NAIC Update 2009

1. Spring 2009
NAIC Update
SAN DIEGO, CA. Of all quarterly meetings of the This follows testimony given by Wisconsin Insurance
National Association of Insurance Commissioners (NAIC), Commissioner Sean Dilweg during a March 12 climate
the spring gathering is considered by regular attendees to change hearing before the U.S. Senate Committee on
be the “slowest.” However, actions taken on the ground at Commerce, Science and Transportation hearing on climate
this year's March meeting did not lack in controversy. change, during which the commissioner outlined NAIC
activities on this front.
Ripped right from the headlines of major newspapers,
the topic of Washington’s consideration of a systemic risk Consequently, at the San Diego meeting, the NAIC
regulator took center stage in the hallways as well as in the Executive Committee/Plenary adopted a climate change
meeting rooms, where regulators and members of state disclosure survey which will be mandatory for most
legislative groups vowed to work together in framing the insurers beginning this year.
debate.
The behaviour of rating agencies has also moved to the
On the federal front, too, there continues to be much forefront at the NAIC. At the spring meeting, the Rating
action by regulators and executives of the NAIC Agency Working Group advanced plans to survey rating
relating to initiatives under consideration by the Obama agencies on issues of concern shared by state regulators.
administration and the U.S. Congress. Concurrent with The NAIC is also moving ahead with exploring the
the spring meeting, for example, Illinois Insurance Director feasibility of creating its own rating agency to rate insurers’
Michael McRaith was down in Washington standing up investments.
for state regulation during a March 17 hearing of the
U.S. Senate Committee on Banking, Housing and Urban Looking forward, items to be considered at the summer
Affairs to “examine perspectives on modernizing insurance meeting in June include capital and surplus relief, credit
regulation.” scoring, and changes to the NAIC’s catastrophe modeling
handbook.
Top stories What’s next
• Insurers to disclose climate change behavior in 2010 • May 18-19, 2009: NAIC International Insurance Forum,
Washington, D.C.
• Regulators eye rating agencies, initiate one of their own
• June 13-16, 2009: NAIC Summer National Meeting,
• Capital and surplus relief proposal considered in pieces
Minneapolis, MN
• July 9-12, 2009: NCOIL Summer National Meeting,
Also in this issue Philadelphia, PA
• In brief
• IAIS Update
• NAIC accounting update

2. Top stories
Insurers to disclose climate change behavior in 2010 While the prior version included pointed disclosure-related
Beginning next year, the insurance industry will be required questions that were to be included in the NAIC Annual
to report to state regulators certain business practices Financial Statement, the eight queries that remain in the
relating to climate change. new iteration are more generic and are to be posed instead
via survey rather than in the financial statement.
Adopted by the NAIC Executive Committee and Plenary at
its March 17 meeting, the Climate Risk Disclosure Proposal “Climate change will have a huge impact on the insurance
requires mandatory disclosure by insurers with premiums industry and we need better information on how insurers
over $500 million in the 2009 reporting year and insurers are responding to the challenge,” Pennsylvania Insurance
with premiums over $300 million in the 2010 reporting Commissioner Joel Ario, chairman of the NAIC Climate
year. All others would complete the disclosure survey on a Change and Global Warming Task Force, said in a
voluntary basis. Surveys are to be submitted to the regulator statement.
of an insurer group’s lead state.
Some insurance industry representatives have expressed
The survey contains eight questions that ask companies concern over the measure, arguing that it sets the stage
to disclose everything from describing the actions they are for possible lawsuits and presents a competitive advantage
taking in managing climate changes risks to telling how issue by making public what might otherwise be internal
they are building the notion of climate change into their risk company information.
and investment management strategies.
Meanwhile, others support the mandate over the more
onerous draft that came before it.
Climate change will have a huge “Whether it’s reducing their own carbon footprints or
impact on the insurance industry
meeting consumer demand by offering ‘green’ products,
insurers have a strong public record on this issue,” David
and we need better information on
Snyder, vice president and associate general counsel of the
America Insurance Association, said in a statement issued
how insurers are responding to the
prior to the meeting.
challenge.
– Pennsylvania Insurance Commissioner Joel Ario
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its subsidiaries.
2

3. Top stories, cont.
Regulators scrutinize rating agencies, make plans to NAIC as NRSRO?
start one of their own In related news, the NAIC continues its pursuit of expanding
its New York-based Securities Valuations Office (SVO) to
While the topic of rating agency oversight by regulators has
include a public NRSRO that would rate investments by
been brewing for some time, a new group within the NAIC
insurers. At the NAIC spring meeting, the newly-formed SVO
has been charged with the “degree of regulatory flexibility
Initiatives Working Group did not meet; rather it forwarded a
available to reduce reliance” on rating agencies.
report of its latest activities to the NAIC Executive Committee.
The working group is pegging the cost of start-up at $4
million for the first two years of operation.
The NAIC continues its pursuit According to the Property Casualty Insurers Association of
of expanding its New York-based America (PCI), two key questions remain at issue in this space:
Securities Valuations Office 1. Does this new entity fit with the mission of the NAIC?
to include a public NRSRO 2. Will it be sufficiently important in the context of projects
currently underway?
that would rate investments “The decision regarding this new entity could also be
by insurers. impacted by the work of the new Rating Agency Working
Group, which is studying the NAIC’s reliance on rating
agencies...PCI as well as other industry representatives have
significant concerns about potential conflicts of interest and
In that vein, the first order of business for the Rating Agency
the funding of an NAIC-affiliated NRSRO,” PCI stated in its
Working Group has been to evaluate what the NAIC
meeting roundup.
characterizes as “shortcomings” in ratings.
The effort so far has produced an NAIC staff-written report
detailing the organization’s current use and reliance on
information supplied by Nationally Recognized Statistical
Rating Organizations (NRSRO) registered under the Securities
and Exchange Commission, such as A.M. Best, Fitch, Moody’s
and Standard and Poor’s.
The report was unveiled at the group’s March 16 meeting
along with a report that examined credit rating transition
from the perspective of the impact realized following a rating
downgrade for corporate and structured securities.
As background for members of the group and the public, the
working group has listed on its Website related information
and studies on the issue created by the Financial Stability
Forum, President’s Working Group, Securities and Exchange
Commission, and International Organization of Securities
Commission.
3

4. Top stories, cont.
Capital and surplus relief proposal considered • Variable annuities recommendations did not support
in pieces any specific changes or actions, according to the NAIC,
When first unveiled publicly at the NAIC’s winter meeting but regulators noted that the Capital Adequacy (E) Task
in December, discussion of the multi-point proposal of the Force is currently reviewing the Standard Scenario and the
American Council of Life Insurers (ACLI) drew a standing- Mortgage Experience Adjustment Factor. The two original
room only crowd. At the spring NAIC meeting, this once recommendations are as follows:
“hot topic” was handled as a matter of course.
1. Eliminate redundant use of stand-alone asset adequacy
As it now stands, several remaining points of the proposal analysis required by Actuarial Guideline 39, which
are moving through the process as follows: covers only Variable Annuity living benefit guarantees
and associated revenue under contract
• The controversial deferred tax measure has been referred
to the NAIC’s Statutory Accounting Principles Working 2. Waive the Standard Scenario as the floor in the C-3
Group for it to decide the appropriateness of any changes Phase 2 calculation of risk-based capital for year end
for 2009 2008 and 2009
• The Executive Committee/Plenary will consider at the June Going forward with its charges for 2009, the Capital and
meeting three points contained within the Capital and Surplus Relief Working Group is set to examine the current
Surplus Relief Working Group’s recommendations, which framework governing permitted practices, including the
are based on the original “interim solution” proposed by definition of a permitted practice, requests around requests
the ACLI: for notification and the processes used in determining if a
practice is granted, among other items.
1. Allow the 2001 Preferred Mortality Tables to be used
for any 2001 CSO product The issue came to the fore in 2008 as ACLI approached the
NAIC citing concerns about the economic climate. Initially,
2. Make Section 8C of Actuarial Guideline 38 retroactive the trade group asked regulators to approve the plan on an
to July 1, 2005 emergency basis. At a special meeting in January, regulators
deferred a vote pending examination of the plan points
3. Clarify that 2001 Non-preferred Mortality Tables can by several NAIC technical committees. Meanwhile, relief
always be used for determining segments within has been considered on a state-by-state basis, including by
Actuarial Guideline 38 Connecticut, Indiana, Iowa and Ohio.
4

5. In brief
Regulators set to advance Model Audit Rule and State groups join to provide “voice” on federal front
Receivership revisions State regulators and state lawmakers don’t always agree
Sarbanes-Oxley-inspired revisions to the NAIC Model Audit on matters relating to the insurance industry, but a new
Rule and an update of the Insurer Receivership Model Act coalition made up of members of both groups is forging the
(IRMA) both sparked spirited debate when they were first way in creating a unified voice on matters relating to the
proposed and finally passed in 2006. But as a one-year question of federal regulation.
comment period for both measures comes to a close, all
appears quiet on the home front. At a meeting of the NAIC/State Government Liaison
Committee in San Diego, NAIC President and New
Formerly known as the Model Audit Rule, the Model Hampshire Insurance Commissioner Roger Sevigny said
Regulation Requiring Annual Audited Financial Reports was while state-based regulation remains strong, the current
revised in 2006 to feature best practices related to auditor environment has demonstrated a need for systemic regulator
independence, corporate governance and internal controls who could fill any gaps that may exist.
over financial reporting.
New York State Sen. James Seward, who is president of the
Revisions to IRMA also sparked debate until the large National Conference of Insurance Legislators (NCOIL), said
deductible provision was removed. The aim of the model that while his organization has not yet taken a position on
is to help bring uniformity in the way states handle the idea of a systemic risk regulator, he is concerned about
insolvencies. the relationship such an entity would have with the state-
based regulatory system.
In June, at the NAIC Summer National Meeting in
Washington, D.C., regulators are to consider whether to Other groups involved in the discussion include the National
adopt IRMA as an “acceptable receivership scheme” a state Conference of State Legislators, the National Governors
may have for Receivership Part A compliance, effective Association and the American Legislative Exchange Council,
January 1, 2012. among others.
Also at the summer meeting, the NAIC will consider No action was taken at the meeting but discussion is
adopting revisions to the Risk Based Capital Model and an expected to continue.
amendment to the current significant element required for
accreditation with an effective date of January 1, 2012. Regulators to scrutinize insurers’ use of credit
scoring
Reinsurance Regulatory Modernization Framework The topic of credit-based insurance scoring permeated
to advance in D.C. several sessions of the NAIC’s spring meeting, with
With the Reinsurance Regulatory Modernization Framework regulators formally adopting a proposal to continue their
adopted at its winter meeting, the NAIC is well on its way study of the issue and announcing a public hearing that will
to filling in the blanks of the framework by drafting federal be set to receive testimony from interested parties.
enabling legislation that would allow for uniformity across
states, albeit usurping existing state reinsurance laws in From the Property Casualty Committee meeting to the
the process. The comment period for the measure is to be Market Regulation and Consumer Affairs Committee
abbreviated in order to submit to Congress in the current confab, discussion on the controversial issue sparked debate
session. An interim meeting to receive comments is being between industry and regulators – with regulators vowing to
slated for mid-April. give the underwriting practice a second look.
The move comes following the December adoption of The issue has been on the forefront for the past 10 years
the framework by the NAIC Executive Committee. The and many states have adopted a credit-based insurance
measure calls for a reduction in collateral requirements scoring model law developed by the National Conference
for nonadmitted reinsurers. Under the proposal, two of Insurance Legislators (which is hailed as something that’s
new classes of reinsurers are defined (domestic port of fair to consumers and business alike). In all, 48 states have
entry reinsurers and non-U.S. reinsurers). It also includes some form of legislation or regulation in place to oversee
the concept of an NAIC Reinsurance Supervisory Review the practice.
Department.
5

6. In brief, cont.
The latest attention at the NAIC has been sparked by New NAIC CEO Vaughan takes helm in San Diego
New NAIC Chief Executive Officer
concern that the impact of the economy is causing personal
Therese M. (Terri) Vaughan, Ph.D. is
credit scores to drop, placing otherwise fiscally responsible
proving to be a hands-on manager.
individuals in line for higher premiums.
In San Diego, her first meeting since
taking the helm, she participated in
To that end, PCI, told regulators that they should not be
several pertinent sessions, enthusiastically adding input and
using the current economic environment to change law on
insight to the discussions at hand.
a practice that has been proven, time and again, to be a
strong tool in predicting risk. Having served as the Iowa Insurance Commissioner for 10
years, and as a past president of the NAIC, Ms. Vaughan is
The public hearing will be jointly hosted by the Property well acquainted with the workings of the organization.
Casualty Committee and the Market and Regulation
Since taking the lead position in February, she has testified
Consumer Affairs Committee. Issues to be discussed include
before Congress on behalf of the NAIC. Her stance on the
the definition of a credit score, its impact on policyholders
issue of a federal regulator for insurance is that she would
and a view on how companies use credit scoring. As of this
support a systemic risk regulator but oppose usurpation of
writing, the date and location of the hearing had yet to be
state-based insurance regulation.
determined.
Prior to appointment as CEO, Ms. Vaughan was a Robb B.
Three hearings in one month Kelley Distinguished Professor of Insurance and Actuarial
As insurance issues take the national stage, the NAIC and Science at Drake University. Several of her studies were
its members are piling up the airline points in frequent distributed at the NAIC meeting, including one of her
travels to Washington, D.C. During the month of March latest; “The Implications of Solvency II for U.S. Insurance
alone, regulators and NAIC executives have appeared Regulation.”
before Congress three times to offer testimony from the
A well-attended reception in her honor was held during the
perspective of state-based regulation.
San Diego meeting, with regulators and industry expressing
enthusiasm about her arrival and wishing her well going
• March 5: NAIC CEO Terri Vaughan testified before a U.S.
forward.
House Financial Services Committee panel on the issue of
insurance regulatory modernization
Vaughan replaces Catherine Weatherford, who resigned in
July 2008.
• March 12: Wisconsin Insurance Commissioner Sean
Dilweg spoke at a U.S. Senate Committee on Commerce,
Science and Transportation hearing on climate change NAIC San Diego meeting by the numbers
response Number of attendees: 1,422
Number of sessions: 64
• March 17: Illinois Director Michael McRaith testified Number of NAIC groups that did not meet: 42
before the U.S. Senate Committee on Banking, Number of drafts to catastrophe white paper: 13
Number of disclosures in climate change survey: 8
Housing and Urban Affairs on the issue of insurance
modernization
NAIC principals appearing before Congress
Terri Vaughan Sean Dilweg Michael McRaith
6

7. International update
Continuing its involvement in areas of insurance supervision Both the NAIC and the IAIS participate in the G-20.1 In
beyond the United States, the NAIC is expected to move addition to providing the United States perspective on
though 2009 with a full international agenda. issues under discussion by two G-20 working groups (such
as reforming credit rating agencies, working on capital
A key player in this initiative will be NAIC staffer George surplus relief issues, enhancing risk assessment mechanisms
Brady who will take the lead in representing the and addressing credit default swaps), the NAIC is also
organization on the Executive Committee of the involved in reviewing IAIS comments on these issues.
International Association of Insurance Supervisors.
Meanwhile, at its March 16 meeting, the NAIC
Immediate NAIC past president and Kansas Insurance International Solvency and Accounting Working Group
Commissioner Sandy Praeger noted that Brady’s position agreed to submit comments on the IAIS issues paper
will be crucial to discussions in May, when the IAIS regarding the relationship between the actuary and the
discusses strategic planning issues regarding international external auditor in the preparation of financial reports.
insurance regulation. Formal comments for the latest draft of the paper are due
to the IAIS by May 15.
Group of 20 heads of state of the 20 largest global economies
1
Continuing its involvement in
areas of insurance supervision
beyond the United States, the
NAIC is expected to move
though 2009 with a full
international agenda.
Also discussed at the March 17 meeting of the International
Insurance Relations Committee was a set of guiding
principles that the NAIC will use going forward in
conversing with international regulatory bodies. Among
the bullet points under discussion is a principle that would
have NAIC representatives “actively promote the adoption
of U.S. insurance regulatory principles worldwide,” with
which some regulators and industry representatives took
issue. Some also debated point No. 2, which states that the
NAIC supports the development of the “eventual
convergence” to international standards of insurance
supervision.
7

8. NAIC accounting update
The NAIC held their 2009 Spring National Meeting in San The survey also addresses when states plan to present the
Diego, California from March 15 to March 18, 2009. This MAR amendments to their legislature or when they plan
newsletter contains a summary of the significant matters to change the related regulation. As of the February 2009
impacting Statutory Accounting that were discussed at the survey, 11 states have adopted changes to address the MAR
meeting. and the remaining 40 states (includes District of Columbia
in the survey) expected to present amendments or adopt
Summary changes to regulatory to address the MAR in 2009.
• The Statutory Accounting Principles Working Group
(SAPWG) held hearing and meeting sessions to address For those states that have presented the adopted changes
comments on certain substantive and nonsubstantive to the MAR to their respective legislature, none of the states
issues (refer to pages 9 through 11 for details). The indicated any significant problems.
comment deadline for the issues newly exposed at the
Members of the NAIC/AICPA Working Group noted that
meeting is May 4, 2009.
questions have arisen regarding the application of certain
• The Emerging Accounting Issues Working Group (EAIWG) language within the MAR, specifically the disclaimer within
held a meeting to take action on certain tentative Section 14 indicating that the section shall not apply to
positions and to address certain outstanding issues (refer SOX Compliant Entities or wholly-owned subsidiaries of
to page 12 for details). The comment deadline for the SOX Compliant Entities. NAIC Staff will be developing some
issues newly exposed at the meeting is May 4, 2009. proposed guidance to clarify the issues within the MAR
Implementation Guide and the Working Group plans to
– In response to recent actions by the FASB, the EAIWG hold an interim conference call to review the developed
held a conference call on March 26, 2009 to discuss guidance. Some specific issues raised include situations
the following two proposed Staff Positions regarding where the SOX Compliant Entity’s audit committee does
inactive markets and the recognition and presentation not desire or is not able to serve in the governance capacity
of other-than-temporary impairments: for the subsidiary statutory insurance company. Further,
if a new audit committee is appointed for the subsidiary
– FSP FAS 157-e, Determining Whether a Market Is Not statutory insurance company, the issue was raised regarding
Active and a Transaction Is Not Distressed whether or not the independence requirements would still
apply.
– FSP FAS 115-a, FAS 124-a, and EITF 99-20-b,
Recognition and Presentation of Other-Than-Temporary
Impairments
• The NAIC/AICPA Working Group updated the previously
provided results of a survey sent out to the states
regarding how the states plan on incorporating the NAIC
Model Audit Rule (MAR) in their state. Surveys are being
sent quarterly and the results of the February 2009 survey
were as follows (includes District of Columbia in the
survey):
– Statute/Law: 16 states
– Regulation/Rule: 28 states
– Combination: 7 states
8

9. Statutory Accounting Principle Working Group
Current Developments: The SAPWG adopted the following amendments as final:
Effective
date
Reference Title Sector FS impact Disclosure
Amendments adopted as final
2008-13 SSAP No. 48 P&C Nonsubstantive Change – Adopted change to allow an insurer to report its Y N Immediate
Audit Report Life investment in a non-SCA entity on an unaudited basis if the annual audited
Requirements Health information is not complete, solely for the calendar year in which the
for non- investment was acquired.
subsidiary,
controlled and
affiliated (SCA)
investments
2008-26 FSP FAS 150-3 P&C Nonsubstantive Change – Adopted as final revisions to Issue Paper No. 99 – Y N Immediate
and FSP FAS Life Nonapplicable GAAP Pronouncements (Issue Paper No. 99) rejecting FSP FAS
150-5 Health 150-3, Effective Date, Disclosure and Transition for Mandatorily Redeemable
Mandatorily Financial Instruments of Certain Nonpublic Entities and Certain mandatorily
Redeemable Redeemable Noncontrolling interests Under FASB Statement No. 150 and FSP
Financial FAS 150-5, Issuer’s Accounting Under FASB Statement 150 for Freestanding
Instruments, Warrants and Other Similar Instruments on Shares That are Redeemable as
Freestanding not applicable to statutory accounting.
Warrants,
and Similar Nonsubstantive Change – Adopted as final the exposed revisions to SSAP No.
Instruments on 72 – Surplus and Quasi Reorganizations to clarify that puttable warrants and
Shares That are mandatorily redeemable warrants are reflected as liabilities.
Redeemable
2008-27 FSP SOP P&C Nonsubstantive Change – Adopted as final revisions to Issue Paper No. 99 N N Immediate
90-7-1 Life rejecting FSP SOP 90-7-1, An Amendment of AICPA Statement of Position
An Amendment Health 90-7 as not applicable to statutory accounting.
of AICPA
Statement of
Position 90-7
9

10. The SAPWG exposed the following items for written comment by interested parties:
Effective
date
Reference Title Sector FS impact Disclosure
Amendments adopted as final
2009-01 Various P&C Nonsubstantive Change – Exposed changes to Issue Paper No. 99 rejecting N N TBD
2009-04 Life the following as not applicable to statutory accounting:
2009-05 Health
• FSP FAS 117-1, Endowments of Not-For-Profit Organizations: Net Asset
Classification of funds Subject to an Enacted Version of the Uniform
Prudent Management of Institutional Funds Act, and Enhanced Disclosure
for All Endowment Funds
• Statement of Position 07-2, Attestation Engagement That Address Specified
Compliance Control Objectives and Related Controls at Entities That Provide
Services to investment Companies, Investment Advisors, or Other Service
Providers
• Statement of Position 07-1, Clarification of the Scope of the Audit and
Accounting Guide for Investment Companies and Accounting by Parent
Companies and Equity Method Investors for Investments in Investment
Companies and FASB Staff Position 07-1-1, Effective Date of AICPA
Statement of Position 07-1
2009-02 FSP FAS 140-3 P&C Y N TBD
Nonsubstantive Change – Exposed changes to SSAP No. 91R, Accounting for
Accounting for Life Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
Transfers of Health adopting FSP FAS 140-3.
Financial Assets
and Repurchase
Financing
Transactions
2009-06 Capital and P&C Y N TBD
Substantive Change – Exposed changes to paragraphs 10 and 11 and Exhibit
Surplus Relief Life A of SSAP No. 10, Income Taxes (SSAP No. 10). The proposed changes
(EX) Working Health include revising the admission thresholds from 1 to 3 years for reversals
Group and 10% to 15% of surplus for entities that qualify under risk-based capital
Consider levels. Entities that qualify will not be permitted to consider the additional
Increase in DTA computed as an admitted asset for the purposes of certain regulatory
Admission of triggering events (e.g. determination of the amount of an ordinary or
Deferred Tax extraordinary dividend). Further, the increase in the DTA as a result of utilizing
Assets the increased thresholds shall be reported separately in the Summary of
Operations, Statement of Income or Statement of Revenue, as applicable.
Industry was specifically requested to demonstrate whether there is an
economic need to change the existing language in SSAP No. 10.
Exposed proposed SSAP No. 92 and SSAP No. 100 – The proposed SSAPs
2006-30 SSAP No. 92 Y Y 2011
Accounting for adopt with modification FASB No. 158, Employers’ Accounting for Defined
Postretirement Benefit Pension and Other Postretirement Plans, an amendment of FASB
Benefits Other Statements No. 87, 88, 106 and 132 (R) (FAS 158). Differences from FAS 158
Than Pensions, include the following:
A Replacement
• nonadmittance of prepaid assets resulting from the excess of the fair value
of SSAP No. 14
of plan assets over the accumulated postretirement benefit obligation or
projected benefit obligation
SSAP No. 100
Accounting • nonpublic entity exceptions for disclosures are not appropriate for statutory
for Pensions, A reporting
Replacement of
• transition guidance will vary depending on the overall impact to surplus of
SSAP No. 89
adoption
Additional significant changes from existing statutory guidance includes the
following:
• nonvested employees are included within the recognition of net periodic
pension cost and pension benefit obligation or of net postretirement
benefit cost and accumulated postretirement benefit obligation
• utilization of projected benefit obligation (PBO) instead of accumulated
benefit obligation (ABO) in establishing pension liabilities
10

11. The SAPWG took the following other actions:
Effective
date
Reference Title Sector FS impact Disclosure
Amendments adopted as final
2002-27 Accounting for P&C Withdrawn – The Working Group noted there was a lack of activity related to N N NA
Index Based Life these derivatives.
Insurance Health
Linked
Securities
2003-12 IP No. 135 P&C The Working Group directed staff to modify the issue paper to prominently Y Y 2010
FASB Life include requirements for related party guarantees within the body of the
Interpretation Health accounting guidance.
45: Guarantor’s
Accounting
and Disclosure
Requirements
for Guarantees,
Including Indirect P&C
Guarantees of Life
Others, and Health
Interpretation of
FASB Statements
No. 5, 57,
and 107 and
Recession of FASB
Interpretation No.
34 (FIN 45)
2008-20 FAS 163 P&C A subgroup was formed to review the comments received on Issue Paper No. Y Y 2009
Accounting Life 136 – Accounting for Financial Guaranty Contracts. The subgroup will:
for Financial
• Prioritize adopting enhanced financial guarantee disclosures effective for
Guarantee
2009
Contracts
• Coordinate with the Financial Guaranty Insurance Guideline Working Group
• Conduct conference call to address technical comments.
2009-03 FSP EITF 99- P&C Y Y TBD
The Working Group moved this item to the Nonsubstantive Active Listing and
20-1 Life requested the Emerging Accounting Issues Working Group consider revising
Amendments to Health INT 06-07, Definition of Phrase “Other Than Temporary” to include guidance
the Impairment in paragraphs 9 and 10 of FSP EITF 99-20-1. The Working Group also referred
Guidance of EITF this item to the Fair Value Subgroup to consider the impact to impairment
Issue No. 99-20-1 assessments from the adoption of FAS 157, Fair Value Measurements.
2008-29 Increase the P&C N N NA
Disposed – The Working Group disposed this item without change to
DTA Admission Life statutory accounting. This item was replaced by Ref 2009-06 (see above).
Limitations Health
2008-15 Deferred Life Y Y TBD
Disposed – The Working Group disposed of this item at the request of the
Premium Health sponsor. A new Form A was submitted at the meeting that the Working
Asset and Group and LHATF will consider in a joint conference.
the Unearned
Premium
Reserve
2008-28 Transfer of P&C Y Y TBD
This item proposes changing P&C reinsurance accounting to allow run
P&C Run Off off reinsurance contracts meeting specified criteria to receive prospective
Portfolios accounting treatment. The Working Group directed staff to draft an Issue
Paper with changes to exclude affiliated transactions for Working Group
review and possible exposure before the Summer National Meeting
Other SAPWG Matters:
• The Fair Value Subgroup held an educational session on March 17, 2009.
• During a March 5, 2009 conference call, the Separate Account Subgroup requested comments by April 5, 2008 on the proposed revisions to SSAP
No. 56, Separate Accounts.
• The Guaranty Fund Subgroup will resume discussions during the second quarter of 2009.
• The Working Group formed the Securities Lending Subgroup with conference calls to be held in the second quarter.
11

12. Emerging Accounting Issues
Working Group
The Emerging Accounting Issues Working Group • EITF 08-7: Accounting for Defensive Intangible Assets
(EAIWG) continues to address the many questions that (EITF 08-7). The Working Group exposed a tentative
are developing as new accounting pronouncements are consensus indicating that defensive intangible assets
issued. are captured with the SSAP No. 20, Nonadmitted
Assets definition of intangible assets, and are
The EAIWG adopted as final the following tentative nonadmitted for statutory accounting.
consensus positions:
The EAIWG referred the following issue:
• INT08-08T: Balance Sheet Presentation of Funding
Agreements issued to a Federal Home Loan Bank • Clarification of SSAP No. 85 for Case and Disease
(FHLB). The Working Group adopted the consensus Management Program Expenses. The Working
indicating that funding agreements issued to an FHLB Group referred this issue to the Accident and Health
shall be evaluated on an individual basis, and shall Working Group.
be accounted for according to the substance of the
This summary was prepared by Matt Wangard and Carolyn Estrada.
individual agreement.
For your comments and suggestions please contact the authors –
mwangard@deloitte.com or cestrada@deloitte.com.
The EAIWG exposed the following tentative consensus
positions:
• EITF 07-4: Application of the Two-Class Method
under FAS 128 to Master Limited Partnerships (EITF
07-4). The Working Group exposed a tentative
consensus rejecting EITF 07-4 as not applicable to
statutory accounting.
• EITF 07-5: Determining Whether an Instrument (or
Embedded Feature) is Indexed to an Entity’s Own
Stock (EITF 07-5). The Working Group exposed
a tentative consensus rejecting EITF 07-5 as not
applicable to statutory accounting.
12

13. Contacts
For more information, please contact:
Rebecca C. Amoroso Steve Foster Howard Mills
Vice Chairman Director Director & Chief Advisor
U.S. Insurance Leader Deloitte & Touche LLP Insurance Industry Group
Deloitte LLP +1 (804) 697 1811 Deloitte LLP
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