The Statutory Accounting Principles Working Group (“SAPWG”) held their Fall National Meeting in San Diego, California on December 11, 2021. This post is intended to provide an informative snapshot of what was accomplished during the meeting, as well as help accelerate your determination of the impact the adoptions and modifications will have on your financial statements.
The SAPWG reviewed and adopted the following six items that were previously exposed for comment. The nonsubstantive revisions are effective immediately and apply to all lines of business (Life/Fraternal, Property and Health), unless otherwise noted.
- Ref #2019-24: Levelized and Persistency Commission – Issue Paper – This item adopts Issue Paper No. 165 – Levelized Commissions, which documents the discussion, for historical retention purposes, that led to the adoption of nonsubstantive revisions to SSAP No. 71 – Policy Acquisition Costs and Commissions from agenda item 2019-24: Levelized and Persistency Commission. This item was adopted effective December 31, 2021, so that impacted companies would have time to prepare and communicate with their respective domestic regulator any financial impact.
- Ref #2021-11: Credit Tenant Loans – Scope – In July 2021, the Valuation of Securities (E) Task Force adopted revisions to the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual), clarifying that the definition of a credit tenant loan (CTL), is specific to mortgage loans in scope of SSAP No. 37 – Mortgage Loans. As a result of the Task Force’s adopted revisions, this item gives the SAPWG approval to take the following actions:
- Nullify INT 20-10: Reporting Nonconforming CTLs as no longer applicable. Even though the INT has expired prior to the SAPWG’s action, specific nullification language will be added to the INT for historical documentation purposes.
- Dispose agenda item 2020-24: Accounting and Reporting of Credit Tenant Loans without statutory revisions.
- Adopt the exposed nonsubstantive revisions to SSAP No. 43R – Loan-Backed and Structured Securities to 1) explicitly identify SVO-Identified CTLs in scope of SSAP No. 43R and 2) delete the examples of “other Loan-Backed and Structured Securities” in paragraph 27.b.
- Ref #2021-16: FHLB Disclosure – Blanks Referral – This item does not propose statutory revisions to SSAP No. 30R – Unaffiliated Common Stock, but results in a referral to the Blanks (E) Working Group (BWG) to capture information on FHLB funding agreements reported as deposit-type contracts through a supplemental data captured footnote reported in Exhibit 7 (Life/Fraternal) or the Life Supplement (Health). The corresponding exposure is 2021-15BWG, which was exposed for comment on November 16, 2021, with a comment deadline of March 4, 2022 (L/F, H only).
- Ref #2021-17: Permitted Valuation Methods – This item modifies SSAP No. 32R – Preferred Stock to remove 1) references indicating that cost is an allowable valuation method, and 2) reference to “characteristics of debt securities” in paragraph 11.a.i to ensure consistency with prior approved edits to yield what is now SSAP No. 32R, paragraph 11.b.i.
- Ref #2021-19EP: Editorial Updates – This item adopts editorial revisions to SSAP No. 16R – Electronic Data Process Equipment and Software to correct cross paragraph references in paragraphs 11.b and 12.b and to SSAP No. 43R to remove outdated references to guidance which was previously deleted in October 2017 through agenda item 2017-22.
- Ref #2021-14: Policy Statement Terminology Change – Substantive and Nonsubstantive – After considering comments from Interested Parties, the SAPWG approved revisions to the NAIC Policy Statement on Maintenance of Statutory Accounting Principles of the AP&P Manual with a January 1, 2022 effective date. This action is in accordance with the intent of the Financial Condition (E) Committee referral to clarify the terms “substantive” and “nonsubstantive” to prevent future misrepresentations or assessment by others. After the January 1 effective date, and on an ongoing basis, the term “substantive” will reference “a new SSAP or new SSAP concept” and “nonsubstantive” will reference the verbiage of a “SAP clarification”.
Updates from prior meetings are available in Gain’s growing library of resources.
As always, Gain Compliance integrates the latest changes into the NAIC guidelines to streamline the reporting process. If there are any further questions or comments, please do not hesitate to reach out.