Attention APIR, PIR, or SPIR Designees

Transcription

1 ZZ Financial Reporting Updates & Issues Mary Caswell NAIC Attention APIR, PIR, or SPIR Designees This presentation is pre-qualified for NAIC Designation Renewal Credits (DRCs). If you currently hold an NAIC APIR, PIR, or SPIR designation and are pursuing continuing education credit to maintain it, you may be awarded credits for your participation. To receive credit, you must be in attendance for the duration of the presentation.

2 Learning Objectives At the end of this presentation, you will be able to: Identify the 2016 adopted annual reporting changes. Identify the Notes to Financial Statement proposed changes and the related SSAPs. Describe the 2016 annual statement changes that have been exposed for comment. Mary Caswell NAIC Data Quality Manager Manages Data Quality Unit Supports Blanks Working Group Supervises Staff Support for: Health Reform Solvency Impact Subgroup Investment Reporting Subgroup Joined NAIC in August 2000 Contact information:

3 Adopted proposal BWG Supplemental Exhibits and Schedules Interrogatories Filing the Communication of Internal Control Related Matters Noted in Audit filing Regulator only, non-public To be filed electronically with the NAIC. Adopted changes Schedule D, Part 1A, Section 1 and Schedule D, Part 1B, Remove the reference to non-rated BWG P&C blank and Health Property Supplement Special code added to Schedule F, Part 3 and 5 2 = Reinsurance contracts ceding 75% or more direct premiums written 3 = Counterparty reporting exception for asbestos and pollution contracts under SSAP 62R New supplemental schedule Details of reinsurers aggregated on Schedule F, Part 3 Conforming modifications to existing Schedule F, Parts 3 & 5 Disclosure as Note 23J (also data captured) Reinsurance agreements qualifying for reinsurer aggregation BWG

4 SUPPLEMENTAL SCHEDULE FOR REINSURANCE COUNTERPARTY REPORTING EXCEPTION ASBESTOS AND POLLUTION CONTRACTS Original Reinsurer Retroactive Reinsurer Reinsurance Recoverables On Original Reinsurer Collateral 15 Reinsurance Recoverable on Paid Losses and Paid Loss Adjustment Expenses Overdue 22 % Trust More Than Funds Total Overd 90 Days and Amt ue % Overdue Name of Other Appvd Cols. Total Overdue Reinsurer Reported Unpd Case Cols 7 IBNR Allowe d as Other 30 to 91 to Over Due Cols. Col. Col. (19 + NAIC Name of Schedule F, Paid Paid Losses Losses +10 Funds Ltrs of Offset Offset 1 to /Co 20)/Co Domiciliary ID # Cocode Reinsurer Part 3 Losses LAE & LAE & LAE Totals Held Credit Items Items Crrnt Days Days Days Days l. 22 l.22 Jurisdiction ID # Totals Exposed proposal BWG Schedule Y, Part 1A: Add a column to identify SCAs where a SUB 1 or SUB 2 NAIC filing is required. Add an electronic only column for LEI. Schedule D, Part 6, Section 1: Add a column to identify the nonadmitted amount. Separate Column 4 into two columns NAIC Company Code Id Number

5 Exposed proposal BWG Incorporate previously adopted Schedule D, Part 1 guidance that included clarification for the description, issue, issuer and capital structure code columns. Combine Senior Subordinated Debt and Junior Subordinated debt codes into one code as Subordinated Debt for the Capital Structure Modify CUSIP and Description column instructions for Schedule D, Parts 2-6 for consistency with Schedule D, Part 1. Add the electronic columns for Issuer, Issue and ISIN across Schedule Ds for consistency. Exposed proposal Title Actuarial Opinion, item 6.d. Reserve Development: Add a new paragraph regarding the ratio of One-Year or Two-Year Known Claims Reserve Development BWG

6 Exposed proposal - Title Operations and Investment Exhibit, Part 1A Add an exclude statement to the instructions for Line 1, Direct Premiums Written and Add an include statement for Details of Write-ins Aggregated at Line 6 for Closing protection letters (CPL) or insured closing letters (ICL) fees or charges considered premiums according to the state jurisdiction wherein the CPL or ICL was issued BWG Exposed proposal Life and Fraternal Schedule S, Part 3, Section 1: Modify definition of XXX Life to be consistent with Supplemental XXX/AXXX Reinsurance Exhibit, Part 1. Add a code XXXLO XXX Life Other to identify the remaining XXX business that is not included on Supplemental XXX/AXXX Reinsurance Exhibit BWG

7 Exposed proposal Investment Schedules General: Reduce the number of foreign codes from 12 to 4 and remove the foreign code matrix BWG Schedule D, Part 1: Modify the instructions to provide clarification on the Bond Characteristic Column BWG BWG A For Canadian securities issued in Canada and denominated in U.S. dollars. B For those securities that meet the definition of foreign provided in the Supplement Investment Risk Interrogatories and pay in a currency OTHER THAN U.S. dollars. C For foreign securities issued in the U.S. and denominated in U.S. dollars. D For those securities that meet the definition of a foreign as provided in Supplement Investment Risk Interrogatories and denominated in U.S. dollars (e.g., Yankee Bonds or Eurodollar bonds). Leave blank for securities that do not meet the criteria for the use of A, B, C or D.

8 BWG - Callable 1. Bonds that are callable at the discretion of the issuer, provided that in no instance will the call price be below par, based on a specified formula for the payoff amount (generally discounting future cash flows at then current interest rates which is generally referred to as a make whole call provision ). 2. Bonds that are callable at the discretion of the issuer, provided that in no instance will the call price be below par with a specified payoff amount based on a fixed schedule. 3. Bonds that are callable at the discretion of the issuer at a price that can be less than par WG 4. Bonds where timing of payments of principal, as well as amounts and timing of interest payments can vary based on a pool of underlying assets or an index. Should include agency and non- agency RMBS; some CMBS; as well as similar Loan-Backed or Structured Securities. This excludes those flagged with #1, 2, or Variable coupon bonds where interest payments vary during life of the transaction, but NOT as is typical based on a fixed spread over a wellestablished interest rate index (such as LIBOR, prime rate or a government bond yield). 6. Terms that may result in principal (or initial investment) not being repaid in full for reasons other than a payment default by the issuer or defaults within a pool of assets underlying a Loan-Backed or Structured Security.

9 BWG 7. Bonds whose payments of principal and/or interest are denominated in a currency other than the US dollar. 8. Bonds where issuer s obligation to make payments is determined by performance of a different credit other than that of the issuer, which could be either affiliated or unaffiliated. 9. Mandatory convertible bonds. Bonds that are mandatorily convertible into equity, or, at the option of issuer, convertible into equity, or whose terms provide for payment in the form of equity instead of cash. 10. Other types of options not otherwise reported in 1-9. Exposed proposal P&C, Health Supplement Add an electronic only column to capture the secure code for reinsurers on Schedule F, Part 3, Part 5 and Part 6 Section BWG Secure Code Following is a listing of the valid secure codes

10 BWG Reinsurer Equivalent Rating Category Code Description Secure 1 Secure 2 Secure 3 Secure 4 Secure 5 Vulnerable 6 or Unrated Unrated Authorized Reinsurers B, B-, C++, C+, Best A++ A+ A A- B++, B+ C, C-, D, E, F S&P AAA AA+, AA, AA- Moody's Aaa Aa1, Aa2, Aa3 A+, A A- BBB+, BBB, BBB- A1, A2 A3 Baa1, Baa2, Baa3 BB+, BB, BB-, B+, B, B-, CCC, CC, C, D, R Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, C Fitch AAA AA+, AA, AA- A+, A A- BBB+, BBB, BBB- BB+, BB, BB-, B+, B, B-, CCC, CC, C, D, R Exposed proposal P&C Statement Clarifications and improvements to P&C Statement of Actuarial Opinion and the Actuarial Opinion Summary instructions BWG Definitions Appointed Actuary = a Qualified Actuary appointed by the Board of Directors in accordance with Section 1 (of the AO & AOS instructions.) Board of Directors = can include the designated Board of Directors, its equivalent, or an appropriate committee directly reporting to the Board of Directors.

11 BWG P&C Statement 6. The Appointed Actuary must provide RELEVANT COMMENT paragraphs to address the following topics of regulatory importance. A. Company-Specific Risk Factors The Appointed Actuary should include an explanatory paragraph to describe the major factors, combination of factors or particular conditions underlying the risks and uncertainties the Appointed Actuary considers relevant. The explanatory paragraph should not include general, broad statements about risks and uncertainties due to economic changes, judicial decisions, regulatory actions, political or social forces, etc., nor is the Appointed Actuary required to include an exhaustive list of all potential sources of risks and uncertainties. Exposed proposal - P&C Statement Property/Casualty Exhibit of Premiums and Losses and Insurance Expense Exhibit, Parts II and III: Add an new line Line Private Flood for writers of the private market coverage BWG

12 Exposed proposal BWG NOTE 4A: Modify the illustration to reflect the disclosure changes to SSAP No. 24, Discontinued Operations and Unusual or Infrequent Items. Note 4A(1), 4A(3) and 4A(4) will be data captured BWG, Note 4 (data capture elements) A.Discontinued Operation Disposed of or Classified as Held for Sale (1) List of Discontinued Operations Disposed of or Classified as Held for Sale Discontinued Operation Identifier Description of Discontinued Operation 3) Loss Recognized on Discontinued Operations Discontinued Operation Identifier Amount for Reporting Period Cumulative Amount Since Classified as Held for Sale

13 BWG Note 4 (data capture elements) 4) Carrying Amount and Fair Value of Discontinued Operations and the Effect on Assets, Liabilities, Surplus and Income a. Carrying Amount of Discontinued Operations Discontinued Operation Identifier Carrying Amount Immediately Prior to Classification as Held for Sale Current Fair Value Less Costs to Sell b. Effect of Discontinued Operations on Assets, Liabilities, Surplus and Income 1. Assets 2. Liabilities 3. Surplus 4. Income Discontinued Operation Identifier Line Number Line Description Amount Attributable to Discontinued Operations Exposed proposal BWG NOTE 5H: Adjust instructions to reference admitted and nonadmitted amounts. Add a column to report total nonadmitted restricted amounts. Add crosschecks for the calculation of % columns.

14 Exposed proposal BWG NOTE 1A: A statement that the accounting practice differs from NAIC statutory accounting practices and procedures (NAIC SAP) identifying whether the practice is a departure from NAIC SAP or from a state prescribed practice and include the financial statement reporting lines predominantly impacted by the permitted or prescribed practice. (Although most practices impact net income or surplus, direct reference to those lines should be avoided. The intent is to capture the financial statement lines reflecting the practice which ultimately impacts net income or statutory surplus.); BWG (cont.) Provide a table reconciling income and surplus between the state basis and NAIC SAP basis for the CY reporting period and PY-end. (Table required regardless of whether the reporting entity has permitted or prescribed practices or not.) The reconciliation should include: Brief description of the prescribed or permitted practice SSAP # Financial statement pages (F/S Pages) primarily impacted by the permitted or prescribed practice (e.g. Assets, Liabilities, Statement of Income, Cash Flow). Use N/A for permitted or prescribed practices that do not impact financial statements pages above. Use commas between any multiple references.

15 BWG (cont.) Table illustration F/S Page F/S Line # SSAP # NET INCOME (1) ABC Company state basis (Page 4, Line 35, Columns 1 & 2) XXX XXX XXX (2) State Prescribed Practices that increase/(decrease) NAIC SAP: (3) State Permitted Practices that increase/(decrease) NAIC SAP: (4) NAIC SAP (1-2-3=4) XXX XXX XXX SURPLUS (5) ABC Company state basis (Page 3, Line 38, Columns 1 & 2) XXX XXX XXX (6) State Prescribed Practices that increase/(decrease) NAIC SAP: (7) State Permitted Practices that increase/(decrease) NAIC SAP: (8) NAIC SAP (5-6-7=8) XXX XXX XXX Exposed proposal BWG Add new disclosure Note 5 for 5* securities. Investment Number of 5* Securities Aggregate BACV Aggregate Fair Value Current Year Prior Year Current Year Prior Year Current Year Prior Year (1) Bonds AC (2) LB&SS AC (3) Preferred Stock AC (4) Preferred Stock FV (5)Total ( )

16 Exposed proposal - Note 5 (1) Unsettled Short Sale Transactions (Outstanding as of Reporting Date) Proceeds Received Current Fair Value of Securities Sold Short (2) Settled Short Sale Transactions Unrealized Gain or Loss Expected Settlement (# of Days) Fair Value of Short Sales Exceeding (or expected to exceed) 3 Settlement Days a. Bonds b. Preferred Stock c. Common Stock d. Totals (a+b+c) XXX Fair Value of Short Sales that Exceeded 3 Settlement Days Current Fair Value of Realized Gain or Proceeds Received Securities Sold Short Loss on Transaction a. Bonds b. Preferred Stock c. Common Stock d. Totals (a+b+c) Fair Value of Short Sales Expected to be Settled by Secured Borrowing Fair Value of Short Sales Settled by Secured Borrowing BWG Exposed proposal BWG Add illustration for Note 10N & 10M for reporting of SCAs. M. All SCA Investments (1) Balance Sheet Value (Admitted and Nonadmitted) All SCAs SCA Entity % of SCA Ownership Gross Amount Admitted Amount a.ssap No. 97 8a Entities Total SSAP No. 97 8a Entities XXX b. SSAP No. 97 8b(i) Entities Total SSAP No. 97 8b(i) Entities XXX c. SSAP No. 97 8b(ii) Entities Total SSAP No. 97 8b(ii) Entities XXX d. SSAP No. 97 8b(iii) Entities Total SSAP No. 97 8b(iii) Entities XXX e. SSAP No. 97 8b(iv) Entities Total SSAP No. 97 8b(iv) Entities XXX f.total SSAP No. 97 8b Entities (b+c+d+e) XXX g Aggregate Total (a+f) XXX Nonadmitted Amount

17 BWG (cont.) - Note 10M(2) (2) NAIC Filing Response Information SCA Entity Type of NAIC Filing Date of Filing to the NAIC NAIC Valuation Amount NAIC Response Received Y/N NAIC Disallowed Entities Valuation Method,, Resubmission Required Y/N (Should be same entities as shown in M(1) above.) Code* a. SSAP No. 97 8a Entities Total SSAP No. 97 8a Entities XXX XXX XXX XXX XXX b. SSAP No. 97 8b(ii) Entities Total SSAP No. 97 8b(ii) Entities XXX XXX XXX XXX XXX c. SSAP No. 97 8b(iii) Entitiesi Total SSAP No. 97 8b(iii) Entities XXX XXX XXX XXX XXX d. SSAP No. 97 8b(iv) Entities Total SSAP No. 97 8b(iv) Entities XXX XXX XXX XXX XXX e. Total SSAP No. 97 8b Entities (b+c+d) XXX XXX XXX XXX XXX f. Aggregate Total (a+e) XXX XXX XXX XXX XXX BWG (cont.) Note 10N (2) The monetary effect on net income and surplus as a result of using an accounting practice that differed from NAIC Statutory Accounting Practices and Procedures (NAIC SAP), the amount of the investment in the insurance SCA per audited statutory equity and amount of the investment if the insurance SCA had completed statutory financial statements in accordance with the AP&P Manual. SCA Entity (Investments in Insurance SCA Entities) Monetary Effect on NAIC SAP Net Income Increase (Decrease) Surplus Increase (Decrease) Amount of Investment Per Audited Statutory Equity If the Insurance SCA Had Completed Statutory Financial Statements *

18 Exposed proposal Note 21 H Insurance-Linked Securities Management of Risk Related To: Number of Outstanding ILS Contacts Aggregate Maximum Proceeds (1)Directly-Written Insurance Risks a. ILS Contracts as Issuer b. ILS Contracts as Ceding Insurer c. ILS Contracts as Counterparty (2)Assumed Insurance Risks a. ILS Contracts as Issuer b. ILS Contracts as Ceding Insurer c. ILS Contracts as Counterparty BWG Exposed proposal BWG Add definition of SVO-Designated Securities to the Investment Schedules General Instructions and add a category line numbers for SVO-Designated Securities. Remove references to Class One Bond Mutual Funds Eliminate the Class One Money Market Mutual Funds Line from Schedule E, Part 2. For the following schedules make the appropriate line and column reference changes. Supplemental Investment Interrogatories Default Component Basic Contribution, Reserve Objective and Maximum Reserve Calculations of the Assets Valuation Reserve Schedule D, Part 1B of the Quarterly Statement Add SVO-Designated Securities to the grouping (Lines 8 through 11) for the Schedule D, Summary by Country blank page.

19 Exposed proposal Life and Fraternal G.1. Captive Reinsurers in Which a Risk-Based Capital Shortfall Exists per the Risk- Based Capital XXX/AXXX Captive Reinsurance Consolidated Exhibit: a. Captives with Risk-Based Capital Shortfall BWG Cession ID NAIC Company Code ID Number Name of Captive Reinsurer Amount of Primary Security Shortfall b. Effect of Risk-Based Capital Shortfall on Total Adjusted Capital (TAC) 1.Total Adjusted Capital (TAC) (Five-Year Historical Line 30) 2.Risk-Based Capital Shortfall (Sum of G(1)a1 Column 5) 3.Total Adjusted Capital (TAC) Before Risk-Based Capital Shortfall(G(1)b1 + G(1)b2) BWG (cont.) (2) Captive Reinsurers for Which a Non-Zero Primary Security Shortfall is Shown on the Risk-Based Capital XXX/AXXX Reinsurance Primary Security Shortfall by Cession Exhibit Cession ID NAIC Company Code ID Number Name of Captive Reinsurer Amount of Primary Security Shortfall Total

20 Exposed proposal BWG (4) Roll-Forward of Risk Corridors Asset and Liability Balances by Program Benefit Year Explanations of Adjustments Risk Corridors Program Year Accrued During the Prior Year on Business Written Before December 31 of the Prior Year Received or Paid as of the Current Year on Business Written Before December 31 of the Prior Year Prior Year Accrued Less Payments (Col 1-3) Differences Adjustments Unsettled Balances as of the Reporting Date Prior Year Accrued Less Payments (Col 2-4) To Prior Year Balances To Prior Year Balances Cumulative Balance from Prior Years (Col 1 3+7) Cumulative Balance from Prior Years (Col 2 4+8) Receivable (Payable) Receivable (Payable) Receivable (Payable) Receivable (Payable) Ref Receivable (Payable) a Accrued retrospective premium 2. Reserve for rate credits of policy experience rating refunds b Accrued retrospective premium 2. Reserve for rate credits of policy experience rating refunds c Accrued retrospective premium 2. Reserve for rate credits of policy experience rating refunds d.total for Risk Corridors BWG (cont.) Note 24E(5) 5) ACA Risk Corridors Receivable as of Reporting Date Risk Corridors Program Year Estimated Amount to be Filed or Final Amount Filed with CMS Non-Accrued Amounts for Impairment or Other Reasons Amounts received from CMS Asset Balance (Gross of Nonadmissions) (1-2-3) Non-admitted Amount Net Admitted Asset (4-5) a b c d. Total (a+b+c)

21 Exposed proposal BWG H Restricted Assets: (4) Collateral Received and Reflected as Assets Within the Reporting Entity s Financial Statements % or Assets to Total Assets (Admitted and Nonadmitted * Collateral Assets Book/Adjusted Carrying Value Fair Value a. Cash % % b. Schedule D, Part 1 % % c. Schedule D, Part 2, Section 1 % % d. Schedule D, Part 2, Section 2 % % e. Schedule B % % f. Schedule A % % g. Schedule BA, Part 1 % % h. Schedule DL, Part 1 % % i. Other % % j. Total Collateral Assets (a+b+c+d+e+f+g+h+i) % % % of Assets to Total Admitted Assets ** % of Liability to Total Amount Liabilities * k. Recognized Obligation to Return Collateral Asset % Exposed proposal BWG General Interrogatories (annual and quarterly) Investment management Identify all investment advisors, investment managers, broker/dealers, including individuals that have the authority to make investment decisions on behalf of the reporting entity. For assets that are managed internally by employees of the reporting entity, note as such. [ that have access to the investment accounts ; handle securities ] 1 Name Firm or Individual 2 Affiliation For those firms/individuals listed in the table for Question 28.05, do any firms/individuals unaffiliated with the reporting entity (i.e. designated with a U ) manage more than 10% of the reporting entity s assets? Yes [ ] No [ ] For firms/individuals unaffiliated with the reporting entity (i.e. designated with a U ) listed in the table for Question 28.05, does the total assets under management aggregate to more than 50% of the reporting entity s assets? Yes [ ] No [ ]

22 BWG (cont.) For those firms or individuals listed in the table for with an affiliation code of A (affiliated) or U (unaffiliated), provide the information for the table below. 1 Name Firm or Individual 2 Central Registration Depository Number 3 Legal Entity Identifier (LEI) 3 Registered With 4 Investment Management Agreement (IMA) Filed Questions?