Draft Pending Adoption

Transcription

1 Draft Pending Adoption Attachment One Date: 4/12/16 Accounting Practices and Procedures (E) Task Force New Orleans, Louisiana April 4, 2016 The Accounting Practice and Procedures (E) Task Force met in New Orleans, LA, April 4, The following Task Force members participated: Dave Jones, Chair, represented by Kim Hudson (CA); David Mattax, Vice Chair, represented by Doug Slape and Jamie Walker (TX); Lori K. Wing-Heier represented by Maxine Froemling, (AK); Jim L. Ridling represented by Richard Ford (AL); Allen W. Kerr represented by Mel Anderson (AR); Katharine L. Wade represented by William Arfanis and Kathy Belfi (CT); Stephen C. Taylor represented by N. Kevin Brown (DC); Karen Weldin Stewart represented by Rylynn Brown (DE); Nick Gerhart represented by Dan Mathis (IA); Anne Melissa Dowling represented by Cindy Andersen (IL); Stephen W. Robertson represented by Cindy Donovan (IN); Ken Selzer represented by Ken Abitz (KS); Brian Maynard represented by Sandy Batts (KY); James J. Donelon represented by Caroline Brock (LA); Daniel R. Judson represented by John Turchi (MA); Eric A. Cioppa represented by Vanessa Leon (ME); Patrick M. McPharlin represented by Judy Weaver (MI); Mike Rothman represented by Kathleen Orth (MN); John M. Huff represented by Leslie Nehring (MO); Mike Chaney represented by Chad Bridges (MS); Wayne Goodwin represented by Tony Riddick (NC); Bruce R. Ramge represented by Justin Schrader (NE); Roger A. Sevigny represented by Douglas Bartlett (NH); Richard J. Badolato represented by Steve Kerner (NJ); Maria T. Vullo represented by Stephen Wiest (NY); Mary Taylor represented by Dale Bruggeman (OH); John D. Doak represented by Eli Snowbarger (OK); Teresa D. Miller represented by Kimberly Rankin (PA); Elizabeth Kelleher Dwyer represented by Jack Broccoli (RI); Larry Dieter represented by Johanna Nickelson (SD); Todd E. Kiser represented by Jake Garn (UT); Jacqueline K. Cunningham represented by Doug Stolte and David Smith (VA); Susan L. Donegan represented by Kaj Samsom (VT); Mike Kreidler represented by Patrick McNaughton (WA); Ted Nickel represented by Tom Houston and Rebecca Easland (WI); Michael D. Riley represented by Leah Cooper (WV); and Tom Glause represented by Linda Johnson (WY). 1. Adopted its Dec. 10, 2015, and 2015 Fall National Meeting Minutes Mr. Hudson directed the Task Force to its Dec. 10, 2015, and 2015 Fall National Meeting minutes. Ms. Andersen made a motion, seconded by Mr. Schrader, to adopt the Task Force s Dec. 10, 2015, (Attachment Three) and 2015 Fall National Meeting minutes (see NAIC Proceedings Fall 2015, Accounting Practices and Procedures (E) Task Force). The motion passed unanimously. 2. Adopted the Report of the Statutory Accounting Principles (E) Working Group Mr. Bruggeman provided the April 3 report of the Statutory Accounting Principles (E) Working Group. The Working Group adopted its Feb. 22, 2016, and Dec. 10, 2015, minutes, which included adoption of 12 nonsubstantive agenda items, and exposure of two nonsubstantive agenda items, as well as adoption of its 2015 Fall National Meeting minutes. The Working Group also adopted the Restricted Asset (E) Subgroup s March 15 minutes. The Working Group adopted a substantively revised SSAP No. 41R Surplus Notes detailing revisions to the measurement guidance for holders of surplus notes and a related Issue Paper No. 151 Valuation for Holders of Surplus Notes. The Working Group adopted nonsubstantive revisions to statutory accounting guidance that: 1) clarify the restricted asset disclosure for interim financial statements; 2) improve the reporting details for permitted and prescribed practices; and 3) clarify reporting of the federal Affordable Care Act (ACA) fee with INT 16-01: ACA Section 9010 Assessment 2017 Moratorium.. The Working Group exposed the following substantive agenda items proposing statutory accounting revisions for a public comment period ending May 20: 1) requested comments on ASU : Leases and three options for lease accounting; 2) revisions to life insurance guidance to incorporate references to the Valuation Manual and facilitate implementation of principle-based reserving (PBR); and 3) a revised Issue Paper No. 152 Short Sales and substantively revised SSAP No. 103R Transfers and Servicing of Financial Assets and Extinguishments of Liabilities Revised. The Working Group also exposed a concept draft to provide for a special accounting provision drafted in response to the charge to consider hedge accounting treatment for certain limited derivatives related to variable annuity products that do not meet hedge effectiveness requirements for a public comment period ending June National Association of Insurance Commissioners 1

2 Draft Pending Adoption Attachment One The Working Group exposed the following nonsubstantive proposals for a public comment period ending May 20: 1) disclosure to capture the aggregate total of collateral assets held and reported with an insurer s invested assets on the financial statement; 2) data-capture disclosure template for insurance-linked securities with instructions in completing the disclosure; 3) clarifications to the disclosure requirements for prescribed or permitted practices; 4) new disclosure to capture current and prior period information on the number and values of 5* securities; 5) removal of the Class 1 Money Market Mutual Fund List; 6) new disclosure to identify the investment income generated upon disposal of an investment as a result of a prepayment penalty and/or acceleration fee, as well as guidance to clarify the amount of investment income and/or realized capital gains/losses to be reported upon disposal; 7) clarifications to the reporting of salvage and subrogation expenses; 8) amendments to allow the Spot Rate method for measuring service cost and interest cost components of net periodic benefit cost; 9) definition of notional principal; 10) guidance for amending financial statements for reporting errors; 11) guidance on weather derivatives and the application to insurance contracts; 12) guidance detailing the subsidiary, controlled and affiliated entities (SCAs) reporting and filing process; 13) data-capture disclosure template for the reported value for SCAs and information received after filing the SCA with the NAIC; and 14) modify Appendix A-820 Minimum Life and Annuity Reserve Standards to incorporate 2009 revisions to the Standard Valuation Law (#820). Mr. Bruggeman highlighted to the Task Force that the Working Group exposed two agenda items on policy statements. As these revisions change the policies of the Working Group, they will be subject to the review of the Task Force. The first item was a proposed new policy statement detailing coordination with the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual) and the Valuation of Securities (E) Task Force, and the second item proposed policy statement revisions to existing statements. For the policy statement revisions to existing statements, the agenda item proposes a super-majority voting requirement when different from standard exposure process which result in reduced exposure time frames (such as concurrent SSAP and issue paper [IP] exposures). Adoption of changes is still proposed to be a simple-majority vote. For the adoption of interpretations, the revisions propose to lower the voting requirements to simple majority to be consistent with the voting requirements for other revisions. The revisions propose a super majority for interpretations temporarily overriding existing SSAP, or creating new statutory accounting principles (SAP) (for example, temporary relaxing of certain rules after a nationally significant hurricane). The policy statement also proposes more explicit definitions, provides guidance on adoption of items once exposure requirements are satisfied, allows issue papers for nonsubstantive revisions at the discretion of the Working Group and incorporates an editorial process. Mr. Hudson recommended that the Task Force review these items and be copied on the comments received. Mr. Bruggeman noted that because of the costs involved and because this is getting into a policy issue, he wants the Task Force to be aware that the Working Group exposed three alternatives for quarterly investment reporting that were offered by interested parties. The Working Group would like broader regulator input into this issue. Each of the alternatives has a cost, but as the chair of the Financial Analysis (E) Working Group noted, volatility in investments is the new normal. Alternatives include: 1) hiring a consultant to aggregate NAIC investment data; 2) expanding time to complete electronic-only supplemental investment information; and 3) replacing quarterly acquisition and disposition schedules with a schedule of owned holdings. Mr. Hudson asked the Task Force members to engage with their staff and industry on investment reporting needs. He noted that comments should be submitted to the Working Group. The Working Group exposed the rejection of the following as not applicable to statutory accounting: 1) ASU : Balance Sheet Classification of Deferred Taxes; and ASU : Financial Instruments with a request for comments on whether elements should be considered for statutory accounting. The Working Group directed NAIC staff to: 1) draft revisions for bond-approved exchange-traded funds (ETFs) and bond mutual funds, which will consider requiring use of fair value (using net asset value as a practical expedient) with allowance of a documented approach to approximate amortized cost; and 2) submit nine proposals to the Blanks (E) Working Group. The Working Group received an update on the Restricted Asset (E) Subgroup, generally accepted accounting principles (GAAP) exposures, and information on the NAIC Web page developed to detail the certified reinsurer and passporting process. The Working Group also received an update from industry on the Financial Accounting Standards Board s (FASB) short-duration and long-duration insurance contracts projects. Mr. Bruggeman made a motion, seconded by Mr. Houston, to adopt the report of the Statutory Accounting Principles (E) Working Group (Attachment One). The motion passed unanimously National Association of Insurance Commissioners 2

3 Draft Pending Adoption Attachment One 3. Adopted the Report of the Blanks (E) Working Mr. Garn provided the April 3 report of the Blanks (E) Working Group. The Working Group adopted its Dec. 29 and Dec. 11, 2015, and 2015 Fall National Meeting minutes and adopted its editorial listing. The Working Group received memorandums from the Statutory Accounting Principles (E) Working Group dated Feb. 23, 2016, and Dec. 10, The Working Group adopted the report of the Investment Reporting (E) Subgroup and adopted two proposals. The first proposal adds clarifying instructions for the Schedule D, Part 1A, Section 1 footnote ( BWG), and the second proposal adds a new supplement with details of reinsurers aggregated on Schedule F ( BWG). The Working Group exposed 22 new proposals for a public comment period ending May 16. Mr. Garn made a motion, seconded by Mr. Kerner, to adopt the report of the Blanks (E) Working (Attachment Two). The motion passed unanimously. Having no further business, the Accounting Practices and Procedures (E) Task Force adjourned. w:\national meetings\2016\spring\tf\app\apptf 4-16.docx 2016 National Association of Insurance Commissioners 3

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5 Attachment Two PROPOSED 2017 CHARGES OF ACCOUNTING PRACTICES AND PROCEDURES (E) TASK FORCE The mission of the Accounting Practices and Procedures (E) Task Force is to identify, investigate and develop solutions to accounting problems with the ultimate goal of guiding insurers in properly accounting for various aspects of their operations; modify the Accounting Practices and Procedures Manual to reflect changes necessitated by task force action; and study innovative insurer accounting practices that affect the ability of regulators to determine the true financial condition of insurers. Ongoing Support of NAIC Programs, Products or Services 1. The Accounting Practices and Procedures (E) Task Force will: A. Oversee the activities of the Blanks (E) Working Group and Statutory Accounting Principles (E) Working Group. Essential The Statutory Accounting Principles (E) Working Group will: A. Maintain codified statutory accounting principles by providing periodic updates to the guidance that address new statutory issues and new generally accepted accounting principles (GAAP) pronouncements. as they developprovide authoritative responses to questions of application and clarifications for existing statutory accounting principles. Report all actions and provide updates to the Accounting Practices and Procedures (E) Task Force. Essential and Ongoing B. At the discretion of the chair, develop comments on exposed GAAP and International Financial Reporting Standards (IFRS) pronouncements affecting financial accounting and reporting. Any comments are subject to review and approval by the chairs of the Accounting Practices and Procedures (E) Task Force and Financial Condition (E) Committee. Essential C. Report its findings relative to these developing issues to the Accounting Practices and Procedures (E) Task Force. Essential D. Provide comments on issues related to evaluating and or implementing to International Financial Reporting Standards (IFRS) for possible U.S. statutory accounting use and provide input on the solvency modernization project as it relates to accounting and reporting issues. Essential and Ongoing E.C. Coordinate with the Life Actuarial (A) Task Force on changes to the Accounting Practices and Procedures Manual related to the Valuation Manual VM-A, Requirements, and VM-C, Actuarial Guidelines, and other Valuation Manual requirements. This process will include the receipt of periodic reports on changes to the Valuation Manual on items that require coordination as well as the development of an accounting mechanism to address reserve volatility. Essential and Ongoing F.D. Obtain, analyze and review information on permitted practices, prescribed practices or other accounting treatments suggesting that issues or trends occurring within the industry may compromise the consistency and uniformity of statutory accounting, including but not limited to activities conducted by insurers for which there is currently no statutory accounting guidance or where states have prescribed statutory accounting that differs from the guidance issued by the NAIC. Utilize this information to consider possible changes to statutory accounting. Essential G.E. Develop and adopt changes to SSAP No. 86 Accounting for Derivatives Instruments and Hedging Activities, with an effective date of Jan. 1, 2017, or earlier, which allow hedge accounting treatment under SSAP No. 86 for certain limited derivative contracts (e.g., interest rate hedges with counterintuitive effects) that otherwise do not meet hedge effectiveness requirements. In adopting such an allowance, consider if the requirement to meet hedge effectiveness can be replaced by some other information that demonstrates strong risk management is in place over the identified hedges. Essential (Note: The Task Force will consider requesting the Financial Condition (E) Committee to allow the completion date and other elements of the above charge to be updated.) 2016 National Association of Insurance Commissioners 1

6 Attachment Two F. Finalize public disclosure on variable annuity risks as developed by the Variable Annuities Issues (E) Working Group. Essential H.G. Consider whether current or future changes to reserves resulting from implementation of the Variable Annuities Framework will be reported in the annual statement as a Change in basis. Essential I. Provide authoritative guidance on current statutory accounting issues, generally relating to application, interpretation and clarification of existing statutory accounting principles, by conducting meetings at NAIC national meeting sites and other meetings and conference calls when necessary. Essential and Ongoing J. Evaluate individual statutory accounting issues based on its established timeline and report its findings to the Accounting Practices and Procedures (E) Task Force. Essential and Ongoing 2. The Blanks (E) Working Group will: A. Consider improvements and revisions to the various annual/quarterly statement blanks to: 1) conform these blanks to changes made in other areas of the NAIC to promote uniformity in reporting of financial information by insurers; 2) develop reporting formats for other entities subject to the jurisdiction of state insurance departments; 3) conform the various NAIC blanks and instructions to adopted NAIC policy; and 4) oversee the development of additional reporting formats within the existing annual financial statements as needs are identified. Essential and Ongoing B. Continue to monitor state filing checklists to maintain current filing requirements. Essential and Ongoing C. Continue to monitor and improve the quality of financial data filed by insurance companies by recommending improved or additional language for the annual statement instructions. Essential and Ongoing D. Continue to monitor and review all proposals necessary for the implementation of statutory accounting guidance to ensure proper implementation of any action taken by the Accounting Practices and Procedures (E) Task Force affecting annual financial statements and/or instructions. Essential and Ongoing E. Continue to coordinate with other task forces of the NAIC to ensure proper implementation of reporting and instructions changes as proposed by these task forces. Essential and Ongoing F. Adjust blanks and instructions to develop principle-based reserving (PBR) reporting under the framework developed by the PBR Review (EX) Working Group. Essential G. Coordinate with the Life Actuarial (A) Task Force to utilize any special reports developed and avoid duplication of reporting. Essential H. Based upon the disclosure developed by the Variable Annuities Issues (E) Working Group on variable annuities, finalize a data captured note with an effective date of Dec. 31, 2017, or earlier. Essential The Investment Reporting (E) Subgroup of the Blanks (E) Working Group will: A Review requests for investment schedule blanks and instructions changes in connection with the work being performed by the Investment Risk-Based Capital (E) Working Group. The Subgroup will review for technical changes and/or clarifications to the blanks and instructions. Essential and Ongoing B. Review changes requested by the Valuation of Securities (E) Task Force and the Invested Assets (E) Working Group as it relates to their work on other invested assets reporting for technical consistency within the investment reporting schedules and instructions. Essential and Ongoing W:\National Meetings\2016\Summer\TF\App\materials\APPTF 2017 charges draft docx 2016 National Association of Insurance Commissioners 2

7 Attachment Three 2016 Summer National Meeting San Diego, California STATUTORY ACCOUNTING PRINCIPLES (E) WORKING GROUP Friday, August 26, :00 11:30 a.m. Meeting Summary Report The Statutory Accounting Principles (E) Working Group met Aug. 26, During this meeting, the Working Group: 1. Adopted its June 9 minutes, which included adoption of 12 nonsubstantive agenda items, exposure of two nonsubstantive agenda items and adoption of its Spring National Meeting minutes. (Details of agenda items adopted begin on page 4.) 2. Adopted the June 21 minutes of the Restricted Asset (E) Subgroup, which included an e-vote to refer disclosure templates and proposed revisions in Statement of Statutory Accounting Principles (SSAP) No. 103 Transfers and Serving of Financial Assets and Extinguishments of Liabilities for repurchase and reverse-repurchase accounting transactions to the Working Group. 3. Adopted substantive revisions to SSAP No. 51 Life Contracts to provide guidance on how to determine the change in valuation basis for principle-based reserving (PBR). (Ref # ) 4. Adopted the following nonsubstantive revisions to statutory accounting guidance: a. SSAP No. 1 Accounting Policies, Risks & Uncertainties, and Other Disclosures: Revisions clarify that disclosure of permitted or prescribed practices shall include practices that result in different statutory accounting reporting, such as gross or net presentation or different financial statement reporting lines. Also adopted an example to provide clarity on completing the permitted practice disclosure. (Ref # ) b. SSAP No. 55 Unpaid Claims, Losses and Loss Adjustment Expenses: Revisions, modified during the meeting, clarify the reporting of anticipated and received salvage and subrogation amounts. (Ref # ) c. SSAP No. 86 Derivatives: Revisions incorporate information on swaptions. (Ref # ) d. SSAP No. 97 Investments in Subsidiary, Controlled and Affiliated Entities: Revisions incorporate a new appendix to bring in the filing guidance on subsidiary, controlled or affiliated (SCA) entities, modified to remove conflicts with the SSAP, from the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual). With this action, the Working Group directed a referral to the Valuation of Securities (E) Task Force requesting modifications to the P&P Manual to retain a filing requirement and reference to SSAP No. 97, but to remove the detailed SCA filing instructions, consistent with the approach proposed in the Task Force s Feb. 23 correspondence. The Working Group also directed NAIC staff to develop a new agenda item to consider revisions to the filing requirements for nonadmitted or immaterial SCAs. (Ref # ) e. SSAP No. 100 Fair Value: Revisions exclude deposit liabilities with no defined or contractual maturities from the fair value financial instruments disclosure. Also, ASU : Financial Instruments was rejected in SSAP No. 26 Bonds, SSAP No. 30 Unaffiliated Common Stock, SSAP No. 32 Preferred Stock, SSAP No. 43R Loan-Backed and Structured Securities and SSAP No (Ref # ) 5. Adopted a response to the Investment Reporting (E) Subgroup noting no opposition to the proposed reduction of collateral codes in Schedule D, Part Exposed the following substantive revisions to existing statutory accounting guidance: a. SSAP No. 2 Cash, Drafts, and Short-Term Investments: Issue paper and substantively revised SSAP to classify money market mutual funds as cash equivalents, with prospective application as of Jan. 1, (Ref # ) 2016 National Association of Insurance Commissioners 1

8 Attachment Three b. Implementation of Principle-Based Reserving: Issue paper to document the substantive revisions to SSAP No. 51 and other changes to facilitate the implementation of PBR. (Ref # ) c. Variable Annuities: Issue paper to propose special accounting treatment for certain limited derivatives related to variable annuity products for a 90-day exposure period to correspond with an exposure on a related topic at the Variable Annuities Issues (E) Working Group. This accounting treatment is proposed to be separate and distinct from the guidance in SSAP No. 86 and is proposed to reside in a new SSAP. (Ref # ) d. Credit Losses: Exposed agenda item detailing ASU : Credit Losses for a 90-day exposure period, with a request for comments on how the ASU should be considered for statutory accounting and on specific discussion points identified in the agenda item. (Ref # ) 7. Exposed the following nonsubstantive revisions to statutory accounting guidance: a. SSAP No. 2, SSAP No. 26 and SSAP No. 43R: Clarifies the scope of the annual audited disclosure requirements on bond categories, bond maturity distributions and proceeds from sales of bonds. (Ref # ) b. SSAP No. 3 Accounting Changes and Corrections of Errors: Clarifications to the guidance in SSAP No. 3 regarding the recognition of accounting errors. (Ref # ) c. SSAP No. 16R Electronic Data Processing Equipment and Software: Requests comments on whether guidance on cloud computing arrangements is necessary for statutory accounting. (Ref # ) d. SSAP No. 23 Foreign Currency Transactions and Translations: o Clarifies the translation of Canadian insurance operations (Ref # ) o Adopts, with modification, ASU Parents Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity to incorporate guidance on when a parent reporting entity shall realize foreign currency translation changes in an investment of a foreign entity. (Ref # ) e. SSAP No. 56 Separate Accounts: Removes disclosure of total maximum guarantees for separate account products, as recommended by the Variable Annuities Issues (E) Working Group. (Ref # ) f. SSAP No. 61R Life, Deposit-Type and Accident and Health Reinsurance: Updates the variable annuities captive disclosure, and modifies the effective date to be for 2016 and thereafter (eliminating the prior sunset language) as recommended by the Variable Annuities Issues (E) Working Group. (Ref # ) g. SSAP No. 84 Health Care and Government Insured Plan Receivables: o o Clarifies that receivables must originate from the government to qualify within the government plan exception and allowed admittance when 90 days past due. Requests comments on whether a longer time frame is needed for collection of performance network rebate receivables that do not originate from government plans, before nonadmittance. (Ref # ) Agenda item pertaining to pharmacy rebates under Medicare Part D was re-exposed with a request on whether the issues originally documented still need to be addressed and/or if there are other issues involving pharmacy rebates that need to be considered for statutory accounting. (Ref # ) h. SSAP No. 86: o Requested comments on two approaches to define notional amount. (Ref # ) o Adopts, with modification, ASU Effective of Derivative Contract Novations on Existing Hedge Accounting Relationships, clarifying that a change in the counterparty to a derivative instrument does not, by itself, result in a termination of the derivative instrument. (Ref # ) 2016 National Association of Insurance Commissioners 2

9 o o Attachment Three Rejects ASU Contingent Put and Call Options in Debt Instruments as embedded derivatives are not accounted for separately from the host contracts. (Ref # ) Rejects ASU Effective Date and Transition Guidance as the elimination of effective dates in specific Financial Accounting Standards Board (FASB) pronouncements will not impact application if the guidance is adopted for statutory accounting. Due to the FASB topics, this rejection will also be noted in SSAP No. 3 and SSAP No. 68 Business Combinations and Goodwill. (Ref # ) i. SSAP No. 97: o Updates references to the identified exchanges allowed under the market valuation method. (Ref # ) o Clarifies that SCA supporting documentation shall be provided in English. (Ref # ) j. SSAP No. 103 Transfers and Servicing of Financial Assets and Extinguishments of Liabilities: Proposes enhanced disclosure requirements for repurchase and reverse-repurchase agreements with disclosure templates referred by the Restricted Asset (E) Subgroup. (Ref # ) k. Appendix A-010 Minimum Reserve Standards for Individual and Group Health Insurance Contracts: Incorporates the 2013 individual disability income valuation table with an effective date of Jan. 1, 2020, with early adoption allowed beginning Jan. 1, (Ref # ) l. Appendix D Nonapplicable GAAP Pronouncements: The following FASB pronouncements are proposed to be rejected as not applicable to statutory accounting: o ASU Revenue from Contracts with Customers: Partial rejection, revisions to Accounting Standards Codification (ASC) and ASC will be discussed in separate agenda items. (Ref # ) o ASU Deferral of the Effective Date (Ref # ) o ASU Recognition of Breakage for Certain Prepaid Stored-Value Products (Ref # ) o ASU Identifying Performance Obligations and Licensing (Ref # ) o ASU Rescission of SEC Guidance (Ref # ) m. Investment Schedules Alternatives for quarterly investment reporting, expanded from previously exposed options to include the possibility of a mid-year collection of investment data and a data-only (non-pdf) submission of Schedule D investments, with information detailing CUSIP, par value, book/adjusted carrying value and fair value to be received with the second quarter statutory financial statements. (Ref # ) 8. Exposed the editorial and maintenance update memorandum. 9. Directed NAIC staff on the following projects: a. Investment Classification Prepare an issue paper for bond-approved exchange-traded funds (ETFs) and bond mutual funds in scope of SSAP No. 26 to require measurement at fair value (using net asset value as a practical expedient), unless the reporting entity elects to use a domiciliary state approved documented systematic value approach. This issue paper will also include the definition of a security, as well as definitions for non-bond items (e.g., loan participation, loan syndication). The Working Group also agreed to publicly post BlackRock s responses to Questions Raised on BlackRock s Calculated Amortized Cost Valuation Proposal, as well as BlackRock s suggested systematic value calculation, and agreed to send a referral to the Valuation of Securities (E) Task Force requesting a review of BlackRock s suggested calculation. (Ref # ) b. Leases Prepare a draft issue paper to document actions and discussion on ASU Leases. Although the existing accounting treatment for operating and financing leases by the lessee is recommended to be retained, this issue paper will also review other elements of the ASU. (Ref # ) 10. Received an update on the following projects and referrals: a. The Restricted Asset (E) Subgroup will begin discussing reinsurance assets and requests regulators and interested parties to provide information regarding whether reinsurance assets are captured in general interrogatory National Association of Insurance Commissioners 3

10 2016 National Association of Insurance Commissioners 4 Attachment Three b. Received notice of planned interim exposure of changes to Appendix A-200 Separate Accounts Funding Guaranteed Minimum Benefits Under Group Contracts in order to facilitate adoption prior to year-end c. Reviewed GAAP exposures, received information on the FASB insurance contracts project and heard an update on the interested parties project to review the FASB disclosures for short-term insurance contracts. d. Received information on the new VISION system to file securities and SCAs with the NAIC. The comment deadline for new and exposed items is Oct. 10, 2016, with the exception of agenda item and agenda item , which were exposed for a 90-day public comment period ending Nov. 28, June 9, 2016, Conference Call Detail of Agenda Items Adopted: a) SSAP No. 1: Revisions to add a disclosure to capture information on 5* securities, including comparable information from the prior reporting period. (Ref # ) Revisions to add a disclosure to capture the aggregate total of collateral assets reported as assets on the reporting entity s financial statement and the reported corresponding liability. (Ref # ) Recommended changes to the Blanks (E) Working Group to clarify the insurance-linked disclosure. This adoption did not revise the SSAP No. 1 disclosure. (Ref # ) b) SSAP No. 2, SSAP No. 26, SSAP No. 30 and SSAP No. 32: Revisions to clarify that all money market mutual funds shall be accounted for and reported as short-term investments on Schedule DA. (Ref # ) c) SSAP No. 26 and SSAP No. 43R: Revisions to clarify the amount of investment income and/or realized capital gains/losses to be reported upon disposal of an investment and a new disclosure, which would require the reporting entity to identify the amount of investment income generated as a result of a prepayment penalty and/or acceleration fee, with an effective date of Jan. 1, (Ref # ) d) SSAP No. 51: Substantive revisions effective Jan. 1, 2017, to incorporate references to the Valuation Manual and facilitate the implementation of PBR. (Ref # ) e) SSAP No. 86: Revisions incorporate the definition of a weather derivative and an illustration, as well as adopt, with modification, EITF Accounting for Weather Derivatives requiring weather derivatives to be reported and valued consistently with other derivatives in SSAP No. 86. (Ref # ) f) SSAP No. 92 Postretirement Benefits Other than Pensions and SSAP No. 102 Pensions: Revisions allow an alternative method for the service cost and interest cost components of net periodic benefit cost (Ref # ) g) SSAP No. 97: Revisions data-capture the disclosure template for the SSAP No. 97 disclosures that provide information on the NAIC filing results for SCA entities. (Ref # ) h) SSAP No. 101 Income Taxes: Revisions reject ASU Balance Sheet Classification of Deferred Taxes (Ref # ) i) SSAP No. 103R: Revisions provide guidance for short sales, as well as guidance for secured borrowing transactions when the insurer is the transferee, with an effective date of Jan. 1, (Ref # ) j) Appendix A-820 Minimum Life and Annuity Reserve Standards: Revisions incorporate updates to the Standard Valuation Law (#820), which will be effective Jan. 1, 2017, and facilitate the implementation of PBR. (Ref # ) k) Appendix F Policy Statements: Revisions document the current processes of the Working Group, address deferred topics from previous agenda items and implement a new editorial and maintenance process. (Ref # ) W:\Summer\Summaries\Final Summaries\SAPWG.docx

11 Attachment Four Date: 8/17/2016 Blanks (E) Working Group Conference Call August 9, 2016 The Blanks (E) Working Group of the Accounting Practices and Procedures (E) Task Force met via conference call Aug. 9, The following Working Group members participated: Jake Garn, Chair (UT); Kim Hudson, Vice Chair (CA); Maxine Froemling (AK); Richard Ford (AL); N. Kevin Brown (DC); Rylynn Brown (DE); Helen Westberry (FL); Daniel Mathis (IA); Cindy Donovan (IN); Vanessa Leon (ME); Dan Schaefer (MI); Justin Schrader and Lindsay Crawford (NE); Patricia Gosselin (NH); Steve Kerner (NJ); Ryan Keeling (OR); Shawn Frederick (TX); Kaj Samsom (VT); Elena Vetrina (WI); and Leah Cooper (WV). Also participating was: Dale Bruggeman (OH). 1. Adopted its June 16 Minutes Upon a motion by Mr. Kerner, seconded by Ms. Donovan, the Working Group voted unanimously to adopt its June 16 minutes (Attachment Two A). 2. Adopted the Investment Reporting (E) Subgroup Report Ms. Donovan stated that the Investment Reporting (E) Subgroup met via conference call July 12. During the call, the Subgroup discussed updating the collateral type codes for Schedule D, Part 1. The Subgroup discussed reducing the codes from the current 21 codes to 10. Interested parties proposed to further reduce the codes to eight by removing the residential mortgage code and the commercial mortgage code. The Subgroup directed NAIC staff to reach out to the Valuation of Securities (E) Task Force and Statutory Accounting Principles (E) Working Group for feedback on the revisions to the collateral code categories. John Bauer (Prudential Financial) asked for a friendly amendment to the minutes to delete the reference to Prudential by his name and replace it with interested parties. Upon a motion by Ms. Donovan, seconded by Mr. Hudson, the Working Group members voted unanimously to adopt the Subgroup report, including the minutes with the friendly amendment (Attachment Two-B). 3. Adopted Items Previously Exposed a. Add an Additional Letter Code (D) and a Code Description to the Explanation of Basis of Allocation of Premiums by States, etc. Section for Use on Schedule T-Exhibit of Premiums Written Allocated by States and Territories. The Change Would Apply to Both the Quarterly and Annual Statement Blanks and Referenced in the Quarterly and Annual Statement Instructions ( BWG) Effective 12/31/2017. Mr. Garn stated that this proposal adds a new letter code and a code description to the Explanation of Basis of Allocation of Premiums by States on Schedule T. The change would apply to both the quarterly and annual 2017 statement blanks and instructions. He stated that there were minor modifications to the description for the code at the request of interested parties. Upon a motion by Mr. Hudson, seconded by Mr. Schaefer, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Hudson, seconded by Mr. Kerner, the Working Group voted unanimously to adopt the modified proposal (Attachment Two C). b. Insert Instructions to the Description Column to Indicate that Swaptions Should Include the Hedge ID Number, the Tenor (i.e., Time from Effective Date to Maturity Date), as Well as the Start and End Dates of the Underlying Swaption within Schedule DB Part A Section 1 ( BWG) 1/01/2017. Ms. Brown stated that regulators are using investment specialists more and are becoming more educated about investments that are highly complex such as derivatives. Regulators have learned that swaptions, the option to invest in a swap, are reported on Schedule DB, Part 1A, Section 1. However it is difficult for regulators to track the value of these from annual statement to annual statement without a specific identifier. She suggested that a hedge number or identifier be reported in the description column to help identify these investments. She stated that a swaption has a maturity date and a trade date, but the effective date is not necessarily effective on the trade date. She stated that, as an example, a swaption could be purchased in the beginning of the year (e.g., Jan. 1) and be effective for three months from Oct. 1 through Dec. 31, which would be the maturity date. Ms. Brown stated that there is a term tenor associated with swaptions which means the time period between the effective date and maturity date. This proposal is requesting more information for tracking these investments. Ed Toy (NAIC) 2016 National Association of Insurance Commissioners 1

12 Attachment Four proposed a clarification to add the words of the option after the word tenor in the swaption instruction and add of the option aspect wording after maturity date. Mr. Bauer agreed that an internal hedge identifier could be used to satisfy this requirement. Upon a motion by Mr. Ford, seconded by Mr. Frederick, the Working Group voted unanimously to adopt the friendly amendment to the proposal. Upon a motion by Mr. Hudson, seconded by Mr. Schrader, the Working Group voted unanimously to adopt the modified proposal (Attachment Two D). c. Add a Disclosure to Note 5, Investments, for Prepayment Penalties and Acceleration of Fees for Callable Securities. Add Instructions to Columns 18 and 20 of Schedule D, Parts 4 and 5 for Reporting Prepayment Penalties and Acceleration of Fees for These Securities ( BWG) Note 5 Disclosure Effective 1/1/2017, Schedule D Changes Effective 1/1/2018. Mr. Bruggeman stated that this proposal relates to a clarification the Statutory Accounting Principles (E) Working Group made to SSAP No. 26 Bonds for prepayment penalties and acceleration of fees for callable securities. A footnote disclosure was added along with additional instruction to capture roll-forwards. Instructions to column 18 and column 20 of Schedule D, Part 4 and Part 5 also were added. He stated that there were interested party comments received on this proposal. As a result, a clarification was made to the calculation of the realized gain (loss), which would show the gain as a positive number and a loss as a negative. Mr. Bruggeman stated that the interested parties expressed concerns with meeting the effective date for the investment schedules change because of systems setup and testing for the individual transactions. He stated that the accounting portion could be achieved with a 2017 effective date as it is reported on an aggregate basis. He stated that companies could adjust the individual investments on a manual basis, but that could create some challenges especially for public companies that are subject to other federal controls. Mr. Bruggeman stated that he would agree with the investment schedule reporting to be effective Jan. 1, 2018, with the notes disclosure being effective Jan. 1, He suggested that companies could report entirely in 2017 if they have the information available. Mr. Bauer agreed with the implementation proposed by Mr. Bruggeman. Mr. Garn stated that there could be an issue with allowing early adoption for some and others reporting in He questioned whether there would be an inconsistency for regulators in reviewing the data. Josh Arpin (NAIC) stated that this issue was brought up at the Statutory Accounting Principles (E) Working Group because there was a conflict between the language in the Accounting Practices and Procedures Manual (AP&P Manual) and the annual statement instructions. The current instructions for the realized gain/(loss) amount in Schedule D, Part 4 and Part 5 does not factor in the prepayment penalties. The current instructions take consideration minus book value. This works for normal, non-callable bonds, and the buying and selling of regular bonds and stocks. It does not work for prepayment penalties. Companies were incorrectly changing the consideration number. For example, the company would receive 105 but would report 100 in consideration because that was the only way it could make the figures roll from part 4 to the verification between years. The instructional language was added and the new line added to the verification schedule to assist in the clarification of reporting and rollforward. Mr. Arpin recommended not adding an early adoption without all the reporting in place. It could cause additional confusion for companies. He stated that there will still be a conflict with the accounting language and the instructions until both the notes disclosure and the schedules instructions are in place, but the disclosure will at least give regulators an aggregate figure. Mr. Bauer stated that the notes disclosure would have the aggregate amounts and although the detail would not be in Schedule D until Jan. 1, 2018, companies would have the detail if their regulator needed it. Upon a motion by Mr. Hudson, seconded by Ms. Donovan, the Working Group voted unanimously to adopt the modifications to the proposal including the change in effective dates. The effective date for the note 5 aggregate disclosure will be 1/1/2017. The effective date will be 1/1/2018 for the remainder of the proposal which affects the Schedule D, Part 4 and Part 5 as well as the Schedule D verifications. Upon a motion by Mr. Hudson, seconded by Ms. Donovan, the Working Group voted unanimously to adopt the modified effective dates for the proposal. Upon a motion by Mr. Hudson, seconded by Mr. Ford, the Working Group voted unanimously to adopt the modified proposal (Attachment Two E). 4. Exposed New Items a. Delete the General Interrogatory, Part 2 Question 9.1 and Question 9.2 (24.1 and 24.2 if Fraternal) Regarding Variable Annuities with Guarantees and Renumber the Remaining Interrogatory Questions. Replace Interrogatory with a Variable Annuities Supplement. Add a Question to the Supplemental Exhibits and Schedules Interrogatories for the Supplement. Remove Line 2.2 from the Separate Accounts General Interrogatories ( BWG) National Association of Insurance Commissioners 2

13 Attachment Four Mr. Garn stated that this proposal deletes the General Interrogatory Part 2 question 9.1 and question 9.2 (question 24.1 and question 24.2 if Fraternal) regarding variable annuities with guarantees. The remaining interrogatory questions will be renumbered. The proposal replaces the interrogatory with a variable annuities supplement. Upon a motion by Mr. Hudson, seconded by Mr. Kerner, the Working Group voted unanimously to expose the proposal for comment. b. Add a New Interrogatory Question to the Annual and Quarterly General Interrogatories Regarding Self-Designated 5*GI Securities ( BWG). Mr. Garn stated that this proposal adds a new interrogatory question to the annual and quarterly general interrogatories regarding self-designated 5*GI securities. Upon a motion by Mr. Hudson, seconded by Mr. Mathis, the Working Group voted unanimously to expose the proposal for a public comment period ending Oct Adopted the Editorial Listing Upon a motion by Mr. Kerner, seconded by Mr. Hudson, the Working Group voted unanimously to adopt the editorial listing (Attachment Two F). Having no further business, the Blanks (E) Working Group adjourned. w:\national meetings\2016\summer\tf\app\blankswg\interim minutes\att two 08-blanks.docx 2016 National Association of Insurance Commissioners 3

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15 Attachment Four Date: 6/29/16 Blanks (E) Working Group Conference Call June 16, 2016 The Blanks (E) Working Group of the Accounting Practices and Procedures (E) Task Force met via conference call June 16, The following Working Group members participated: Jake Garn, Chair (UT); Kim Hudson, Vice Chair (CA); David Phifer (AK); Richard Ford (AL); Sam Merlo (DC); Holly Conley (DE); David Altmaier and Robert Ridenour (FL); Daniel Mathis (IA); Cindy Donovan (IN); Vanessa Leon (ME); Dan Schaefer (MI); Lindsay Crawford (NE); Patricia Gosselin (NH); Steve Kerner (NJ); Joe DiMemmo (PA); Mark Jaquish (TN); Shawn Frederick (TX); Kaj Samsom (VT); Tom Houston (WI); and Jamie Taylor (WV). Also participating was: Dale Bruggeman (OH). 1. Adopted its Spring National Meeting Minutes Upon a motion by Mr. Hudson, seconded by Ms. Donovan, the Working Group voted unanimously to adopt its April 3 minutes (see NAIC Proceedings Spring 2016, Accounting Practices and Procedures (E) Task Force, Attachment Two). 2. Adopted the Report of the Investment Reporting (E) Subgroup Ms. Donovan stated that the Investment Reporting (E) Subgroup has not met since its last report at the Spring National Meeting. The Subgroup plans to meet via conference call July 12 to continue discussions on updating and/or reducing the collateral type codes from the current 21 codes for the Schedule D, Part 1. She stated that the Subgroup will begin discussion on the items remaining on its issues log, including Schedule DB, Part B verification between years for futures contracts acquired in year 1 and terminated in year 2 or owned at the end of year 2; Schedule DB, Part A to clarify reporting of notional amount; and possible updates to the Summary Investment Schedule to match up with the current investment schedules reporting. Upon a motion by Ms. Donovan, seconded by Ms. Conley, the Working Group voted unanimously to adopt the Subgroup report. 3. Adopted Items Previously Exposed a. Add a Column to Schedule Y, Part 1A to Identify Subsidiary, Controlled and Affiliate (SCA) Investments Where a SUB 1 (Initial) or SUB 2 (Annual) NAIC Filing is Required and Add an Electronic Only Column for Legal Entity Identifier (LEI). Add a Column to Schedule D, Part 6, Section 1 to Identify the Amount Nonadmitted and Separate Column 4 into Two Columns (NAIC Company Code & ID Number) ( BWG) Effective 12/31/2016. Mr. Hudson stated that this proposal adds a column to Schedule Y, Part 1A to identify SCA companies and a yes/no question as to whether a filing had been made. An electronic-only column is being added to capture the LEI. A column is being added to Schedule D, Part 6, Section 1 to identify the amount that is nonadmitted. The proposal separates column 4 into two columns the NAIC company code and ID number for clarity. Connie Woodroof (StoneRiver) stated that, for the record, interested parties would like to once again note that several of the proposals being considered on this conference call, including proposal BWG, result in providing duplicate information in different parts of the annual and quarterly financial statement filings. She stated that interested parties would like to point out that this duplication is not an efficient use of space on the NAIC databases, as well as an inefficient use of other state, NAIC and industry resources. Although the industry has been assured by regulators on several occasions that efforts would be taken to eliminate duplications and/or to not adopt initiatives that increase duplication, interested parties note that specific proposals being discussed on this conference call will result in duplicate information if adopted. She stated that the interested parties comment letter indicates specific areas of concern for these particular proposals. Interested parties realize that blanks proposals are submitted by many different groups and there is bound to be some overlap in the information requested. She stated that this Working Group would appear to be a group that could take the lead in trying to eliminate overlap between proposals. Ms. Woodroof stated that interested parties would like to ask that, in the future, this Working Group consider initiating some type of policy discussion that might lead to a reduction in reporting duplication. Mr. Garn stated that he believes most would agree that the intent is not to create more complex statements than are necessary to accomplish regulatory purposes. There could be further discussion on how to coordinate reporting data prior to the proposals getting to the point of exposure. He stated that each group has specific reasons for a particular proposal to where it may appear there is duplication, but there is a difference in how the statement data is used. It has been the desire of regulators 2016 National Association of Insurance Commissioners 1

16 Attachment Four to have certain pieces of information in more than one place for different purposes. He stated that there is one proposal being presented during this call, as an example, that actually reduces the amount of information being received. That proposal references the reduction in the foreign codes from 12 to four and deletes the matrix. Upon a motion by Mr. Hudson, seconded by Mr. Ford, the Working Group voted unanimously to adopt the proposal (Attachment Two-A1). b. Incorporate the Schedule D, Part 1 Guidance Adopted in December 2015 for Annual Statement 2015 Reporting into the Instructions. Combine the Code for Senior Subordinated Debt and Junior Subordinated Debt into One Code as Subordinated Debt for the Capital Structure Code Column. Modify the Instructions for Schedule D, Part 2 Through Part 6 to Reflect the Changes Adopted for Schedule D, Part 1 for the CUSIP and Description Column and Add the Electronic Columns for Issuer, Issue and ISIN to These Schedules for Consistency Across Schedule D ( BWG) Effective 12/31/2016. Ms. Donovan stated that this proposal adds instructions to incorporate the guidance for Schedule D, Part 1 reporting. The proposal combines the codes for senior subordinated debt and junior subordinated debt into one code, Subordinated Debt, for the Capital Structure Code column. She stated that the proposal modifies the instructions for Schedule D, Part 2 through Part 6 for the CUSIP and Description columns, and adds the electronic columns for Issuer, Issue and ISIN (International Securities Identification Number) for consistency across the Schedule D. Upon a motion by Mr. Kerner, seconded by Ms. Crawford, the Working Group voted unanimously to adopt the proposal (Attachment Two- A2). c. For the Actuarial Opinion, Item 6.d. Reserve Development in the Title Annual Statement Instructions, Add a New Paragraph Regarding the Ratio of One-Year or Two-Year Known Claims Reserve Development ( BWG) Effective 12/31/2016. Mr. Garn stated that this proposal is presented by the Title Insurance Financial Reporting (C) Working Group and the Actuarial Opinion (C) Working Group. The proposal adds a new paragraph to the actuarial opinion item 6.d. for the ratio of one year or two year known claims reserve development. Upon a motion by Mr. Hudson, seconded by Ms. Donovan, the Working Group voted unanimously to adopt the proposal (Attachment Two- A3). d. For the Operations and Investment Exhibit, Part 1A, Add an Exclude Statement to the Instructions for Line 1, Direct Premiums Written and an Include Statement to the Instructions for Details of Write-ins Aggregated at Line 6 for Service Charges Regarding the Handling of Fees or Charges for Closing Protection Letters (CPLs) or Insured Closing Letters (ICLs) ( BWG) Effective 12/31/2016. Mr. Garn stated that this proposal is presented by the Title Insurance Financial Reporting (E) Working Group. For the Operations and Investment Exhibit, Part 1A, it adds an exclude statement to the line 1 instructions for direct premiums written and an include statement to the details of write-ins aggregated at line 6 for service charges regarding the handling of fees or charges for CPLs or ICLs. Upon a motion by Ms. Donovan, seconded by Mr. Houston, the Working Group voted unanimously to adopt the proposal (Attachment Two- A4). e. Modify the Definition of XXX Life on Schedule S, Part 3, Section 1 for Consistency with the Supplemental XXX/AXXX Reinsurance Exhibit, Part 1 Instructions. Add a Code, XXXLO XXX Life Other to Identify the Remaining XXX Business That is not Included on Supplemental XXX/AXXX Reinsurance Exhibit ( BWG) Effective 12/31/2016. Mr. Kerner stated that this proposal modifies the definition of XXX Life on Schedule S, Part 3, Section 1 to be worded consistent with the Supplemental XXX/AXXX Reinsurance Exhibit, Part 1 instructions. The proposal adds a code, XXXLO XXX Life Other to identify the remaining XXX business that is not included on the exhibit. The proposal contains a minor modification at the request of interested parties. Upon a motion by Mr. Kerner, seconded by Mr. Hudson, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Ford, seconded by Ms. Crawford, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A5). f. Reduce the Number of Codes From Twelve to Four for the Foreign Code Column on Schedule D and Remove the Foreign Code Matrix ( BWG) Effective 12/31/ National Association of Insurance Commissioners 2

17 Attachment Four Ms. Donovan stated that this proposal reduces the number of foreign codes from 12 to four on Schedule D in the Foreign Code column and removes the foreign code matrix. Upon a motion by Ms. Donovan, seconded by Mr. Kerner, the Working Group voted unanimously to adopt the proposal (Attachment Two- A6). g. Modify the Schedule D, Part 1 Annual Statement Instructions to Provide Clarification on the Bond Characteristics Column ( BWG) Effective 12/31/2016. Ms. Donovan stated that this proposal modifies the Schedule D, Part 1 annual financial statement instructions to provide clarification on the Bond Characteristics column and provides examples for each code. There was a minor modification to indicate the use of commas where multiple codes are used. There is also a friendly amendment to delete code 7 in this proposal, as it will be a duplication of what is in proposal BWG because that proposal was also adopted. Upon a motion by Mr. Kerner, seconded by Mr. Hudson, the Working Group voted unanimously to adopt the modifications, including the friendly amendment to the proposal. Upon a motion by Mr. Houston, seconded by Mr. Ford, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A7). h. Add an Electronic-Only Column to Capture the Secure Code for Reinsurers on Schedule F, Part 3, Part 5 and Part 6, Section 1 ( BWG) Effective 12/31/2016. Commissioner Altmaier stated that the Property and Casualty Risk-Based Capital (E) Working Group has been working on adjusting the RBC charge for reinsurance recoverables on the P/C RBC blank to be based on a secure code that regulators will be assigning to reinsurers based on their credit rating. In an effort to make this process as automated as possible and avoid manual entry, this proposal adds an electronic-only column to capture the secure code for reinsurers on Schedule F, Part 3, Part 5 and Part 6, Section 1. The secure codes will then be imported into the RBC blank to conduct the calculation. Upon a motion by Ms. Donovan, seconded by Mr. Kerner, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Hudson, seconded by Ms. Gosselin, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A8). i. Clarifications and Improvements to the P/C Statement of Actuarial Opinion and the Actuarial Opinion Summary Instructions ( BWG) Effective 12/31/2016. Mr. Garn stated that this proposal provides clarifications and improvements to the P/C Statement of Actuarial Opinion and the Actuarial Opinion Summary Instructions. He stated that there was a minor modification. Upon a motion by Mr. Kerner, seconded by Mr. Hudson, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Houston, seconded by Ms. Gosselin, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A9). j. Add an Additional Line of Business Labeled Line Private Flood in the P/C Exhibit of Premiums and Losses (Statutory Page 14) and Insurance Expense Exhibit, Part II and Part III of the NAIC Annual Statement Blank, and the Corresponding Instructions. This Line is Intended for Writers of the Private Market Coverage ( BWG) Effective 12/31/2016. Mr. DiMemmo stated that he would present the prepared statement by Commissioner Teresa D. Miller (PA). He stated that this proposal adds a new line to the P/C Exhibit of Premiums and Losses and Insurance Expense Exhibit, Part II and Part III of the NAIC annual financial statement blank for the reporting of private flood business. The Property and Casualty Insurance (C) Committee has been actively working on issues related to flood insurance. The National Flood Insurance Program (NFIP) is up for reauthorization in The U.S. Congress is considering legislation, supported by the NAIC, that would promote the writing of flood insurance by private insurers. The Committee has been taking comments and formulating recommendations for NFIP reform, in addition to regulations needed to understand how much flood insurance is being written outside of the NFIP and by which insurers. It is also a 2016 charge of the Committee to collect private insurance data. Such collection will allow state insurance regulators to capture the entire spectrum of flood data that will be useful to regulators and policymakers when evaluating proposed changes to the NFIP. The current version of the blanks proposal clarifies that the Committee is seeking all private writings of flood insurance through a new line of business to include standalone policies that are separate from NFIP and policies written in excess of the NFIP policies. The proposal clarifies that creditor-placed flood insurance should be included. There were some minor modifications to the proposal at the request of interested parties. Upon a motion by Mr. Hudson, seconded by Mr. Ford, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Kerner, seconded by Ms. Gosselin, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A10) National Association of Insurance Commissioners 3

18 Attachment Four k. Modify the Illustration for Note 4A to Reflect the Disclosure Changes to SSAP No. 24 Discontinued Operations and Unusual or Infrequent Items Adopted by the Statutory Accounting Principles (E) Working Group on its June 17 Conference Call. Note 4A(1), Note 4A(3) and Note 4A(4) will be Data-Captured ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal is intended to reflect the changes that were made by Statutory Accounting Principles (E) Working Group for year-end 2015 within the 2016 Note 4, Discontinued Operations, illustration and add data-capture. Upon a motion by Mr. Houston, seconded by Ms. Conley, the Working Group voted unanimously to adopt the proposal (Attachment Two- A11). l. Modify the Instructions for Note 5H, Restricted Assets and Add a Column to the Illustration for the Disclosure. A Crosscheck for the Calculation of the Percentage Columns is Added ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal modifies the instructions for Note 5H, Restricted Assets, adds a column to the illustration for the disclosure and adds a crosscheck for the calculation of the percentage columns. This disclosure change was adopted on the June 9 call of the Statutory Accounting Principles (E) Working Group. There were some minor modifications. Upon a motion by Mr. Hudson, seconded by Ms. Donovan, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Kerner, seconded by Ms. Crawford, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A12). m. Modify the Instructions and Illustration for Note 1A, Accounting Practices, to Include SSAP Reference Numbers, as well as Financial Statement Line References and Column Numbers ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal modifies the instructions and illustration for Note 1A, Accounting Practices, for changes made to SSAP No. 1 Accounting Policies & Uncertainties and Other Disclosures. There were modifications to the proposal at the request of interested parties. Upon a motion by Mr. Houston, seconded by Mr. Hudson, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Hudson, seconded by Mr. Houston, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A13). n. Add New Disclosure Note 5, Investments for 5* Securities. The Illustration in the Disclosure will be Data-Captured ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal adds a new disclosure to Note 5, Investments, to capture the number of 5* securities along with the book/adjusted carrying value and fair value as an aggregate total. He stated that there was discussion on the Statutory Accounting Principles (E) Working Group call about the levels of disaggregation, and it was decided that the starting point would be to get the initial numbers for future purposes. This disclosure was adopted in response to a referral from the Valuation of Securities (E) Task Force because of changes to the Purposes and Procedures Manual of the NAIC Investment Analysis Office. There were some minor modifications to this proposal. Upon a motion by Mr. Hudson, seconded by Ms. Donovan, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Kerner, seconded by Mr. Hudson, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A14). o. Add a New Disclosure to Note 5 for Short Sales. The Illustration in the Disclosure will be Data-Captured. Add a New Code (SS) to the Code List in the Investment Schedules General Instructions for Short Sales. Add Additional Instructions Related to Short Sales to Schedule D (Part 1; Part 2, Section 1; Part 2, Section 2), Schedule DA, Part 1; and Schedule E, Part 2 ( BWG) Effective 1/1/2017. Mr. Bruggeman stated that this proposal adds a new disclosure to Note 5, Investments, for short sales. A new code (SS) will be added to the code list in the Investment Schedules General Instructions for short sales, as well as additional instructions for short sales added to Schedule D (Part 1; Part 2, Section 1; Part 2, Section 2), Schedule DA, Part 1; and Schedule E, Part 2. There were some minor modifications to this proposal, as well as a request to change the effective date to Jan. 1, Upon a motion by Mr. Hudson, seconded by Mr. Houston, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Houston, seconded by Mr. Hudson, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A15). p. Add an Illustration for Note 10N and Note 10M, Information Concerning Parent, Subsidiaries, Affiliates and Other Related Parties. These Tables will be Data-Captured. Editorial Changes Made to the Instructions Order and Changes 2016 National Association of Insurance Commissioners 4

19 Attachment Four to Additional Numbering to Better Match the Instructions to the Illustrations Provided ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal adds an illustration for Note 10M and Note 10N, Information Concerning Parent, Subsidiaries, Affiliates and Other Related Parties. The Statutory Accounting Principles (E) Working Group adopted revisions to SSAP No. 97 Investments in Subsidiary, Controlled and Affiliated Entities related to the SCA investments disclosure, with technical edits recommended by interested parties to remove paragraph 8.b.i entities from the scope of the disclosure. The intent of the disclosure is to capture information regarding a reporting entity s SCA investments, including the percentage of ownership, the admitted and nonadmitted balances reported on the balance sheet, as well as key information regarding the SCA filing, including whether the reported SCA investment was in compliance with NAIC valuation response. There were slight editorial numbering changes made to the instructions to better match the instructions to the illustrations. Mr. Garn asked for input with regard to interested party comments suggesting duplication of requested information in this proposal compared to proposal BWG. Julie Gann (NAIC) stated that this proposal, as well as proposal BWG, contains disclosure information with regard to the nonadmitted amounts for SCAs. She stated the Note 10M and Note 10N disclosures were adopted by the Statutory Accounting Principles (E) Working Group last year for 2015 annual reporting. The notes disclosure is intended to provide the regulators with greater information with regard to whether companies are filing the SCA disclosures to the NAIC in accordance with the Purposes and Procedures Manual of the NAIC Investment Analysis Office. She stated that it has been identified that a number of SCA disclosures that should have been filed with the NAIC have not been. There are also those where the SCA disclosure has been filed with the NAIC in a previous year, but the NAIC information is not being considered and reflected in subsequent years filings. The purpose of this notes disclosure, which was included in the 2015 annual financial statement, and is now to be data-captured in the 2016 annual financial statement, is to provide that information to the regulators. The information being captured is the amounts that the company is reporting on their financial statements, whether admitted or nonadmitted, and the filing amounts provided by the NAIC. She stated that nonadmitted amount is a key component of the disclosure, as the SCA investment may be less of a concern to the regulators when comparing the nonadmitted amount to the NAIC identified amount. Ms. Gann stated that the notes to financial statement disclosures are also included in the audited statement, whereas the Schedule D, Part 6, Section 1 disclosure is not specifically included in the audited statement. Mr. Bruggeman stated that there may be some perceived duplication between this proposal and proposal BWG; however, they serve different purposes. Ms. Gann stated that there is a column in the notes disclosure that refers to the Percent of SCA Ownership that was a special request by regulators. Upon a motion by Mr. Kerner, seconded by Ms. Donovan, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Ms. Donovan, seconded by Mr. Kerner, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A16). q. Add an Illustration to the Insurance-Linked Securities Disclosure in Note 21, Other Items, with Some Additional Clarifying Instructions. The Illustration will be Data-Captured ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal adds an illustration to the Insurance-Linked Securities disclosure in Note 21, Other Items, with some additional clarifying instructions. He stated that there were some minor modifications. Upon a motion by Mr. Hudson, seconded by Mr. Houston, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Hudson, seconded by Mr. Kerner, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A17) National Association of Insurance Commissioners 5

20 Attachment Four r. Add a Definition of SVO-Identified Funds to the Investment Schedules General Instructions and Add Category Line Numbers to the Investment Schedules. Remove the * Code for Class One Bond Mutual Funds and # for Exchange Traded Funds for the Code Column for Schedule D, Part 1, Schedule DL, Part 1 and 2. Eliminate the Class One Money Market Mutual Funds Line from Schedule E, Part 2. Add a New Section (SVO-Identified Funds) and a New Column (No Maturity Date) to Schedule D, Part 1A with Appropriate Instruction Changes. Make the Appropriate Line and Column Reference Changes in the Supplemental Investment Interrogatories, Default Component Basic Contribution, Reserve Objective and Maximum Reserve Calculations of the Assets Valuation Reserve and Schedule D, Part 1B of the Quarterly Statement. Add SVO Identified Funds to the Grouping (Line 8 Through Line 11) for the Schedule D, Summary by Country Blank Page ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal incorporates the term SVO-Identified Funds and deleting the term Class One from the money market mutual funds as a result of U.S. Securities and Exchange Commission changes. There were some technical edits. He stated that there were discussions on the Statutory Accounting Principles (E) Working Group call regarding whether to keep what used to be called a class one money market mutual fund, but call it other money market mutual funds to keep it on Schedule DA as it is still a SSAP No. 2 Cash, Drafts and Short-Term Investments item for geography purposes. There is no longer a locked-in pricing for these other money market mutual funds; therefore, they continue to be classified as a short-term investment. Mr. Bruggeman stated that the Statutory Accounting Principles (E) Working Group will consider whether these types of investments will later be considered as cash equivalent. For now, he stated, they are still considered a Schedule DA investment. Upon a motion by Mr. Hudson, seconded by Mr. Kerner, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Houston, seconded by Mr. Frederick, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A18). s. Add Illustrations for Life and Fraternal Note 23G, Reinsurance, and Make the Appropriate Adjustment to the Instructions to Match the Illustration. These Illustrations will be Data-Captured ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal adds illustrations to Note 23G, Reinsurance, for the XXX/AXXX disclosures. There were a couple of technical edits made. Upon a motion by Mr. Hudson, seconded by Mr. Ford, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Samsom, seconded by Ms. Crawford, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A19). t. Add Two New Disclosures to the Instructions with Illustrations for Note 24, Retrospectively Rated Contracts and Contracts Subject to Redetermination, Related to the ACA Risk Corridor Program. These New Disclosures will be Data-Captured with Crosschecks ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal adds two new disclosures to the instructions with illustrations for Note 24, Retrospectively Rated Contracts and Contracts Subject to Redetermination, related to the ACA risk corridor program to be data-captured and add related crosschecks. The purpose of this proposal is to reflect the changes to SSAP No. 107 Risk- Sharing Provision of the Affordable Care Act adopted by the Statutory Accounting Principles (E) Working Group. There were minor technical modifications. Upon a motion by Mr. Hudson, seconded by Mr. Samsom, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Houston, seconded by Mr. Ford, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A20). u. Modify the Instructions for Note 5H, Disclosure for Collateral Received and Reflected as Assets Within the Reporting Entity s Financial Statements. The Illustration for this Disclosure will be Data-Captured. ( BWG) Effective 12/31/2016. Mr. Bruggeman stated that this proposal modifies the instructions for Note 5H, Investments, for the disclosure of collateral received and reflected as assets within the reporting entity s financial statements. This proposal reflects changes that were adopted to SSAP No. 1 Accounting Policies & Uncertainties and Other Disclosures. He stated that there were some discussions regarding duplication in reporting with this item, with interested parties claiming that some of this information is available in other parts of the financial statement. At the regulators request, this proposal is intended to provide data in a specific location with a percentage so regulators can easily identify the gross-up amount reported in the balance sheet as a result of this type of collateral. There were some minor modifications. Upon a motion by Mr. Kerner, seconded by Mr. Ford, the Working Group voted unanimously to adopt the modifications to the proposal. Upon a motion by Mr. Frederick, seconded by Ms. Donovan, the Working Group voted unanimously to adopt the modified proposal (Attachment Two- A21) National Association of Insurance Commissioners 6

21 Attachment Four v. Modify the General Interrogatory, Part 1 Question Regarding Investment Manager and Broker-Dealers. The Table for Question (Annual) and 17.5 (Quarterly) will be Modified, Add Questions and (Annual) and Questions and (Quarterly) (Yes/No Question Regarding Assets Under Management) and Additional Table for (Annual) and 17.6 (Quarterly) will be Added to Expand on Data Reported Regarding Investment Management with the Appropriate Instruction Modifications and Additions ( BWG) Effective 12/31/2016. Ms. Donovan stated that this proposal is intended to hold regulators in compliance with the additional procedures on investment managers adopted into the Financial Analysis Handbook and the Financial Condition Examiners Handbook in 2015 to highlight the extent of an insurer s use of investment managers. The proposal modifies the General Interrogatory, Part 1 question regarding investment managers and broker-dealers. Question in the annual table and question 17.5 in the quarterly table will be modified to incorporate affiliation. Question and question in the annual disclosure and question and question in the quarterly disclosure will be yes/no regarding assets under management. An additional table for (annual) and 17.6 (quarterly) will be added to expand on data reported for investment management, with the appropriate instruction modifications and additions. Upon a motion by Mr. Kerner, seconded by Mr. Hudson, the Working Group voted unanimously to adopt the proposal (Attachment Two- A22). 5. Exposed New Items a. Add New Supplement for Reporting VM-20 Reserves. Add New Line to Analysis of Increase in Reserves During the Year Related to VM-20 Deterministic/Stochastic Reserves. Modify the Instructions for Exhibit 5 to Reflect Valuation Under VM-20. Add Lines to the Five-Year Historical Related to VM-20 Deterministic/Stochastic Reserves. Add the VM-20 Reserve Supplement to the Supplemental Exhibits and Schedules Interrogatories ( BWG). Mr. Samsom stated that this proposal is the result of several months of work performed by the PBR Review (EX) Working Group and the PBR Blanks (EX) Subgroup. The proposal adds a new supplement for the reporting of reserves under VM-20, Requirements for Principle-Based Reserves for Life Products, and makes changes to existing reserve exhibits such as Exhibit 5. Upon a motion by Mr. Samsom, seconded by Ms. Conley, the Working Group voted unanimously to expose the proposal for a public comment period ending Sept. 16. b. Add an Additional Letter Code (D) and a Code Description be Added to the Explanation of Basis of Allocation of Premiums by States, etc. Section for Use on Schedule T Exhibit of Premiums Written Allocated by States and Territories. The Change Would Apply to Both the Quarterly and Annual Financial Statement Blanks and Referenced in the Quarterly and Annual Financial Statement Instructions ( BWG). Mr. Garn stated that this proposal is presented by the Surplus Lines (C) Working Group and adds an additional letter code (D) and a code description to the Explanation of Basis of Allocation of Premiums by States section for use on Schedule T. The change would apply to both the quarterly and annual financial statement blanks beginning with Jan. 1, David Kodama (Property Casualty Insurers Association of America PCI) stated that the PCI raised this issue with the Surplus Lines (C) Working Group regarding the terms being used of eligible and approved in the proposal description for the new code to be replaced with the term authorized. He stated that it is critical for the surplus lines writers to keep their terms consistent in all aspects of regulation, documents, forms and instructions. He stated that, for surplus lines eligibility, one of the paramount conditions for the company to be eligible is to be authorized in its state of domicile. For a domestic surplus lines insurer, in that state of domicile, the company is authorized in that state. Ms. Donovan stated that NAIC support staff for the Blanks (E) Working Group may want to coordinate with the NAIC support staff for the National Treatment and Coordination (E) Working Group, as they are currently looking at lines of business descriptions. She stated that NAIC staff should coordinate so there is no overlap or conflict of terminology with licensed insurers. Upon a motion by Mr. Kerner, seconded by Ms. Crawford, the Working Group voted unanimously to expose the proposal for a public comment ending July 15. c. Insert Instructions to the Description Column to Indicate that Swaptions Should Include the Hedge ID Number, the Tenor (i.e. Time from Effective Date to Maturity Date), as Well as the Start and End Dates of the Underlying Swaption within Schedule DB, Part A, Section 1 ( BWG). Upon a motion by Ms. Conley, seconded by Mr. Hudson, the Working Group voted unanimously to expose the proposal for a public comment period ending July National Association of Insurance Commissioners 7

22 Attachment Four d. Add a Disclosure to Note 5, Investments, for Prepayment Penalties and Acceleration of Fees for Callable Securities. Add Instructions to Column 18 and Column 20 of Schedule D, Part 4 and Part 5 for Reporting Prepayment Penalties and Acceleration of Fees for These Securities ( BWG). Mr. Bruggeman stated that this proposal relates to adopted revisions to SSAP No. 26 Bonds and SSAP No. 43R Loan- Backed and Structured Securities for prepayment penalties. These revisions add a new disclosure to capture the number CUSIPs and aggregate amount of investment income generated as a result of a prepayment and/or acceleration fees, as well as clarifying guidance on the amount of investment income and/or realized capital gains/losses to be reported upon disposal of an investment. Comments were received from interested parties on the June 9 Statutory Accounting Principles (E) Working Group conference call, noting concerns with the adopted recommended revisions to Schedule D, Part 4 and Part 5, as they will provide issues when completing the Schedule D, Verification between Years. In reviewing these schedules, NAIC staff agrees that the current revisions proposed in BWG (as shown in meeting materials for June 16 Blanks (E) Working Group conference call) to Schedule D, Part 4 and Part 5 would conflict with completion of the Schedule D, Verification between Years. Therefore, as part of the exposure for proposal BWG, Mr. Bruggeman stated that NAIC staff will make the recommended revisions to the Schedule D, Verification between Years to incorporate a new line to identify the amount of investment income generated as a result of prepayment penalties and post the revised proposal on the Blanks (E) Working Group web page as the exposed proposal. Inclusion of this new line will allow the balances recorded on Schedule D, Part 4 and Part 5 to appropriately roll into the Verification between Years. Steven Burrows (Eagle Investment Systems) stated that he agrees with the addition of the new line to assist in the data rolling within the verification schedule; however, he indicated that there is not a specific column for reference. Upon a motion by Mr. Houston, seconded by Mr. Hudson, the Working Group voted unanimously to expose the proposal for a public comment ending July 15. The Blanks (E) Working Group received a memorandum from the Statutory Accounting Principles (E) Working Group dated June 9 supporting the modifications referenced during this call to proposals BWG through BWG, BWG and BWG (Attachment Two- A23). Mr. Garn stated that the comment deadline is July 15 for the quarterly proposals effective Jan. 1, 2017 ( BWG, BWG and BWG). He stated that the next Blanks (E) Working Group call is scheduled for Aug. 9 in lieu of a meeting at the Summer National Meeting. 6. Adopted the Editorial Listing Upon a motion by Mr. Hudson, seconded by Mr. Frederick, the Working Group voted unanimously to adopt the editorial listing (Attachment Two- A24). w:\national meetings\2016\summer\tf\app\blankswg\interim minutes\june call\att a01 06-blanks.docx 2016 National Association of Insurance Commissioners 8

23 Attachment Five -- To: Superintendent Eric Cioppa, Chair of Financial Condition (E) Committee From: Kim Hudson, Commissioner Representative of Dave Jones, chair of Accounting Practices and Procedures (E) Task Force Date: August 27, 2016 Re: Update on Statutory Accounting Principles (E) Working Group s Derivatives Charge The purpose of this memo is to provide an update to the Committee regarding progress on the noted 2016 charge and request that the Committee adopt a revised updates to the 2017 charge Charge Statutory Accounting Principles (E) Working Group: Develop and adopt changes to SSAP No. 86 Derivatives, with an effective date of Jan. 1, 2017, or earlier, which allow hedge accounting treatment under SSAP No. 86 for certain limited derivative contracts (e.g., interest rate hedges with counterintuitive effects) that otherwise do not meet hedge effectiveness requirements. In adopting such an allowance, consider if the requirement to meet hedge effectiveness can be replaced by some other information that demonstrates strong risk management is in place over the identified hedges. Essential Charge Progress and Proposed 2017 Charge: An initial agenda item for the 2016 charge was exposed by the Statutory Accounting Principles (E) Working Group during the 2016 Spring National Meeting. This agenda item included initial concepts for drafting guidance; however, throughout the agenda item exposure NAIC staff continued working with regulators and industry (including Oliver Wyman, the consultant for the QIS project). As a result of these continuing discussions, a draft issue paper was prepared that included several key revisions from the initial concepts proposed within the agenda item. During the 2016 Summer National Meeting, the draft issue paper was exposed for comment. Although the draft issue paper is believed to reflect several industry-supported concepts (e.g., dynamic hedging, open portfolios), the guidance within the issue paper is significantly different from what is allowed under SSAP No. 86 (and under US GAAP) with regards to what is allowed as an effective hedge as well as the accounting guidance for effective hedges. The Variable Annuities Issues (E) Working Group is continuing to work with Oliver Wyman and the industry to establish a reserving methodology change. The special accounting change for the related derivative must work in harmony with the reserve methodology, to be effective. Additionally, while the Working Group is focusing on this charge, in order to ensure proper regulator consideration of the complex issues, as well as corresponding reporting revisions, additional time is needed to complete this charge. As the original charge was specific to SSAP No. 86, with a Jan. 1, 2017 effective date, the Task Force requests that the Committee adopt the following 2017 charge to reflect the ongoing work on this project: Develop specific statutory accounting guidance for certain limited derivative contracts hedging variable annuity guarantees, subject to fluctuations as a result of interest rate sensitivity, reserved for in accordance with Actuarial Guideline XLIII, CARVM for Variable Annuities (AG 43). This guidance shall place an emphasis on reducing non-economic surplus volatility for these specific hedges in situations where strong risk-management is in place, with safeguards to ensure appropriate financial statement presentation and disclosures, sufficient transparency, and regulatory oversight. This charge shall be a high priority, with the earliest effective date feasible that allows for adequate development of guidance and related reporting schedules. W:\National Meetings\2016\Summer\TF\App\materials\update VA charge.docx