NAIC Updates - IASA States...qualifying security for 2018 systematic value •Use * in Code Column to identify SVO-identified funds using systematic value in 2018; for 2017 use measurement

8/31/2017

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NAIC Updates

Central States IASASeptember 12, 2017

Sara Cork, Statutory Accountant

StoneRiver

• 2017 Annual Statement Changes

• Risk-Based Capital Revisions

• New Schedule F Changes for 2018

Agenda

2© 2017 StoneRiver, a Sapiens Company. – Confidential & Proprietary

2017 Annual Statement Changes


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Jurat

• Life insurance policy locator contact

– Added as electronic section; but only applicable to entities with life products

• Name, address, telephone number, email address

• Some states require signed Jurat as part of NAIC filing

– Instructions on how to accommodate is in the General Electronic Filing Directive www.naic.org/cmte_e_app_blanks.htm


Note #1

• Additional disclosure for mandatory convertible securities and SVO-identified funds

– Basis which each are stated

– Amortization method used

– Approach for using systematic value; is systematic value used for all SVO-identified funds

– From revisions to SSAP No. 26R


Note #5

• Prepayment penalties & acceleration fees for callable securities

– For securities sold, redeemed or otherwise disposed

– Result of callable feature (including make whole call provisions)

– From revisions to SSAP Nos. 26R


http://www.naic.org/cmte_e_app_blanks.htm

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Note #5

• Repurchase and reverse repurchase agreements– Removed from previous disclosure

– New disclosures put in place (still in Note 5)• Repurchase agreements accounted for as secured borrowings

• Reverse repurchase agreements accounted for as 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

– No longer included in Note #17

– Revisions to SSAP No. 103R


Note #5

• Short Sales

– Unsettled transactions

– Settled transactions

• Mortgage Loans

– New disclosures for a participant or co-lender in mortgage loan agreements

– Done mostly through current disclosure requirements

• Addition of a few new lines

– From revisions to SSAP No.37


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


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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


Note #25

• Significant changes in methodology and assumptions used for calculating unpaid losses and loss adjustment expenses

• Results from revisions to SSAP No. 55


General Interrogatories

• Self-designated 5*GI securities

• Serves as company self-certification

• No longer files certification with SVO

• Does not apply to all 5* securities

– But may be expanded

– 5*GI codes added for use in investment schedules


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Schedule BA

• CUSIP Column instructions now conform to corresponding Schedule D CUSIP instructions


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



• Schedule E – Part 2 – Cash Equivalents


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• Removal from Schedule DA and Schedule 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

• Short Sale Reporting

– New code – SS – added to code listing for investment schedules

– Instructions for short sales added to Schedule D – Parts 1 and 2;

• Schedule DA – Part 1

• Schedule E – Part 2

– From revisions of SSAP No. 103R

• Mandatory Convertible Bonds

– Reported book/adjusted carrying value to be lower of amortized cost or fair value during the period prior to conversion


Schedule D

• SVO-Identified Funds

– BACV equals fair value or systematic value unless designated as qualifying security for 2018 systematic value

• Use * in Code Column to identify SVO-identified funds using systematic 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


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Schedule D

• SVO-Identified Funds

– From revisions to SSAP No. 26R

• Systematic value can be used as of 12/31/2018

• Systematic value can be deferred to 1/1/2018

– HOWEVER, funds that will be utilizing systematic value must be indicated by * at year-end 2017 reporting

• Election of systematic value is irrevocable

• Do not have to use systematic value; can instead use fair value


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Schedule D – Part 1Collateral Type Column - Reduction of codes from 21 to 10

• 1 – RMBS

• 2 – CMBS

• 3 – Home equity

• 4 – Individual obligationscollateralized by indivoblig; credit card, auto, student loans

• 5 – Corp/Industrial Oblig

• 6 – Lease transactionscollateralized by leases; aircraftequipment, trust certs

• 7 – CLO/CBO/CDO

• 8 – Manufact housing

& mobile home loans

• 9 – Credit tenant loans

• 10 – Other

© 2017 StoneRiver, a Sapiens Company. – Confidential & Proprietary

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Schedule D – Part 1

• 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


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Schedule DB

• Schedule DB – Swaptions

– Defined

• Swaption is agreement granting owner the right, but not obligation, to enter into an underlying swap

– Description column on Schedule DB now to include:

• Hedge ID number

• Tenor of option (time from effective date to maturity date of the option aspect)

• Start and end dates of underlying swap

– Revisions to SSAP No. 86


Schedule DB

• Part A, general instructions

– Definition of “notional” updated to match SSAP No. 86 definition

– Modification of instructions for Notational Amount Column on Parts A and B


Schedule DL

Subtitle clarification


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Schedule DL

• CUSIP Column instructions now conform to corresponding 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:

• Real estate

• Mortgage loans

• Schedule BA-type investment

• S/T invested assets

• Cash equivalents


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 determining LOB reporting for riders, endorsements and floaters

– If acts like a separate policy with separate premium, deductible and limit, treat like a stand-alone policy in LOB it most nearly resembles

– If not additional premium, separate deductible or limit, report 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

– #31 – High Deductibles

• Reserve credit recorded on unpaid claims

• Reserve credit recorded on billed and recoverable paid claims

• High deductible recoverables on paid claims

• Deductibles for the highest 10 deductible policies gross of collateral

• Total group unsecured aggregate recoverable

• Obligators and related members in group

– Revisions to SSAP No. 65


Property/Casualty

• Notes to Financials

– Note #32

• Where tabular discounting used

– Amount of interest accretion recognized in income statement

– Line on income statement where accreted interest recognized

• From revisions to SSAP No. 65


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Property/Casualty

• Additional LOB definitions of sublines to match P&C Uniform Product Code Matrix.

– Inland Marine:

• Animal mortality

• Travel coverage

• Vehicle excess waiver

• Boatowners/personal watercraft

• Other commercial inland marine

• Other personal inland marine

• Cash and cash in transit insurance


Property/Casualty

• Additional LOB definitions of sublines to match P&C Uniform Product Code Matrix.

– Other Accident and Health

• Collectively renewable

• Non-cancelable

• Guaranteed renewable

• Non-renewable for stated reasons only

• All other

– Other Liability

• Internet liability

• Cyber liability


Property/Casualty

• Additional LOB definitions of sublines to match P&C Uniform Product Code Matrix

– Write-ins

• Involuntary unemployment insurance

• Space

• Political and natural disaster evacuation

• War risk insurance/war terrorism and political violence

• Mortgage interest insurance

• Money insurance


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Property/Casualty

• Schedule T

– New code for Active Status Column

• D – Domestic Surplus Lines Insurer

– Reporting entities authorized to write surplus lines in their state of domicile


Property/Casualty

• Cybersecurity & Identity Theft Insurance Coverage Supplement

– Reorganization

• Part 1 – Interrogatories

• Part 2 – Stand-alone policies

• Part 3 – Part of package policy

– New format


Property/Casualty

• Cybersecurity & Identity Theft Insurance Coverage Supplement

– Addition of interrogatories to help indicate types of cybersecurity and identity theft business written

• Clarifies who should complete supplement

– Add information on claims open, closed w/payment and closed wo/payment


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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 systematic value is weighted-average life of underlying bonds


LAH/Fraternal/Separate Accounts

• Reporting of VM-20 reserves (Principles-Based Reserves -PBR)

– New line on 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


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• 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



• Variable annuities with guarantees

– Delete 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


LAH/Fraternal

• Previous Supplemental XXX/AXXX Reinsurance Exhibit

– New name “Supplemental Term and Universal Life Reinsurance Exhibit”

• Part 1 – All Term and Universal Life Cessions (new title)

• Part 2A – Transactions Subject to Part 2 Disclosure (Grandfathered and Special Exemption

• Part 2B – Transactions Subject to Part 2 Disclosure (Non-grandfathered)

• Part 3 – Collateral for all Term and Universal Life Reinsurance Transactions Reported on Part 2A or Part 2B

All of the above also have format changes.


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LAH/Fraternal

• Previous Supplemental XXX/AXXX Reinsurance Exhibit

– New name “Supplemental Term and Universal Life Reinsurance Exhibit”

• Part 4 – Non-collateral Assets Supporting Reserves for Affiliate Term and Universal Life Insurance Reinsurance Transactions Reported On Part 2A or Part 2B

• Part 5 – Supplemental Term and Universal Life Insurance Reinsurance Exhibit Interrogatories

All of the above have title changes only.

Due date stays at April 1


Other 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


Risk-Based Capital


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All Formulas

• Treatment of money market mutual funds changed to match statement changes

• Operational Risk add-on approach adopted

– Now “active” status; not information only

– Different format for each formula

– Excludes Op Risk of Affiliates from parent insurer’s RBC

– 2017 Factor 0%


All Formulas

• Change of Medicare Part D factor to 50% for all health lines of business

• Stop Loss line of business subject to a “tiered-factor” approach

35% times first $25m

25% times remaining premium > $25m


PRBC

• Simplification of RBC charge for investment affiliates (Affiliate code 7)

– No longer using a “look through” approach

– Now set factor of .225 times carrying value of common stock, preferred stock, and bonds

• Catastrophe Risk Charge

– Now official part of formula; no longer information only

– Earthquake and hurricane separated into two sections

• New interrogatories to support exemptions


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PRBC


LRBC

• Addition of Authorized Control Level RBC ratio

– Already disclosed in PRBC and HRBC

• Instructional changes to Primary Security Shortfall


HRBC

• Guidance for start-up companies for Excessive Growth Charge

Start-up companies may consider use of first year projected amountsupon approval of domiciliary state, using approved pro forma RBC. Reportfirst 12 months projected Underwriting Risk Revenue on Line 13 andprojected Net Underwriting Risk on Line 15. Current year values are pulledautomatically into Lines 14 and 16.

Complete footnote 1 explaining projections used.


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Changes for Schedule F Coming


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Reports Financial Rating of Reinsurers

• Why?

• Electronic column added last year to Schedule F, Part 3; Currently sole purpose is to “feed” into RBC

• Needed for changes to RBC charges for reinsurance recoverable charge

• Where do I get the financial rating?

• Both statement instructions and RBC instructions state comes from “approved rating agency as outlined in table”

• Must be current rating

• If certified reinsurer, do not report Secure Code assigned by state; code must be determined by current financial rating


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New Schedule F Reporting?

• Adopted at April NAIC National Meeting• Effective year-end 2018

• What would change?• Eliminates aggregate reporting for amounts <$100,000 on

Part 1• Combines current Parts 3, 4, 5, 6, 7, and 8 into a single

Schedule F – Part 3 – Ceded Reinsurance• New Parts 4, 5; 9 renumbered to 6

• Restatement of Balance Sheet now Part 6• Modifies crosscheck to Liabilities page• Changes made to Schedule F supplement• Revisions to Schedule F in Life Workers’ Compensation Carve-

Out Supplement


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New Schedule F

• Why?

• Would eliminate duplication of information between current Schedule F Parts, promotes consistent reporting, greater automation, could reduce filing errors; helps feed RBC

New Schedule F Proposal 2016-35BWG

http://www.naic.org/documents/cmte_e_app_blanks_related_adopted_mods_2016-35BWG_Modified.pdf


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Questions?

Please contact:

Sara Cork

StoneRiver Statutory Accountant

[email protected]

Phone: 319-378-5778 or

Mobile: 319-651-2214


Thank You



mailto:[email protected]

Documents

NAIC Updates - IASA States...qualifying security for 2018 systematic value •Use * in Code Column to identify SVO-identified funds using systematic value in 2018; for 2017 use measurement