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April 29, 2022

NAIC Spring 2022 Meeting Summary

The NAIC held its Spring National Meeting in Kansas City, Missouri, in a hybrid format. Sessions that were not part of the in-person meeting were held virtually. In this edition, you’ll find a summary of statutory accounting adoptions made by the Statutory Accounting Principles Working Group (SAPWG) during the Spring National Meeting that will impact 2022 statutory basis financial statements and the latest updates from various NAIC groups including the Climate Risk and Resiliency Task Force. 

Ref #SSAP NoTitleRevision DescriptionEffective
2021-18108VM-21 Scenario Consistency UpdateRemoves reference to the “Standard Scenario” from SSAP No 108, Derivatives Hedging variable Annuity Guarantees, to align with the NAIC’s Valuation Manual section 21 (VM-21), that specifies requirements for principle-based reserves for variable annuity contracts.12.31.21(adopted 01.27.22)
2021-3161RLife Reinsurance Disclosure ClarificationsNarrows and clarifies the scope of the supplemental reinsurance disclosures for life insurance companies. These disclosures were first effective as of 12.31.20.12.31.21(adopted 01.27.22)
2021-2297Schedule D-6-1, Supplemental ReportingAccepts Blanks Working Group (BWG) proposal 2022-02BWG to add supplemental data capture elements in Schedule D – Part 6 – Section 1: Valuation of Shares of Subsidiary, Controlled or Affiliated Entities. No change to statutory accounting.04.04.22


2021-2343RSSAP No. 43R – Financial Modeling – Updated GuidanceIncorporates recent Valuation of Securities Task Force (VOSTF) changes to NAIC designation categories into the summarized financial modeling guidance for residential mortgage-backed securities and commercial mortgage-backed securities. Securities with no expected losses will be assigned an NAIC 1 Designation and a NAIC 1.A. Designation Category.04.04.22
2021-242RCryptocurrency General Interrogatory Accepts BWG proposal 2022-01BWG to add a new general interrogatory regarding the use or acceptance of cryptocurrencies. No change to statutory accounting.04.04.22
2021-26EPVariousEditorial Updates (Substantive vs. Nonsubstantive) Conforming updates to replace the term “substantive” with “New SAP” and “nonsubstantive” with “SAP clarification” in the Preamble, Table of Contents, Summary of Changes and Appendix F to reflect recently adopted guidance from agenda item 2021-14: SAP Terminology.04.04.22
2021-2772ASU 2021-04, Issuer’s Accounting for Certain ModificationsClarifies that a modification of terms, conditions or exchanges of freestanding equity-classified written call options are treated as an exchange of the original instrument for a new instrument.04.04.22

Rejected ASUs

The following FASB ASUs were rejected by the SAPWG during the Spring, 2021 meeting:

  • ASU 2021-03, Intangibles – Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events
  • ASU 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options
  • ASU 2021-05, Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments
  • ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants (SEC update)

Climate Risk and Resiliency (EX) Task Force

The task force adopted a redesigned Climate Risk Disclosure Survey on April 6, 2022.  The revised survey is aligned with the internationally recognized Task Force for Climate – Related Financial Disclosures (TCFD) Framework. The survey is a voluntary tool for state regulators to help them understand insurers’ assessment and management of climate-related risks. In 2020 and prior, 6 states participated in the survey, increasing to 15 during 2021, including: California, Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Minnesota, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington. The increase in state participation is expected to increase the number of insurers responding to the Climate Risk Disclosure Survey.

The reporting threshold for insurers remains the same: $100 million in direct written premium nationwide and licensed to write business in any one of the participating states above. Since the survey is based on a new reporting framework, the 2022 filing deadline is extended from August 30, 2022 to November 30, 2022. The first reporting deadline for insurers that have not previously responded to the NAIC survey will be August 30, 2023.  States may grant extensions at their discretion.  

Reinsurance (E) Task Force

As of March 11, 2022, forty-eight U.S. jurisdictions have adopted the 2019 revisions to the Credit for Reinsurance Model Law (#785) and five jurisdictions have actions under consideration. Thirty-four U.S. jurisdictions have adopted the 2019 revisions to the Credit for Reinsurance Model Regulation (#786) and eight have actions under consideration. The revised Model Law and Regulation reduce collateral requirements for certain reinsurers in reciprocal jurisdictions and are necessary to implement the collateral and other provisions of the International Covered Agreements. These models are scheduled to become accreditation standards this year on September 1, 2022, and nationwide adoption is crucial to the United States’ participation in the International Covered Agreements. The task force recommended the Model Law and Regulation be in place by July 1, 2022 to allow time for the Federal Insurance Office preemption analysis. 

The Model Law and Regulation are prospective in nature, meaning they may only be used to reduce collateral after a reporting entity’s state of domicile adopts them. Additionally, reinsurance agreements must be new, amended, or renewed on or after the domiciliary state of the ceding company adopts the Model Law and Regulation.

Joint Meeting of the Financial Stability (E) Task Force and the Macroprudential (E) Working Group

The Financial Stability Task Force and Macroprudential Working Group met in a joint meeting on April 5, 2022 and adopted the Macroprudential Risk Assessment process (MRA), which is a component of the NAIC’s overall Macroprudential Supervision Initiative. The purpose of the MRA is to help the NAIC and state regulators identify and assess industrywide insurance risks. The MRA process is designed to support the activities-based supervisory approach to macroprudential supervision by relying extensively on existing data sources, including results of microeconomic surveillance, aggregated industry data, and publicly available data, where necessary. MRA results will be published in a public report describing risk exposures and ongoing supervisory efforts. While no additional data is collected directly from insurers for the MRA, regulators may elect to use the data to identify insurers that contribute to higher risk in the overall industry.

If you have any questions about the Spring National Meeting update you can contact us here.

Lauren Darr

Lauren Darr

Partner

Rick Nelson

Rick Nelson

Principal

Joanne Smith

Joanne Smith

Senior Manager

Scott Haynes

Scott Haynes

Senior Manager

NAIC Spring 2022 Meeting Summary

The NAIC held its Spring National Meeting in Kansas City, Missouri, in a hybrid format. Sessions that were not part of the in-person meeting were held virtually. In this edition, you’ll find a summary of statutory accounting adoptions made by the Statutory Accounting Principles Working Group (SAPWG) during the Spring National Meeting that will impact 2022 statutory basis financial statements and the latest updates from various NAIC groups including the Climate Risk and Resiliency Task Force. 

Ref #SSAP NoTitleRevision DescriptionEffective
2021-18108VM-21 Scenario Consistency UpdateRemoves reference to the “Standard Scenario” from SSAP No 108, Derivatives Hedging variable Annuity Guarantees, to align with the NAIC’s Valuation Manual section 21 (VM-21), that specifies requirements for principle-based reserves for variable annuity contracts.12.31.21(adopted 01.27.22)
2021-3161RLife Reinsurance Disclosure ClarificationsNarrows and clarifies the scope of the supplemental reinsurance disclosures for life insurance companies. These disclosures were first effective as of 12.31.20.12.31.21(adopted 01.27.22)
2021-2297Schedule D-6-1, Supplemental ReportingAccepts Blanks Working Group (BWG) proposal 2022-02BWG to add supplemental data capture elements in Schedule D – Part 6 – Section 1: Valuation of Shares of Subsidiary, Controlled or Affiliated Entities. No change to statutory accounting.04.04.22


2021-2343RSSAP No. 43R – Financial Modeling – Updated GuidanceIncorporates recent Valuation of Securities Task Force (VOSTF) changes to NAIC designation categories into the summarized financial modeling guidance for residential mortgage-backed securities and commercial mortgage-backed securities. Securities with no expected losses will be assigned an NAIC 1 Designation and a NAIC 1.A. Designation Category.04.04.22
2021-242RCryptocurrency General Interrogatory Accepts BWG proposal 2022-01BWG to add a new general interrogatory regarding the use or acceptance of cryptocurrencies. No change to statutory accounting.04.04.22
2021-26EPVariousEditorial Updates (Substantive vs. Nonsubstantive) Conforming updates to replace the term “substantive” with “New SAP” and “nonsubstantive” with “SAP clarification” in the Preamble, Table of Contents, Summary of Changes and Appendix F to reflect recently adopted guidance from agenda item 2021-14: SAP Terminology.04.04.22
2021-2772ASU 2021-04, Issuer’s Accounting for Certain ModificationsClarifies that a modification of terms, conditions or exchanges of freestanding equity-classified written call options are treated as an exchange of the original instrument for a new instrument.04.04.22

Rejected ASUs

The following FASB ASUs were rejected by the SAPWG during the Spring, 2021 meeting:

  • ASU 2021-03, Intangibles – Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events
  • ASU 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options
  • ASU 2021-05, Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments
  • ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants (SEC update)

Climate Risk and Resiliency (EX) Task Force

The task force adopted a redesigned Climate Risk Disclosure Survey on April 6, 2022.  The revised survey is aligned with the internationally recognized Task Force for Climate – Related Financial Disclosures (TCFD) Framework. The survey is a voluntary tool for state regulators to help them understand insurers’ assessment and management of climate-related risks. In 2020 and prior, 6 states participated in the survey, increasing to 15 during 2021, including: California, Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Minnesota, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington. The increase in state participation is expected to increase the number of insurers responding to the Climate Risk Disclosure Survey.

The reporting threshold for insurers remains the same: $100 million in direct written premium nationwide and licensed to write business in any one of the participating states above. Since the survey is based on a new reporting framework, the 2022 filing deadline is extended from August 30, 2022 to November 30, 2022. The first reporting deadline for insurers that have not previously responded to the NAIC survey will be August 30, 2023.  States may grant extensions at their discretion.  

Reinsurance (E) Task Force

As of March 11, 2022, forty-eight U.S. jurisdictions have adopted the 2019 revisions to the Credit for Reinsurance Model Law (#785) and five jurisdictions have actions under consideration. Thirty-four U.S. jurisdictions have adopted the 2019 revisions to the Credit for Reinsurance Model Regulation (#786) and eight have actions under consideration. The revised Model Law and Regulation reduce collateral requirements for certain reinsurers in reciprocal jurisdictions and are necessary to implement the collateral and other provisions of the International Covered Agreements. These models are scheduled to become accreditation standards this year on September 1, 2022, and nationwide adoption is crucial to the United States’ participation in the International Covered Agreements. The task force recommended the Model Law and Regulation be in place by July 1, 2022 to allow time for the Federal Insurance Office preemption analysis. 

The Model Law and Regulation are prospective in nature, meaning they may only be used to reduce collateral after a reporting entity’s state of domicile adopts them. Additionally, reinsurance agreements must be new, amended, or renewed on or after the domiciliary state of the ceding company adopts the Model Law and Regulation.

Joint Meeting of the Financial Stability (E) Task Force and the Macroprudential (E) Working Group

The Financial Stability Task Force and Macroprudential Working Group met in a joint meeting on April 5, 2022 and adopted the Macroprudential Risk Assessment process (MRA), which is a component of the NAIC’s overall Macroprudential Supervision Initiative. The purpose of the MRA is to help the NAIC and state regulators identify and assess industrywide insurance risks. The MRA process is designed to support the activities-based supervisory approach to macroprudential supervision by relying extensively on existing data sources, including results of microeconomic surveillance, aggregated industry data, and publicly available data, where necessary. MRA results will be published in a public report describing risk exposures and ongoing supervisory efforts. While no additional data is collected directly from insurers for the MRA, regulators may elect to use the data to identify insurers that contribute to higher risk in the overall industry.

If you have any questions about the Spring National Meeting update you can contact us here.

Lauren Darr

Lauren Darr

Partner

Rick Nelson

Rick Nelson

Principal

Joanne Smith

Joanne Smith

Senior Manager

Scott Haynes

Scott Haynes

Senior Manager