Updates from the NAIC Statutory Accounting Principles (E) Working Group
Our insurance experts attended the National Association of Insurance Commissioners (NAIC) Fall 2019 National Meeting on Dec. 7–10, 2019, in Austin, Texas, to monitor regulatory updates. This report summarizes key activities that occurred in a conference call that followed, held by the Statutory Accounting Principles (E) Working Group (SAPWG) on Jan. 8, 2020.
Statutory Accounting Principles (E) Working Group
The SAPWG met to discuss two topics, including editorial updates and collateralized fund obligations.
Insurance organizations should take note of these changes, as they may significantly affect their accounting in 2020 and beyond.
Editorial updates
Ref #2019-44EP: NAIC Accounting Practices and Procedures Manual Editorial and Maintenance Update
Adopted revisions to SSAP No. 62R – Property and Casualty Reinsurance and various other SSAPS to improve readability and update cross references. Revisions are effective Jan. 8, 2020.
Collateralized fund obligations
Ref #2019-21: SSAP 43R – Equity Instruments
During the 2019 Summer National Meeting, SAPWG exposed revisions to SSAP No. 43R – Loan-backed and Structured Securities which would exclude collateralized fund obligations (CFOs), and similar structures that reflect underlying equity interests, from the scope of SSAP No. 43R, as well as prevent existing equity assets from being repackaged as securitizations and reported as long-term bonds. In its Jan. 8 conference call, SAPWG directed NAIC staff to begin drafting an issue paper to address concerns from industry and provide clarification on proposed revisions to SSAP No. 43R. The issue paper will discuss four issues:
- Division of guidance between items considered “asset-backed securities” under the Code of Federal Regulations (CFR) and items that do not meet this definition
- Removal from the SSAP No. 43R scope investments in the form of a debt instrument where the investment provides that the amount of principal or interest to be returned to the holder is calculated solely with reference to an external market indicator, whether public or proprietary
