Spring Midwest IASA Conference. Omaha, Nebraska April 27-28, 2017

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1 Spring Midwest IASA Conference Omaha, Nebraska April 27-28, 2017

2 NAIC Focus April 28, 2017 Connie Jasper Woodroof NAIC Liaison, StoneRiver

3 Agenda Accounting Update Effective 1/1/2017 Accounting Update Planning for yearend Quarterly Statement Update RBC Update Other NAIC Projects

4 Statutory Accounting Effective 1/1/2017

5 SSAP Nos. 26 and 43R - Bonds Prepayment penalties and/or acceleration fees Prospective basis beginning 1/1/2017 Reported as investment income when received, however Bifurcation of final payment between interest and principal Difference between total consideration received and par value reported as net investment income Difference between book and par value treated as realized gain/loss New quarterly and annual disclosure Schedule D changes deferred until 1/1/2018

6 SSAP No. 35R Guaranty Funds Guaranty fund credits for short-duration contracts Allows expected renewals of short-term health contracts when considering assets recognized from accrued guaranty fund liability assessments Discounting of LTC Guaranty Fund Assessments Adopted 3/16, but retroactive to 1/1/2017 and used for first quarter reporting Allows for discounting of assets & liabilities related to guaranty fund assessments New Note disclosure

7 SSAP No. 41R Surplus Notes Surplus Notes Issue Paper No. 151 Changes valuation of surplus notes NAIC designation 1 and 2 at amortized cost All others, lower of amortized cost or fair value More closely aligns surplus notes valuation with other fixed income investment Effective 1/1/2017

8 SSAP No Derivatives Definition of notional for derivative contracts Effective 1/1/2017

9 Short Sales SSAP No. 103R Issue Paper No. 152 Addresses lack of specific accounting State of domicile may still prohibit Prospective change, effective 1/1/2017 Effective 12/31/2017 Enhanced disclosures for repurchase and reverse repurchase agreements SAPWG also recommending all repo disclosures be located in one Note Currently #5 and #17

10 SSAP No. 51R Life Contracts Principles-Based Reserving (PBR) revisions Revisions to reflect PBR as means for accounting for life insurance reserves Also updates Appendix A-820 with reserving guidance Effective 1/1/2017, but allows for 3-year PBR phasein period PBR reminder: Affected companies must decide PBR implementation for first quarter reporting Immediate recognition 3-year phase-in period

11 Statutory Accounting Effective 12/31/2017

12 SSAP No. 2R Cash, Cash Equivalents & Short-Term Investments All money market mutual funds (MMMFs) to be classified as cash equivalents Effective year-end 2017 reporting Measured at fair value or net asset value (NAV) as a practical expedient Unrealized gains/losses AVR entities run through IMR/AVR according to SSAP No. 7 Direct charge to surplus for non-avr companies

13 Quarterly Statement Update

14 Jurat Some states now requiring signed Jurat as part of the PDF filed with the NAIC NAIC has posted instructions on how to accommodate in the General Electronic Filing Directive

15 Required Quarterly Notes 1A SAP Accounting reconc 1C(6) Accounting policies 1D Going concern 5D Loan-backed securities 5E(3)b Repos & sec lend 5I(2) & 5I(3) WCFN 5J Offsetting & netting 11B Debt; FHLB 12A(4) Def benefit plans 17B(2), 17B(4)a, 17B(4)b Transfer & Servicing of Financial Assets 17C Wash sales 20 Fair Value 24E ACA risk-sharing (LAH & Health 24F ACA risk-sharing (P&C) 25 Chg in losses and LAE 36B Financial guaranty (P&C)

16 New Note #5 Disclosures Short sales Prepayment penalties and acceleration fees for callable securities For securities sold, redeem or otherwise disposed as a result of callable feature (including make whole call provision)

17 Short Sale Reporting New code SS added to code listing for investment schedules Instructions for short sales added to instructions for Schedule D Parts 1 and 2; Schedule DA Part 1 and Schedule E Part 2 Result of revisions to SSAP No. 103 Transfers and Servicing of Financial Assets and Extinguishment of Liabilities

18 Schedule DB Reporting Schedule DB Swaptions Defined Swaption is agreement granting owner the right, but not obligation, to enter into an underlying swap Description column on Schedule DB now to include: Hedge ID number Tenor of option (time from effective date to maturity date of the option aspect) Start and end dates of underlying swap

19 2017 PC Schedule T New code for Active Status Column D Domestic Surplus Lines Insurer Reporting entities authorized to write surplus lines in their state of domicile Total is now total of all L s and D s

20 Blanks Working Group On April Meeting agenda for adoption consideration Addition of policy locator contact to Jurat page Long-term care instructional changes for completing Form 5 Grand Total page Reduce the number of collateral types reported on Schedule D Par 1 Reorganize Cybersecurity Supplement Blank and instructional changes for reporting of MMMFs as cash equivalents

21 Blanks Working Group On April Meeting agenda for adoption consideration Modification of Note 12A(3) for OPEB New Property/Casualty Schedule F reporting format (for 2018 implementation)

22 Blanks Working Group 16 items on April Agenda for exposure and possible June adoption Health Statement Delete Property & Life Supplements LOB definitions and Analysis of Ops instructions for riders, endorsements & floaters

23 Blanks Working Group 16 items on April Agenda for exposure and possible June adoption Property/Casualty Statement Changes to Statement of Actuarial Opinion & Actuarial Opinion Summary LOB definitions for riders, endorsements & floaters LOB definitions for Lines 9, 15, 17 & 34 Modify Note 31 High Deductibles Note 32 additional disclosures

24 Blanks Working Group 16 items on April Agenda for exposure and possible June adoption Life Statement Analysis of Operations instructions for riders, endorsements & floaters Revisions to Actuarial Opinion for new Valuation Manual requirements Modification to the Supplemental XXX/AXXX Reinsurance Exhibit Modify IMR instructions for SVO-identified invest

25 Blanks Working Group 16 items on April Agenda for exposure and possible June adoption Notes for all Note 1 additional disclosure for mandatory convertible securities and SVO-identified investments Note 5 additional mortgage loan disclosures Note 5 new repurchase agreement and reverse-repurchase agreement disclosures (and remove current from Note 17)

26 Blanks Working Group 16 items on April Agenda for exposure and possible June adoption Notes for all Note 14 disclosures related to guaranty funds liabilities and assets Note 25 revisions in incurred losses and loss adjustment expenses

27 Blanks Working Group 16 items on April Agenda for exposure and possible June adoption Investment Schedules Reduction of Capital Structure Codes on D-1 Modify CUSIP column in BA and DL; add ISIN column to DL New designation suffixes in D and BA for private letter (PL) and reporting exception (RE) Definition of notional amount in DB Addition Code for systematic value of bond ETFs and bond funds on D and DA

28 Blanks Working Group On April meeting agenda Combining of Fraternal and Life blanks Update from April meeting

29 Risk-Based Capital

30 PRBC Investment affiliates (Type 7) now with set factor of.225 Earthquake and hurricane separated into two sections New interrogatories to support exemptions

31 HRBC Guidance for start-up companies for Excessive Growth Charge

32 Investment RBC Working Group Several projects not yet finalized RBC bond reporting categories Bond factors Same for all insurers? Or difference between LRBC (FRBC) and other formulas? Academy s Bond Factors Report on website Bond size factor Probably maintaining current format but revising factors Real Estate next Current factors too high in relation to materiality?

33 Other NAIC Projects

34 Valuation of Securities Task Force Valuation of SCA companies out of SVO Manual and into AP&P Manual as appendix to SSAP No. 97 Identification of credit rating categories for each CRP For example

35 Valuation of Securities Task Force Still in the works Substantive changes in the FE and private letter rating processes Removal of the 5* certification process Will need to update for March conference call and April meeting

36 Group Capital Requirement Working Group Group capital requirement to include insurers and non-insurers; US domiciled and non-us domiciled US Insurers will most likely be an aggregate of each insurer s RBC with elimination entries Looking at use of scalars for non-us insurers Some documentation available on their website UPDATE FROM MAR CONFERENCE CALL AND APRIL NAIC MEETING

37 Group Solvency Issue Working Group Currently working on implementation guide for Form F (Enterprise Risk Report) Based on comments received from regulators and industry with 2 years of Form F filings behind them

38 Questions? Please contact: Connie Jasper Woodroof x5761