This report summarizes key activities of the National Association of Insurance Commissioners (NAIC) Statutory Accounting Principles (E) Working Group (SAPWG) “evotes” on Dec. 28, 2020 and Jan. 6, 2021 for interpretations on credit tenant loans (CTLs) and troubled debt restructurings (TDRs).
Insurance organizations should take note of these changes as they may significantly affect their accounting for 2020 and beyond.
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 Statement of Statutory Accounting Principles (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 Interpretation (INT) 20-10 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. On Dec. 28, 2020, SAPWG adopted INT 20-10; the following summarizes the 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.
On Dec. 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021, which slightly modified and extended the original Coronavirus Aid, Relief, and Economic Security (CARES) Act. These modifications included extending the provisions for temporary relief from TDRs. Accordingly, on Jan. 6, 2021, SAPWG exposed tentative extended effective dates for previously adopted interpretations related to TDRs:
Proposed revisions in each interpretation above would extend their effective dates through the earlier of Jan. 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the COVID–19 outbreak, declared by the President on March 13, 2020 under the National Emergencies Act, terminates. With this extension, the interpretation’s effective dates correspond with the current effective dates of the CARES Act. Unless the outbreak under the National Emergencies Act terminates, both interpretations will automatically expire on Jan. 2 , 2022 (to include year-end 2021 financial statements reporting).
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