This report summarizes key activities of the National Association of Insurance Commissioners (NAIC) Statutory Accounting Principles (E) Working Group (SAPWG) conference call on Dec. 18, 2020. Our insurance industry Value Architects™ attended this virtual meeting to monitor regulatory updates. SAPWG met to discuss interpretations on credit tenant loans (CTLs) and admission of premium receivables.
Insurance organizations should take note of these changes as they may significantly affect their accounting in 2020 and beyond.
INT 20-11: Extension of Ninety-Day Rule for the Impact of 2020 Hurricanes, California Wildfires and Iowa Windstorms
This interpretation provides a temporary 60-day extension from the ninety-day rule for uncollected premium balances specific to the following identified disasters:
The interpretation is similar to previous extensions that have been granted for other major national storms and hurricanes and will automatically be nullified on March 1, 2021.
INT 20-10: Reporting Nonconforming Credit Tenant Loans
This interpretation addresses questions received regarding the actions SAPWG directed at its Nov. 12, 2020 conference call on agenda item 2020-24 Accounting and Reporting of Credit Tenant Loans. In order to provide timely guidance, it was previously identified that this issue needed to be considered separately outside of the substantive SSAP No. 43R project. On Nov. 12, 2020, SAPWG discussed and deferred final decision on inconsistencies in the reporting of “nonconforming” CTLs. This deferral was supported as the SSAP No. 43R project will assess investments that are captured on Schedule D-1. With this project, it was identified that it would be undesirable to require an investment that is currently being reported on Schedule D-1 to be moved to a different schedule if there was potential for that investment to subsequently qualify for Schedule D-1. At its Dec. 18, 2020 conference call, SAPWG revised INT 20-10T in response to industry concerns that there would not be sufficient time for insurers to file nonconforming CTLs and for the NAIC Securities Valuation Office (SVO) to provide NAIC designations on them in time for 2020 reporting. The revised INT 20-10T includes the following summarized provisions:
These provisions are designed to ensure that nonconforming CTLs are not afforded better reporting treatment than conforming CTLs and to provide regulators with information to identify the magnitude of nonconforming CTLs held by reporting entities. This INT is applicable for the year-end 2020 statutory financial statements and through the first three quarters of 2021, expiring on Oct. 1, 2021. SAPWG noted that the exceptions provided in this INT shall not be interpreted to indicate its likely conclusion in determining the appropriate reporting schedule for nonconforming CTLs. Accordingly, reporting entities with nonconforming CTLs should be prepared to make adjustments to comply with the reporting schedule utilized for nonconforming CTLs upon final conclusion by SAPWG.
For more information on these topics, or to learn how Baker Tilly’s insurance industry Value Architects™ can help, contact our team.