Michigan Chapter IASA

Statutory Update

April 20, 2016

Connie Jasper Woodroof

NAIC Liaison, StoneRiver

Agenda

• Statement Update

• Accounting Activity

• Risk-Based Capital

• A Lot of Other Stuff

Statement Update

© 2016 StoneRiver, Inc. 3

First Quarter 2016

• Liabilities Page – Instructions

• Recognized ACA Section 9010 fee is reported as a write-in for special surplus

However

First Quarter 2016

However

• INT 16-01 – ACA Section 9010 Assessment • No Section 9010 fee payable in 2017

• Reporting changes beginning first quarter 2016

• 1/1/2016 regular accrual of liability for fee based on 2015 data-year net written premiums

• No segregation of surplus on 2016 data-year written premiums; no liability at 1/1/2017 (no payment due in 2017)

• Resume segregation of surplus 1/1/2017 based on 2017 data-year net written premium

Quarterly Notes To Financials

• Note #1D added a required quarterly disclosure• Going concern

• Note #24• SSAP No. 107 disclosures updates risk corridors (ACA)

disclosures

1. Requires disclosure of risk corridors asset and liability balances and adjustments by benefit year

2. Estimated amount to be filed with CMS, non-accrued amounts, amount received, nonadmittedand admitted receivable

• Effective 1st quarter 2016, even though adopted late

Blanks WG – On the April Agenda

• Blanks Revisions• Schedule D – Part 1A – Section 1

• Remove reference to “non-rated” in footnote d

• Property/Casualty Reinsurance

• Allows for aggregation of asbestos and pollution reinsurers according to SSAP No. 62R

• Schedule F - new reporting formats/instructions for Parts 3 and 5 for aggregate reporting

• New supplement providing details of reinsurers aggregated in Schedule F

• Note #23 disclosure

Exposed and Pending a Decision

• Notes (9)

• Schedule D (4)

• Sc D – Pt 6 – Sec 1

• Sc D – Pt 1A

• Schedule Y

• Property/Casualty

• Actuarial Opinion (2)

• Schedule F

• New LOB for private flood

• Life and Fraternal

• Notes

• Schedule S – Part 3

• Several changes to Title statement

Accounting Activity

© 2016 StoneRiver, Inc. 9

Since the Beginning of the Year

• Revision to SSAP No. 97 - SCAs

• Ownership in an ETF or mutual fund does not represent ownership in underlying entity within scope of SSAP No. 97

• Issue Paper No. 153

• Provides documentation for already adopted changes to SSAP No. 62R

• Several GAAP pronouncements rejected

Adopted at the April Meeting

• SSAP No. 1 – Disclosure of Accounting Policies….

• Restricted Assets disclosure• For quarterly reporting, “significant change” measured

by separate restricted asset category

• However, if quarterly disclosure needed for any category, entire illustration template must be included

• Adopted as nonsubstantive change; effective first quarter 2016

• Disclosure of permitted and prescribed practices• Clarification of instructions and reporting format

• Adopted as nonsubstantive changes; effective first quarter 2016

Adopted at the April Meeting

• SSAP No. 41R – Surplus Notes & Issue Paper 151

• Changes valuation of many surplus notes

SAPWG – On the April Agenda

• Hearing Agenda

• SSAP No. 1 – Disclosure of Accounting Policies….

• Quarterly reporting of investment schedules

• SSAP No. 3 – Accounting Changes & Corrections

• Correction of an error; filing revised statements

• SSAP No. 26 – Bonds

• Make-whole provisions

• Change in bond 5* NAIC designation

• ETF and Bond MF reporting in investment schedules

SAPWG – On the April Agenda

• Hearing Agenda

• SSAP No. 55 – Unpaid Claims, Losses & LAE

• Fees incurred for salvage/subrogation recoveries

• SSAP No. 86 – Derivatives

• Accounting for weather derivatives

• Definition of Notional

• SSAP No. 103 – Accounting for Transfers………

• Guidance for short sales and secured borrowing

• BlackRock paper on ETFs

SAPWG – On the April Agenda

• Meeting Agenda• SSAP No. 1 – Accounting Policies ……..

• Collateral received and reported within insurer statement

• Insurance-linked securities data capture disclosure• Additional clarification on permitted and prescribed

practices• SSAP No. 3 – Changes and Corrections

• SSAP No. 3 only covers corrections for accounting errors, not reporting errors

• SSAP No. 22 – Leases• Operating and finance leases

• SSAP Nos. 26, 30, 32• Removal of Class 1 list from the P&P manual

SAPWG – On the April Agenda

• Meeting Agenda

• SSAP Nos. 26, 30, 32, 43R, 100

• ASU 2016-01 – Financial Instruments

• SSAP No. 51 – Life Contracts

• Principles-based reserving

• SSAP No. 86 – Derivatives

• Variable Annuities

• SSAP Nos. 92 and 102

• Allows Spot Rate method of measuring service cost and interest cost components of net periodic benefit cost

SAPWG – On the April Agenda

• Meeting Agenda

• SSAP No. 97 – SCA Entities

• SCA data capture disclosure

• SCA filing guidance

• Appendix A-820

• Revisions for Standard Valuation Law

• Appendix F

• Policy statement revisions (2)

Interesting Fact

• SAPWG has sent several proposals to the Blanks Working Group for consideration, even though SAPWG has not adopted the SSAP revisions requiring the revised reporting

• Will need to adopt prior to June 16 Blanks conference call

Risk-Based Capital

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RBC

• Formula changes effecting reporting format must be adopted by Capital Adequacy Task Force by April 30

• Many last minute items are the norm

• Once adopted, posted on website

• All formulas

• Clarification that the grand total of all issuers is based on the sum of all issuers; not on a factor (factors removed for grand total)

PRBC

• Adopted • 2016-02-P – Credit Risk for Receivables (PR012A)

• Reinsurer credit ratings

• Adds several new tables to utilized info directly from Schedule F

• Also provides for revisions to Schedule F – Parts 2, 5, 6

• 2015-20-P – Underwriting Risk

• Changes computation of industry average development factors and industry average loss & LAE ratios

PRBC

• 2015-19 – Rcat component

• Establishes a separate Rcat component to formula; eliminates R6 and R7

• 2015-21-CR – Catastrophe Risk

• Changes exemptions for completing

LRBC

• Still working on

• Modification of instructions for XXX/AXXX Captive Reinsurance

• Since instructional change, have until June to finalize

HRBC

• New columns on Underwriting Risk; pages XR012 and XR012A • Medicaid Pass-Through Payments

• 2% factor• Other Non-Health

• 13% factor

• Still working on • Footnote on XR012A for disclosure of individual

premiums and claims inside and outside of exchanges• Excess growth charge for start-up companies• New factors for Medicare Part D (maybe 2016)• Change of factor for “other” health care receivables

(maybe 2016)

Other RBC Issues

• Operational Risk Subgroup• Still in the works for all formulas

• Would like to collect 2015 data for analysis, therefore 2016 implementation unlikely

• Stress Testing Subgroup for LRBC• PBR driving analysis

• Looking at possibilities both inside and outside of RBC

• Longevity Risk for LRBC• New topic

• Very complex

Other Stuff

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New Certified Reinsurance Webpage

• http://www.naic.org/committees_e_reinsurance_certified_reinsurers.htm

• Information on certified reinsurance process

• Access to each state’s listing of certified reinsurers

Valuation of Securities Task Force

• At year-end 2016 no more Class 1 Bond Mutual Funds reported on Schedule DA • Due to changes made by SEC to be implemented in

October 2016

• Can remain on Schedule DA through 3rd quarter reporting

• Afterward, reported on Schedule D – Part 2 – Section 2

• Plan accordingly

• Investment schedules

• AVR impact

• RBC impact

Valuation of Securities Task Force

• Filing guidance for SCA investments to be deleted from SVO Manual and moved to AP&P Manual

• Bank List to be expanded

• Will include approved non-bank entities

• SVO requesting to become official source of FE designations

• Companies would have to access information from SVO to use FE ratings; not assign their own FE ratings

Group Solvency Issues Working Group

• Holding Company Form F review

• Required under 2010 Insurance Holding Company System Model Act (#440) and Model Regulation (#450)

• Provides information on exposures that could produce enterprise risk

• Became accreditation standard 1/1/2016

• Surveying states to determine effectiveness of information that has been received in 2014 and 2015.

Group Capital Calculation Working Group

• Charged with constructing a US group capital calculation using RBC aggregation method• Monitoring international capital developments

• Initial meeting in June• Heard presentation from industry on proposed

methodologies

http://www.naic.org/committees_e_grp_capital_wg.htm

Check out the CDAWG Group Capital Calculation Recommendations 11/19/15 – link on website

Principles-Based Reserving

• PREPARE FOR a 1/1/2017 PBR implementation

• NAIC verifying triggering point was reached

• Companies can choose three year implementation phase-in or implement in 2017

• LAH statement reporting changes have been developed; includes new supplement

Areas to Watch

• Title Companies

• Due to recent increase in troubled companies, regulators tightening/changing reporting

• Mortgage Guaranty Insurance

• Model law being analyzed for substantive revisions

• Development of appropriate RBC being considered

• Please contact:

• Connie Jasper Woodroof

• 800.373.3366 x5761

• connie.woodroof@stoneriver.com

Questions?

34© 2016 StoneRiver, Inc.

Thank You