Updates from the NAIC APPTF July 2020 Conference Call

This report summarizes key activities of the National Association of Insurance Commissioners (NAIC) Accounting Practices and Procedures (E) Task Force (APPTF) conference call on July 22, 2020. Our insurance industry Value Architects™ attended this virtual meeting to monitor regulatory updates. APPTF met to discuss interpretations of statements of statutory accounting practices in response to COVID-19 impacts on insurers.  

The interpretation discussed below, Interpretation (INT) 20-08: COVID-19 Premium Refunds, Rate Reductions and Policyholder Dividends, was originally adopted by the Statutory Accounting Principles (E) Working Group on June 15, 2020 and by the APPTF on June 22, 2020. On July 1, 2020, the Financial Condition (E) Committee returned INT 20-08 to the APPTF with direction to revise the interpretation to consider incorporating flexibility in reporting. Reporting entities had sought alternative treatment to allow underwriting expense treatment for reporting entities which made either manual rate filing or policy endorsements for voluntary payments to policyholders, in response to decreased activity for COVID-19. While the reporting entities which sought this treatment were in the minority, they wanted to be permitted to follow this reporting approach without having to seek a permitted practice in multiple states. The limited-time exception described below, which applies to property and casualty lines of business only, to allow underwriting expense treatment was designed to provide this flexibility. 

Insurance organizations should take note of these changes as they may significantly affect their accounting in 2020 and beyond.  

Adopted interpretation in response to COVID-19 

SSAP No. 5R – Liabilities, Contingencies and Impairments of Assets, SSAP No. 24 – Discontinued Operations and Unusual or Infrequent Items, SSAP No. 53 - Property Casualty Contracts - Premium, SSAP No. 54R - Individual and Group Accident and Health Contracts, SSAP No. 65 – Property and Casualty Contracts, and SSAP No. 66 - Retrospectively Rated Contracts 

INT 20-08: COVID-19 Premium Refunds, Rate Reductions and Policyholder Dividends 

This adopted interpretation provides guidance on how to account for premium refunds issued in response to COVID-19 and specifically addresses the following issues: 

How to account for refunds not required under the policy terms