Any month that contains an NAIC National Meeting is a busy month. Besides the National Meeting itself, there are usually some groups that meet just prior to that meeting and then some activity that occurs afterward, often follow-ups from the National Meeting. Let’s take a look at November.
Blanks Working Group (BWG) – November 6, 2024
As BWG meetings go, this one was very short. That’s mainly because there were no proposals that had been previously exposed for comment and awaiting further action. However, actions were taken for new items.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-13 | Renames the bond reporting category of “Bonds Issued from SEC-Registered Business Corps, Closed End Funds & REITS” to “Bonds Issued by Funds Representing Operating Entities.” | Exposed for comment through February 6, 2025. |
As one might expect with the implementation of such a huge project as the Bond Project, small or nonsubstantive errors or oversights are being discovered as various parties prepare for the new reporting. Because of the number of these corrections needed, BWG decided to cover them in one proposal rather than adding to the editorial listing of items. A wide variety of investment schedules are impacted.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-14 | Updates Various 2025 annual investment schedules with editorial revisions to support the Bond Project implementation. | Exposed for comment through February 6, 2025. |
This proposed change came directly from the Statutory Accounting Principles Working Group (SAPWG) and resulted from SAPWG’s recent activity. When adopted, the revisions would be reflected in the instructions to the 2025 annual statement instructions and reporting. Since the reporting for the 2025 quarterly reporting has already been finalized and does not include this line caption change or the corresponding definition, a SAPWG memorandum will be posted to the BWG webpage containing the necessary information for 2025 quarterly reporting.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-15 | Removes the Affordable Care Act disclosure on the transitional reinsurance program and the risk corridors program from the Supplemental Health Care Exhibit. | Exposed for comment through February 6, 2025. |
| 2024-16 | Deletes the quarterly investment interrogatory for reporting mortgages and real estate as short-term investments. | Exposed for comment through February 6, 2025. |
This proposal is a reminder that many investments that were previously allowed to be reported as short-term or cash equivalents can no longer be treated in that manner after January 1, 2025.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-17 | Adds a reporting line to the Market Conduct Annual Statement Premium Exhibit for pet insurance. | Exposed for comment through February 6, 2025. |
| 2024-18 | Proposes a new footnote to the Supplemental Health Care Exhibit (SCHE) – Part 2 reporting premium deficiency reserves. | Exposed for comment through February 6, 2025. |
| 2024-19 | Expands the reporting categories in Schedule BA for collateral loans, adds two electronic reporting columns to Schedule BA – Part 1, and updates the Asset Valuation Reserve accordingly. | Exposed for comment through February 6, 2025. |
Although this is still a SAPWG open item, reference #2023-28, BWG exposed the proposal for comment. It is assumed that any changes made by SAPWG will be incorporated into the BWG exposure prior to any additional action by BWG.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-20 | Enlarges Jurat page reporting by adding an electronic disclosure of a contact person for assessments. | Exposed for comment through February 6, 2025. |
The Working Group then adopted a listing of editorial changes. Most of the revisions are for the 2025 annual and 2026 quarterly statements. However, there were a couple of revisions to the 2024 Notes to Financial Statements that should be specifically noted. Note #21J will now be data captured. This Note applies to only the Life/Fraternal statement. In addition, the instruction indicating the Note only applies to Life/Fraternal statement was removed, with the rationale being the Note only appears in the Life/Fraternal statement.
The group adopted its 2025 proposed charges, which are the same as last year. A quick review of the state filing checklists was next. Next, the checklists will be distributed to the appropriate state regulatory agency for the addition of any state-specific items before posting to their websites.
Capital Adequacy Task Force and Property/Casualty Risk-Based Capital (RBC) Working Group – via email November 6, 2024
These two groups jointly released proposal 2024-23-CR for a seven-day comment period that ended on November 13, 2024. The proposal updates the U.S. and non-U.S. catastrophe events listing.
Joint Meeting Property/Casualty Risk-Based Capital Working Group and Catastrophe Risk Subgroup – November 18, 2024
The following items were adopted.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-22-CR | 2015-2023 Severe Convective Storm Event List. | Adopted |
This is the first listing to be issued for severe convective storms. At this point, the list does not include 2024 occurrences. The Working Group will continue to review input until January 7, 2025 and then will update and re-issue the list.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-23-CR | January through October 2024 Catastrophe Event List. | Adopted |
This adoption adds events occurring from January through October of 2024 to the current listing. The Working Group will continue to review November and December events through January 7, 2025 and then will update and re-issue the list.
The Wildfire Model Review Ad Hock Subgroup then provided an update on its work. The Subgroup is still in the process of reviewing one model, which it hopes to have completed by the NAIC Spring National Meeting in March. The group has already completed reviews of three other models. The Working Group then briefly reviewed changes to its and the Subgroup’s working agendas.
A panel presentation and discussion on “The State of Flood Insurance Market Trends, Challenges, and Opportunities” then followed. According to the presentations, for some areas the risk of flood is the fastest growing catastrophe risk and one that is underserved outside of the Federal Flood Insurance Program. Attendees, both regulators and others, were given an opportunity to ask questions and provide comments. The groups indicated the hope that this presentation will be a “kick-off” to further discussion and action in the future.
As the final piece of business, the NAIC announced the establishment of the Climate Scenario Resource Center in the NAIC’s Catastrophe Modeling Center of Excellence. (Go to the NAIC’s home page and do a search.) Posted to that website is a copy of the 2024 RBC instructions and format for the new climate-conditioned disclosure, a short presentation, and Frequently Asked Questions (FAQ). The FAQ will be kept live, addressing new questions as they are received. There also is a dedicated email address for submitting new questions.
Capital Adequacy Task Force – November 18, 2024
After adopting the minutes or hearing updates from its working groups, the Task Force moved onto specific proposals, taking the following action.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-22-CR | Listing of Severe Convective Storms. | Adopted |
| 2024-23-CR | Catastrophic Event listing. | Adopted |
For further information on the above two items, see the write-up for the joint meeting of the Property/Casualty Risk-Based Capital Working Group and Catastrophe Risk Subgroup.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-25-CA | Creates new bond reporting lines for the Property/Casualty and Health RBC formulas to align with new 2025 statement reporting. The Life/Fraternal RBC Working Group already had exposed a similar proposal. | Exposed for comment through January 7, 2025. |
| 2024-26-CA | Revises the RBC reporting for tax credit investments in the Property/Casualty and Health formulas to reflect new 2025 statement reporting. The Life RBC Working Group already exposed a similar proposal. | Exposed for comment through January 7, 2025. |
The Task Force adopted the working agenda for itself and its work groups and heard an update on collateral loan activity being addressed by SAPWG.
Third-Party Data and Models Task Force – November 18, 2024
Since its inception, the goal of this Task Force has been to develop a framework for the regulatory oversight of third-party data and predictive models. As part of this process, the Task Force monitors state, federal, and international activities related to governmental oversight and regulation of these parties, their products, and services. During this meeting, the Task Force heard current state solutions to third-party regulatory issues. The National Association of Mutual Insurance Companies provided a presentation that included its recommendations to the Task Force. The Task Force will be deciding its next steps shortly, which might include identifying risk inherent in the market that states identify as being of greatest concern, and how to use existing or new tools to develop a third-party regulatory framework.
Statutory Accounting Principles Working Group – via email November 12; November 17, 2024
Via email notification, SAPWG announced the extension of the comment period for the following items. The expanded time period was at the request of industry.
| Reference # | Subject | Disposition |
|---|---|---|
| 2022-14 | New Market Tax Credit project issue paper. | Comment period extended to December 16, 2024. |
| 2023-24 | Current Expected Credit Losses issue paper. | Comment period extended to December 16, 2024. |
During the National Meeting, SAPWG took the following actions.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-11 | Rejects ASU: 2023 – 09, Improvements to Income Tax Disclosures, remove disclosure detailed in SSAP No. 101 – Income Taxes, paragraph 23b, consolidates paragraph 23a into single paragraph. | Adopted effective immediately. |
| 2024-17 | Revises SSAP No. 108 – Derivatives Hedging Variable Annuity Guarantees to clearly define hedging strategy to incorporated recent changes to VM-21. | Adopted effective immediately. |
| 2024-18 | Clarifications incorporated into several SSAPs regarding the new market tax credits project. | Adopted effective January 1, 2025. |
After adopting revisions to SSAP No. 93 – Low Income Housing Tax Credit Property Investments and SSAP No. 94 – Transferable and Non-Transferable State Tax Credits earlier this year, it became apparent that there were several inconsistencies between the accounting guidelines and the example journal entries provided. These revisions correct that problem. Since the original SSAP adoptions were not to be implemented until January 1, 2025, these new revisions reflect the same implementation date.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-19 | Rejection of ASU 2024-02, Codification Improvements, Amendments to Remove References to the Concept Statements. | Adopted effective immediately. |
| 2019-21 | Int 24-01 – Principles-Based Bond Definition Implementation Questions & Answers was adopted as a new interpretation to SSAP No. 21 – Other Admitted Assets. | Adopted effective January 1, 2025. |
The adoption of this item opened up several other areas for action. Although adopted, it will continue to be revised during the implementation of the new bond definition. By making this an interpretation, the Q&A guidance will fall into Level 2 of the statutory hierarchy. In addition, a referral will be sent to the Property/Casualty and Health RBC Working Groups asking if, with the implementation of the new bond definition, the groups should consider more granular RBC reporting based on SVO-assigned designations. NAIC staff and industry also will be conducting a review of SSAP No. 41 – Surplus Notes for possible revisions distinguishing capital notes in the SSAP. As part of this discussion, NAIC staff was directed to prepare an agenda item to classify issue papers in Level 5 of the statutory hierarchy.
| Reference # | Subject | Disposition |
|---|---|---|
| 2023-28 | Revisions to SSAP No. 21 – Other Admitted Assets covering collateral loan reporting. | Re-exposed through January 1, 2025. |
No revisions were made to this exposure; however, since BWG has a blanks proposal exposed for comment that would expand the reporting of collateral loans in Schedule BA, SAPWG thought it would be beneficial to work through any issues in both revisions at the same time, prior to adoption.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-16 | SSAP No. 86 – Derivatives; guidance for repack and derivative wrapper investments. | To be modified and then re-exposed for comment. |
The Working Group decided this item should be modified to bifurcate embedded derivatives and provide limited revisions clarifying the reporting when a bond is sold and reacquired from a special purpose vehicle with derivative wrappers or other components.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-20 | Clarification that assets held under modified coinsurance or funds withheld agreements are to be reported as restricted assets. | Exposed for comment through January 31, 2025. |
| 2024-21 | Concept exposure that would affect SSAP No. 97 – Investments in Subsidiary, Controlled and Affiliated Entities. | Exposed for comment through January 31, 2025. |
SAPWG is asking for comments on possible new accounting and reporting for investment subsidiaries. Options being considered include new accounting guidelines, a new statement schedule to detail underlying assets held by an investment subsidiary, and referrals to the Capital Adequacy Task Force and related RBC Working Groups.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-22 | Changes would adopt with modification ASU 2024-01, Compensation – Stock Compensation (Topic 218), Scope Application of Profits Interest and Similar Awards into SSAP No. 104 – Share-Based Payments. | Exposed for comment through January 31, 2025. |
| 2024-23 | Amends SSAP No. 86 – Derivatives for consistent terminology for financing derivatives, clarification that derivative premium is not captured as a realized gain/loss and not included in Interest Maintenance Reserve. | Exposed for comment through January 31, 2025. |
| 2024-24 | Creates INT 24-02: Medicare Part D Prescription Payment Plans and modifies INT 05-05: Accounting for Revenues Under Medicare Part D Coverage. | Exposed for comment through January 31, 2025. |
The above is needed because of changes to the Medicare Part D prescription drug program due to go into effect in 2025. SAPWG also is sending notification of pending accounting changes to the Health Insurance and Managed Care Committee and the Health RBC Working Group. Annual statement reporting changes also may be developed.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-25 | Revisions to SSAP No. 16 – Electronic Data Processing Equipment and Software clarify references to accounting standards codification by including the relevant ASUs. | Exposed for comment through January 31, 2025. |
| 2024-26EP | Editorial change to SSAP No. 26 – Bonds clarifies the scope of annual audited disclosure regarding investments receiving bond treatment by reporting categories. | Exposed for comment through December 9, 2024. |
NAIC staff was directed to prepare a future agenda item that would classify issue papers as level 5 in the Statutory Hierarchy. The IMR Ad Hoc Group reported that its recent activity has focused on IMR (interest maintenance reserve) from reinsurance transaction. SAPWG was informed that Lloyd’s has submitted requests to the NAIC that have resulted in the removal of several syndicates from the NAIC’s Listing of Companies Manual. Lloyd’s has indicated that the removal was because of inactivity and that any remaining existing business was transferred to other syndicates. However, it is not clear if ceding reinsurers have been timely notified of the change in order to be able to properly report the reinsurance at year-end. Further conversations with Lloyd’s are scheduled and then SAPWG will decide if some type of memorandum needs to be sent to the Blanks Working Group regarding year-end reporting instructions.
Life Actuarial Task Force (LATF) – November 16, 2024
LATF usually meets more than once for several hours each time during the National Meeting and this time was no exception. The Task Force’s activities included adopting reports from its subgroups, hearing several presentations from different groups, and receiving updates on a variety of topics. In addition, the following activity took place.
| Reference # | Subject | Disposition |
|---|---|---|
| APF 2024-13 | Clarifies the reflection of negative Interest Maintenance Reserve. | Re-exposed for comment ending December 2, 2024. |
| APF 2024-14 | Adds reporting requirements on waiver of surrender charges for variable annuities. | Adopted |
| APF 2024-15 | Revises VM-21, requirements for principles-based reserves for variable annuities, SPA mortality application, where little or no company experience exists. | Exposed for comment through December 6, 2024. |
LATF exposed for comment through January 9, 2024 the following items:
- Academy Knowledge Statements presentation
- Academy Qualify Actuary Knowledge Statement comment letter
- Academy response to LATF public comments
- LATF Appointed Actuary Knowledge Statements redline changes
In addition, the following items on the asset adequacy testing (AAT) for reinsurance were re-exposed for a 51-day comment period ending January 15, 2025:
- AAT for Reinsurance Actuarial Guideline (AG) Exposure Questions 111824
- AAT for Reinsurance AG Presentation LATF 111524
- Draft AG ReAAT 111524
Financial Regulation Standards and Accreditation (F) Committee (F Committee) – November 17, 2024
Because of the type of work the F Committee does, it often meets in regulatory-only meetings. The F Committee indicated it had met in such an environment on November 16 to discuss some state-specific accreditation issues and to vote for continued accreditation to the insurance departments of Connecticut, Massachusetts, New York, and the U.S. Virgin Islands. During this public meeting, the Committee adopted its 2025 charges. These charges include the formalization of a new subordinate working group, the Accreditation Scope and Alignment Working group. The group had previously been an ad-hoc group that met several times in 2024. The new Working Group will evaluate the current Financial Regulation Standards and Accreditation Program to determine if there are any multistate companies or activities not currently covered in the program’s scope. It also will review state regulations looking for any discrepancies from the program or any unique regulatory practices. The F Committee also adopted revisions to the review team guidelines and self-evaluation guide within the Accreditation Program Manual related to department oversight of contract analysis resources.
Valuation of Securities Task Force – November 17, 2024
The following action to the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual) took place. All adopted items had previously been exposed for comment.
| Subject | Disposition |
|---|---|
| Amendment requires an annual review of all regulatory transactions. | Adopted |
| Revisions update the list of Credit Rating Providers (CRPs) and the use of CRP credit ratings. | Adopted |
| Changes removed references to Subscript-S and update references to investment risk. | Adopted |
A report on private letter rating (PLR) rational reports was received. After hearing the report, the Task Force directed the Securities Valuation Office to deactivate private rating securities issued after January 1, 2022 where the required rating rational report has not been received. A 30-day grace period, however, will be allowed for private rating securities that were renewed in December. The Task Force received a report on the status of the collateralized loan obligation modeling project.
Via an email on November 18, the structured securities group announced it was ready to begin modelling SASB (single asset single borrower) commercial mortgage-backed securities uni-tranche deals.
Accounting Practices and Procedures Task Force – November 18, 2024
There was no unusual activity during this meeting. The Task Force received and adopted the minutes of the BWG and SAPWG and recognized two individuals who were retiring.
Financial Conditions (E) Committee – November 19, 2024
After asking if there were any items that should be pulled out of the minutes of the Committee’s various groups to be considered separately and receiving no response, those minutes were adopted en masse. The Qualified Jurisdictions and Reciprocal Jurisdiction Working Group provided a summary of its recent work. Its work resulted in all current, qualified jurisdictions being recertified. The Committee adopted this listing. The Working Group also indicated it had approved the Canadian Office of Superintendent of Financial Institutions as a jurisdiction that recognizes and accepts the U.S. approach to group capital. However, that recognition is not final, as it was still under a 30-day public comment period. The Committee also heard updates on activity from VOSTF, the RBC Investment Risk and Evaluation Working Group, and the status on the Draft Reinsurance Asset Adequacy Actuarial Guideline.
Executive (EX) Committee and Plenary – November 19, 2024
All of the lettered committees, Committees A, B, C, D, E, F, G, and H, had their reports received. Adoptions of the following occurred:
- 2025 Generally Recognized Expense Table.
- P&P Manual amendment authorizing regulator discretion over NAIC designations through the filing exemption process.
The meeting culminated with the election of the NAIC officers for 2025. They are:
- President: Commissioner Jon Godfread (North Dakota)
- President-Elect: Commissioner Scott White (Virgina)
- Vice President: Director Elizabeth Kelleher Dwyer (Rhode Island)
- Secretary/Treasurer: Commission Jon Pick (Utah)
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