N A I C~ Update Spring2009
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NAIC Update 2009

NAIC Update 2009

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N A I C~ Update Spring2009 Document Transcript

  • 1. Spring 2009 NAIC Update SAN DIEGO, CA. Of all quarterly meetings of the This follows testimony given by Wisconsin Insurance National Association of Insurance Commissioners (NAIC), Commissioner Sean Dilweg during a March 12 climate the spring gathering is considered by regular attendees to change hearing before the U.S. Senate Committee on be the “slowest.” However, actions taken on the ground at Commerce, Science and Transportation hearing on climate this year's March meeting did not lack in controversy. change, during which the commissioner outlined NAIC activities on this front. Ripped right from the headlines of major newspapers, the topic of Washington’s consideration of a systemic risk Consequently, at the San Diego meeting, the NAIC regulator took center stage in the hallways as well as in the Executive Committee/Plenary adopted a climate change meeting rooms, where regulators and members of state disclosure survey which will be mandatory for most legislative groups vowed to work together in framing the insurers beginning this year. debate. The behaviour of rating agencies has also moved to the On the federal front, too, there continues to be much forefront at the NAIC. At the spring meeting, the Rating action by regulators and executives of the NAIC Agency Working Group advanced plans to survey rating relating to initiatives under consideration by the Obama agencies on issues of concern shared by state regulators. administration and the U.S. Congress. Concurrent with The NAIC is also moving ahead with exploring the the spring meeting, for example, Illinois Insurance Director feasibility of creating its own rating agency to rate insurers’ Michael McRaith was down in Washington standing up investments. for state regulation during a March 17 hearing of the U.S. Senate Committee on Banking, Housing and Urban Looking forward, items to be considered at the summer Affairs to “examine perspectives on modernizing insurance meeting in June include capital and surplus relief, credit regulation.” scoring, and changes to the NAIC’s catastrophe modeling handbook. Top stories What’s next • Insurers to disclose climate change behavior in 2010 • May 18-19, 2009: NAIC International Insurance Forum, Washington, D.C. • Regulators eye rating agencies, initiate one of their own • June 13-16, 2009: NAIC Summer National Meeting, • Capital and surplus relief proposal considered in pieces Minneapolis, MN • July 9-12, 2009: NCOIL Summer National Meeting, Also in this issue Philadelphia, PA • In brief • IAIS Update • NAIC accounting update
  • 2. Top stories Insurers to disclose climate change behavior in 2010 While the prior version included pointed disclosure-related Beginning next year, the insurance industry will be required questions that were to be included in the NAIC Annual to report to state regulators certain business practices Financial Statement, the eight queries that remain in the relating to climate change. new iteration are more generic and are to be posed instead via survey rather than in the financial statement. Adopted by the NAIC Executive Committee and Plenary at its March 17 meeting, the Climate Risk Disclosure Proposal “Climate change will have a huge impact on the insurance requires mandatory disclosure by insurers with premiums industry and we need better information on how insurers over $500 million in the 2009 reporting year and insurers are responding to the challenge,” Pennsylvania Insurance with premiums over $300 million in the 2010 reporting Commissioner Joel Ario, chairman of the NAIC Climate year. All others would complete the disclosure survey on a Change and Global Warming Task Force, said in a voluntary basis. Surveys are to be submitted to the regulator statement. of an insurer group’s lead state. Some insurance industry representatives have expressed The survey contains eight questions that ask companies concern over the measure, arguing that it sets the stage to disclose everything from describing the actions they are for possible lawsuits and presents a competitive advantage taking in managing climate changes risks to telling how issue by making public what might otherwise be internal they are building the notion of climate change into their risk company information. and investment management strategies. Meanwhile, others support the mandate over the more onerous draft that came before it. Climate change will have a huge “Whether it’s reducing their own carbon footprints or impact on the insurance industry meeting consumer demand by offering ‘green’ products, insurers have a strong public record on this issue,” David and we need better information on Snyder, vice president and associate general counsel of the America Insurance Association, said in a statement issued how insurers are responding to the prior to the meeting. challenge. – Pennsylvania Insurance Commissioner Joel Ario As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please review www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. 2
  • 3. Top stories, cont. Regulators scrutinize rating agencies, make plans to NAIC as NRSRO? start one of their own In related news, the NAIC continues its pursuit of expanding its New York-based Securities Valuations Office (SVO) to While the topic of rating agency oversight by regulators has include a public NRSRO that would rate investments by been brewing for some time, a new group within the NAIC insurers. At the NAIC spring meeting, the newly-formed SVO has been charged with the “degree of regulatory flexibility Initiatives Working Group did not meet; rather it forwarded a available to reduce reliance” on rating agencies. report of its latest activities to the NAIC Executive Committee. The working group is pegging the cost of start-up at $4 million for the first two years of operation. The NAIC continues its pursuit According to the Property Casualty Insurers Association of of expanding its New York-based America (PCI), two key questions remain at issue in this space: Securities Valuations Office 1. Does this new entity fit with the mission of the NAIC? to include a public NRSRO 2. Will it be sufficiently important in the context of projects currently underway? that would rate investments “The decision regarding this new entity could also be by insurers. impacted by the work of the new Rating Agency Working Group, which is studying the NAIC’s reliance on rating agencies...PCI as well as other industry representatives have significant concerns about potential conflicts of interest and In that vein, the first order of business for the Rating Agency the funding of an NAIC-affiliated NRSRO,” PCI stated in its Working Group has been to evaluate what the NAIC meeting roundup. characterizes as “shortcomings” in ratings. The effort so far has produced an NAIC staff-written report detailing the organization’s current use and reliance on information supplied by Nationally Recognized Statistical Rating Organizations (NRSRO) registered under the Securities and Exchange Commission, such as A.M. Best, Fitch, Moody’s and Standard and Poor’s. The report was unveiled at the group’s March 16 meeting along with a report that examined credit rating transition from the perspective of the impact realized following a rating downgrade for corporate and structured securities. As background for members of the group and the public, the working group has listed on its Website related information and studies on the issue created by the Financial Stability Forum, President’s Working Group, Securities and Exchange Commission, and International Organization of Securities Commission. 3
  • 4. Top stories, cont. Capital and surplus relief proposal considered • Variable annuities recommendations did not support in pieces any specific changes or actions, according to the NAIC, When first unveiled publicly at the NAIC’s winter meeting but regulators noted that the Capital Adequacy (E) Task in December, discussion of the multi-point proposal of the Force is currently reviewing the Standard Scenario and the American Council of Life Insurers (ACLI) drew a standing- Mortgage Experience Adjustment Factor. The two original room only crowd. At the spring NAIC meeting, this once recommendations are as follows: “hot topic” was handled as a matter of course. 1. Eliminate redundant use of stand-alone asset adequacy As it now stands, several remaining points of the proposal analysis required by Actuarial Guideline 39, which are moving through the process as follows: covers only Variable Annuity living benefit guarantees and associated revenue under contract • The controversial deferred tax measure has been referred to the NAIC’s Statutory Accounting Principles Working 2. Waive the Standard Scenario as the floor in the C-3 Group for it to decide the appropriateness of any changes Phase 2 calculation of risk-based capital for year end for 2009 2008 and 2009 • The Executive Committee/Plenary will consider at the June Going forward with its charges for 2009, the Capital and meeting three points contained within the Capital and Surplus Relief Working Group is set to examine the current Surplus Relief Working Group’s recommendations, which framework governing permitted practices, including the are based on the original “interim solution” proposed by definition of a permitted practice, requests around requests the ACLI: for notification and the processes used in determining if a practice is granted, among other items. 1. Allow the 2001 Preferred Mortality Tables to be used for any 2001 CSO product The issue came to the fore in 2008 as ACLI approached the NAIC citing concerns about the economic climate. Initially, 2. Make Section 8C of Actuarial Guideline 38 retroactive the trade group asked regulators to approve the plan on an to July 1, 2005 emergency basis. At a special meeting in January, regulators deferred a vote pending examination of the plan points 3. Clarify that 2001 Non-preferred Mortality Tables can by several NAIC technical committees. Meanwhile, relief always be used for determining segments within has been considered on a state-by-state basis, including by Actuarial Guideline 38 Connecticut, Indiana, Iowa and Ohio. 4
  • 5. In brief Regulators set to advance Model Audit Rule and State groups join to provide “voice” on federal front Receivership revisions State regulators and state lawmakers don’t always agree Sarbanes-Oxley-inspired revisions to the NAIC Model Audit on matters relating to the insurance industry, but a new Rule and an update of the Insurer Receivership Model Act coalition made up of members of both groups is forging the (IRMA) both sparked spirited debate when they were first way in creating a unified voice on matters relating to the proposed and finally passed in 2006. But as a one-year question of federal regulation. comment period for both measures comes to a close, all appears quiet on the home front. At a meeting of the NAIC/State Government Liaison Committee in San Diego, NAIC President and New Formerly known as the Model Audit Rule, the Model Hampshire Insurance Commissioner Roger Sevigny said Regulation Requiring Annual Audited Financial Reports was while state-based regulation remains strong, the current revised in 2006 to feature best practices related to auditor environment has demonstrated a need for systemic regulator independence, corporate governance and internal controls who could fill any gaps that may exist. over financial reporting. New York State Sen. James Seward, who is president of the Revisions to IRMA also sparked debate until the large National Conference of Insurance Legislators (NCOIL), said deductible provision was removed. The aim of the model that while his organization has not yet taken a position on is to help bring uniformity in the way states handle the idea of a systemic risk regulator, he is concerned about insolvencies. the relationship such an entity would have with the state- based regulatory system. In June, at the NAIC Summer National Meeting in Washington, D.C., regulators are to consider whether to Other groups involved in the discussion include the National adopt IRMA as an “acceptable receivership scheme” a state Conference of State Legislators, the National Governors may have for Receivership Part A compliance, effective Association and the American Legislative Exchange Council, January 1, 2012. among others. Also at the summer meeting, the NAIC will consider No action was taken at the meeting but discussion is adopting revisions to the Risk Based Capital Model and an expected to continue. amendment to the current significant element required for accreditation with an effective date of January 1, 2012. Regulators to scrutinize insurers’ use of credit scoring Reinsurance Regulatory Modernization Framework The topic of credit-based insurance scoring permeated to advance in D.C. several sessions of the NAIC’s spring meeting, with With the Reinsurance Regulatory Modernization Framework regulators formally adopting a proposal to continue their adopted at its winter meeting, the NAIC is well on its way study of the issue and announcing a public hearing that will to filling in the blanks of the framework by drafting federal be set to receive testimony from interested parties. enabling legislation that would allow for uniformity across states, albeit usurping existing state reinsurance laws in From the Property Casualty Committee meeting to the the process. The comment period for the measure is to be Market Regulation and Consumer Affairs Committee abbreviated in order to submit to Congress in the current confab, discussion on the controversial issue sparked debate session. An interim meeting to receive comments is being between industry and regulators – with regulators vowing to slated for mid-April. give the underwriting practice a second look. The move comes following the December adoption of The issue has been on the forefront for the past 10 years the framework by the NAIC Executive Committee. The and many states have adopted a credit-based insurance measure calls for a reduction in collateral requirements scoring model law developed by the National Conference for nonadmitted reinsurers. Under the proposal, two of Insurance Legislators (which is hailed as something that’s new classes of reinsurers are defined (domestic port of fair to consumers and business alike). In all, 48 states have entry reinsurers and non-U.S. reinsurers). It also includes some form of legislation or regulation in place to oversee the concept of an NAIC Reinsurance Supervisory Review the practice. Department. 5
  • 6. In brief, cont. The latest attention at the NAIC has been sparked by New NAIC CEO Vaughan takes helm in San Diego New NAIC Chief Executive Officer concern that the impact of the economy is causing personal Therese M. (Terri) Vaughan, Ph.D. is credit scores to drop, placing otherwise fiscally responsible proving to be a hands-on manager. individuals in line for higher premiums. In San Diego, her first meeting since taking the helm, she participated in To that end, PCI, told regulators that they should not be several pertinent sessions, enthusiastically adding input and using the current economic environment to change law on insight to the discussions at hand. a practice that has been proven, time and again, to be a strong tool in predicting risk. Having served as the Iowa Insurance Commissioner for 10 years, and as a past president of the NAIC, Ms. Vaughan is The public hearing will be jointly hosted by the Property well acquainted with the workings of the organization. Casualty Committee and the Market and Regulation Since taking the lead position in February, she has testified Consumer Affairs Committee. Issues to be discussed include before Congress on behalf of the NAIC. Her stance on the the definition of a credit score, its impact on policyholders issue of a federal regulator for insurance is that she would and a view on how companies use credit scoring. As of this support a systemic risk regulator but oppose usurpation of writing, the date and location of the hearing had yet to be state-based insurance regulation. determined. Prior to appointment as CEO, Ms. Vaughan was a Robb B. Three hearings in one month Kelley Distinguished Professor of Insurance and Actuarial As insurance issues take the national stage, the NAIC and Science at Drake University. Several of her studies were its members are piling up the airline points in frequent distributed at the NAIC meeting, including one of her travels to Washington, D.C. During the month of March latest; “The Implications of Solvency II for U.S. Insurance alone, regulators and NAIC executives have appeared Regulation.” before Congress three times to offer testimony from the A well-attended reception in her honor was held during the perspective of state-based regulation. San Diego meeting, with regulators and industry expressing enthusiasm about her arrival and wishing her well going • March 5: NAIC CEO Terri Vaughan testified before a U.S. forward. House Financial Services Committee panel on the issue of insurance regulatory modernization Vaughan replaces Catherine Weatherford, who resigned in July 2008. • March 12: Wisconsin Insurance Commissioner Sean Dilweg spoke at a U.S. Senate Committee on Commerce, Science and Transportation hearing on climate change NAIC San Diego meeting by the numbers response Number of attendees: 1,422 Number of sessions: 64 • March 17: Illinois Director Michael McRaith testified Number of NAIC groups that did not meet: 42 before the U.S. Senate Committee on Banking, Number of drafts to catastrophe white paper: 13 Number of disclosures in climate change survey: 8 Housing and Urban Affairs on the issue of insurance modernization NAIC principals appearing before Congress Terri Vaughan Sean Dilweg Michael McRaith 6
  • 7. International update Continuing its involvement in areas of insurance supervision Both the NAIC and the IAIS participate in the G-20.1 In beyond the United States, the NAIC is expected to move addition to providing the United States perspective on though 2009 with a full international agenda. issues under discussion by two G-20 working groups (such as reforming credit rating agencies, working on capital A key player in this initiative will be NAIC staffer George surplus relief issues, enhancing risk assessment mechanisms Brady who will take the lead in representing the and addressing credit default swaps), the NAIC is also organization on the Executive Committee of the involved in reviewing IAIS comments on these issues. International Association of Insurance Supervisors. Meanwhile, at its March 16 meeting, the NAIC Immediate NAIC past president and Kansas Insurance International Solvency and Accounting Working Group Commissioner Sandy Praeger noted that Brady’s position agreed to submit comments on the IAIS issues paper will be crucial to discussions in May, when the IAIS regarding the relationship between the actuary and the discusses strategic planning issues regarding international external auditor in the preparation of financial reports. insurance regulation. Formal comments for the latest draft of the paper are due to the IAIS by May 15. Group of 20 heads of state of the 20 largest global economies 1 Continuing its involvement in areas of insurance supervision beyond the United States, the NAIC is expected to move though 2009 with a full international agenda. Also discussed at the March 17 meeting of the International Insurance Relations Committee was a set of guiding principles that the NAIC will use going forward in conversing with international regulatory bodies. Among the bullet points under discussion is a principle that would have NAIC representatives “actively promote the adoption of U.S. insurance regulatory principles worldwide,” with which some regulators and industry representatives took issue. Some also debated point No. 2, which states that the NAIC supports the development of the “eventual convergence” to international standards of insurance supervision. 7
  • 8. NAIC accounting update The NAIC held their 2009 Spring National Meeting in San The survey also addresses when states plan to present the Diego, California from March 15 to March 18, 2009. This MAR amendments to their legislature or when they plan newsletter contains a summary of the significant matters to change the related regulation. As of the February 2009 impacting Statutory Accounting that were discussed at the survey, 11 states have adopted changes to address the MAR meeting. and the remaining 40 states (includes District of Columbia in the survey) expected to present amendments or adopt Summary changes to regulatory to address the MAR in 2009. • The Statutory Accounting Principles Working Group (SAPWG) held hearing and meeting sessions to address For those states that have presented the adopted changes comments on certain substantive and nonsubstantive to the MAR to their respective legislature, none of the states issues (refer to pages 9 through 11 for details). The indicated any significant problems. comment deadline for the issues newly exposed at the Members of the NAIC/AICPA Working Group noted that meeting is May 4, 2009. questions have arisen regarding the application of certain • The Emerging Accounting Issues Working Group (EAIWG) language within the MAR, specifically the disclaimer within held a meeting to take action on certain tentative Section 14 indicating that the section shall not apply to positions and to address certain outstanding issues (refer SOX Compliant Entities or wholly-owned subsidiaries of to page 12 for details). The comment deadline for the SOX Compliant Entities. NAIC Staff will be developing some issues newly exposed at the meeting is May 4, 2009. proposed guidance to clarify the issues within the MAR Implementation Guide and the Working Group plans to – In response to recent actions by the FASB, the EAIWG hold an interim conference call to review the developed held a conference call on March 26, 2009 to discuss guidance. Some specific issues raised include situations the following two proposed Staff Positions regarding where the SOX Compliant Entity’s audit committee does inactive markets and the recognition and presentation not desire or is not able to serve in the governance capacity of other-than-temporary impairments: for the subsidiary statutory insurance company. Further, if a new audit committee is appointed for the subsidiary – FSP FAS 157-e, Determining Whether a Market Is Not statutory insurance company, the issue was raised regarding Active and a Transaction Is Not Distressed whether or not the independence requirements would still apply. – FSP FAS 115-a, FAS 124-a, and EITF 99-20-b, Recognition and Presentation of Other-Than-Temporary Impairments • The NAIC/AICPA Working Group updated the previously provided results of a survey sent out to the states regarding how the states plan on incorporating the NAIC Model Audit Rule (MAR) in their state. Surveys are being sent quarterly and the results of the February 2009 survey were as follows (includes District of Columbia in the survey): – Statute/Law: 16 states – Regulation/Rule: 28 states – Combination: 7 states 8
  • 9. Statutory Accounting Principle Working Group Current Developments: The SAPWG adopted the following amendments as final: Effective date Reference Title Sector FS impact Disclosure Amendments adopted as final 2008-13 SSAP No. 48 P&C Nonsubstantive Change – Adopted change to allow an insurer to report its Y N Immediate Audit Report Life investment in a non-SCA entity on an unaudited basis if the annual audited Requirements Health information is not complete, solely for the calendar year in which the for non- investment was acquired. subsidiary, controlled and affiliated (SCA) investments 2008-26 FSP FAS 150-3 P&C Nonsubstantive Change – Adopted as final revisions to Issue Paper No. 99 – Y N Immediate and FSP FAS Life Nonapplicable GAAP Pronouncements (Issue Paper No. 99) rejecting FSP FAS 150-5 Health 150-3, Effective Date, Disclosure and Transition for Mandatorily Redeemable Mandatorily Financial Instruments of Certain Nonpublic Entities and Certain mandatorily Redeemable Redeemable Noncontrolling interests Under FASB Statement No. 150 and FSP Financial FAS 150-5, Issuer’s Accounting Under FASB Statement 150 for Freestanding Instruments, Warrants and Other Similar Instruments on Shares That are Redeemable as Freestanding not applicable to statutory accounting. Warrants, and Similar Nonsubstantive Change – Adopted as final the exposed revisions to SSAP No. Instruments on 72 – Surplus and Quasi Reorganizations to clarify that puttable warrants and Shares That are mandatorily redeemable warrants are reflected as liabilities. Redeemable 2008-27 FSP SOP P&C Nonsubstantive Change – Adopted as final revisions to Issue Paper No. 99 N N Immediate 90-7-1 Life rejecting FSP SOP 90-7-1, An Amendment of AICPA Statement of Position An Amendment Health 90-7 as not applicable to statutory accounting. of AICPA Statement of Position 90-7 9
  • 10. The SAPWG exposed the following items for written comment by interested parties: Effective date Reference Title Sector FS impact Disclosure Amendments adopted as final 2009-01 Various P&C Nonsubstantive Change – Exposed changes to Issue Paper No. 99 rejecting N N TBD 2009-04 Life the following as not applicable to statutory accounting: 2009-05 Health • FSP FAS 117-1, Endowments of Not-For-Profit Organizations: Net Asset Classification of funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosure for All Endowment Funds • Statement of Position 07-2, Attestation Engagement That Address Specified Compliance Control Objectives and Related Controls at Entities That Provide Services to investment Companies, Investment Advisors, or Other Service Providers • Statement of Position 07-1, Clarification of the Scope of the Audit and Accounting Guide for Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies and FASB Staff Position 07-1-1, Effective Date of AICPA Statement of Position 07-1 2009-02 FSP FAS 140-3 P&C Y N TBD Nonsubstantive Change – Exposed changes to SSAP No. 91R, Accounting for Accounting for Life Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, Transfers of Health adopting FSP FAS 140-3. Financial Assets and Repurchase Financing Transactions 2009-06 Capital and P&C Y N TBD Substantive Change – Exposed changes to paragraphs 10 and 11 and Exhibit Surplus Relief Life A of SSAP No. 10, Income Taxes (SSAP No. 10). The proposed changes (EX) Working Health include revising the admission thresholds from 1 to 3 years for reversals Group and 10% to 15% of surplus for entities that qualify under risk-based capital Consider levels. Entities that qualify will not be permitted to consider the additional Increase in DTA computed as an admitted asset for the purposes of certain regulatory Admission of triggering events (e.g. determination of the amount of an ordinary or Deferred Tax extraordinary dividend). Further, the increase in the DTA as a result of utilizing Assets the increased thresholds shall be reported separately in the Summary of Operations, Statement of Income or Statement of Revenue, as applicable. Industry was specifically requested to demonstrate whether there is an economic need to change the existing language in SSAP No. 10. Exposed proposed SSAP No. 92 and SSAP No. 100 – The proposed SSAPs 2006-30 SSAP No. 92 Y Y 2011 Accounting for adopt with modification FASB No. 158, Employers’ Accounting for Defined Postretirement Benefit Pension and Other Postretirement Plans, an amendment of FASB Benefits Other Statements No. 87, 88, 106 and 132 (R) (FAS 158). Differences from FAS 158 Than Pensions, include the following: A Replacement • nonadmittance of prepaid assets resulting from the excess of the fair value of SSAP No. 14 of plan assets over the accumulated postretirement benefit obligation or projected benefit obligation SSAP No. 100 Accounting • nonpublic entity exceptions for disclosures are not appropriate for statutory for Pensions, A reporting Replacement of • transition guidance will vary depending on the overall impact to surplus of SSAP No. 89 adoption Additional significant changes from existing statutory guidance includes the following: • nonvested employees are included within the recognition of net periodic pension cost and pension benefit obligation or of net postretirement benefit cost and accumulated postretirement benefit obligation • utilization of projected benefit obligation (PBO) instead of accumulated benefit obligation (ABO) in establishing pension liabilities 10
  • 11. The SAPWG took the following other actions: Effective date Reference Title Sector FS impact Disclosure Amendments adopted as final 2002-27 Accounting for P&C Withdrawn – The Working Group noted there was a lack of activity related to N N NA Index Based Life these derivatives. Insurance Health Linked Securities 2003-12 IP No. 135 P&C The Working Group directed staff to modify the issue paper to prominently Y Y 2010 FASB Life include requirements for related party guarantees within the body of the Interpretation Health accounting guidance. 45: Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect P&C Guarantees of Life Others, and Health Interpretation of FASB Statements No. 5, 57, and 107 and Recession of FASB Interpretation No. 34 (FIN 45) 2008-20 FAS 163 P&C A subgroup was formed to review the comments received on Issue Paper No. Y Y 2009 Accounting Life 136 – Accounting for Financial Guaranty Contracts. The subgroup will: for Financial • Prioritize adopting enhanced financial guarantee disclosures effective for Guarantee 2009 Contracts • Coordinate with the Financial Guaranty Insurance Guideline Working Group • Conduct conference call to address technical comments. 2009-03 FSP EITF 99- P&C Y Y TBD The Working Group moved this item to the Nonsubstantive Active Listing and 20-1 Life requested the Emerging Accounting Issues Working Group consider revising Amendments to Health INT 06-07, Definition of Phrase “Other Than Temporary” to include guidance the Impairment in paragraphs 9 and 10 of FSP EITF 99-20-1. The Working Group also referred Guidance of EITF this item to the Fair Value Subgroup to consider the impact to impairment Issue No. 99-20-1 assessments from the adoption of FAS 157, Fair Value Measurements. 2008-29 Increase the P&C N N NA Disposed – The Working Group disposed this item without change to DTA Admission Life statutory accounting. This item was replaced by Ref 2009-06 (see above). Limitations Health 2008-15 Deferred Life Y Y TBD Disposed – The Working Group disposed of this item at the request of the Premium Health sponsor. A new Form A was submitted at the meeting that the Working Asset and Group and LHATF will consider in a joint conference. the Unearned Premium Reserve 2008-28 Transfer of P&C Y Y TBD This item proposes changing P&C reinsurance accounting to allow run P&C Run Off off reinsurance contracts meeting specified criteria to receive prospective Portfolios accounting treatment. The Working Group directed staff to draft an Issue Paper with changes to exclude affiliated transactions for Working Group review and possible exposure before the Summer National Meeting Other SAPWG Matters: • The Fair Value Subgroup held an educational session on March 17, 2009. • During a March 5, 2009 conference call, the Separate Account Subgroup requested comments by April 5, 2008 on the proposed revisions to SSAP No. 56, Separate Accounts. • The Guaranty Fund Subgroup will resume discussions during the second quarter of 2009. • The Working Group formed the Securities Lending Subgroup with conference calls to be held in the second quarter. 11
  • 12. Emerging Accounting Issues Working Group The Emerging Accounting Issues Working Group • EITF 08-7: Accounting for Defensive Intangible Assets (EAIWG) continues to address the many questions that (EITF 08-7). The Working Group exposed a tentative are developing as new accounting pronouncements are consensus indicating that defensive intangible assets issued. are captured with the SSAP No. 20, Nonadmitted Assets definition of intangible assets, and are The EAIWG adopted as final the following tentative nonadmitted for statutory accounting. consensus positions: The EAIWG referred the following issue: • INT08-08T: Balance Sheet Presentation of Funding Agreements issued to a Federal Home Loan Bank • Clarification of SSAP No. 85 for Case and Disease (FHLB). The Working Group adopted the consensus Management Program Expenses. The Working indicating that funding agreements issued to an FHLB Group referred this issue to the Accident and Health shall be evaluated on an individual basis, and shall Working Group. be accounted for according to the substance of the This summary was prepared by Matt Wangard and Carolyn Estrada. individual agreement. For your comments and suggestions please contact the authors – mwangard@deloitte.com or cestrada@deloitte.com. The EAIWG exposed the following tentative consensus positions: • EITF 07-4: Application of the Two-Class Method under FAS 128 to Master Limited Partnerships (EITF 07-4). The Working Group exposed a tentative consensus rejecting EITF 07-4 as not applicable to statutory accounting. • EITF 07-5: Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock (EITF 07-5). The Working Group exposed a tentative consensus rejecting EITF 07-5 as not applicable to statutory accounting. 12
  • 13. Contacts For more information, please contact: Rebecca C. Amoroso Steve Foster Howard Mills Vice Chairman Director Director & Chief Advisor U.S. Insurance Leader Deloitte & Touche LLP Insurance Industry Group Deloitte LLP +1 (804) 697 1811 Deloitte LLP +1 (973) 602 5385 sfoster@deloitte.com +1 (212) 436 6752 ramoroso@deloitte.com howmills@deloitte.com Naru Navele Mark Parkin Ed Wilkins Partner Partner Partner Deloitte & Touche LLP Deloitte & Touche LLP Deloitte & Touche LLP +1 (973) 602 16801 +1 (212) 436 4761 +1 (402) 444 1810 nnavele@deloitte.com mparkin@deloitte.com ewilkins@deloitte.com Contributors For more information, please contact: Eleanor Barrett Carolyn Estrada Jan Lommele Matt Wangard Senior Manager Senior Manager Principal Partner Deloitte LLP Deloitte & Touche LLP Deloitte Consulting LLP Deloitte & Touche LLP +1 (212) 436 2954 +1 (212) 436 2954 +1 (860) 725 3050 +1 (312) 486 3224 elbarrett@deloitte.com cestrada@deloitte.com jlommele@deloitte.com mwangard@deloitte.com For further information, visit our website at www.deloitte.com/us/insurance 13
  • 14. About this newsletter This newsletter is distributed for promotional purposes and is not intended to represent investment, accounting, tax or legal advice. Any opinions and analyses presented or expressed herein are those of the authors and are not intended to represent the position of Deloitte & Touche LLP or other individual members of the firm. Data presented herein has been obtained from sources believed to be reliable. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which isa legally separate and independent entity. Please see www.deloitte.com/aboutfor a detailed description of the legal structureof Deloitte Touche Tohmatsu and its member firms. Please see www.deloitte. com/us/aboutfor a detailed description of thelegal structure of Deloitte LLP and its subsidiaries. Copyright ©2009 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu