January 31, 2019
NAIC 2018 Highlights – Year In Review
Johnson Lambert LLP is dedicated to keeping you abreast of changes adopted by the NAIC within the Statutory Accounting Principles (E) Working Group (SAPWG) that will impact your 2018 statutory basis financial statements; and providing you a summary of significant activities related to reinsurance.
Statutory Accounting Updates
The following FASB ASUs were rejected by the SAPWG during 2018:
- ASU 2014-09, Revenue from Contracts with Customers
- ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date
- ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
- ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing
- ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients
- ASU 2017-06, Plan Accounting: Defined Benefit Pension Plans, Defined Contribution Pension Plans and Health and Welfare Benefit Plans: Employee Benefit Plan Master Trust Reporting
- ASU 2017-13, Revenue Recognition, Revenue from Contracts with Customers, Leases and Leases: Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017, EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments
- ASU 2017-15, Codification Improvements to Topic 995, U.S. Steamship Entities: Elimination of Topic 995
- ASU 2018-01, Leases: Land Easement Practical Expedient for Transition to Topic 842
- ASU 2018-02, Income Statement – Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
- ASU 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities
- ASU 2018-04, Investments – Debt Securities and Regulated Operations: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273
- ASU 2018-05, Income Taxes: Amendmenets to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118
- ASU 2018-06, Codification Improvements to Topic 942, Financial Services – Depository and Lending
The Reinsurance (E) Task Force had a busy 2018. After three NAIC meetings, a public hearing, multiple exposure drafts and numerous comment letters, the Task Force and its parent committee, the Financial Condition (E) Committee, adopted revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786) to conform to the Bilateral Agreement between the United States of America and the European Union (EU) on Prudential Measures Regarding Insurance and Reinsurance (U.S./EU Covered Agreement). It was anticipated that the amendments would be officially adopted during the Executive (EX) Committee and Plenary meeting on December 19, 2018. However, due to input from the United States Department of Treasury (Treasury) and the Office of the United States Trade Representative (USTR), a vote on the amendments was delayed to allow the NAIC more time to properly consider the input before proceeding.
Also subsequent to the Fall National Meeting, the United States and the United Kingdom (UK) signed the Bilateral Agreement between the United States of America and the United Kingdom on Prudential Measures Regarding Insurance and Reinsurance (US-UK Covered Agreement). The NAIC issued a statement regarding the US-UK Covered Agreement noting that “it appears Treasury and USTR have mirrored the terms of the U.S./EU covered agreement and largely replicated it for the UK.”
Both Covered Agreements contain provisions on group capital, group supervision and reinsurance, including eliminating the reinsurance collateral requirements for EU and UK reinsurers that meet certain requirements. For EU and UK reinsurers to be eligible for collateral elimination, the states need to amend their credit for reinsurance laws and will have five years to adopt the necessary reinsurance reforms. The amendments to Models #785 and #786 will provide reinsurers domiciled in NAIC qualified jurisdictions, other than within the EU and UK, with similar reinsurance collateral reductions, but only if such jurisdictions agree to the states’ approach to group supervision, group capital, information sharing, and enforcement.
If you have any questions about this annual update you can contact us here.