NAIC’s SAPWG Advances Exposure Drafts at Virtual Summer National Meeting

The National Association of Insurance Commissioners (NAIC) Statutory Accounting Principles Working Group (SAPWG) met remotely on July 30, as part of the NAIC’s all-virtual 2020 Summer National Meeting.

SAPWG exposed for public comment, until August 14, draft guidance on topics including the following:

• Extension of the NAIC’s prior action on the “90-day rule,” motivated by the COVID-19 pandemic, so that for the third quarter of 2020, premium receivables more than 90 days old would not be required to be non-admitted
• Extension until September 30 of relief concerning impairments of mortgage loans
• Impairments on other investments where payment holidays have been granted
• “Levelized commissions,” in which a funding agent is used to level premium obligations between a carrier and agents
• Effect of a disclaimer (a statement that one entity does not control another despite owning at least 10 percent of the other’s voting shares) on related-party status for statutory accounting purposes
• Updates to the filing review process for investments in subsidiary, controlled and affiliated (SCA) entities.
• Clarification on situations where equity-method losses on an SCA investment can result in negative equity valuation of such investment
• Clarification that a mortgage participation may include the right to take legal action but typically does not include the right to take such action unilaterally
• Reporting on short-term investments to the extent that they include cash equivalents
• Mapping of accounting designations of residential and commercial mortgage-backed securities to the NAIC designation categories as shown in the Purposes and Procedures Manual of the NAIC Investment Analysis Office
• Accounting treatment of perpetual bonds
• Whether credit tenant loans (CTLs) are appropriately classified under SSAP No. 43R – Loan-Backed and Structured Securities
• Return of premium and other premium adjustments

The following items were deferred for subsequent interim or national meetings of SAPWG:

• Investment products that appear to be surplus notes but include “multi-layered/linked transactions that ‘embed’ the risk” of payment non-approval by the insurance regulator
• Clarification of reporting for retroactive reinsurance that qualifies for accounting treatment as prospective reinsurance