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

The Statutory Accounting Principles (E) Working Group of the Accounting Practices and Procedures (E) Task Force met Dec. 5, 2009. During this meeting, the Working Group:

Adopted the following significant items:

• SSAP No. 100—Fair Value Measurements (SSAP No. 100)(Ref # 2007-24)
  The Working Group adopted the exposed SSAP No. 100, with minor revisions. SSAP No. 100 provides statutory accounting guidance on defining fair value, establishing a framework for measurement of fair value, and expanding fair value disclosures. This new SSAP applies fair value when required by other statutory accounting pronouncements that require or permit fair value measurements, but does not require any new items to be measured at fair value. Within SSAP 100, a fair value hierarchy is established to increase consistency and comparability in fair value measurements and related disclosures. SSAP No. 100 is effective for Dec. 31, 2010, annual financial statements, with interim and annual reporting thereafter. Early adoption is permitted for Dec. 31, 2009, annual financial statements. In addition to adopting SSAP 100, the Working Group also adopted various nonsubstantive revisions to other SSAPs to reflect the new fair value guidance within SSAP No. 100.

• SSAP No. 62—Property and Casualty Reinsurance – Revised (SSAP No. 62R) (Ref #2008-28)
  The Working Group adopted the exposed SSAP No. 62R with minor revisions. This substantively revised SSAP expands the exceptions for retroactive reinsurance to include property/casualty reinsurance run-off agreements that meet specified criteria. Although, this is less conservative than other methods of accounting for retroactive reinsurance, there are several criteria, including commissioner approval, financial strength of the nonaffiliated assuming entity and unlimited transfer of risk, without the ability to cancel the contract.

• SSAP No. 60—Financial Guaranty Insurance (SSAP No. 60)  (Ref #2009-09)
  The Working Group adopted the nonsubstantive exposed disclosures to SSAP No. 60, with minor revisions to footnotes. The adopted disclosures are initially required for 2009 year-end reporting, with annual reporting required thereafter. Interim reporting is also required if a significant change has occurred.

• SSAP No. 43R—Loan-Backed and Structured Securities – Revised  (Ref #2009-18)
  The Working Group adopted the nonsubstantive exposed revisions to SSAP No. 43R. These changes update the statutory accounting guidance to reflect the revised “Residential Mortgage-Backed Securities Designation Process” originating from the Valuation of Securities Task Force.

• Issue Paper No. 140—Substantive Revisions to SSAP No. 43 (Issue Paper No. 140)
  The Working Group adopted the exposed Issue Paper No. 140. Issue Paper No. 140 provides a historical reference of the guidance superseded by SSAP No. 43R—Loan-backed and Structured Securities – Revised (SSAP No. 43R), which was adopted in September 2009. Guidance superseded and referenced within Issue Paper No. 140 includes:  SSAP No. 43—Loan-backed and Structured Securities (SSAP No. 43), SSAP No. 98—Treatment of Cash Flows When Quantifying Changes in Valuation and Impairments, an Amendment of SSAP No. 43 (SSAP No. 98) and paragraph 13 of SSAP No. 99—Accounting for Certain Securities Subsequent to an Other-Than-Temporary Impairment (SSAP No. 99). 

 Adopted the following additional items:

• SSAP No. 9—Subsequent Events (SSAP No. 9) (Ref #2009-12)
  The Working Group adopted the nonsubstantive exposed revisions to SSAP No. 9. These revisions adopt FAS 165, Subsequent Events (FAS 165) for statutory accounting. Due to the issuance of both statutory financial statements and audited financial statements for insurers, the adopted revisions include disclosure requirements for both sets of financials that indicate the date for which subsequent events were reviewed, and the dates the financial statements were issued or available to be issued.  

• Preamble, INT 04-01 and INT 04-18 (Ref #2009-13)
  The Working Group adopted the nonsubstantive exposed revisions to the Preamble of the NAIC Accounting Practices and Procedures Manual, INT 04-01: Applicability of New GAAP Disclosures Prior to NAIC Consideration (INT 04-01) and INT 04-18: EITF 00-21: Revenue Arrangements with Multiple Deliverables (INT 04-18) to reference the new FASB codification and GAAP hierarchy established under FAS 168, FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (FAS 168).

• SSAP No. 26—Bonds, excluding Loan-backed and Structured Securities (Ref #2009-16)
  The Working Group adopted the nonsubstantive exposed revisions to paragraph 17e of SSAP No. 26 to revise the bond categories to mirror what has previously been adopted by the Blanks (E) Working Group.

• Appendices A-815 and A-830 (Ref #2009-17)
  The Working Group adopted the nonsubstantive exposed revisions to Appendices A-815 and A-830. These revisions reflect changes made to the corresponding Model Laws adopted by the Life and Health Actuarial Task Force. 

Exposed the following substantive revisions to statutory accounting guidance:

• SSAP No. 5R—Liabilities, Contingencies and Impairments of Assets – Revised (SSAP No. 5R) (Ref #2003-12)
  The Working Group re-exposed revisions to SSAP No. 5R with modifications discussed during the meeting. The substantive revisions proposed to SSAP No. 5R adopt, with modification, FASB Interpretation No. 45: Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45) and incorporate a requirement to recognize a liability, representing the fair value of the guarantee, at the inception of the guarantee. The modifications discussed during the meeting eliminate the requirement for liability recognition for guarantees provided to wholly owned subsidiaries. In addition to the substantive revisions exposed to SSAP No. 5R, the Working Group exposed nonsubstantive revisions to disclosures within SSAP No. 25—Accounting for and Disclosures about Transactions with Affiliates and Other Related Parties (SSAP No. 25). 

• Issue Paper No. 141—Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (Issue Paper No. 141) (Ref #2009-14)
  The Working Group exposed Issue Paper No. 141 for public comment. Issue Paper No. 141 proposes adoption with modification of FAS 166, Accounting for Transfers of Financial Assets – an Amendment to FAS 140 (FAS 166) in a new SSAP to supersede SSAP No. 91R—Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SSAP No. 91R). Revisions to statutory accounting reflected in Issue Paper No. 141 include the establishment of new conditions for when a transferred financial asset can be accounted for as a sale, as well as removal of the concept of a qualifying special-purpose entity. In addition to exposing Issue Paper No. 141, the Working Group also formed a subgroup to review comments and assess the impact of adopting this guidance for statutory accounting.

• Issue Paper No. 142—Variable Interest Entities (Issue Paper No. 142) (Ref #2009-15)
  The Working Group exposed Issue Paper No. 142 for public comment. Issue Paper No. 142 proposes adoption with modification of FAS 167, Amendments to FASB Interpretation No. 46R (FAS 167) in a new SSAP to provide guidance on variable interest entities. The consolidation concept within FAS 167 has previously been rejected for statutory accounting; therefore, Issue Paper No. 142 does not incorporate consolidation aspects, but has been drafted to require documentation of a reporting entity’s financial interests in variable interest entities. The subgroup formed to review Issue Paper No. 141 will also be charged with reviewing this item.

Exposed the following nonsubstantive revisions to statutory accounting guidance:

• SSAP No. 43—Loan-backed and Structured Securities – Revised (SSAP No. 43R) (Ref #2009-19)
  The Working Group exposed nonsubstantive revisions to the disclosures in SSAP No. 43R to clarify that the disclosures that correspond with SSAP No. 27—Disclosure Information about Financial Instruments with Off-Balance-Sheet Risk, Financial Instruments with Concentration of Credit Risk and Disclosures about Fair Value of Financial Instruments (SSAP No. 27) are only required for annual audited statutory financial statements. Within SSAP No. 43R, these disclosures include paragraphs 48a (fair values), 48b (concentrations of credit risk) and 48k (when it is not practicable to estimate fair value). As it is desired to adopt this nonsubstantive revision by year-end, the exposure period is for two weeks.

• Accounting Standards Update 2009-02: Omnibus Update – Amendments to Various Topics for Technical Corrections (ASU 2009-02) (Ref #2009-20)
  The Working Group exposed nonsubstantive revisions to Issue Paper No. 99—Nonapplicable GAAP Pronouncements (Issue Paper No. 99) rejecting ASU 2009-02 for statutory accounting.

Conducted the following actions and discussions:

• SSAP No. 43R—Question and Answer Implementation Guide (Ref #2009-19)
  The Working Group formed a subgroup to review identified questions and establish answers to create a “Questions and Answer Implementation Guide” as an appendix to SSAP No. 43R.

• FSP FAS 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and 124-2) (Ref #2009-07)
  The Working Group discussed comments received from interested parties requesting that SSAP No. 26 be evaluated and compared to FSP FAS 115-2 and 124-2 with the goal of adopting consistent guidance for all bonds. The Working Group noted that FSP FAS 115-2 and 124-2 is on the maintenance agenda but will continue to be deferred at this time.

• Received Subgroup Updates:

  • Guaranty Fund Subgroup (Ref #2006-14) – The Subgroup advised that they have exposed a draft Issue Paper that re-evaluates the previous conclusion regarding SOP 97-3, Accounting by Insurance and Other Enterprises for Insurance Related Assessments (SOP 97-3 and ACS 405-30) in SSAP No. 35—Guaranty Fund and Other Assessments (SSAP No. 35) and proposes substantive revisions to SSAP No. 35 to incorporate the SOP 97-3 approach for guaranty fund liability recognition. This Issue Paper is exposed until Jan. 15, 2010.

  • Financial Guaranty Contracts Subgroup (Ref #2008-20) – The Subgroup referred to the adopted nonsubstantive disclosures to SSAP No. 60 and advised that they will begin discussion on their remaining directives in 2010.

  • Securities Lending Subgroup (Ref #2008-14) – The Subgroup discussed their current proposal for securities lending transactions and exposed their recommendations for comments ending Jan. 29, 2010.

• Interim Meetings
  The Working Group adopted interim minutes from July 20, Oct. 5 and Nov. 2.
  

• The Working Group approved a memo related to admission of deferred tax assets to the chair of Financial Condition (E) Committee.

The deadline for submission of comments, unless otherwise noted, for new or re-exposed items is Feb. 11, 2010.