New and Updated Disclosures Part II: SAPWG and BWG Addendums

Gain Compliance previously provided a overview of changes in the 2017 Annual Statement Instructions. Notably, not all updates and revisions were complete and approved in time to make it into this document; nonetheless, carriers are responsible for complying with the additional guidance as recently provided by the SAP Working Group.

A non-comprehensive of subsequent changes effective on the 2017 Annual Statement follows.

Edits and updates affecting both Life and Property companies.

  • 8.D. New Disclosure: “8.D – Derivative Contracts with Financing Premiums” has been added for the “Identification of whether the reporting entity has derivative contracts with financing premiums. (For purposes of this term, this includes scenarios in which the premium cost is paid at the end of the derivative contract or throughout the derivative contract.)” This addition reflects modifications coming from the SAPWG memo dated 11/06/2017 adopting changes to SSAP No. 86 – Derivatives.
  • 8.E – 8G. Updated, non-substantial change associated with the re-lettering of sections due to the insertion of a new section in 8.D as follows:
    • 8E: “Net Gain or Loss Recognized” disclosure has been re-lettered from 8.D
    • 8.F: “Net Gain or Loss Recognized from Derivatives No Longer Qualifying for Hedge Accounting” disclosure has been re-lettered from 8.E to 8.F.
    • 8.G: “Derivatives Accounted for as Cash Flow Hedges of a Forecasted Transaction” disclosure has been re-lettered from 8.F to 8.G
  • 8.H. New Mandatory Disclosure: “8.H – Premium Cost for Derivative Contracts” has been added for disclosure of “the aggregate, non-discounted total premium cost for these contracts and the premium cost due in each of the following four years, and thereafter.” The disclosure is to “Include the aggregate fair value of derivative instruments with financing premiums excluding the impact of the deferred or financing premiums.” This addition reflects modifications coming from the SAPWG memo dated 11/06/2017 adopting changes to SSAP No. 86 – Derivatives. NOTE: Disclosure 8.H is a required disclosure in all quarters.
  • 17.C. Updated change: the 11/2017 Revision to the Instructions clarify that money market fund transactions are exempt from this disclosure in light of the adoption of changes to SSAP No. 103R – Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
  • 20. Updated change: the guidance in SSAP No. 100R – Fair Value allows the use of net asset value per share (NAV) instead of fair value for certain investments. The guidance is effective Jan. 1, 2018 with early adoption permitted. The 11/2017 Revision to the Instructions gives guidance on early adaption of NAV: “For reporting entities electing to early-adopt, the reporting entity shall include narrative disclosures on the use of NAV and include the SSAP No. 100R disclosures for situations when an investment may be sold below NAV or if there are significant restrictions in the liquidation of an investment held at NAV.” This change is reflected in the tables as follows:
    • 20.A(1) & 20.C. New Column: the guidance in SSAP No. 100R – Fair Value allows the use of net asset value per share (NAV) instead of fair value for certain investments. The guidance is effective Jan. 1, 2018 with early adoption permitted. The 11/2017 Revision to the Instructions gives guidance on early adaption of NAV by utilizing a new column to report NAV included in Level 2 of the Fair Value Hierarchy: “For 2017, those reporting entity’s electing to early adopt the use of net asset value per share (NAV) instead of fair value for certain investments should report those investments in the Level 2 column and provide the NAV amount included in that column in the Net Asset Value (NAV) Column.”

Edits and updates affecting Property companies only:

  • 31. Update: The 11/2017 Revision to the Annual Instructions includes a clarification on the definition for a high deductible policy (as SSAP No. 65 – Property and Casualty Contracts does not define what constitutes a high deductible policy).
  • 31.A. Update: The 11/2017 Revision to the Annual Instructions includes two clarifications. The first is a a note that “The reference to the ‘gross loss reserves’ normally only includes direct business, (excluding reinsurance) because amounts below the deductible are rarely ceded to external reinsurers. However, if amounts under the high deductible layer are not retained by the ceding insurer under either external or internal reinsurance arrangements such as intercompany pools, the ‘gross (of high deductible) amount of loss reserves’ should reflect amounts net of such reinsurance.” The second is a note that “The disclosure is trying to capture total counterparty risk to the policyholder. Therefore, the total amount of deductible that is netted from the reserve and the billed recoverable from the policyholder should be the reported.”

As always, Gain Compliance integrates the latest changes into the NAIC guidelines to streamline the reporting process.

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