2023 Q3 and Annual Reporting Item – Disclosures for Net Negative (Disallowed) Interest Maintenance Reserve (IMR)


During the NAIC 2023 Summer National Meeting, the Statutory Accounting Principles (E) Working Group (SAPWG) adopted optional, limited-time guidance which allows the admittance of net negative (disallowed) IMR up to 10% of adjusted capital and surplus.

Reference Number: INT 23-01 – Net Negative (Disallowed) Interest Maintenance Reserve

Effective Date: Q3 2023

End Date: December 31, 2025 (or sooner depending on subsequent SAPWG actions)

SAPWG Memo to the Blanks Working Group(BWG): To review the additional guidance from the NAIC regarding what is required in the Notes to Financials disclosures as well as the complete INT 23-01, please click here 

What does this mean?

This interpretation prescribes limited-time, optional, statutory accounting guidance, as an exception to the existing guidance detailed in SSAP No. 7 – Asset Valuation Reserve and Interest Maintenance Reserve and the Annual Statement instructions which require nonadmittance of net negative (disallowed) IMR 

Paragraph 13 of the INT provides details of the disclosures required for those reporting entities that choose to admit the net negative (disallowed) IMR asset.  After reaching out to the NAIC, it has been determined that the following disclosures should be captured in Note 21.C – Other Disclosures for Q3 2023 and Annual 2023 reporting.

“13. Reporting entities admitted net negative (disallowed) IMR are required to complete the following disclosures in the annual and quarterly financial statements for IMR:

a. Reporting entities that have allocated gains/losses to IMR from derivatives that were reported at fair value prior to the termination of the derivative shall disclose the unamortized balances in IMR from these allocations separately between gains and losses. 

b. Reporting entities shall complete a note disclosure that details the following: 

i. Net negative (disallowed) IMR in aggregate and allocated between the general account, insulated separate account and non-insulated account, 

ii. Amounts of negative IMR admitted in the general account and reported as an asset in the separate account insulated and non-insulated blank, 

iii. The calculated adjusted capital and surplus per paragraph 9.a., and

iv. Percentage of adjusted capital and surplus for which the admitted net negative (disallowed) IMR represents (including what is admitted in the general account and what is recognized as an asset in the separate account). 

c. Reporting entities shall include a note disclosure that attests to the following statements: 

i. Fixed income investments generating IMR losses comply with the reporting entity’s documented investment or liability management policies, 

ii. IMR losses for fixed income related derivatives are all in accordance with prudent and documented risk management procedures, in accordance with a reporting entity’s derivative use plans and reflect symmetry with historical treatment in which unrealized derivative gains were reversed to IMR and amortized in lieu of being recognized as realized gains upon derivative termination. 

iii. Any deviation to 13.c.i was either because of a temporary and transitory timing issue or related to a specific event, such as a reinsurance transaction, that mechanically made the cause of IMR losses not reflective of reinvestment activities. 

iv. Asset sales that were generating admitted negative IMR were not compelled by liquidity pressures (e.g., to fund significant cash outflows including, but not limited to excess withdrawals and collateral calls). “

What’s Next?

The NAIC SAPWG currently has an item out for exposure that proposes a long-term project to capture accounting guidance for AVR and IMR in SSAP No. 7—Asset Valuation Reserve and Interest Maintenance Reserve. Ref #2023-14 will be considered a new SAP concept with the goal of providing consistency between the SSAP and the Annual Statement Instructions, assessing admittance/non-admittance for negative IMR and proper reflection of the investment schedules within the AVR.

In addition, the NAIC has also indicated they have a BWG proposal that will data-capture the IMR admittance disclosures as part of Note 5 – Investments and move the reporting entity certification to a General Interrogatory. This proposal will be exposed at the next BWG call scheduled for November 7, 2023.

Due to the long-term nature of this proposal, an effective date has not been included. It is noted that interim revisions (within specific agenda items) will be proposed to ensure progress towards consistent application and address potential areas where credit losses may be reported as IMR.

As always, Gain Compliance integrates the latest changes into the NAIC guidelines to streamline the reporting process. If there are any questions or comments, please do not hesitate to reach out.

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