Statutory Accounting Principles Working Group

Ref #2016-42 Statutory Accounting Principles (E) Working Group Maintenance Agenda Submission Form Form A

Issue: Appendix C Introduction

Check (applicable entity): P/C Life Health Modification of existing SSAP New Issue or SSAP Interpretation

Description of Issue: This agenda item recommends updates to the introduction page of Appendix C - Actuarial Guidelines in the Accounting Practices and Procedures Manual to promote consistent application of the Actuarial Guidelines. The proposed revisions add language noting that various Statements of Statutory Accounting Principles (SSAPs) incorporate the Actuarial Guidelines by reference into the accounting standard. Additionally, the updates provide information regarding the applicability of actuarial guidelines after the operative date of the Valuation Manual (1/1/2017).

Existing Authoritative Literature:

The title page of Appendix C currently includes:

Introduction

The NAIC Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force, formerly known as the Life and Health Actuarial Task Force, have been asked on many occasions to assist a particular state insurance department in interpreting a statute dealing with an actuarial topic relative to an unusual policy form or situation not contemplated at the time of original drafting of a particular statute. The Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force, in developing an interpretation or guideline, must often consider the intent of the statute, the reasons for initially adopting the statute and the current situation. The Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force feel that for those situations which are sufficiently common to all states, that the publishing of actuarial guidelines on these topics would be beneficial to the regulatory officials in each state and would promote uniformity in regulation, which is beneficial to everyone. To this end, the Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force have developed certain actuarial guidelines and will continue to do so as the need arises. The guidelines are not intended to be viewed as statutory revisions but merely a guide to be used in applying a statute to a specific circumstance.

Activity to Date (issues previously addressed by the SAPWG, Emerging Accounting Issues WG, SEC, FASB, other State Departments of Insurance or other NAIC groups): Agenda item 2014-22: Health Actuarial Guideline XLVII previously updated the Appendix C introduction to be consistent with the separation of the Life and Health Actuarial (A&B) Task Force into the Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force.

Information or issues (included in Description of Issue) not previously contemplated by the SAPWG: None

Convergence with International Financial Reporting Standards (IFRS): Not applicable

Staff Recommendation: Staff recommends that the Working Group move this item to the active listing, categorized as nonsubstantive and expose revisions to the introduction section of Appendix C – Actuarial Guidelines of the Accounting Practices and Procedures Manual.

The NAIC Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force, formerly known as the Life and Health Actuarial Task Force, have been asked on many occasions to assist a particular state insurance department in interpreting a statute dealing with an actuarial topic relative to an unusual policy form or situation not contemplated at the time of original drafting of a particular statute. The Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force, in developing an interpretation or guideline, must often consider the intent of the statute, the reasons for initially adopting the statute and the current situation. The Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force feel that for those situations which are sufficiently common to all states, that the publishing of actuarial guidelines on these topics would be beneficial to the regulatory officials in each state and would promote uniformity in regulation, which is beneficial to everyone. To this end, the Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force have developed certain actuarial guidelines and will continue to do so as the need arises. The guidelines are not intended to be viewed as legislative statutory revisions but merely a guideance to be used in applying a statute to a specific circumstance.

Various statements of statutory accounting principles (SSAPs) reference applicable actuarial guidelines in this appendix, which thereby incorporates the actuarial guidelines into the accounting standard. To the extent a reporting entity departs from the actuarial guideline, the difference should be disclosed as a prescribed or permitted practice in in accordance with SSAP No. 1—Accounting Policies, Risks & Uncertainties, and Other Disclosures

While the Valuation Manual is expected to reduce the need for future actuarial guidelines, it should be noted that actuarial guidelines will continue to be required for interpretations of statues governing valuation of policies issued prior to the January 1, 2017 operative date of the Valuation Manual, for interpretations of statues governing valuation of policies issued after the operative date of the Valuation Manual that are not subject to a principle-based valuation and for non-valuation related interpretive guidance.

Staff Review Completed by: Robin Marcotte, NAIC Staff October 2016

Status: On December 10, 2016, the Statutory Accounting Principles (E) Working Group moved this agenda item to the active listing, categorized as nonsubstantive, and exposed revisions to update the introduction of Appendix C in the Accounting Practices and Procedures Manual to promote consistent application of the actuarial guidelines.

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