NAIC SAPWG 2021 adoptions

This report summarizes all adopted agenda items of the National Association of Insurance Commissioners (NAIC) Statutory Accounting Principles (E) Working Group (SAPWG) during 2021 or first effective for 2021 reporting which resulted in statutory accounting principles (SAP) revisions. Insurance organizations should take note of these changes as they may significantly affect their accounting in 2022 and beyond. The agenda items are organized by adoption date. All adopted revisions to SAP noted below are considered effective immediately after adoption by SAPWG unless specifically noted otherwise. The summaries below come from our article series on SAPWG developments.

Dec. 7, 2019 – Fall National Meeting

Ref #2017-28: Reinsurance Credit – Informal Life and Health Reinsurance Drafting Group Recommendations

SSAP No. 61R – Life and Health Reinsurance

At the Summer National Meeting, SAPWG exposed proposed changes to SSAP No. 61R regarding risk transfer and yearly renewable term (YRT) reinsurance with “excessive premium.” Below is a summary of these proposals and the actions taken on them during the Fall National Meeting:

• SSAP No. 61R disclosures expanded to include “risk limiting” reinsurance contracts. The SAPWG adopted these revisions at the Fall National Meeting. Revisions are effective for reporting periods ending on or after Dec. 15, 2020.
• A-791 – Life and Health Insurance Question and Answer update to clarify the phrase “certain nonproportional contracts” to assist in determining which nonproportional reinsurance contracts are subject to the A-791 guidance. At the Fall National Meeting the SAPWG referred this item to the informal life and health reinsurance drafting group as more discussion is needed regarding this question and answer item.
• New A-791 – Life and Health Insurance Question and Answer added regarding business that has a medical loss ratio rebate. The SAPWG adopted this revision at the Fall National Meeting.
• New A-791 – Life and Health Insurance Question and Answer added under paragraph 2c regarding group term life YRT reinsurance contracts to limit premiums charged by reinsurers on such contracts. The SAPWG elected to send a referral to the Life Actuarial Task Force to receive their insight on this issue as part of their YRT project.

July 30, 2020 – Summer National Meeting

Ref #2019-04: SSAP No. 32 – Investment Classification Project

SSAP No. 32 – Preferred Stock

The SAPWG adopted substantive revisions to SSAP No. 32, and corresponding Issue Paper No. 164 -Preferred Stock, which were effective Jan. 1, 2021. The revisions include:

• Improved preferred stock definitions for classifying preferred stock as redeemable or perpetual. The revisions also incorporate a new exhibit to capture various terms prevalent in preferred stock.
• Revised measurement guidance to ensure appropriate, consistent measurement based on the type of preferred stock held and the terms of the preferred stock. The revisions also incorporate guidance for mandatory convertible preferred stock.
• Clarified impairment guidance as well as guidance for dividend recognition and redemption of preferred stock with the issuer.

Ref #2019-38: Financing Derivatives

SSAP No. 86 – Derivatives

Adopted revisions require gross reporting of derivative activity for financing derivative transactions. A financing derivative transaction is one in which the premium to acquire the derivative is paid throughout the derivative term or at maturity of the derivative. The revisions are also intended to ensure consistency in reporting amounts owed to/from the reporting entity from the acquisition or writing of derivatives. The effective date of Jan. 1, 2021 was intended to allow companies to implement changes in their investment systems prior to adoption as the revisions represent a significant change to how certain companies account for derivatives.

Ref #2020-02: Accounting for Bond Tender Offers

SSAP No. 26R – Bonds

Adopted nonsubstantive revisions to SSAP No. 26R clarify that the accounting and reporting of investment income and capital gain or loss, due to the early liquidation either through a call or a tender offer, shall be similarly applied. The guidance in SSAP No. 26R is currently not specific to called bonds. Rather, the existing guidance refers to “prepayment penalties or acceleration fees in the event the bond is liquidated prior to its scheduled termination date.” The revisions were effective Jan. 1, 2020 with early application permitted.

Ref #2020-05: Repeal of Affordable Care Act Section 9010 Assessment

SSAP No. 106 – Affordable Care Act Section 9010 Assessment

The Affordable Care Act (ACA) Section 9010 assessment, also known as the health insurer’s tax (HIT), was repealed for calendar years beginning Jan. 1, 2021. The adopted substantive revisions supersede SSAP No. 106 and nullify INT 18-02: ACA Section 9010 Assessment Moratoriums and were effective Jan. 1, 2021. There were no changes to required disclosures for year end 2020 reporting, however, additional instructions were posted to the SAPWG website.

March 15, 2021 – Spring National Meeting

Ref #2019-24: Levelized and Persistency Commission

SSAP No. 71 - Policy Acquisition Costs and Commissions

Adopted nonsubstantive revisions to SSAP No. 71 clarify existing levelized commissions guidance and provide additional guidance regarding commission that is based on policy persistency. This agenda item and clarified guidance was developed in response to state financial exams identifying a limited number of insurers that used third parties to pay acquisition costs and did not recognize the full liability to repay those third parties. Not recognizing the full liability to repay the parties who are paying acquisition costs on an insurer’s behalf is inconsistent with the guidance and original intent of SSAP No. 71.

At its March 15 meeting, SAPWG reaffirmed that while the limited number of insurers who are affected by the clarified guidance may have significant impacts to their surplus and risk-based capital, the revisions are nonetheless classified as nonsubstantive, as they are a clarification of existing guidance. The adopted revisions distinguish traditional persistency commission from a funding agreement and clarify that there should be full recognition of funding agreement liabilities when an insurance policy is written, as writing the insurance policy is the obligating event for initial sales commissions.

The adopted revisions were effective Dec. 31, 2021, and apply to existing contracts in effect as of Dec, 31, 2021, and new contracts thereafter. Changes resulting from the adoption of these revisions shall be accounted for as a change in accounting principle in accordance with SSAP No. 3 - Accounting Changes and Corrections of Errors. Accordingly, the impacts of the change in accounting principle would still be calculated as of Jan. 1, 2021, but would not be initially reported until the year-end 2021 financial statements.

SAPWG directed NAIC staff to update an issue paper for exposure which will document the historical discussion on this agenda item and revisions.

SAPWG exposed a blanks proposal to incorporate a new general interrogatory to assist with identifying the use of funding agreements as a concurrent exposure with the Blanks (E) Working Group (BWG). This general interrogatory required the identification of circumstances when an insurer utilizes third parties to pay agent commissions in which the advances paid by the third party are not settled in full within 90 days. The 90-day threshold for reporting was selected to not require reporting when an insurer uses a third party for traditional payment processing.

This agenda item was included as a specific agenda item for the Financial Condition (E) Committee, Executive (EX) Committee and Plenary, and therefore will not be formally adopted or effective until adopted by those committees. The Financial Condition (E) Committee was expected to discuss this agenda item at its meeting on April 13, 2021.

Ref #2019-34: Related Parties, Disclaimer of Affiliation and Variable Interest Entities

SSAP No. 25 – Affiliates and Other Related Parties

• The adopted nonsubstantive revisions clarify identification of related parties and affiliates in SSAP No. 25 and incorporate new disclosures to ensure regulators have the full picture of complicated business structures. Below is a summary of the key aspects within the adopted revisions:
• Clarify the identification of related parties and ensure that any related party identified under U.S. GAAP or SEC reporting requirements would be considered a related party under statutory accounting principles.
• Clarify that any direct or indirect ownership over 10% of the reporting entity results in a related party classification regardless of any disclaimer of control or disclaimer of affiliation.
• Clarify the impact of a disclaimer of control or disclaimer of affiliate under statutory accounting principles. As detailed, such disclaimers impact holding company group allocation and reporting as an SCA under SSAP No. 97, but do not eliminate the classification as a “related party” and the disclosure of material transactions as required under SSAP No. 25.
• Several rejections were made to U.S. GAAP standards addressing variable interest entities.
• Add new disclosure, listed below, within new Schedule Y Part 3, of ownership interest of the reporting entity. The intent of this disclosure is to capture information related to active ownership and is not intended for passive fund owners to be reported.

1. Disclosure is required for all owners with greater than 10% ownership of the reporting entity.
2. The reporting entity must disclose each owner’s ultimate controlling party and must provide a listing of other U.S. insurance groups or entities under that ultimate controlling party’s control.

These updates are not intended to change reporting in Schedule BA or Schedule D for any investments.

Ref #2020-22: Accounting for Perpetual Bonds

SSAP No. 26R – Bonds

Nonsubstantive revisions to SSAP No. 26R clarify the accounting treatment for perpetual bonds. A perpetual bond is a fixed income security, with a fixed schedule of future payments, however it does not contain a maturity date. These bonds are typically not redeemable at the option of the holder but generally possess call options for the benefit of the issuer. Due to the similarities between perpetual bonds and perpetual preferred stock, this agenda item originally proposed similar accounting and reporting treatment be applied for these two instruments and reflected the accounting and reporting guidance for perpetual preferred stock in conjunction with agenda item 2019-04.

The adopted revisions were modified to specify bond treatment for perpetual bonds which have an upcoming, scheduled call date – these perpetual bonds thus would be subject to amortized cost treatment (utilizing the yield-to-worst concept) in instances where a termination date (i.e., call date) is known. Perpetual bonds that do not possess, or no longer possess, a call feature shall be reported at fair value.

Ref #2020-32: SSAP No. 26R – Disclosure Update

SSAP No. 26R – Bonds

Nonsubstantive revisions to SSAP No. 26R expanded the called bond disclosures to also include bonds which are terminated early through a tender offer.

Ref #2020-33: SSAP No. 32R – Publicly Traded Preferred Stock Warrants

SSAP No. 32R – Preferred Stock and SSAP No. 86 – Derivatives

Nonsubstantive revisions to SSAP No. 32R expanded its scope to include publicly traded preferred stock warrants and require publicly traded preferred stock warrants to be reported at fair value. Nonsubstantive revisions to SSAP No. 86 identify this treatment. This treatment is similar to the treatment for publicly traded common stock warrants, which are scoped into SSAP No. 30R.

Ref #2020-34: SSAP No. 43R – Government-Sponsored Enterprises – Credit Risk Transfer Transactions

SSAP No. 43R – Loan-Backed and Structures Securities

Nonsubstantive revisions to SSAP No. 43R reflected changes to the Freddie Mac Structured Agency Credit Risk (STACR) and Fannie Mae Connecticut Avenue Securities (CAS) programs as it is anticipated that future Freddie Mac STACR and Fannie Mae CAS issuances will be solely conducted through a Real Estate Mortgage Investment Conduit (REMIC) trust (which remains functionally equivalent and retains the same material risk structure as the original STACR and CAS programs). The revisions include STACR and CAS REMICs within the scope of SSAP No. 43R and align SSAP No. 43R guidance regarding the financial modeling of mortgage-referenced securities to the requirements as directed in the “Purposes and Procedures Manual of the NAIC Investment Analysis Office.”

Ref #2020-39: Interpretation Policy Statement Updates

Appendix F – Policy Statements

This agenda item adopts nonsubstantive revisions to NAIC Policy Statement on Maintenance of Statutory Accounting Principles in Appendix F, which document the adoption and review process of interpretations of statutory accounting principles. The revisions also clarify that interpretations that conflict with existing SSAPs shall be temporary guidance and restricted to circumstances arising from the need to issue guidance for circumstance requiring immediate, temporary guidance.

Ref #2020-40: Prescribed Practices

Preamble – Accounting Practices and Procedures Manual

This agenda item adopts nonsubstantive revisions to the Preamble Implementation Questions and Answers to clarify prescribed practices. These revisions clarify that while any state in which a company is licensed can issue prescribed practices, the prescribed practices directed by the domiciliary state shall be reflected in the financial statements filed with the NAIC and are the financial statements subject to the independent auditor requirements.

Ref #2020-41: ASU 2020-06: Convertible Instruments

SSAP No. 5R – Liabilities, Contingencies and Impairment of Assets, SSAP No. 72 – Surplus and Quasi-Reorganizations and SSAP No. 86 – Derivatives

Adopted revisions to SSAP No. 5R, SSAP No. 72, and SSAP No. 86 reject ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity for statutory accounting.

Ref #2020-42: ASU 2020-07: Presentation and Disclosures by Not-for-Profit Entities

Appendix D – Nonapplicable GAAP Pronouncements

Adopted revisions in this agenda item reject ASU 2020-07 as not applicable to statutory accounting.

May 20, 2021 – Interim Meeting

Ref #2021-01: ASU 2021-01, Reference Rate Reform

INT 20-01: ASU 2020-04 – Reference Rate Reform

SAPWG previously issued INT 20-01 to adopt ASU 2020-04 Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. Subsequent to that interpretation FASB issued ASU 2021-01, Reference Rate Reform, which expands the scope of ASU 2020-04 by allowing an entity to apply the optional expedients, by stating that a change to the interest rate used for margining, discounting or contract price alignment for a derivative is not considered to be a change to the critical terms of the hedging relationship that requires dedesignation. This agenda item adopts nonsubstantive revisions to INT 20-01 to provide temporary (optional) expedient and exception interpretative guidance, with an expiration date of Dec. 31, 2022. Derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment (regardless of whether they reference LIBOR or another rate that is expected to be discontinued as a result of reference rate reform) would be in scope of INT 20-01. This exception would allow for continuation of the existing hedge relationship and thus not require hedge dedesignation. Adopted revisions also clarify that the intent of INT 20-01 is to capture all hedging transaction types, regardless of if the transaction occurred bilaterally or through a central clearing party.

Ref #2021-02: ASU 2020-08 – Premium Amortization on Callable Debt Securities

SSAP No. 26R – Bonds

Adopted revisions to SSAP No. 26R reject ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs for statutory accounting.

Ref #2021-03: SSAP No. 103R – Disclosures

SSAP No. 103R – Transfers and Servicing of Financial Assets and Extinguishments of Liabilities

This agenda item adopts nonsubstantive revisions for additional disclosures and to data-capture certain existing disclosure elements in SSAP No. 103R as a result of SAPWG’s continued work on the substantive project in agenda item 2019-21: SSAP No. 43R - Equity Instruments. With inclusion of the data templates, narrative reporting will still occur to provide additional information regarding transfers accounted for as a sale when the transferor maintains continuing involvement in the transferred financial assets. A BWG proposal is anticipated to be in place for 2021 year-end reporting.

Ref #2021-05: Cryptocurrencies

INT 21-01T: Statutory Accounting Treatment for Cryptocurrencies

SAPWG adopted INT 21-01T: Statutory Accounting Treatment for Cryptocurrencies which clarifies that cryptocurrencies do not meet the definition of cash in SSAP No. 2R - Cash, Cash Equivalents, Drafts, and Short-Term Investments, and when directly held by the reporting entity are nonadmitted assets for statutory accounting. Cryptocurrencies do not meet the definition within SSAP No. 2R because they are not able to be deposited or exchanged with most U.S. banks and financial institutions. This interpretation does not impact the guidance for investments in funds that may hold cryptocurrencies in SSAP No. 30R - Unaffiliated Common Stock, SSAP No. 48 - Joint Ventures, Partnerships and Limited Liability Companies or SSAP No. 97 - Investments in Subsidiary, Controlled and Affiliated Entities.

Ref #2021-06EP: Editorial Updates

SSAP No. 53 – Property and Casualty Contracts - Premiums, SSAP No. 97 – Investments in Subsidiary, Controlled and Affiliated Entities, and SSAP Glossary

Adopted nonsubstantive changes for editorial corrections and reference changes to the above referenced SSAPs for ease of readability.

Ref #2021-07: ASU 2020-11 – Financial Services – Insurance: Effective Date

Appendix D – Nonapplicable GAAP Pronouncements

Adopted revisions in this agenda item reject ASU 2020-11 as not applicable to statutory accounting.

Ref #2021-08: ASU 2021-02 – Franchisors Revenue from Contracts with Customers

SSAP No. 47 – Uninsured Plans

Adopted revisions to SSAP No. 47 – Uninsured Plans reject ASU 2021-02.

Aug. 26, 2021 – Interim Meeting

Ref #2021-04: SSAP No. 97 – Valuation of Foreign Insurance SCAs

SSAP No. 97 – Investments in Subsidiary, Controlled and Affiliated Entities and SSAP No. 48 - Joint Ventures, Partnerships and Limited Liability Companies

Nonsubstantive revisions restrict the SSAP No. 97, paragraph 9 limited statutory adjustments for foreign insurance SCAs (8.b.iv entities) and will result in a valuation floor of zero if the entity is not engaged in providing services to, or holding assets on behalf of, the U.S. insurers and to clearly indicate that the equity method valuation referenced in SSAP No. 97 can result in a negative equity valuation for SSAP No. 48 entities.

Ref #2021-10: SSAP No. 32R – Clarification of Effective Call Price

SSAP No. 32R – Preferred Stock

SAPWG adopted nonsubstantive revisions to SSAP No. 32R to clarify that the ‘effective call price’ valuation limitation, for all instruments within scope of the standard, shall only apply if the call is currently exercisable by the issuer or if the issuer has announced that the instrument will be redeemed or called.

Nov. 10, 2021 – Interim Meeting

Ref #2021-12EP: Editorial Updates

Preamble, Appendix A-001, Appendix C, Appendix C-2, and SSAP No. 21R – Other Admitted Assets

Nonsubstantive editorial corrections and reference changes to the above referenced sections of the AP&P Manual were made for ease of readability.

Ref #2021-13: Salvage – Legal Recoveries

SSAP No. 55 – Unpaid Claims, Losses and Loss Adjustment Expenses

Nonsubstantive revisions to SSAP No. 55 1) clarify that subrogation recoveries should be reported as a reduction of losses and/or loss adjusting expense or LAE reserves, depending on the nature of the costs being recovered and 2) update the related disclosures to reflect the reporting of estimated salvage and subrogation and their impact on unpaid claims, losses or associated LAE. The clarifications are believed to be consistent with current practice by a majority of reporting entities. In conjunction, with the agenda item, NAIC staff were directed to coordinate developing conforming revisions to the annual statement instructions.

Ref #2021-15: SSAP No. 43R – Residual Tranches

SSAP No. 43R – Loan-Backed and Structured Securities

Nonsubstantive revisions to SSAP No. 43R clarify that residual tranches shall be reported on Schedule BA-Other Long-Term Invested Assets and valued at the lower of cost or fair value. The revisions are effective Dec. 31, 2022 with early adoption permitted. These revisions were made to address inconsistencies in reporting that came to light through the ongoing principles-based bond project and are an interim action in advance of the adoption of the principles-based bond project.

The revisions add a new footnote within paragraph 26 defining residual tranches as securitization tranches and beneficial interests that reflect loss layers without any contractual payments, whether principal or interest, or both.

INT 21-02: Extension of Ninety-Day Rule for the Impact of Hurricane Ida

SSAP No. 6 – Uncollected Premium Balances, Bills Receivable for Premiums, and Amounts Due from Agents and Brokers

SAPWG adopted this Interpretation (INT) which provide an optional 60-day extension from the “ninety-day rule” in SSAP No. 6 for related items that were directly impacted by Hurricane Ida. The INT is consistent with previous temporary extensions granted for other nationally significant catastrophes and will be automatically nullified on Jan. 24, 2022.

Dec. 11, 2021 – Fall National Meeting

Ref #2019-24: Levelized and Persistency Commission - Issue Paper

SSAP No. 71 – Policy Acquisition Costs and Commissions

At the 2021 Spring Meeting SAPWG adopted nonsubstantive revisions to SSAP No. 71 which clarify the guidance regarding levelized commissions with a Dec. 31, 2021, effective date. Read our article regarding those revisions. The revisions were adopted by the Executive (EX) Committee and Plenary on Aug. 17, 2021.

SAPWG adopted Issue Paper No. 165: Levelized Commission to document the historical discussion and final adoption revisions on this topic.

Ref #2021-11: SSAP No. 43R – Credit Tenant Loans - Scope

SSAP No. 43R – Loan-Backed and Structured Securities

On July 15, 2021, the Valuation of Securities (E) Task Force (VOSTF) adopted revisions to the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual) to clarify that the definition of a credit tenant loan (CTL), which defines CTLs as mortgage loans, is specific to “mortgage loans in scope of SSAP No. 37.” This limited amendment to the P&P Manual clarifies that the application of the structural assessment to identify CTLs is limited to direct mortgage loans and relates to the potential reclassification of investments from Schedule B (Mortgage Loans) to Schedule D (Bonds) for qualifying investments. The amendment also clarifies that security structures, which are excluded from SSAP No. 37 – Mortgage Loans, are not subject to the P&P Manual CTL structural assessments and should be captured for accounting and reporting in accordance with the applicable SSAP within the NAIC Accounting Practices and Procedures Manual (AP&P Manual). In order to simplify and clarify current guidance and to address immediate issues with the reporting of mortgage loan CTLs and other securities while the “bond project” (see Other actions directed, below) progresses, SAPWG adopted the following actions:

• Nullified INT 20-10: Reporting Nonconforming CTLs as no longer applicable.
• Disposed of agenda item 2020-24: Accounting and Reporting of Credit Tenant Loans without statutory revisions. This agenda item had two exposures regarding CTLs prior to the development of INT 20-10 and the VOSTF adoption that clarified the definition of CTLs.
• Revisions to SSAP No. 43R to explicitly identify the SVO identified CTLs in scope of SSAP No. 43R and to delete the examples of “other LBSS” in paragraph 27.b.

Ref #2021-14: Policy Statement Terminology Change – Substantive & Nonsubstantive

NAIC Policy Statement on Maintenance of Statutory Accounting Principles

The discussions involving SSAP No. 71 - Policy Acquisition Costs and Commissions, highlighted that the statutory accounting terminology of “substantive” and “nonsubstantive” to describe statutory accounting revisions being considered by SAPWG to the AP&P Manual could be misunderstood by users that are not familiar with the specific definitions and intended application of those terms. To avoid the incorrect perception that these terms may reflect the degree of financial impact to companies based on their common usage, the Financial Condition (E) Committee requested that SAPWG consider updating these terms to prevent future misunderstandings. Under the adopted revisions, a revision that would have previously been considered “substantive” would be referred to as a “New SAP Concept” and a revision that would have previously been considered as “nonsubstantive” would be referred to as a “SAP Clarification.” This agenda item revises only the policy statement referenced above. Agenda item 2021-26EP, discussed in “Exposed revisions to statutory guidance”, below, addresses updating of these terms more comprehensively in the AP&P Manual due to the extent that the terms “substantive” and “nonsubstantive” are currently used throughout the AP&P Manual. These new terms will be used on a go-forward basis only. The effective date of Jan. 1, 2022 is intended to provide a clear date for which new items presented to SAPWG will be reflected with the new terminology.

Ref #2021-16: SSAP No. 30R – FHLB Disclosure – Blanks Referral

SSAP No. 30R – Unaffiliated Common Stock

SAPWG adopted this agenda item, which does not result in statutory revisions, in order to express support for the corresponding Blanks (E) Working Group (BWG) exposure which proposes a supplemental data capture footnote for FHLB borrowings reported in Exhibit 7 as a deposit-type contract.

Ref #2021-17: SSAP No. 32R – Permitted Valuation Methods

SSAP No. 30R – Preferred Stock

Adopted revisions remove 1) lingering references indicating that cost is an allowable valuation method, and 2) reference to “characteristics of debt securities” in paragraph 11.a.i, both of which provide consistency with prior approved edits made when SSAP No. 32R was substantively revised in July 2020.

Ref #2021-19EP: Editorial Updates

SSAP No. 16R – Electronic Data Processing Equipment and Software and SSAP No. 43R – Loan-Backed and Structured Securities

Adopted nonsubstantive changes for editorial corrections and reference changes to the above referenced SSAPs for ease of readability.

Jan. 27, 2022 – Interim Meeting

Ref #2021-18: VM-21 Scenario Consistency Update

SSAP No. 108 – Derivatives Hedging Variable Annuity Guarantees

Adopted revisions, effective Dec. 31, 2021, provide consistency with VM-21: Requirements for Principle-Based Reserves for Variable Annuities (VM-21) with regard to the amortization of deferred assets and deferred liabilities by 1) removing reference to the “standard scenario” and 2) adding reference to the conditional tail expectation (CTE) 70 as well as reference the VM-21’s guidance which allows a reporting entity to choose the company specific market path or CTE with prescribed assumptions to calculate prescribed projection amounts for reserve purposes.

Ref #2021-31: Life Reinsurance Disclosure Clarifications

SSAP No. 61R - Life and Health Reinsurance

Adopted revisions, effective Dec. 31, 2021, to SSAP No. 61R clarify life reinsurance disclosures which were new for 2020 reporting in response to questions from the American Institute of Certified Public Accountants (AICPA) NAIC Task Force. The proposed revisions, summarized below, narrow the scope of the disclosures, and clarify what is required in the disclosures.

1. Clarifies that the disclosures apply to reinsurance contracts in effect for the current period covered by the statement, i.e. comparative disclosure is not required.
2. Clarifies that the disclosures shall be made in the accompanying supplemental schedules. If the disclosures are not applicable, an affirmative statement that no such contracts were identified is acceptable in the notes to the financial statements or the supplemental schedules.
3. Clarifies that disclosures under paragraphs 79 and 80 are for ceded reinsurance contracts.
4. Clarifies that a stop loss or excess of loss reinsurance agreement with deductibles or loss caps which apply to the entire contract and are not adjustable based on other features, do not require disclosure under paragraph 80.
5. Removes required disclosure of non-proportional reinsurance which does not result in significant surplus relief from paragraph 82.
6. Clarifies in paragraph 83 that reporting entities that do not prepare U.S. GAAP financial statements, or its financial statements are not part of upstream U.S. GAAP financial statements, can answer this disclosure as not applicable.

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