The NAIC 2019 Fall Summary Continued

Updates from the NAIC Statutory Accounting Principles (E) Working Group

Our insurance experts attended the National Association of Insurance Commissioners (NAIC) Fall 2019 National Meeting on Dec. 7–10, 2019, in Austin, Texas, to monitor regulatory updates. This report summarizes key activities that occurred in a conference call that followed, held by the Statutory Accounting Principles (E) Working Group (SAPWG) on Jan. 8, 2020.

Statutory Accounting Principles (E) Working Group

The SAPWG met to discuss two topics, including editorial updates and collateralized fund obligations.

Insurance organizations should take note of these changes, as they may significantly affect their accounting in 2020 and beyond.

Editorial updates

Ref #2019-44EP: NAIC Accounting Practices and Procedures Manual Editorial and Maintenance Update

Adopted revisions to SSAP No. 62R – Property and Casualty Reinsurance and various other SSAPS to improve readability and update cross references. Revisions are effective Jan. 8, 2020.

Collateralized fund obligations

Ref #2019-21: SSAP 43R – Equity Instruments

During the 2019 Summer National Meeting, SAPWG exposed revisions to SSAP No. 43R – Loan-backed and Structured Securities which would exclude collateralized fund obligations (CFOs), and similar structures that reflect underlying equity interests, from the scope of SSAP No. 43R, as well as prevent existing equity assets from being repackaged as securitizations and reported as long-term bonds. In its Jan. 8 conference call, SAPWG directed NAIC staff to begin drafting an issue paper to address concerns from industry and provide clarification on proposed revisions to SSAP No. 43R. The issue paper will discuss four issues:

• Division of guidance between items considered “asset-backed securities” under the Code of Federal Regulations (CFR) and items that do not meet this definition
• Removal from the SSAP No. 43R scope investments in the form of a debt instrument where the investment provides that the amount of principal or interest to be returned to the holder is calculated solely with reference to an external market indicator, whether public or proprietary
• Inclusion of guidance, investment reporting provisions, and disclosures to clearly identify and assess “insurer-sponsored securitizations”
• Separate review and reference for equipment trust certificates, credit tenant loans and lease-backed securities

This agenda item is expected to be discussed further at the 2020 Spring National Meeting.

For more information on these topics, or to learn how Baker Tilly’s insurance industry specialists can help, contact our team.