N A I C~ Update Spring2009

Top stories•Insurerstodiscloseclimatechangebehaviorin2010

•Regulatorseyeratingagencies,initiateoneoftheirown

•Capitalandsurplusreliefproposalconsideredinpieces

Also in this issue •Inbrief

•IAISUpdate

•NAICaccountingupdate

What’s next•May18-19,2009:NAICInternationalInsuranceForum,Washington,D.C.

•June13-16,2009:NAICSummerNationalMeeting,Minneapolis,MN

•July9-12,2009:NCOILSummerNationalMeeting,Philadelphia,PA

SAN DIEGO, CA.OfallquarterlymeetingsoftheNationalAssociationofInsuranceCommissioners(NAIC),thespringgatheringisconsideredbyregularattendeestobethe“slowest.”However,actionstakenonthegroundatthisyear'sMarchmeetingdidnotlackincontroversy.

Rippedrightfromtheheadlinesofmajornewspapers,thetopicofWashington’sconsiderationofasystemicriskregulatortookcenterstageinthehallwaysaswellasinthemeetingrooms,whereregulatorsandmembersofstatelegislativegroupsvowedtoworktogetherinframingthedebate.

Onthefederalfront,too,therecontinuestobemuchactionbyregulatorsandexecutivesoftheNAICrelatingtoinitiativesunderconsiderationbytheObamaadministrationandtheU.S.Congress.Concurrentwiththespringmeeting,forexample,IllinoisInsuranceDirectorMichaelMcRaithwasdowninWashingtonstandingupforstateregulationduringaMarch17hearingoftheU.S.SenateCommitteeonBanking,HousingandUrbanAffairsto“examineperspectivesonmodernizinginsuranceregulation.”

ThisfollowstestimonygivenbyWisconsinInsuranceCommissionerSeanDilwegduringaMarch12climatechangehearingbeforetheU.S.SenateCommitteeonCommerce,ScienceandTransportationhearingonclimatechange,duringwhichthecommissioneroutlinedNAICactivitiesonthisfront.

Consequently,attheSanDiegomeeting,theNAICExecutiveCommittee/Plenaryadoptedaclimatechangedisclosuresurveywhichwillbemandatoryformostinsurersbeginningthisyear.

ThebehaviourofratingagencieshasalsomovedtotheforefrontattheNAIC.Atthespringmeeting,theRatingAgencyWorkingGroupadvancedplanstosurveyratingagenciesonissuesofconcernsharedbystateregulators.TheNAICisalsomovingaheadwithexploringthefeasibilityofcreatingitsownratingagencytorateinsurers’investments.

Lookingforward,itemstobeconsideredatthesummermeetinginJuneincludecapitalandsurplusrelief,creditscoring,andchangestotheNAIC’scatastrophemodelinghandbook.

Spring 2009

NAIC Update

https://external-apps.naic.org/education/registration_form.htm

http://naic.org/meetings_home.htm

http://www.ncoil.org/schedule/philadelphia09.html

Deloitte Newsletter US Letter Template | Proof no.: XX | Job code: DEOXXXXX | Colors: CMYK | Trim: 8.5x11IN | Bleed: 1/8IN | Designer: XXXXXXXXXXX | Date: XX.XX.XX

2

Climate change will have a huge impact on the insurance industry and we need better information on how insurers are responding to the challenge. –PennsylvaniaInsuranceCommissionerJoelArio

Top stories

Insurers to disclose climate change behavior in 2010Beginningnextyear,theinsuranceindustrywillberequiredtoreporttostateregulatorscertainbusinesspracticesrelatingtoclimatechange.

AdoptedbytheNAICExecutiveCommitteeandPlenaryatitsMarch17meeting,theClimateRiskDisclosureProposalrequiresmandatorydisclosurebyinsurerswithpremiumsover$500millioninthe2009reportingyearandinsurerswithpremiumsover$300millioninthe2010reportingyear.Allotherswouldcompletethedisclosuresurveyonavoluntarybasis.Surveysaretobesubmittedtotheregulatorofaninsurergroup’sleadstate.

Thesurveycontainseightquestionsthataskcompaniestodiscloseeverythingfromdescribingtheactionstheyaretakinginmanagingclimatechangesriskstotellinghowtheyarebuildingthenotionofclimatechangeintotheirriskandinvestmentmanagementstrategies.

Whilethepriorversionincludedpointeddisclosure-relatedquestionsthatweretobeincludedintheNAICAnnualFinancialStatement,theeightqueriesthatremaininthenewiterationaremoregenericandaretobeposedinsteadviasurveyratherthaninthefinancialstatement.

“Climatechangewillhaveahugeimpactontheinsuranceindustryandweneedbetterinformationonhowinsurersarerespondingtothechallenge,”PennsylvaniaInsuranceCommissionerJoelArio,chairmanoftheNAICClimateChangeandGlobalWarmingTaskForce,saidinastatement.

Someinsuranceindustryrepresentativeshaveexpressedconcernoverthemeasure,arguingthatitsetsthestageforpossiblelawsuitsandpresentsacompetitiveadvantageissuebymakingpublicwhatmightotherwisebeinternalcompanyinformation.

Meanwhile,otherssupportthemandateoverthemoreonerousdraftthatcamebeforeit.

“Whetherit’sreducingtheirowncarbonfootprintsormeetingconsumerdemandbyoffering‘green’products,insurershaveastrongpublicrecordonthisissue,”DavidSnyder,vicepresidentandassociategeneralcounseloftheAmericaInsuranceAssociation,saidinastatementissuedpriortothemeeting.

Asusedinthisdocument,“Deloitte”meansDeloitteLLPanditssubsidiaries.Pleasereviewwww.deloitte.com/us/aboutforadetaileddescriptionofthelegalstructureofDeloitteLLPanditssubsidiaries.

http://www.naic.org/documents/committees_ex_climate_090224_survey.pdf


3


The NAIC continues its pursuit of expanding its New York-based Securities Valuations Office to include a public NRSRO that would rate investments by insurers.

Regulators scrutinize rating agencies, make plans to start one of their own

Whilethetopicofratingagencyoversightbyregulatorshasbeenbrewingforsometime,anewgroupwithintheNAIChasbeenchargedwiththe“degreeofregulatoryflexibilityavailabletoreducereliance”onratingagencies.

Inthatvein,thefirstorderofbusinessfortheRatingAgencyWorkingGrouphasbeentoevaluatewhattheNAICcharacterizesas“shortcomings”inratings.

TheeffortsofarhasproducedanNAICstaff-writtenreportdetailingtheorganization’scurrentuseandrelianceoninformationsuppliedbyNationallyRecognizedStatisticalRatingOrganizations(NRSRO)registeredundertheSecuritiesandExchangeCommission,suchasA.M.Best,Fitch,Moody’sandStandardandPoor’s.

Thereportwasunveiledatthegroup’sMarch16meetingalongwithareportthatexaminedcreditratingtransitionfromtheperspectiveoftheimpactrealizedfollowingaratingdowngradeforcorporateandstructuredsecurities.

Asbackgroundformembersofthegroupandthepublic,theworkinggrouphaslistedonitsWebsiterelatedinformationandstudiesontheissuecreatedbytheFinancialStabilityForum,President’sWorkingGroup,SecuritiesandExchangeCommission,andInternationalOrganizationofSecuritiesCommission.

NAIC as NRSRO? Inrelatednews,theNAICcontinuesitspursuitofexpandingitsNewYork-basedSecuritiesValuationsOffice(SVO)toincludeapublicNRSROthatwouldrateinvestmentsbyinsurers.AttheNAICspringmeeting,thenewly-formedSVOInitiativesWorkingGroupdidnotmeet;ratheritforwardedareportofitslatestactivitiestotheNAICExecutiveCommittee.Theworkinggroupispeggingthecostofstart-upat$4millionforthefirsttwoyearsofoperation.

AccordingtothePropertyCasualtyInsurersAssociationofAmerica(PCI),twokeyquestionsremainatissueinthisspace:

1. DoesthisnewentityfitwiththemissionoftheNAIC?

2. Willitbesufficientlyimportantinthecontextofprojectscurrentlyunderway?

“ThedecisionregardingthisnewentitycouldalsobeimpactedbytheworkofthenewRatingAgencyWorkingGroup,whichisstudyingtheNAIC’srelianceonratingagencies...PCIaswellasotherindustryrepresentativeshavesignificantconcernsaboutpotentialconflictsofinterestandthefundingofanNAIC-affiliatedNRSRO,”PCIstatedinitsmeetingroundup.

Top stories, cont.

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


4


Capital and surplus relief proposal considered in piecesWhenfirstunveiledpubliclyattheNAIC’swintermeetinginDecember,discussionofthemulti-pointproposaloftheAmericanCouncilofLifeInsurers(ACLI)drewastanding-roomonlycrowd.AtthespringNAICmeeting,thisonce“hottopic”washandledasamatterofcourse.

Asitnowstands,severalremainingpointsoftheproposalaremovingthroughtheprocessasfollows:

• ThecontroversialdeferredtaxmeasurehasbeenreferredtotheNAIC’sStatutoryAccountingPrinciplesWorkingGroupforittodecidetheappropriatenessofanychangesfor2009

• TheExecutiveCommittee/PlenarywillconsiderattheJunemeetingthreepointscontainedwithintheCapitalandSurplusReliefWorkingGroup’srecommendations,whicharebasedontheoriginal“interimsolution”proposedbytheACLI:

1.Allowthe2001PreferredMortalityTablestobeusedforany2001CSOproduct

2.MakeSection8CofActuarialGuideline38retroactivetoJuly1,2005

3.Clarifythat2001Non-preferredMortalityTablescanalwaysbeusedfordeterminingsegmentswithinActuarialGuideline38

• Variableannuitiesrecommendationsdidnotsupportanyspecificchangesoractions,accordingtotheNAIC,butregulatorsnotedthattheCapitalAdequacy(E)TaskForceiscurrentlyreviewingtheStandardScenarioandtheMortgageExperienceAdjustmentFactor.Thetwooriginalrecommendationsareasfollows:

1. Eliminateredundantuseofstand-aloneassetadequacyanalysisrequiredbyActuarialGuideline39,whichcoversonlyVariableAnnuitylivingbenefitguaranteesandassociatedrevenueundercontract

2.WaivetheStandardScenarioasthefloorintheC-3Phase2calculationofrisk-basedcapitalforyearend2008and2009

Goingforwardwithitschargesfor2009,theCapitalandSurplusReliefWorkingGroupissettoexaminethecurrentframeworkgoverningpermittedpractices,includingthedefinitionofapermittedpractice,requestsaroundrequestsfornotificationandtheprocessesusedindeterminingifapracticeisgranted,amongotheritems.

Theissuecametotheforein2008asACLIapproachedtheNAICcitingconcernsabouttheeconomicclimate.Initially,thetradegroupaskedregulatorstoapprovetheplanonanemergencybasis.AtaspecialmeetinginJanuary,regulatorsdeferredavotependingexaminationoftheplanpointsbyseveralNAICtechnicalcommittees.Meanwhile,reliefhasbeenconsideredonastate-by-statebasis,includingbyConnecticut,Indiana,IowaandOhio.

Top stories, cont.


5

In briefRegulators set to advance Model Audit Rule and Receivership revisions Sarbanes-Oxley-inspiredrevisionstotheNAICModelAuditRuleandanupdateoftheInsurerReceivershipModelAct(IRMA)bothsparkedspiriteddebatewhentheywerefirstproposedandfinallypassedin2006.Butasaone-yearcommentperiodforbothmeasurescomestoaclose,allappearsquietonthehomefront.

FormerlyknownastheModelAuditRule,theModelRegulationRequiringAnnualAuditedFinancialReportswasrevisedin2006tofeaturebestpracticesrelatedtoauditorindependence,corporategovernanceandinternalcontrolsoverfinancialreporting.

RevisionstoIRMAalsosparkeddebateuntilthelargedeductibleprovisionwasremoved.Theaimofthemodelistohelpbringuniformityinthewaystateshandleinsolvencies.

InJune,attheNAICSummerNationalMeetinginWashington,D.C.,regulatorsaretoconsiderwhethertoadoptIRMAasan“acceptablereceivershipscheme”astatemayhaveforReceivershipPartAcompliance,effectiveJanuary1,2012.

Alsoatthesummermeeting,theNAICwillconsideradoptingrevisionstotheRiskBasedCapitalModelandanamendmenttothecurrentsignificantelementrequiredforaccreditationwithaneffectivedateofJanuary1,2012.

Reinsurance Regulatory Modernization Framework to advance in D.C.WiththeReinsuranceRegulatoryModernizationFrameworkadoptedatitswintermeeting,theNAICiswellonitswaytofillingintheblanksoftheframeworkbydraftingfederalenablinglegislationthatwouldallowforuniformityacrossstates,albeitusurpingexistingstatereinsurancelawsintheprocess.ThecommentperiodforthemeasureistobeabbreviatedinordertosubmittoCongressinthecurrentsession.Aninterimmeetingtoreceivecommentsisbeingslatedformid-April.

ThemovecomesfollowingtheDecemberadoptionoftheframeworkbytheNAICExecutiveCommittee.Themeasurecallsforareductionincollateralrequirementsfornonadmittedreinsurers.Undertheproposal,twonewclassesofreinsurersaredefined(domesticportofentryreinsurersandnon-U.S.reinsurers).ItalsoincludestheconceptofanNAICReinsuranceSupervisoryReviewDepartment.

State groups join to provide “voice” on federal frontStateregulatorsandstatelawmakersdon’talwaysagreeonmattersrelatingtotheinsuranceindustry,butanewcoalitionmadeupofmembersofbothgroupsisforgingthewayincreatingaunifiedvoiceonmattersrelatingtothequestionoffederalregulation.

AtameetingoftheNAIC/StateGovernmentLiaisonCommitteeinSanDiego,NAICPresidentandNewHampshireInsuranceCommissionerRogerSevignysaidwhilestate-basedregulationremainsstrong,thecurrentenvironmenthasdemonstratedaneedforsystemicregulatorwhocouldfillanygapsthatmayexist.

NewYorkStateSen.JamesSeward,whoispresidentoftheNationalConferenceofInsuranceLegislators(NCOIL),saidthatwhilehisorganizationhasnotyettakenapositionontheideaofasystemicriskregulator,heisconcernedabouttherelationshipsuchanentitywouldhavewiththestate-basedregulatorysystem.

OthergroupsinvolvedinthediscussionincludetheNationalConferenceofStateLegislators,theNationalGovernorsAssociationandtheAmericanLegislativeExchangeCouncil,amongothers.

Noactionwastakenatthemeetingbutdiscussionisexpectedtocontinue.

Regulators to scrutinize insurers’ use of credit scoring Thetopicofcredit-basedinsurancescoringpermeatedseveralsessionsoftheNAIC’sspringmeeting,withregulatorsformallyadoptingaproposaltocontinuetheirstudyoftheissueandannouncingapublichearingthatwillbesettoreceivetestimonyfrominterestedparties.

FromthePropertyCasualtyCommitteemeetingtotheMarketRegulationandConsumerAffairsCommitteeconfab,discussiononthecontroversialissuesparkeddebatebetweenindustryandregulators–withregulatorsvowingtogivetheunderwritingpracticeasecondlook.

Theissuehasbeenontheforefrontforthepast10yearsandmanystateshaveadoptedacredit-basedinsurancescoringmodellawdevelopedbytheNationalConferenceofInsuranceLegislators(whichishailedassomethingthat’sfairtoconsumersandbusinessalike).Inall,48stateshavesomeformoflegislationorregulationinplacetooverseethepractice.


6

ThelatestattentionattheNAIChasbeensparkedbyconcernthattheimpactoftheeconomyiscausingpersonalcreditscorestodrop,placingotherwisefiscallyresponsibleindividualsinlineforhigherpremiums.

Tothatend,PCI,toldregulatorsthattheyshouldnotbeusingthecurrenteconomicenvironmenttochangelawonapracticethathasbeenproven,timeandagain,tobeastrongtoolinpredictingrisk.

ThepublichearingwillbejointlyhostedbythePropertyCasualtyCommitteeandtheMarketandRegulationConsumerAffairsCommittee.Issuestobediscussedincludethedefinitionofacreditscore,itsimpactonpolicyholdersandaviewonhowcompaniesusecreditscoring.Asofthiswriting,thedateandlocationofthehearinghadyettobedetermined.

Three hearings in one monthAsinsuranceissuestakethenationalstage,theNAICanditsmembersarepilinguptheairlinepointsinfrequenttravelstoWashington,D.C.DuringthemonthofMarchalone,regulatorsandNAICexecutiveshaveappearedbeforeCongressthreetimestooffertestimonyfromtheperspectiveofstate-basedregulation.

•March 5:NAICCEOTerriVaughantestifiedbeforeaU.S.HouseFinancialServicesCommitteepanelontheissueofinsuranceregulatorymodernization

•March 12:WisconsinInsuranceCommissionerSeanDilwegspokeataU.S.SenateCommitteeonCommerce,ScienceandTransportationhearingonclimatechangeresponse

•March 17:IllinoisDirectorMichaelMcRaithtestifiedbeforetheU.S.SenateCommitteeonBanking,HousingandUrbanAffairsontheissueofinsurancemodernization

TerriVaughan SeanDilweg MichaelMcRaith

NAIC principals appearing before Congress

New NAIC CEO Vaughan takes helm in San Diego

NewNAICChiefExecutiveOfficer

ThereseM.(Terri)Vaughan,Ph.D.is

provingtobeahands-onmanager.

InSanDiego,herfirstmeetingsince

takingthehelm,sheparticipatedin

severalpertinentsessions,enthusiasticallyaddinginputand

insighttothediscussionsathand.

HavingservedastheIowaInsuranceCommissionerfor10

years,andasapastpresidentoftheNAIC,Ms.Vaughanis

wellacquaintedwiththeworkingsoftheorganization.

SincetakingtheleadpositioninFebruary,shehastestified

beforeCongressonbehalfoftheNAIC.Herstanceonthe

issueofafederalregulatorforinsuranceisthatshewould

supportasystemicriskregulatorbutopposeusurpationof

state-basedinsuranceregulation.

PriortoappointmentasCEO,Ms.VaughanwasaRobbB.

KelleyDistinguishedProfessorofInsuranceandActuarial

ScienceatDrakeUniversity.Severalofherstudieswere

distributedattheNAICmeeting,includingoneofher

latest;“TheImplicationsofSolvencyIIforU.S.Insurance

Regulation.”

Awell-attendedreceptioninherhonorwasheldduringthe

SanDiegomeeting,withregulatorsandindustryexpressing

enthusiasmaboutherarrivalandwishingherwellgoing

forward.

VaughanreplacesCatherineWeatherford,whoresignedin

July2008.

In brief, cont.

NAIC San Diego meeting by the numbers

Numberofattendees: 1,422

Numberofsessions: 64

NumberofNAICgroupsthatdidnotmeet: 42

Numberofdraftstocatastrophewhitepaper: 13

Numberofdisclosuresinclimatechangesurvey: 8


7

International update

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.

ContinuingitsinvolvementinareasofinsurancesupervisionbeyondtheUnitedStates,theNAICisexpectedtomovethough2009withafullinternationalagenda.

AkeyplayerinthisinitiativewillbeNAICstafferGeorgeBradywhowilltaketheleadinrepresentingtheorganizationontheExecutiveCommitteeoftheInternationalAssociationofInsuranceSupervisors.

ImmediateNAICpastpresidentandKansasInsuranceCommissionerSandyPraegernotedthatBrady’spositionwillbecrucialtodiscussionsinMay,whentheIAISdiscussesstrategicplanningissuesregardinginternationalinsuranceregulation.

AlsodiscussedattheMarch17meetingoftheInternationalInsuranceRelationsCommitteewasasetofguidingprinciplesthattheNAICwillusegoingforwardinconversingwithinternationalregulatorybodies.AmongthebulletpointsunderdiscussionisaprinciplethatwouldhaveNAICrepresentatives“activelypromotetheadoptionofU.S.insuranceregulatoryprinciplesworldwide,”withwhichsomeregulatorsandindustryrepresentativestookissue.SomealsodebatedpointNo.2,whichstatesthattheNAICsupportsthedevelopmentofthe“eventualconvergence”tointernationalstandardsofinsurancesupervision.

BoththeNAICandtheIAISparticipateintheG-20.1InadditiontoprovidingtheUnitedStatesperspectiveonissuesunderdiscussionbytwoG-20workinggroups(suchasreformingcreditratingagencies,workingoncapitalsurplusreliefissues,enhancingriskassessmentmechanismsandaddressingcreditdefaultswaps),theNAICisalsoinvolvedinreviewingIAIScommentsontheseissues.

Meanwhile,atitsMarch16meeting,theNAICInternationalSolvencyandAccountingWorkingGroupagreedtosubmitcommentsontheIAISissuespaperregardingtherelationshipbetweentheactuaryandtheexternalauditorinthepreparationoffinancialreports.FormalcommentsforthelatestdraftofthepaperareduetotheIAISbyMay15.

1Groupof20headsofstateofthe20largestglobaleconomies


8

NAIC accounting update

TheNAICheldtheir2009SpringNationalMeetinginSanDiego,CaliforniafromMarch15toMarch18,2009.ThisnewslettercontainsasummaryofthesignificantmattersimpactingStatutoryAccountingthatwerediscussedatthemeeting.

Summary• TheStatutoryAccountingPrinciplesWorkingGroup(SAPWG)heldhearingandmeetingsessionstoaddresscommentsoncertainsubstantiveandnonsubstantiveissues(refertopages9through11fordetails).ThecommentdeadlinefortheissuesnewlyexposedatthemeetingisMay4,2009.

• TheEmergingAccountingIssuesWorkingGroup(EAIWG)heldameetingtotakeactiononcertaintentativepositionsandtoaddresscertainoutstandingissues(refertopage12fordetails).ThecommentdeadlinefortheissuesnewlyexposedatthemeetingisMay4,2009.

– InresponsetorecentactionsbytheFASB,theEAIWGheldaconferencecallonMarch26,2009todiscussthefollowingtwoproposedStaffPositionsregardinginactivemarketsandtherecognitionandpresentationofother-than-temporaryimpairments:

– FSPFAS157-e,Determining Whether a Market Is Not Active and a Transaction Is Not Distressed

– FSPFAS115-a,FAS124-a,andEITF99-20-b,Recognition and Presentation of Other-Than-Temporary Impairments

• TheNAIC/AICPAWorkingGroupupdatedthepreviouslyprovidedresultsofasurveysentouttothestatesregardinghowthestatesplanonincorporatingtheNAICModelAuditRule(MAR)intheirstate.SurveysarebeingsentquarterlyandtheresultsoftheFebruary2009surveywereasfollows(includesDistrictofColumbiainthesurvey):

– Statute/Law:16states

– Regulation/Rule:28states

– Combination:7states

ThesurveyalsoaddresseswhenstatesplantopresenttheMARamendmentstotheirlegislatureorwhentheyplantochangetherelatedregulation.AsoftheFebruary2009survey,11stateshaveadoptedchangestoaddresstheMARandtheremaining40states(includesDistrictofColumbiainthesurvey)expectedtopresentamendmentsoradoptchangestoregulatorytoaddresstheMARin2009.

ForthosestatesthathavepresentedtheadoptedchangestotheMARtotheirrespectivelegislature,noneofthestatesindicatedanysignificantproblems.

MembersoftheNAIC/AICPAWorkingGroupnotedthatquestionshavearisenregardingtheapplicationofcertainlanguagewithintheMAR,specificallythedisclaimerwithinSection14indicatingthatthesectionshallnotapplytoSOXCompliantEntitiesorwholly-ownedsubsidiariesofSOXCompliantEntities.NAICStaffwillbedevelopingsomeproposedguidancetoclarifytheissueswithintheMARImplementationGuideandtheWorkingGroupplanstoholdaninterimconferencecalltoreviewthedevelopedguidance.SomespecificissuesraisedincludesituationswheretheSOXCompliantEntity’sauditcommitteedoesnotdesireorisnotabletoserveinthegovernancecapacityforthesubsidiarystatutoryinsurancecompany.Further,ifanewauditcommitteeisappointedforthesubsidiarystatutoryinsurancecompany,theissuewasraisedregardingwhetherornottheindependencerequirementswouldstillapply.


9

Statutory Accounting Principle Working GroupCurrent Developments: TheSAPWGadoptedthefollowingamendmentsasfinal:

Reference Title Sector Amendments adopted as finalEffective

dateFS impact Disclosure

2008-13

2008-26

2008-27

SSAP No. 48Audit Report Requirements for non-subsidiary, controlled and affiliated (SCA) investments

FSP FAS 150-3 and FSP FAS 150-5Mandatorily Redeemable Financial Instruments, Freestanding Warrants, and Similar Instruments on Shares That are Redeemable

FSP SOP 90-7-1An Amendment of AICPA Statement of Position 90-7

P&CLifeHealth

P&CLifeHealth

P&CLifeHealth

Nonsubstantive Change – Adoptedchangetoallowaninsurertoreportitsinvestmentinanon-SCAentityonanunauditedbasisiftheannualauditedinformationisnotcomplete,solelyforthecalendaryearinwhichtheinvestmentwasacquired.

Nonsubstantive Change – AdoptedasfinalrevisionstoIssuePaperNo.99– Nonapplicable GAAP Pronouncements (Issue Paper No. 99) rejectingFSPFAS150-3,Effective Date, Disclosure and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain mandatorily Redeemable Noncontrolling interests Under FASB Statement No. 150 andFSPFAS150-5, Issuer’s Accounting Under FASB Statement 150 for Freestanding Warrants and Other Similar Instruments on Shares That are Redeemable asnotapplicabletostatutoryaccounting.

Nonsubstantive Change – AdoptedasfinaltheexposedrevisionstoSSAPNo.72–Surplus and Quasi Reorganizationstoclarifythatputtablewarrantsandmandatorilyredeemablewarrantsarereflectedasliabilities.

Nonsubstantive Change – AdoptedasfinalrevisionstoIssuePaperNo.99rejectingFSPSOP90-7-1,An Amendment of AICPA Statement of Position 90-7asnotapplicabletostatutoryaccounting.

Y

Y

N

N

N

N

Immediate

Immediate

Immediate


10

TheSAPWGexposedthefollowingitemsforwrittencommentbyinterestedparties:



2009-012009-042009-05

2009-02

2009-06

2006-30

Various

FSP FAS 140-3AccountingforTransfersofFinancialAssetsandRepurchaseFinancingTransactions

Capital and Surplus Relief (EX) Working GroupConsiderIncreaseinAdmissionofDeferredTaxAssets

SSAP No. 92AccountingforPostretirementBenefitsOtherThanPensions,AReplacementofSSAPNo.14

SSAP No. 100AccountingforPensions,AReplacementofSSAPNo.89

P&CLifeHealth

P&CLifeHealth

P&CLifeHealth

Nonsubstantive Change –ExposedchangestoIssuePaperNo.99rejectingthefollowingasnotapplicabletostatutoryaccounting:

•FSPFAS117-1,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

•StatementofPosition07-2,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

•StatementofPosition07-1,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

Nonsubstantive Change – ExposedchangestoSSAPNo.91R,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,adoptingFSPFAS140-3.

Substantive Change–Exposedchangestoparagraphs10and11andExhibitAofSSAPNo.10,IncomeTaxes(SSAPNo.10).Theproposedchangesincluderevisingtheadmissionthresholdsfrom1to3yearsforreversalsand10%to15%ofsurplusforentitiesthatqualifyunderrisk-basedcapitallevels.EntitiesthatqualifywillnotbepermittedtoconsidertheadditionalDTAcomputedasanadmittedassetforthepurposesofcertainregulatorytriggeringevents(e.g.determinationoftheamountofanordinaryorextraordinarydividend).Further,theincreaseintheDTAasaresultofutilizingtheincreasedthresholdsshallbereportedseparatelyintheSummaryofOperations,StatementofIncomeorStatementofRevenue,asapplicable.

IndustrywasspecificallyrequestedtodemonstratewhetherthereisaneconomicneedtochangetheexistinglanguageinSSAPNo.10.

Exposed proposed SSAP No. 92 and SSAP No. 100–TheproposedSSAPsadoptwithmodificationFASBNo.158,Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132 (R)(FAS158).DifferencesfromFAS158includethefollowing:

•nonadmittanceofprepaidassetsresultingfromtheexcessofthefairvalueofplanassetsovertheaccumulatedpostretirementbenefitobligationorprojectedbenefitobligation

•nonpublicentityexceptionsfordisclosuresarenotappropriateforstatutoryreporting

•transitionguidancewillvarydependingontheoverallimpacttosurplusofadoption

Additionalsignificantchangesfromexistingstatutoryguidanceincludesthefollowing:

•nonvestedemployeesareincludedwithintherecognitionofnetperiodicpensioncostandpensionbenefitobligationorofnetpostretirementbenefitcostandaccumulatedpostretirementbenefitobligation

•utilizationofprojectedbenefitobligation(PBO)insteadofaccumulatedbenefitobligation(ABO)inestablishingpensionliabilities

N

Y

Y

Y

N

N

N

Y

TBD

TBD

TBD

2011


11

TheSAPWGtookthefollowingotheractions:



2002-27

2003-12

2008-20

2009-03

2008-29

2008-15

2008-28

Accounting for Index Based Insurance Linked Securities

IP No. 135FASB Interpretation 45: Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Others, and Interpretation of FASB Statements No. 5, 57, and 107 and Recession of FASB Interpretation No. 34 (FIN 45)

FAS 163Accounting for Financial Guarantee Contracts

FSP EITF 99-20-1Amendments to the Impairment Guidance of EITF Issue No. 99-20-1

Increase the DTA Admission Limitations

Deferred Premium Asset and the Unearned Premium Reserve

Transfer of P&C Run Off Portfolios

P&CLifeHealth

P&CLifeHealth

P&CLifeHealth

P&CLife

P&CLifeHealth

P&CLifeHealth

LifeHealth

P&C

Withdrawn – The Working Group noted there was a lack of activity related to these derivatives.

TheWorkingGroupdirectedstafftomodifytheissuepapertoprominentlyincluderequirementsforrelatedpartyguaranteeswithinthebodyoftheaccountingguidance.

AsubgroupwasformedtoreviewthecommentsreceivedonIssuePaperNo.136–Accounting for Financial Guaranty Contracts.Thesubgroupwill:

•Prioritizeadoptingenhancedfinancialguaranteedisclosureseffectivefor2009

•CoordinatewiththeFinancialGuarantyInsuranceGuidelineWorkingGroup

•Conductconferencecalltoaddresstechnicalcomments.

TheWorkingGroupmovedthisitemtotheNonsubstantiveActiveListingandrequestedtheEmergingAccountingIssuesWorkingGroupconsiderrevisingINT06-07,Definition of Phrase “Other Than Temporary”toincludeguidanceinparagraphs9and10ofFSPEITF99-20-1.TheWorkingGroupalsoreferredthisitemtotheFairValueSubgrouptoconsidertheimpacttoimpairmentassessmentsfromtheadoptionofFAS157,Fair Value Measurements.

Disposed–TheWorkingGroupdisposedthisitemwithoutchangetostatutoryaccounting.ThisitemwasreplacedbyRef2009-06(seeabove).

Disposed–TheWorkingGroupdisposedofthisitemattherequestofthesponsor.AnewFormAwassubmittedatthemeetingthattheWorkingGroupandLHATFwillconsiderinajointconference.

ThisitemproposeschangingP&Creinsuranceaccountingtoallowrunoffreinsurancecontractsmeetingspecifiedcriteriatoreceiveprospectiveaccountingtreatment.TheWorkingGroupdirectedstafftodraftanIssuePaperwithchangestoexcludeaffiliatedtransactionsforWorkingGroupreviewandpossibleexposurebeforetheSummerNationalMeeting

N

Y

Y

Y

N

Y

Y

N

Y

Y

Y

N

Y

Y

NA

2010

2009

TBD

NA

TBD

TBD

Other SAPWG Matters:• TheFairValueSubgroupheldaneducationalsessiononMarch17,2009.• DuringaMarch5,2009conferencecall,theSeparateAccountSubgrouprequestedcommentsbyApril5,2008ontheproposedrevisionstoSSAP

No.56,SeparateAccounts.• TheGuarantyFundSubgroupwillresumediscussionsduringthesecondquarterof2009.• TheWorkingGroupformedtheSecuritiesLendingSubgroupwithconferencecallstobeheldinthesecondquarter.


12

Emerging Accounting Issues Working Group

TheEmergingAccountingIssuesWorkingGroup(EAIWG)continuestoaddressthemanyquestionsthataredevelopingasnewaccountingpronouncementsareissued.

TheEAIWGadoptedasfinalthefollowingtentativeconsensuspositions:

• INT08-08T: Balance Sheet Presentation of Funding Agreements issued to a Federal Home Loan Bank (FHLB).TheWorkingGroupadoptedtheconsensusindicatingthatfundingagreementsissuedtoanFHLBshallbeevaluatedonanindividualbasis,andshallbeaccountedforaccordingtothesubstanceoftheindividualagreement.

TheEAIWGexposedthefollowingtentativeconsensuspositions:

•EITF 07-4: Application of the Two-Class Method under FAS 128 to Master Limited Partnerships (EITF 07-4). TheWorkingGroupexposedatentativeconsensusrejectingEITF07-4asnotapplicabletostatutoryaccounting.

•EITF 07-5: Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock (EITF 07-5).TheWorkingGroupexposedatentativeconsensusrejectingEITF07-5asnotapplicabletostatutoryaccounting.

•EITF 08-7: Accounting for Defensive Intangible Assets (EITF 08-7).TheWorkingGroupexposedatentativeconsensusindicatingthatdefensiveintangibleassetsarecapturedwiththeSSAPNo.20,NonadmittedAssetsdefinitionofintangibleassets,andarenonadmittedforstatutoryaccounting.

TheEAIWGreferredthefollowingissue:

•Clarification of SSAP No. 85 for Case and Disease Management Program Expenses.TheWorkingGroupreferredthisissuetotheAccidentandHealthWorkingGroup.

This summary was prepared by Matt Wangard and Carolyn Estrada. For your comments and suggestions please contact the authors – [email protected] or [email protected].


13

ContributorsFor more information, please contact:

Eleanor BarrettSeniorManagerDeloitteLLP+1(212)[email protected]

Carolyn Estrada SeniorManagerDeloitte&ToucheLLP+1(212)[email protected]

Jan LommelePrincipalDeloitteConsultingLLP+1(860)[email protected]

Matt WangardPartnerDeloitte&ToucheLLP+1(312)[email protected]

For further information, visit our website at www.deloitte.com/us/insurance

ContactsFor more information, please contact:

Rebecca C. AmorosoViceChairmanU.S.InsuranceLeaderDeloitteLLP+1(973)[email protected]

Steve FosterDirectorDeloitte&ToucheLLP+1(804)[email protected]

Howard MillsDirector&ChiefAdvisorInsuranceIndustryGroupDeloitteLLP+1(212)[email protected]

Naru NavelePartnerDeloitte&ToucheLLP+1(973)[email protected]

Mark ParkinPartnerDeloitte&ToucheLLP+1(212)[email protected]

Ed WilkinsPartnerDeloitte&ToucheLLP+1(402)[email protected]

About this newsletterThisnewsletterisdistributedforpromotionalpurposesandisnotintendedtorepresentinvestment,accounting,taxorlegaladvice.AnyopinionsandanalysespresentedorexpressedhereinarethoseoftheauthorsandarenotintendedtorepresentthepositionofDeloitte&ToucheLLPorotherindividualmembersofthefirm.Datapresentedhereinhasbeenobtainedfromsourcesbelievedtobereliable.

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Technology

N A I C~ Update Spring2009