John Roberts, Managing Partner Assurance Brian Kilbane, Senior Manager Assurance

December 2015 DHG s NAIC 2015 Fall Meeting Newsletter John Roberts, Managing Partner Assurance Brian Kilbane, Senior Manager Assurance Kevin Lee Ryals, Partner Assurance David Berry, Manager Assurance A summary of the key decisions made by the NAIC during the 2015 fall meeting is discussed below. Contents Executive Committee... 1 Life Insurance Owned Captive Insurance Update... 2 Principles-Based Reserving Implementation Update... 4 P&C Insurance (C) Committee... 4 Title Insurance (C) Task Force... 4 Financial Regulation Standards and Accreditation (F) Committee... 5 Executive Committee At the 2015 fall meeting, the Governance Review (EX) Task Force voted 9-2 on a proposal to eliminate voting rights by all past NAIC presidents and only provide voting rights to the most recent past president, along with current executive officers and three representatives from each of the NAIC s regional zones. All past NAIC presidents are able to continue to be participants in committee meetings in an advisory role. The NAIC Executive (EX) Committee did not vote on this proposal during the 2015 fall meeting, however, it plans to have follow up discussions in December with the goal to implement any changes for 2016. Life Insurance and Annuities (A) Committee... 5 Financial Condition Updates... 5 Accounting Policy & Procedures (E) Task Force... 8

Life Insurance Owned Captive Insurance Update The continued discussion over the regulation of life insurance company owned captives was highlighted during a panel discussion organized by the NAIC and The Center for Insurance Policy and Research (CIPR) on Wednesday, Nov. 18, 2015. More than 350 people attended the panel discussion, which consisted of regulators (David F. Provost Vermont Deputy Commissioner, Captive Insurance Division; Joseph Torti, III Rhode Island Division of Insurance Superintendent; Nick Gerhart Iowa Insurance Commissioner; Ted Nickel Wisconsin Insurance Commissioner), members from the industry (William Pargeans Assistant Vice President, A.M. Best; Alan Routhenstein Principal, Consulting Actuary, Milliman; Neil Rector Rector & Assoc.; Paul Graham American Council of Life Insurers Actuary), and academia (Robert E. Hoyt, Ph.D.- University of Georgia). The panel discussion focused on the history of captive formation for life insurance owned captives, the drivers of the XXX/AXXX financing captives, the drivers of the current regulatory changes and the future state of the use of captives by life insurance companies. Overall, the panel noted that the regulatory changes over the past 2-3 years have been an effort to provide greater transparency to the consumers on life insurance companies use of captive financing arrangements and to provide greater consistency in how state insurance departments are regulating these arrangements. Next on the horizon is to build out similar requirements for captives established to reinsure variable annuity and long-term care risks. Below is a summary of the key decisions made by the NAIC during the 2015 fall meeting in regards to life insurance owned captives. Reinsurance Credit During the 2015 summer meeting, the Reinsurance (E) Task Force exposed for comment the requirement that credit for reinsurance of XXX/AXXX captives is only allowed if the entity maintains primary security holdings equal to the principal based reserve (required level of primary security). If the entity maintains the required level of primary security, the credit for reinsurance allowed is equal to the ceded AG 48 reserves (full credit for reinsurance). If the entity does not maintain the required level of primary security, no credit for reinsurance is allowed. During an Oct. 26, 2015 conference call, the Reinsurance (E) Task Force adopted this all-ornothing option by a 12-8 majority vote. The changes will be incorporated into the model regulation. Risk Based Capital (RBC) Shortfall Disclosure The Principle-Based Reserving Implementation (EX) Task Force adopted a proposal for disclosure of the RBC shortfall in the XXX/AXXX reinsurance framework. The disclosure would consist of the following: 1. For each captive for which an RBC shortfall exists per the XXX/AXXX captive reinsurance consolidated exhibit, list the name of the captive and the dollar amount of the RBC shortfall. 2. List the Total Adjusted Capital (TAC) for the current year, as reported in the annual statement, five year historical data page, along with the sum of TAC plus the total of the RBC shortfalls shown in item 1 above. (This is intended to provide perspective on how much the TAC has been impacted by any captive RBC shortfalls. Note that the impact of any RBC shortfall is already reflected in the published annual statement numbers.) 3. For each reinsurer for which a non-zero primary security shortfall is shown on the XXX/AXXX reinsurance primary security shortfall by cession exhibit, list the name of the reinsurer and the amount of primary security shortfall. Also show the total shortfall from that exhibit across all reinsurers. The proposal will be sent to the Statutory Accounting Principles (E) Working Group with a requested 2015 implementation date. Captive Accrediation At the 2015 summer meeting, the Financial Regulation Standards and Accreditation (F) Committee adopted a new preamble in the Part A: Laws and Regulation Standards, requiring life insurance owned captives to be subject to the accreditation requirements. During the 2015 fall meeting, Julie Garber, NAIC Senior Manager Solvency Regulation, laid out the following internal process NAIC staff will use to assess compliance with the new requirements of the Part A Preamble: 1. The Supplemental XXX/AXXX reinsurance exhibit, part 2B will be used to compile a complete listing of XXX/ AXXX cessions to captive reinsurers. This exhibit is to be filed with the NAIC on April 1, and NAIC staff will begin compiling the list shortly thereafter. Part 2B of the exhibit includes only those transactions that have not been grandfathered in accordance with actuarial guideline 48 and consistent with the accreditation preamble. 2

2. NAIC staff will contact the domestic state of its ceding insurer(s) to ensure that all XXX/AXXX cessions by its domestic life insurers to captive reinsurers is included in the listing. 3. Once the listing of all non-grandfathered XXX/AXXX cessions to captive reinsurers is complete, NAIC staff will review the information in the part 2B of the exhibit to determine, for each transaction, whether there is a primary security shortfall or an other security shortfall. 4. For those transactions where there is not a primary security shortfall or an other security shortfall, no further work is considered necessary as the transaction complies with XXX/AXXX reinsurance framework. 5. For those transactions in which there is a primary security shortfall or an other security shortfall, NAIC staff will review the annual statement and supplements to ascertain whether the shortfall has been remediated by the input of additional assets prior to March 1 or by establishing a corresponding liability for the shortfall. 6. For those transactions in which there is a primary security shortfall or an other security shortfall and the shortfall was not remediated or a corresponding liability was not established, NAIC staff will confirm whether all three of the resulting requirements from the XXX/AXXX reinsurance framework have been met as follows: a. NAIC staff will review the ceding insurer s Dec. 31, 2015, actuarial opinion to ensure that the appointed actuary issued a qualified actuarial opinion related to the primary security or other security shortfall. b. NAIC staff will review the ceding insurer s Dec. 31, 2015, RBC filing to ensure that an adjustment was made to the ceding insurer s authorized control level RBC related to the primary security shortfall. Note: This step does not apply to an other security shortfall. c. NAIC staff will review the ceding insurer s Dec. 31, 2015, annual audited financial report to ensure that proper disclosure was included in the notes section related to the primary security or other security shortfall. (Note: In most states, this filing is not due until June 1, so this review will take place later than steps 6a and 6b above.) 7. For those transactions in which there is a primary security shortfall or an other security shortfall and NAIC staff confirmed in steps 6a 6c (as applicable) that the proper disclosure/adjustment were made, no further work is considered necessary as the transaction complies with the XXX/AXXX reinsurance framework. 8. For those transactions in which there is a primary security shortfall or an other security shortfall and NAIC staff confirmed in steps 6a 6c (as applicable) that any of the three requirements were not met, the transaction does not comply with the XXX/AXXX reinsurance framework. In such cases, NAIC staff will contact the domestic state of the captive reinsurer to assess whether the state has been applying the Part A: Laws and Regulations Standards to the captive reinsurer. 9. At the 2016 summer meeting, NAIC staff will report its findings, specifically identifying the results of work performed in step 8 above. Model Law Changes The Reinsurance (E) Task Force exposed revisions to the Credit for Reinsurance Model Law (#785) (Model Law) which are designed primarily to give the commissioner authority to enact the XXX/AXXX model regulation (AG 48). The option 1 exposure would limit the scope of the regulatory authority to cover XXX/AXXX captive reinsurance transactions, whereas option 2 would provide the commissioner authority to adopt regulations with respect to variable annuities and long-term care (LTC) reinsurance transactions, in addition to XXX/AXXX captive reinsurance transactions. Option 3 goes further to give the commissioner regulatory authority in connection with particular types of reinsurance arrangements, without specifying the types of arrangements as per options 1 and 2. Each time the Model Law is amended to address new types of reinsurance arrangements, the Model Law has to be brought up before state legislatures for ratification. The Reinsurance (E) Task Force members cited the need for some flexibility in commissioner authority levels to regulate reinsurance transactions that are not yet addressed in the Model Law. According to the Reinsurance (E) Task Force, this will help the commissioner to be more responsive to regulating new and emerging reinsurance structures, and not to be additional regulation on professional reinsurers. However, interested parties provided feedback that the intent of the Reinsurance (E) Task Force is not encapsulated in the proposed wording changes to the Model Law. According to interested parties, the amendments, particularly option 3, are vague and have very broad implications that could potentially scope in traditional reinsurance and property and casualty reinsurance transactions, which is not the stated intent of the Reinsurance (E) Task Force. 3

As a result of this feedback, the Reinsurance (E) Task Force voted to expose for comment (a) options 1, 2 and 3, with technical edits by the NAIC staff; (b) proposed revisions by New York Life to the previously exposed option 2 to limit the commissioner s discretion to only adopt a regulation related to other insurance and annuity products that is directly related to a NAIC credit for reinsurance Model Law and (c) American Council for Life Insurer s proposed revisions to previously exposed option 2 which includes language on exempting a reinsurer if certain licensing and capital and surplus requirements are met. Principles-Based Reserving Implementation Update Update The Principle-Based Reserving (PBR) Implementation Task Force announced that 39 states have enacted PBR legislation, representing approximately 71 percent of premiums. Additionally, four states have actions under consideration. In order for PBR to become effective at least 42 states with 75 percent of the premium must pass this legislation. The task force adopted a general approach for determining whether a state will be counted towards the threshold for placing these Valuation Manual changes into operation, when a state s law uses substantially similar terms and provisions compared to the NAIC s Model Law. In the event that a state s law is not considered substantially similar, which the task force has not defined, the state would not count toward the thresholds required to effectuate PBR. The task force believes that they remain on track for an effective date of Jan. 1, 2017. PBR Pilot The PBR task force was presented with an outline of the 2016 PBR Reserve pilot program by the PBR Review (EX) Working Group. The objective of the pilot project is to evaluate the regulatory process surrounding compliance with the PBR valuation model. The program is seeking between 10 and 12 volunteer companies and will focus on the following: 1. PBR calculations for term and universal life secondary guarantee products as required by VM-20, 2. VM-20 reserve supplement and instructions as revised in the life annual statement blank and 3. VM-31 actuarial reporting. P&C Insurance (C) Committee Terrorism Risk Update During the 2015 summer meeting, the Accounting Practices and Procedures (E) Task Force voted against a proposed annual statement supplement to collect data required by the Terrorism Insurance Reauthorization Act of 2015. The Federal Insurance Office (FIO) took up the responsibility for the data collection. The Terrorism Insurance Implementation (C) Working Group has started planning for assisting FIO in the collection of 2016 data. This working group is considering developing a data call to obtain the information required to be collected, in coordination with FIO. Workers Compensation (C) Task Force The Workers Compensation (C) Task Force was notified by the NAIC/IAIABC Joint (C) Working Group that their study of large/mega deductibles is complete and their paper is being reviewed by NAIC staff. The objective of the study is to identify whether the use of mega-deductibles by large employers is a significant trend, to identify causes of recent insurer insolvencies and the role large deductibles played in these insolvencies, to understand special concerns related to the use of large deductibles by professional employment organizations and finally to update the 2006 workers compensation large deductible study, where deemed necessary. The study is intended to serve as a resource to educate the insurance industry on how large deductible policies work and special issues which arise from their use. The joint working group intends to present their findings to the task force during the 2016 spring meeting to seek permission to expose the paper for public comments. Title Insurance (C) Task Force The Title Insurance (C) Task Force met to discuss the results of the updated NAIC survey of state title insurance laws regarding title data and title matters. The survey was originally published in March 2010 as a tool for regulators and interested parties to gain insight into the regulation of title insurance. The task force agreed at the spring meeting to update the survey, which was modified to include questions regarding state regulation of affiliated business arrangements and the availability of state guaranty funds for title insurance. The survey was sent to state regulators for completion on Jun. 17. All but one state and three territories participated. The results were compiled and posted on the task force 4

web page. The task force also discussed revising its 2016 proposed charges to include a review of the market regulation handbook chapter on title insurers and agents, as well as a review of the recent Consumer Financial Protection Bureau (CFPB) bulletin to determine if it would be beneficial for the task force to draft a companion notice or bulletin. Financial Regulation Standards and Accreditation (F) Committee The Financial Regulation Standards and Accreditation (F) Committee discussed the current optionality of the certified reinsurer provisions and agreed in principle to make those provisions from the Credit for Reinsurance Model Act (#785) and Credit for Reinsurance Model Regulation (#786) an accreditation requirement. The committee directed NAIC staff to draft revisions to the current guidance to incorporate the desired changes. Further, the committee noted that during the 2016 spring meeting they will discuss options for accelerating the accreditation process. Life Insurance and Annuities (A) Committee The Life Insurance and Annuities (A) Committee adopted the following items: 1. Its 2016 proposed charges and the Life Actuarial (A) Task Force s 2016 proposed charges; 2. The valuation manual amendments that the Life Actuarial (A) Task Force has adopted since the spring meeting; 3. Amendments to Actuarial Guideline XXXIII Determining CARVM Reserves for Annuity Contracts with Elective Benefits (AG 33) clarifying that a) some types of benefits may depend on values other than the values used to determine cash values and which may allow for benefits to continue past the point where the cash value is zero; b) the presence of certain types of non-elective benefits may affect other non-elective benefits and/or elective benefits; c) the valuation actuary should consider factors such as the degree to which contract owner actions would be influenced by the availability of each benefit in the contract when making determinations related to item b; and d) incidence rates for non-elective non-mortality benefits should be used only to the extent appropriate, revisions to the Synthetic Guaranteed Investment Contracts Model Regulation (#695) exempting contingent deferred annuities (CDAs) from its scope and other revisions related to modifying the method of determining the crediting rate for synthetic guaranteed investment contracts (GICs); and Financial Condition Updates Capital Adequacy (E) Task Force and Risk Based Capital Investments The Investment Risk-Based Capital (E) Working Group heard a presentation from the American Academy of Actuaries (Academy) on the methodology for calculating the asset risk base factors for fixed income assets in the life RBC formula and the recommended base factors. The working group discussed related topics including: 1) the granularity of the base factors; and 2) the concept of a carrying value adjustment. The Academy s recommendation would change the C-1 factors from the traditional six NAIC designations to up to 14 factors. The overall impacts of the proposal would increase the industry average C-1 charges for bonds and in some cases double the C-1 charge. Interested parties raised the concern on the need to analyze the need for reallocation of its bonds under these conditions. The working group indicated that while the focus and proposed changes related exclusively to the life RBC formula the plan is for the health and property & casualty RBC formulas to be updated as well. Life and Fraternal Entities The Life Risk Based Capital (E) Working Group did not adopt any changes in the 2015 fall meeting. However, they did discuss potential agenda items for 2016. One of those items was the consideration of addressing longevity risk within the RBC calculation. The NAIC s Longevity Risk Subgroup presented its findings on the state of the longevity risk industry. They noted that there has been increase in products marketed with material longevity risk. Although there is no RBC charge for longevity risk in the United States, some foreign regulators do provide a risk charge for longevity risk products, such as the United Kingdom, Canada and Chile. The Longevity Risk Subgroup will continue to research and propose an RBC solution by summer 2016. Variable Annuities Issues The Variable Annuity Issues (E) Working Group provided a blank proposal which redesigns the annual statement disclosures applicable to variable annuities to add more meaningful information about the valuation of the guaranteed liabilities with an effective date of Dec. 31, 2017 or earlier. The objective of the improved disclosure should be to provide all stakeholders (e.g. regulators, consumers, and investors) with more transparency and additional insights into how the contractual obligations could change over time as well as the insurance company s ability to manage those obligations. 4. The 2016 Generally Recognized Expense Table (GRET). 5

Health Entities The Health Risk-Based Capital (E) Working Group discussed methods for reflecting Medicaid pass-through payments in the health RBC formula. The working group directed NAIC staff to draft guidance for reporting pass-through payments for discussion. Property & Casualty Entities The Property and Casualty Risk-Based Capital (E) Working Group adopted certain changes impacting the property and casualty RBC formula through the Catastrophe Risk (E) Subgroup. The changes which follow arose from the subgroup s ongoing efforts to consider how catastrophe risk should be reflected in the property and casualty RBC formula. Agenda item 2015-21-CR, which proposes the inclusion of a new interrogatory to provide information on how companies define the new Madrid seismic zone for purposes of determining if they qualify for exemption from the requirement to report their earthquake exposure was adopted. The agenda item was exposed for a 30-day comment period which ended on Oct. 30, 2015. Agenda item 2015-19-CR, proposes to add a separate page which will combine all catastrophe risk charges into a single RCAT component. The current R6 and R7 charges will be replaced by this new component in the covariance adjustment. As more catastrophe perils are anticipated in the future, the intent is to simplify the covariance adjustment formula by including all charges into one RCAT component. The agenda item was exposed for a 30-day comment period which ended on Oct. 30, 2015. The working group discussed the possibility of including a portfolio beta adjustment, similar to that used in the life RBC formula, for property and casualty filers. The working group concluded that additional analysis surrounding the logic behind the original exclusion of a beta adjustment should occur before a decision is reached. The working group continues to contemplate changes to asset risk factors for fixed income instruments being discussed in the Life Risk- Based Capital (E) Working Group and how these changes should impact the property and casualty RBC formula. Based upon the relative immateriality of the asset risk factors on the property and casualty RBC formula, the working group currently supports maintenance of the bond factors currently in use; however, the working group is evaluating an alternative approach which would leverage the Academy s modeling work with certain adjustments to address known differences between the life and property and casualty RBC formulas. Valuation of Securities (E) Task Force During the meeting the Valuation of Securities (E) Task Force completed the following: The task force received a referral from the Statutory Accounting Principles (E) Working Group regarding a proposal to move filing instructions for subsidiary, controlled and affiliated investments (SCA) from Part 5, Section 2 of the P&P Manual to SSAP 97 Investments in Subsidiary, Controlled and Affiliated Entities. As SSAP 97 already adopts the relevant section of the P&P Manual, this change is not expected to result in any new filing requirements. In addition to the aforementioned change, proposed revisions to SSAP 97 would require insurers to disclose information regarding their SCA investments such as the date in which the investment was filed with the NAIC, the type of filing, the response received from the NAIC and the NAIC s valuation. The task force heard a report from the SVO on the development of criteria for adding nonbanks to the NAIC bank list. The inclusion of nonbanks would expand the NAIC bank list to an NAIC list of qualified U.S. financial institutions, consistent with model 785 and 786. Under the SVO s proposal, credit ratings issued by approved nationally recognized statistical rating organizations (NRSROs) would be used to determine eligibility. Those financial institutions with a credit rating of Baa/BBB or better and whose country of domicile maintains a sovereign debt rating of Aa/AA for long-term debt or P1/ A1 for short-term debt would be eligible for inclusion. The SVO would be responsible for monitoring movements in the credit quality of financial institutions included on the NAIC bank list to determine whether eligibility remains appropriate based upon the criteria proposed in the SVO s report. The SVO report was released for a 60-day public comment period. The task force received an update from the SVO regarding their efforts to modernize the process by which insurers file securities with the NAIC for valuation. The intent of project is to modernize SVO electronic computer systems which were developed for a paper-based filing environment. The task force instructed the SVO to continue to work with interested parties and to report back during the 2016 spring meeting regarding their progress. 6

The task force reviewed a memorandum from NAIC staff regarding the treatment of mandatorily convertible securities in the P&P Manual. Mandatorily convertible securities are reported as bonds or preferred stock in Schedule D based upon the nature of the security. However, as mandatorily convertible securities are not assigned NAIC designations by the SVO, the P&P Manual instructs insurers to manually enter the RBC associated with common stock for these instruments. In practice, the manual entry of RBC for common stock is no longer considered appropriate; therefore, the P&P Manual was updated to instruct insurers to report an NAIC designation for these instruments by self-assigning or determining in accordance with filing exempt rules in the P&P Manual. The proposed changes were adopted and the task force referred a request to the Capital Adequacy (E) Task Force to consider whether a separate RBC factor should be developed for mandatorily convertible securities. During the 2015 summer meeting, the task force referred an SVO report on non-recourse notes for charitable organizations to the Statutory Accounting Principles (E) Working Group to determine whether specific statutory accounting guidance is deemed necessary for these instruments. The working group concluded that non-recourse notes for charitable organizations do not represent a significant portion of insurer s invested assets to warrant separate accounting consideration. As such, it was determined that no action is considered necessary. The task force continued the discussion from its referral from the Financial Condition (E) Committee requesting the task force to review the Derivative Instruments Model Regulation (#282) against the NAIC s Model Law development criteria. The task force heard a report from the investment analysis office which indicates that only 13 states have adopted the model in its entirety or with modification. However, these states represent 96 percent of total derivative exposure in the U.S. insurance industry. As such, the task force noted that they would consider whether a 70 percent adoption rate in the 10 states with the highest derivative exposure (by dollar weighted average) or an adoption rate of 61.5 percent if all 13 states suggests that model #282 may be indicative of a regulation which requires a national standard or uniform approach. The task force released the report received from the investment analysis office for a 60-day public comment period. Reinsurance (E) Task Force The Reinsurance (E) Task Force adopted a SVO-proposed definition for the phrase securities listed by the SVO at the fall meeting. The phrase is used in the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786) but was not previously defined. The SVO can now finalize its recommendation to the Valuation of Securities (E) Task Force on compilation instructions previously released for the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual). 7

Accounting Policy & Procedures (E) Task Force Statutory Accounting Principles (E) Working Group and Emerging Accounting Issues (E) Working Group This section summarizes the actions of the Statutory Accounting Working Group (SAPWG) and Emerging Accounting Issues Working Group (EAIWG) relating to the adoption or exposure of the Statements of Statutory Accounting Principles. The following is a summary of non-substantive accounting changes or revisions that were adopted by the SAPWG during the 2015 fall meeting: Ref # Statement Reference Title Description of Change or Revision Effective Date 2015-08 SSAP No. 97 Investments in Subsidiary, Controlled and Affiliated Entities Revisions incorporate a new disclosure for reporting entities that have insurance subsidiary, controlled and affiliated entities (SCAs) for which the audited statutory equity of the insurance SCA includes permitted or prescribed practices. 2015-18 Appendix F Policy Statements Revisions disband the Emerging Accounting Issues (E) Working Group and incorporate the interpretation process within the Statutory Accounting Principles (E) Working Group, effective Jan. 1, 2016. 2015-25 SSAP No. 97 Investments in Subsidiary, Controlled and Affiliated Entities Revisions incorporate a new disclosure detailing the reported value for SCAs, as well as information received after filing the SCA with the NAIC. 2015-34 SSAP No. 1 Accounting Policies, Risks & Uncertainties and Other Disclosures Revisions incorporate a disclosure for possible proceeds from insurance-linked securities. 2015-35 SSAP No. 65 Property and Casualty Contracts Revisions incorporate a disclosure to identify professional employer organization s aggregate unsecured highdeductible recoverables. 2015-36 SSAP No. 61R Life, Deposit-Type, Accident and Health Reinsurance Revisions incorporate a disclosure to capture information regarding reinsurance agreements with affiliated captive reinsurers. This disclosure sunsets after the 2015 financial statements, with a subsequent disclosure to be considered in 2016. The following is a summary of substantive accounting changes or revisions that was exposed for comment by the SAPWG during the 2015 summer meeting: Ref # Title Description of Change 2014-25 SSAP No. 41 Surplus Notes Directed NAIC staff to concurrently expose a revised issue paper, after incorporating direction from the working group discussed during the meeting, with a substantively revised SSAP No. 41R detailing revisions to the measurement guidance for holders of surplus notes. 2014-28 Issue Paper No. 153 Counterparty Reporting Exception for Asbestos and Pollution Contracts Provides historical documentation of changes adopted for certain asbestos and pollution reinsurance contracts. 2015-02 Issue Paper No. 152 Short Sales Proposes accounting guidance for short sales, as well as guidance for secured borrowing transactions, when the insurer is the transferee. 8

The following is a summary of non-substantive accounting changes or revisions that was exposed for comment by the SAPWG during the 2015 fall meeting: Ref # Title Description of Change 2015-08 SSAP No. 97 Investments in Subsidiary, Controlled and Affiliated Entities Clarifies accounting for non-insurance SCAs and clarifies adjustments for noninsurance SCAs meeting the revenue and activity test. 2015-19 2015-21 SSAP No. 1 Accounting Policies, Risks & Uncertainties and Other Disclosures SSAP No. 55 Unpaid Claims, Losses and Loss Adjustment Expenses Quarterly disclosure of restricted assets if significantly different from the prior year-end financial statement, consistent with the preamble. Solicits comments on issues noted within the agenda item regarding the reporting of subrogation expenses, and to notify the Casualty Actuarial and Statistical (C) Task Force of the exposure. 2015-23 SSAP No. 26 Bonds 2015-27 Investment Schedules Proposes amendments to various SSAPs and reporting tools to clarify the appropriate reporting of prepayment penalties within the investment schedules. Proposes quarterly reporting of electronic-only data as an NAIC supplemental filing that includes the CUSIP, par value, book/adjusted carrying value (BACV) and fair value for Schedule D investments. 2015-40 SSAP No. 15 Debt and Holding Company Obligations Rejects ASU 2015-15: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. 2015-41 SSAP No. 26 Bonds 2015-43 SSAP No. 86 Derivatives Requests comments on whether accounting revisions are needed if the SVO no longer provides a 5* designation after reviewing insurer certifications and if insurers selfdesignate with disclosure in a general interrogatory. Incorporates the GAAP definition of weather derivatives and proposes to adopt, with modification, EITF 99-02: Weather Derivatives to require weather derivatives to be reported and valued consistently with other derivatives under SSAP No. 86. 2015-44 Appendix A-695 Synthetic Guaranteed Investment Contracts Model Regulation Changes previously adopted by the Life Insurance and Annuities (A) Committee. 2015-45 SSAP No. 26 Bonds Presents two options to modify the reporting of SVO bond-designated exchangetraded fund (ETFs). 2015-46 2015-49 SSAP No. 3 Accounting Changes and Corrections of Errors SSAP No. 97 - Investments in Subsidiary, Controlled and Affiliated Entities Clarifies that amended financial statements shall be filed for material accounting errors unless otherwise directed by the domiciliary regulator, and for reporting discrepancies identified within a submitted annual financial statement. Clarifies that ownership of an ETF or a mutual fund does not represent ownership in an underlying entity within the scope of SSAP No. 97, unless ownership of the ETF actually results in control of an underlying company. 2015-51 SSAP No. 86 Derivatives Proposes to incorporate a definition of notional principal. 2015-52 SSAP No. 1 Accounting Policies, Risks & Uncertainties and Other Disclosures Proposes to improve guidance and reporting of permitted and prescribed practices. Blanks Working (E) Group The Blanks Working (E) Group did not adopt any additional changes to the annual statement blanks during the 2015 fall meeting. 9

DHG LLP Insurance Services Group Contacts and Contributors John Roberts Partner, Assurance 336.822.4482 john.roberts@dhgllp.com Brian Kilbane Senior Manager, Assurance 404.575.8954 brian.kilbane@dhgllp.com Kevin Lee Ryals Partner, Assurance 704.367.7043 kevin.ryals@dhgllp.com David Berry Manager, Assurance 404.575.8900 david.berry@dhgllp.com 10