Updates from the Statutory Accounting Principles Working Group’s March 2025 spring national meeting

At the spring national meeting, SAPWG adopted reporting recommendations to provide granular reporting lines on Schedule BA in order to identify the type of collateral that secures the loan. The Schedule BA reporting lines for collateral loans are as follows: 

• Collateral loans backed by mortgage loans 
• Collateral loans backed by joint ventures, partnerships or limited-liability companies (LLCs) 
• Collateral loans backed by residual interests 
• Collateral loans backed by debt securities 
• Collateral loans backed by real estate 
• Collateral loans not captured in the specific reported lines 

Each category would be further bifurcated as either affiliated or unaffiliated. The effective date of the SAPWG adoption is intended to align with the adoption of a future Blanks proposal, which is currently exposed. 

SSAP No. 1 — Accounting Policies, Risks & Uncertainties and Other Disclosures 

At the spring national meeting, SAPWG adopted revisions to require restricted asset disclosure for modified coinsurance (modco) and funds withheld assets reported within a ceding company’s financial statements. As well as, at the request of interested parties, recommended note illustrations and general interrogatory revisions to improve the restricted asset disclosure. 

The Medicare Prescription Payment Program (MP3), effective in 2025, requires insurers to pay pharmacies the out-of-pocket costs at the point of sale for enrollees who have opted into MP3. The enrollees then have the remaining policy term to make installment payments to the insurer. At the spring national meeting, SAPWG adopted revisions to INT 24-02 — Medicare Part D Prescription Payment Program and edits to INT 05-05 — Accounting for Revenues Under Medicare Part D Coverage to provide accounting and reporting for MP3. 

NAIC has prepared, and SAPWG exposed for comment, a memo detailing the discussions and conclusions of the interest maintenance reserve (IMR) ad hoc group with regards to hypothetical IMR. The memo indicates that the group reached an informal consensus that the practical limitations of applying the concept of hypothetical IMR outweigh the benefits of such a concept. At the conclusion of the exposure period, the intent is to incorporate the discussion and conclusion from the memo into the IMR issue paper and ultimately reflect these items in broader revisions of Ref #2023-14. 

In a continuing effort to include all accounting concepts for IMR in the statutory accounting guidance as opposed to the annual statement instructions, SAPWG exposed, as a new SAP concept, a revised definition of IMR. The revised definition incorporates feedback from the IMR ad hoc group. 

These items have a public comment period ending June 6, 2025. 

At the summer 2024 national meeting, SAPWG exposed for comment a proposal to add a new part to the reinsurance Schedule S in the Life/Fraternal and Health annual statement blanks and Schedule F in the Property/Casualty and Title annual statement blanks. Exposed revisions coming out of the spring national meeting to capture information on modco/funds withheld assets remove the requirement for health and property/casualty companies from the proposal and add a Part 8 to Schedule S for life insurers. The draft Schedule S includes aggregated data and is consistent with asset valuation reserve reporting. 

SAPWG also received a referral from the Financial Analysis (E) Working Group to consider enhanced reporting or disclosures to indicate whether modco/funds withheld assets are related or affiliated to the reinsurer. The exposure recommends expanding the restricted asset disclosure to identify the amount of modco/funds withheld assets related or affiliated to the reinsurer, utilizing existing related party investment codes. This expanded disclosure would be required in all annual and quarterly financial statements. 

These items have a public comment period ending May 2, 2025. 

SAPWG exposed revisions to clarify that sale leasebacks with restrictions on access to the cash proceeds do not qualify for sale leaseback accounting and should be accounted for by the seller using the financing method. 

This item has a public comment period ending June 6, 2025

ASU 2024-04, Debt — Debt with Conversion and Other Options (Subtopic 470-20), Induced Conversions of Convertible Debt Instruments clarifies how to determine whether a settlement of convertible debt at terms that differ from the original conversion terms should be accounted for under the induced conversion or extinguishment guidance. Under the ASU, to account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument. Current statutory accounting guidance requires recognition of an expense for the fair value of the additional consideration issued to induce conversion. The majority of the guidance adopted by the ASU relates to paragraphs in Generally Accepted Accounting Principle (GAAP) guidance that had previously been rejected for statutory accounting purposes. 

SAPWG exposed revisions to clarify that the additional consideration provided by the inducement offer shall be recognized when the offer is accepted by the debt holder. This may defer slightly the recognition of the expense under SSAP No. 15 – Debt and Holding Company Obligations, but aligning with GAAP on this guidance and aligning the recognition with the acceptance of the inducement is not expected to have a significant impact on insurers. 

This item has a public comment period ending June 6, 2025. 

SAPWG exposed a series of annual statement blanks revisions: 

• Exposed revisions remove the “capital structure code” reporting column in Schedule D-1-1: Long-Term Bonds – Issuer Credit Obligations (D-1-1) and Schedule D-1-2: Asset-Backed Securities (D-1-2) 
• Exposed revisions to the life/fraternal annual statement blank remove reporting line 8, “Unrated Multi-Class Securities Acquired by Conversion,” from the asset valuation reserve 
• Exposed revisions to the life/fraternal annual statement blank remove a general interrogatory on dividends received 

These items have a public comment period ending May 2, 2025. 

SAPWG exposed revisions to SSAP No. 84 — Health Care and Government Insured Plan Receivables to add disclosures around MP3. The exposure accompanies a Blanks (E) Working Group proposal to allow for initial reporting for year-end 2025, meaning data capture should begin immediately. Key disclosure elements include balances before and after non-admission, aging and write-offs. 

This item has a public comment period ending May 2, 2025. 

SAPWG exposed minor consistency revisions to SSAP No.51 — Life Contracts to reflect updates to the Valuation Manual in VM-22 PBR: Requirements for Principle-Based Reserves for Non-Variable Annuities to incorporate new principle-based reserve requirements between the different methods of reserving.  

This item has a public comment period ending June 6, 2025. 

SAPWG exposed for rejection the above-referenced ASUs as not applicable to statutory accounting.  

This item has a public comment period ending June 6, 2025. 

SAPWG exposed editorial revisions to further clarify treatment of issue papers in level 5 of the statutory hierarchy and to update reference to SEC rules and interpretations as authoritative GAAP for SEC registrants. 

This item has a public comment period ending June 6, 2025. 

NAIC staff received considerable feedback from interested parties regarding repurchase and securities lending transactions, particularly the relevance and/or consistent application of guidance within SSAP No. 103 – Revised — Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. As a result, SAPWG directed NAIC staff to develop revisions to clarify guidance for securities lending, repurchase and reverse purchase agreements, with the potential to carve out securities lending/repurchase guidance and present within a separate statement. Preliminarily, this is expected to result in SAP clarifications and the potential for enhanced/consolidated disclosures. The following have been identified as elements requiring review: 

• Review of the “conforming” provisions for securities lending transactions, including mechanisms in place to confirm compliance as well as verify regulator intent as to application  
• Review of the current admittance provisions based on ongoing comparisons to fair value  
• Review with the potential for enhanced guidance and/or disclosure for repo transactions that result in the received collateral being used as working capital (or other external uses)  
• Review of the existing disclosures for both repurchase and securities lending transactions with a goal to simplify and consolidate to the extent possible  
• Review of the restricted asset coding for sec lending and repo transactions as well as a review of the current short-term admittance provisions for repurchase transactions