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Midwest IASA
1
Fall Midwest IASA Conference
Blue Springs, Missouri
September 13- 15, 2017
NAIC Update
Agenda
• Statement Revisions
• Risk-Based Capital (RBC)
• Statutory Accounting Update
• Other NAIC Projects
Midwest IASA
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Statement Revisions
Jurat
• Life insurance policy locator contact
– Added as electronic section to all statements;
but only applicable to entities with life
products
• Name, address, telephone number, email address
Note #1
• Additional disclosure for mandatorily
convertible securities and SVO-identified
funds
– Basis which each stated
– Amortization method used
– Approach for using systemic value; is
systemic value used for all SVO-identified
funds
– From revisions to SSAP No. 26R
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Note #5
• Repurchase and reverse repurchase agreements– Removed previous disclosure including what was in Note
#17
– New disclosures put in place (still in Note 5)• Repurchase agreements accounted for as secured borrowings
• Reverse repurchase agreements accounted for a secured borrowings
• Repurchase agreements accounted for as a sale
• Reverse repurchase agreements accounted for as a sale
• Where quarterly info indicated, only need to complete 4th
quarter for 2017 year-end– Will be required in quarterly beginning 2018
• A lot of detailed information required
– Revisions to SSAP No. 103R
Note #5
Prepayment penalties & acceleration fees
for callable securities
Repurchase and reverse repurchase
agreements
Short sales
Note #5
• Mortgage Loans
– New disclosures for a participant or co-lender
in mortgage loan agreements
– From revisions to SSAP No.37
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Note #12
• Defined Benefit Plan
– Funded status
– New reporting of
overfunded w/prepaid
cost benefit,
overfunded w/accrued
benefit cost,
underfunded
w/accrued benefit
cost, underfunded
w/prepaid benefit
Note #14
• Discount rate used for reporting long-term
care (LTC) guaranty fund liabilities and
assets
• Specific, separate information on LTC
insolvencies and assessments
• Revisions to SSAP No. 35R
– Not only allows for discounting, also allows
expected renewals for short-term health
contracts
Notes #25
• Significant changes in methodology and
assumptions used for calculating unpaid
losses and loss adjustment expenses
• Results from revisions to SSAP No. 55
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General Interrogatories
• Self-designated 5*GI securities
– Serves as company self-certification
• No longer files certification with SVO
– 5*GI codes added for use in investment
schedules
Money Market Mutual
Funds (MMMFs)
• Blank and instructional changes to report
all MMMFs as cash equivalents on
Schedule E – Part 2
• Revisions to SSAP Nos. 2R and 26R
Money Market Mutual
Funds (MMMFs)
• Schedule E – Part 2 – Cash Equivalents
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Money Market Mutual
Funds (MMMFs)
• Removal from Sch DA and Sch D – Part 2
– CUSIP column also removed from Schedule
DA
• Reclassification on Summary Investment
Schedule
• Removal from Summary by Country
• Exclusion from Schedule D – Part 1A
• AVR instructions updated
Schedule D
• SVO-Identified Funds– BACV equals fair value or systemic value unless
designated as qualifying security for 2018 systemic value
• Use * in Code Column to identify SVO-identified funds using systemic value in 2018; for 2017 use measurement method used through out year
– Fair value column – report fair value or net asset value
– Updating of other various columns for SVO-identified funds
– Revisions also to Schedule DA
Schedule D
• SVO-Identified Funds
– From revisions to SSAP No. 26R
• Systemic value can be used as of 12/31/2017
• Systemic value can be deferred to 1/1/2018
– HOWEVER, funds that will be utilizing systemic value
must be indicated by * at year-end 2017 reporting
• Election of systemic value is irrevocable
• Do not have to use systemic value; can instead
use fair value
Short sales instructions
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Schedule D – Part 1
• Collateral Type Column
– Reduction of code from 21 to 10
• Capital Structure Column
– Option 4 changed from “Other” to “Not
Applicable”
• Not all reported securities have capital structure to
be reported
– For example, ETFs and Bond Mutual Funds
Schedule DB
Swaptions
“Notional” definition and instructions
updated
Schedule DL
Subtitle clarification
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Schedule DL
• CUSIP instructions conform to Schedule D
CUSIP instructions
• Addition of International Security
Identification Numbering (ISIN) Column
– Works like same column on Schedule D
– Zero fill ISIN for certain assets:
Long-Term Care Supplement
• Instructional changes for completing LTC
Form 5
– Grand total page to be filed
• Added crosschecks to Columns 1, 2 and 3
to LTC Form 2, Part C and Form 3
Lines of Business (LOB)
• Clarifies LOB reporting for riders,
endorsements and floaters
– If acts like a separate policy treat like a stand-
alone policy in LOB it most nearly resembles
– If not, in same LOB as base policy
– In addition for LAH and Fraternal:
• Incidental benefits like permanent disability,
accidental death, accidental death and
dismemberment in same LOB as contracts
associated with
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Property/Casualty & Title
• Statement of Actuarial Opinion & Actuarial
Opinion Summary
– Instructional clarifications to assist actuaries
in understanding regulatory expectations.
Property/Casualty
• Notes to Financials
– Note #31 – High Deductibles
• Revisions to SSAP No. 65
– Note #32
• Where tabular discounting used
– Amount of interest accretion recognized in income
statement
– Line on income statement were accreted interest
recognized
• From revisions to SSAP No. 65
Property/Casualty
• Additional LOB definitions of sublines to
match P&C Uniform Product Code Matrix.
– Inland Marine
– Other Accident & Health
– Other Liability
– Write-ins
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Property/Casualty
New active status code on Schedule T
• Cybersecurity & Identity Theft Insurance
Coverage Supplement
– Reorganization
• Part 1 – Interrogatories
• Part 2 – Stand-alone policies
• Part 3 – Part of package policy
– New format
LAH/Fraternal
• Actuarial Opinion
– Requirements for Appointed Actuary,
Qualified Actuary
• Must meet guidelines established by VM-30,
Actuarial Opinion and Memorandum Requirements
– Revisions to Actuarial Opinion instructions
• Must be separate Opinion for each company
• Must meet requirements of VM-30
LAH/Fraternal
• Interest Maintenance Reserve (IMR)
– Holding period for SVO-identified funds
designated for systemic value is weighted-
average life of underlying bonds
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LAH/Fraternal/Separate Accounts
• Reporting of VM-20 reserves (Principles-
Based Reserves - PBR)
– Analysis of Increase in Reserves During Year
– Exhibit 5 – Aggregate Reserves for Life Contracts
• Valuation Standard editions
• Instructional changes for business valued under VM-20
– Five-Year Historical
– PRB Revisions to SSAP No. 51R
• Remember, company may choose 3-yr phase in period
LAH/Fraternal/Separate Accounts
• Reporting of VM-20 reserves (Principles-
Based Reserves - PBR)
– New supplement
• Part 1 – Life insurance reserves valued according
to VM-20 by product type
• Part 2 – Reserves for policies not based on VM-20
as a result of the 3-year transition period
• Part 3 – Companywide exemption
LAH/Fraternal/Separate Accounts
• Variable annuities with guarantees
– Deleted General Interrogatories – Part 2, 9.1
and 9.2 in LAH, 24.1 and 24.2 in Fraternal,
2.2 in SA
– Changes Actuarial Memorandum
– Addition of Variable Annuities Supplement
• Part 1 – Individual variable annuities
• Part 2 – Group contracts with individual certificates
• Due March 1
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LAH/Fraternal
• Previous Supplemental XXX/AXXX
Reinsurance Exhibit
– New name “Supplemental Term and
Universal Life Reinsurance Exhibit”
• Parts 1, 2A, 2B, 3 – All Term and Universal Life
Cessions (new title)
All of the above also have format changes and title
changes.
• Parts 4, 5; title changes only
Other StatementsOther Statements
• Health
• Delete Property/Casualty Supplement & IEE
• LOB definitions and Analysis of Ops
instructions for riders, endorsements and
floaters
• Title
• Same changes made to 2016 and 2017 P/C
Actuarial Opinion
Blanks Working GroupBlanks Working Group
Combining of Fraternal and Life blanks
An electronic only filing as of June 30
listing owned Schedule D investments
• Only 4 columns
• CUSIP, par value, book/adjusted carrying value,
and fair value
• Now being debated at Financial E Committee
• Would take policy change
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Risk-Based Capital
All Formulas
• All adopted proposals posted on Capital
Adequacy Task Force’s website until
November 1
http://www.naic.org/cmte_e_capad.htm
• Click on Related Documents tab at right
All Formulas
Treatment of money MMFs changed to
match statement changes
• Some bad statement references remain
Operational Risk add-on approach
adopted
– Official part of formula – not info only
– 2017 Factor 0%
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All Formulas
Change of Medicare Part D factor to 50% for all
lines of business
Stop Loss line of business now subject to a
“tiered-factor” approach
PRBC
Simplification of RBC charge for
investment affiliates (Affiliate code 7)
Catastrophe Risk Charge
– Now official part of formula; no longer
information only
PRBC
• Underwriting Risk Factors Updates
– Line 1 – Industry Average Risk Factors
• Annual update
– Line 4 - Underwriting Risks – Reserves; and
Underwriting Risk – Net Written Premiums
• Factors had not been updated since 2010
• Updated for all lines of business
• Not a complete update; re-evaluation will continue
with 4 year goal for completion
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LRBC
Addition of Authorized Control Level RBC
ratio
• Instructional changes to Primary Security
Shortfall
– Only list cessions subject to AG 48
– If treaties include some AG 48 policies and
some Model #787 policies, only AG 48
cessions included
HRBC
Guidance for start-up companies for
Excessive Growth Charge
Investment RBC Working Group
• Several projects not yet finalized– RBC bond reporting categories
– Bond factors• Same for all insurers? Or difference between LRBC (FRBC)
and other formulas?
• Academy’s Bond Factors Report on website
– Bond size factor• Probably maintaining current format but revising factors
– Real Estate next • Current factors too high in relation to materiality?
• ACLI proposal re-exposed for comment
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Statutory Accounting Update
Accounting ChecklistAccounting Checklist
• INT 01-12; U.S. Treasury Inflation-Indexed
Securities
SSAP No. 26R
• OTTI losses to be recorded entirely to
AVR or IMR in accordance with annual
statement instructions (eliminated previous
bifurcation requirement)
• Retained “yield-to-worst” amortization with
rejection of ASU-2017-08
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SSAP Nos. 30, 48, 97
• Adopts ASU 2016-07 with modifications
• No retroactive adjustments needed when
switching to equity method because of
change in level of ownership or degree of
influence
• Provides guidance on handling of change
SSAP No. 69SSAP No. 69
• Adopted ASU-2016-15, classification of certain cash receipts and payments
• Refers to ASU, but does not contain copy
• Effective date & transition guidance found in ASU
• Adopted ASU -2016-18, restricted cash and cash equivalents to be included in cash flow
• Also to be included in Note #5 restricted assets disclosure
Appendices
• A-781 – Life and health reinsurance
agreements
– Contract must state it is entire agreement; no
other understandings not in contract
– Any and all changes must be signed by all
parties to become effective
– Property/Casualty contracts already have
these requirements
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Substantive Revisions Currently
Exposed
• SSAP No. 22 – Leases
• SSAP No. 41R – Surplus Notes
• SSAP No. 100 – Fair Value
• Appendix F – Policy Statements
Nonsubstantive Revisions
Currently Exposed
•SSAP No. 2R
•SSAP No. 12
•SSAP No. 22
•SSAP No. 26R (2)
•SSAP Nos. 41R & 97
•SSAP No. 43R
•SSAP No. 61R & 62R
•SSAP No. 68
•SSAP No. 68 & 97
•SSAP No. 86 (2)
•SSAP No. 90
•SSAP No. 92
•SSAP No. 92 & 102
•SSAP No. 97 (2)
•SSAP No. 104R
•SSAP No. 107
Other NAIC Projects
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Valuation Of Securities
Task Force (VOSTF)
Remember -
The Purposes and Procedures Manual of
the NAIC’s Investment Analysis Office is
only published annually. Adopted revisions
during year posted at
http://www.naic.org/cmte_e_vos.htm
VOSTF
• Valuation guidance for SCA companies
removed from SVO Manual and placed into
AP&P Manual as appendix to SSAP No. 97
• Expansion of NAIC Bank List to include
eligible non-banks
– Monthly publication can be found at
http://www.naic.org/prod_serv_publications.htm
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VOSTF
• Proposed modification of FE process– Policy changes that would allow the IAO
(Investment Analysis Office) oversight of FE designations
– Five major policy change being considered• IAO have ability to change automated FE designations
• Production of designations for Private Letter Ratings
• Resolve discrepancies between official NAIC designations and insurer’s designations
• Review of requiring rated securities to be filed with IAO
• Changes to regulatory process because of above implementation ; for example, changes to Jumpstart report
– Current target date 1/1/2018 for Private Letter Ratings; year-end 2018 for others
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NAIC/AICPA Working Group
• Proposing new general interrogatory to
determine if reporting entity part of a
publicly traded group
• Proposing clarifying instructions for
reporting of CIK on Schedule Y – Part
1A
– Includes adding verifications between
Column 6 and Column 7
• Wants implemented for 1st quarter of
2018
Other
• Group Capital Requirement Working
Group
• Group Solvency Issues Working Group
• Reinsurance Task Force
Questions?
• Please contact:
– Connie Jasper Woodroof
– 800.373.3366 x5761