Statutory Accounting Principles (E) Working Group
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Joint Executive (EX) / Plenary Committee Summary Report
Fall 2009 Meeting Summaries Index

The Statutory Accounting Principles (E) Working Group of the Accounting Practices and Procedures (E) Task Force met Sept. 21, 2009. During this meeting, the Working Group:

• Adopted the following significant items:
  • SSAP No. 10—Income Taxes (SSAP No. 10) (Ref #2009-06)
    The Working Group adopted substantive revisions to SSAP No. 10 to allow increased admittance of deferred-tax assets (DTAs) for companies with a risk-based capital calculation that exceeds a stated percentage. The motion adopted the previously exposed SSAP No. 10 with the following modifications:
    1. Modifications to paragraphs 10e.i. and 10.e.ii.a. to require that admitted DTAs should correspond with IRS tax-loss carryback provisions, not to exceed three years.
    2. Modification to paragraph 10.f.i. to clarify that by regulation, DTAs may not be used for determining any regulatory trigger that involves admitted assets and/or statutory surplus. This would include triggers contained in the Insurance Holding Company System Regulatory Act (#440) — i.e., determination of ordinary or extraordinary dividends — as well as investment limitations and grounds for rehabilitation and liquidation.
    3. Addition of paragraph 10.f.iii. to require DTAs to be reported as an aggregate write-in for surplus.
    4. A sunset provision that expires with year-end Dec. 31, 2010, financial statements.
    5. Formation of a Deferred Tax Asset Subgroup to further evaluate and conclude on the appropriate calculation of admitted DTAs to be applied with financial statements filed after Dec. 31, 2010, including a study of the realization of DTAs.
  • Issue Paper No. 137, Transfer of Property and Casualty Reinsurance Agreements in Run-Off (Issue Paper No. 137) (Ref # 2008-28)
    The Working Group adopted the exposed Issue Paper No. 137 with modifications discussed during the meeting. The adopted guidance expands the exceptions for retroactive reinsurance to include property/casualty reinsurance run-off agreements that meet specified criteria. The Working Group agreed to re-expose SSAP No. 62R—Property and Casualty Reinsurance (Revised) with the modifications discussed during the meeting.
  • Issue Paper No. 135—Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Others (Issue Paper No. 135) (Ref # 2003-12)
    The Working Group adopted the exposed Issue Paper No. 135, with modifications to paragraphs 18, 22, 23 and 32 as discussed during the meeting and directed NAIC staff to draft SSAP No. 5—Liabilities, Contingencies and Impairments of Assets – Revised (SSAP No. 5R) to reflect the adopted guidance for exposure in the interim. The Working Group also agreed to submit a referral to the Capital Adequacy Task Force to determine whether revisions should be made to the risk-based capital calculation as a result of the liability recognition adopted. Issue Paper No. 135 adopts, with modification, FASB Interpretation No. 45: Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). Modifications from FIN 45 include statutory terms and concepts, as well as a requirement to recognize a liability for intercompany or related party transactions, with an offsetting entry to expense, unless such transactions provide “unlimited” guarantees. Discussion on this SSAP is expected during the Winter National Meeting.
  • Issue Paper No. 138—Fair Value Measurements (Issue Paper No. 138) (Ref # 2007-24)
    The Working Group adopted the exposed Issue Paper No. 138, with modifications to paragraphs 16 and 41 as discussed during the meeting, and directed NAIC staff to draft a new SSAP on fair value measurements to reflect the adopted guidance for interim exposure. NAIC staff was directed to work with interested parties on considering additional revisions to paragraph 16 to further consider how derivatives should be addressed. The Working Group agreed to submit a referral to the Valuation of Securities Task Force regarding how fair value is determined by the SVO. Issue Paper No. 138 adopts with modification, FAS 157, Fair Value Measurements (FAS 157). Modifications from FAS 157 include scope exclusions, statutory terms and restrictions, as well as limits own-credit risk considerations in determining the fair value of a liability. Discussion of this new SSAP is expected during the Winter National Meeting.
• Adopted the following nonsubstantive items:
  • SSAP No. 56—Separate Accounts (SSAP No. 56) (Ref # 2007-27)
    The Working Group adopted exposed nonsubstantive disclosure requirements to SSAP No. 56, with an initial 2010 annual reporting effective date. The exposed disclosures were modified to reflect the interested parties’ proposed revisions to the definition of a “total maximum guarantee,” as well as revisions to the separate account securities-lending disclosures. The Working Group agreed to submit a proposal to the Blanks Working Group requesting the inclusion of a new separate account interrogatory that would be utilized to comply with the adopted disclosure requirements. Although nonsubstantive revisions are typically effective upon adoption, the Working Group agreed that the adopted SSAP No. 56 disclosure requirements would initially be effective for 2010 year-end reporting. By the 2010 effective date, the new interrogatory — as well as annual statement instructions and illustrations — will be included within the blanks, and allow for consistent, comparable reporting.
• Adopted as final the following statutory accounting revisions rejecting GAAP guidance as not applicable in Issue Paper No. 99—Nonapplicable GAAP Pronouncements:
  • FSP SOP 94-3-1 and AAG HCO-1, Omnibus Changes to Consolidate and Equity Method Guidance for Not-For-Profit Organizations (FSP FAS 94-3-1) (Ref#2009-08).
• Exposed the following nonsubstantive revisions to statutory accounting guidance:
  • SSAP No. 60—Financial Guaranty Insurance (SSAP No. 60) (Ref # 2009-09)
    The Working Group exposed proposed disclosures within SSAP No. 60. The disclosures were previously exposed, but due to considerations of comments received and modifications suggested by the Financial Guaranty Subgroup, the Working Group agreed to re-expose the revised disclosures for public comment. The Working Group reiterated its desire to have financial guaranty disclosures adopted for the year-end 2009 reporting period.

Due to time restrictions, the Working Group did not address several items included on the agenda. The Working Group will conduct a conference call shortly after the Fall National Meeting to address these items.

The deadline for submission of comments and for new items is Oct. 28, 2009.