Updates from the NAIC SAPWG Dec. 28, 2020 and Jan. 6, 2021 “evotes” 

This report summarizes key activities of the National Association of Insurance Commissioners (NAIC) Statutory Accounting Principles (E) Working Group (SAPWG) “evotes” on Dec. 28, 2020 and Jan. 6, 2021 for interpretations on credit tenant loans (CTLs) and troubled debt restructurings (TDRs).

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

Adopted interpretation of statutory guidance

SSAP No. 43R - Loan-Backed and Structured Securities

INT 20-10: Reporting Nonconforming Credit Tenant Loans

This interpretation addresses questions received regarding the actions SAPWG directed at its Nov. 12, 2020 conference call on agenda item 2020-24 Accounting and Reporting of Credit Tenant Loans. In order to provide timely guidance, it was previously identified that this issue needed to be considered separately outside of the substantive Statement of Statutory Accounting Principles (SSAP) No. 43R project. On Nov. 12, 2020, SAPWG discussed and deferred final decision on inconsistencies in the reporting of “nonconforming” CTLs. This deferral was supported as the SSAP No. 43R project will assess investments that are captured on Schedule D-1. With this project, it was identified that it would be undesirable to require an investment that is currently being reported on Schedule D-1 to be moved to a different schedule if there was potential for that investment to subsequently qualify for Schedule D-1. At its Dec. 18, 2020 conference call, SAPWG revised Interpretation (INT) 20-10 in response to industry concerns that there would not be sufficient time for insurers to file nonconforming CTLs and for the NAIC Securities Valuation Office (SVO) to provide NAIC designations on them in time for 2020 reporting. On Dec. 28, 2020, SAPWG adopted INT 20-10; the following summarizes the provisions:

• CTLs that qualify per the provisions of the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual) are considered to be “conforming” CTLs and shall be reported on Schedule D-1 with the NAIC designation obtained from the SVO.
• CTLs that do not qualify per the provisions of the P&P Manual as “conforming” CTLs shall follow the accounting and reporting provisions detailed in the following subparagraphs. These CTLs are noted as “nonconforming CTLs.”