ohio iasa statutory accounting update session 2 · •adopted modified asu 2016-05 –change in...

Ohio IASA

StoneRiver 1

Ohio IASA

Statutory Accounting Update

Session 2.3

November 21, 2016

Connie Jasper Woodroof

NAIC Liaison, StoneRiver

Agenda

• 2016 Accounting Changes

• Accounting Changes Effective

1/1/2017

2016 Accounting Changes

© 2016 StoneRiver, Inc.

Ohio IASA

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SSAP No. 1 – Accounting Policies, Risks & Uncertainties, and Other Disclosures

• Restricted assets disclosure

– Include in quarterly if “significant change” since annual

– “Significant change” measured by separate restricted asset category

– However, if quarterly disclosure needed for any category, entire illustration template must be

included


• Disclosure of permitted and prescribed practices– Disclosure should include all permitted and prescribed

practices – not just ones affecting capital and surplus or RBC

– Must now identify SSAP, statement page and line impacted


• 5* securities disclosure

– Since insurers now permitted to self-designate 5* securities, new disclosure

• Number of 5* securities, BACV, fair value• Reporting in the aggregate for bonds and preferred

stock• Will probably be associated General Interrogatory

in 2017

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• Collateral received disclosure

– Reported in the aggregate

– Amount of assets received as collateral reflected as assets in financial statements

• Identify page/schedule in statement

– Recognized corresponding liability

SSAP No. 3 – Cash, Drafts, and Short-Term Investments

• Correction of errors guidance in SSAP applies to accounting errors, not reporting errors

– Therefore, does not require domiciliary permission to file revised statement

– Language revisions stress SSAP No. 3 applies to accounting errors

SSAP Nos. 2, 26, 30 & 32

• EFTs

– Those on SVO approved bond list accounted for under SSAP No. 26

– Those on SVO approve preferred stock list accounted for under SSAP No. 30

• Bond Funds

– On SVO approved list accounted for under SSAP No. 26

Ohio IASA

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SSAP Nos. 2, 26, 30 & 32

• Class 1 Bond Money Market Mutual Funds

– No longer exists

• Other Money Market Mutual Funds

– Schedule DA as short-term investments

– Accounted for under SSAP No. 30 as common stock

– Not included in bond summary schedules, such as Schedule D – Part 1A

SSAP Nos. 2, 26, 43R

• Clarification of investment proceeds disclosure

– Clarification of scope of disclosures in the annual audited statements on bond categories, bond maturity distributions and proceeds from sales of bonds

Adopted

• SSAP No. 16R – EDP Equipment and Software

– Leases involving internal-use computer software to follow lease guidance found in SSAP No. 22

• SSAP No. 22 – Leases

– Review for possible GAAP changes

• No SAP change in accounting treatment for leases

• Issue Paper will be prepared documenting discussion of the rejection of ASU 2016-02

Ohio IASA

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Adopted

• SSAP No. 23 – Foreign Currency Transactions and Translations– Translation of Canadian insurance operations– When parent reporting entity realizes foreign currency

translation changes in an investment of a foreign entity

• SSAP No. 55 – Unpaid Claims, Losses and Loss Adjustment Expenses– Clarification of reporting for anticipated and received salvage

and subrogation• Amounts received deducted from paid claims• If reporting anticipated amounts, they are net of

expenses and deducted from liability for unpaid claims or unpaid losses– No separate receivable

Adopted

• SSAP No. 56 – Separate Accounts

– Removal of disclosure for total maximum guarantees for separate account products

• SSAP No. 61R – LAH Reinsurance

– Update variable annuity capture disclosure

SSAP No. 86 - Derivatives

• Weather derivatives

– Adopted GAAP definition

– Clarifies difference between insurance contract and a weather derivative

– New disclosure

• Swaptions

– Definition

– Reporting guidance for 2016 exposed

Ohio IASA

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SSAP No. 86 - Derivatives

• Adopted modified ASU 2016-05

– Change in counterparty does not by itself result in termination of derivative instruments

• Rejection of ASUs 2016-03 and 2016-06

SSAP Nos. 92 and 102

• Discount rate to measure net periodic benefit costs

– Spot rate allowed as an option for measuring the service cost and interest cost components of net periodic benefit cost

SSAP No. 97 – Investments in SCAs

• Ownership in ETF or mutual fund

– Does not represent ownership in underlying investments, unless insurer has control of ETF or mutual fund

– For example, if insurer owns 8% of an entity and another 3% through an ET, 10% threshold would not be met

• Updated exchanges that can be used for market valuation method

Ohio IASA

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SSAP No. 97 – Investments in SCAs

• Expansion of SCA disclosures

– Balance sheet amount; admitted and nonadmitted

– SCA filing done?

– NAIC response to filing?

• SVO filing instructions for SCAs moved to Appendix of SSAP No. 97– Still must do

• SUB1 and SUB2 documentation must be in English

Adopted

• SSAP No. 100 – Fair Value

– Excludes deposit liabilities with no defined or contractual maturities from fair value financial instruments disclosure

– Rejected ASU 2016-01

• Rejected for this SSAP and SSAP Nos. 26, 30, 32, and 43R

• SSAP No. 107 – Risk-Sharing Provisions of the Affordable Care Act

– Risk corridors disclosures

• Expanded existing roll-forward disclosure

• Although adopted in February, was to be included in 2016 quarterly

Policy Statement Revisions

• Development of SSAPs

– SSAP and IP concurrently

– Definitions of substantive, nonsubstantive, interpretations

– SAP maintenance agenda process

– Correction of editorial errors

Ohio IASA

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Accounting Changes Effective 2017


SSAP No. 2R - Cash, Cash Equivalents & Short-term Investments

• All money market mutual funds (MMMFs) to be classified as cash equivalents

– Goal is to have effective in time for year-end 2017 reporting

• Still pending

– MMMFs measured at fair value

• Net asset value as practical expedient

• Unrealized gains/losses– Run through AVR according to SSAP No. 7

– Direct charge to surplus for non-AVR companies

SSAP Nos. 26 and 43R - Bonds

• Make-whole provisions (prepayment penalties; acceleration fees)

– Reported as net income for bonds/mortgages, however

– Bifurcation of final payment between interest and principal

– Difference between total consideration received and par value reported as net investment income

– Difference between book and par value treated as realized gain/loss

– New disclosure beginning 1/1/2017

– Schedule D change deferred until 1/1/2018

Ohio IASA

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SSAP No. 41R – Surplus NotesIssue Paper No. 151

• Surplus Notes

– Changes valuation of surplus notes

• NAIC designation 1 and 2 at amortized cost

• All others, lower of amortized cost or fair value

– More closely aligns surplus notes valuation with other fixed income investment

– Effective 1/1/2017

SSAP No. 51 – Life Contracts

• Principles-Based Reserving (PBR) revisions

– Revisions to reflect PBR as means for accounting for life insurance reserves

– Also updates Appendix A-820 with reserving guidance

– PBR Effective 1/1/2017

• Companies may choose 3 year phase-in period

Principles-Based Reserving (PBR)

• PREPARE for a 1/1/2017 implementation

• NAIC verified triggering point was reached

• Companies can choose phase-in options

• LAH statement reporting changes have been developed including a new supplement

• SSAP No. 51 already revised; other SSAP revisions being developed


Ohio IASA

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Principles-Based Reserving (PBR)

• Small company exemption

• $300m for legal entity

• < $600m for the associated group

• If meets RBC requirements and other exemption thresholds

• Prospective

• Only new life products (except Credit Life) issued on or after the operative date of the Standard Valuation Law and Valuation Manual are in effect

• Does not apply to A&H products

SSAP No. 103RIssue Paper No. 152

• Short Sales

– Addresses lack of specific accounting

– If borrowed securities used to settle short sale, contra-asset recognizing short sale is eliminated and liability established to return borrowed security

– Prospective change

– Effective 1/1/2017

Still Pending


Ohio IASA

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Still Pending

• SAPWG will be meeting during NAIC National Meeting, December 10 – 13

• Blanks Working Group will not be meeting, but has conference call scheduled for December 15

– Last minute Note additions

Still Pending

• ETF and Bond Fund valuation

– Fair value or “systematic value”

• Valuation of money market mutual funds

– Fair value (NAV as a practical expedient)

• Exclusion of Nonadmitted and Immaterial SCAs from SUB1 and SUB2 filings

• Health Valuation Manual updates to SSAP No. 54

• Accounting for limited derivatives

• Pharmacy Rebates under Medicare Part D

Still Pending

• Disclosure for repurchase & reverse repurchase agreements

• Definition of notational

• Receivables of Government Plans

Ohio IASA

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Questions

• Please contact:

• Connie Jasper Woodroof

• 800.373.3366 x5761

• [email protected]

Thank You

ohio iasa statutory accounting update session 2 · •adopted modified asu 2016-05 –change in...

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