NAIC Spring 2015 National Meeting Highlights
By Jean Adams-Harris, CFE, CPA, CISA, AES, MCM, Principal; and Lori Brock, CFE, Senior Examiner
A regulator’s work is never done, which was evidenced at the NAIC Spring 2015 National Meeting. Highlights from the jam packed meeting include:
Accounting Practices and Principles – Non-Substantive Changes
The following revisions were effective immediately upon their adoption:
• SSAP No. 1- Disclosure of Accounting Policies, Risks & Uncertainties, and Other Disclosures and SSAP No. 4 - Assets and Nonadmitted Assets – Adopted ASU 2014-15, Presentation of Financial Statements - Going Concern requiring the evaluation and disclosure of whether there is substantial doubt about the entity’s ability to continue as a going concern.
• SSAP No. 11- Postemployment Benefits and Compensated Absences - Certain defined benefit and defined contribution plan disclosures were deleted and a reference was added to SSAP No. 92 disclosures.
• SSAP No. 69 - Statement of Cash Flow – Items reported in the Cash Flow Statement are limited to cash, cash equivalents and short-term investments. The disclosures were expanded to include non-cash operating items, such as investments transferred in a reinsurance agreement.
• SSAP No. 92 - Accounting for Postretirement Benefits Other Than Pensions and SSAP No. 102 - Accounting for Pensions - Incorporated INT 13-03, Clarification of Surplus Deferral.
The newly formed NAIC Cybersecurity (EX) Task Force held its kickoff meeting on March 29, 2015. A draft Principles for Effective Cybersecurity Insurance Regulatory Guidance, which includes twelve guiding principles to create a consistent approach for regulatory oversight of insurers and insurance producers in order to protect consumer’s personally identifiable information from cybersecurity breaches, was discussed and later adopted on April 16, 2015. Insurance companies and producers can expect increased scrutiny from regulators of cybersecurity risks and mitigating controls.
Investment Classification Review Project
Four non-substantive revisions to SSAP No. 26 – Bonds, Excluding Loan-Backed and Structured Securities were exposed for comment:
• Incorporate the U.S. GAAP definition of a security;
• Require all bonds subject to SSAP No. 26 have a “contractual amount of principal due”;
• Exchange Traded Funds should use Fair Value or Net Asset Value as the Book Adjusted Carrying Value; and
• Define non-bonds as debt-like securities that do not fit into the proposed bond definition.
Principles-Based Reserving Update (PBR)
Twenty states have adopted the Standard Valuation Law (SVL) and three states are awaiting the Governor’s signature. Forty-two states, representing at least 75% of U.S. life premiums, must adopt the SVL for PBR to be effective for life companies. Twenty additional states expect to introduce or have active legislation this year. January 1, 2017 is the projected PBR implementation date.
The Small Company exemption proposal was discussed, which would be applicable to companies writing less than $300 million and insurer groups writing less than $600 million in ordinary life premiums with an RBC of at least 450% of Authorized Control Level and no material universal life secondary guarantees in-force.
To address issues surrounding ceding variable annuity business to captive reinsurers, a Variable Annuities Issues (E) Working Group was appointed.
For more information, contact: Jean Adams-Harris at email@example.com or Lori Brock at firstname.lastname@example.org.
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