Statutory Accounting Principles Working Group (SAPWG) Makes Revisions to APP Manual

The Statutory Accounting Principles Working Group (SAPWG) met on December 1, 2023, in Orlando, Florida for the Fall National Meeting. The group adopted one new SAP concept and three SAP clarifications that will be incorporated into the Accounting Practices and Procedures (APP) Manual.

An exposure draft is expected in February 2024 regarding pooling arrangements for insurers. Be on the lookout for this item for potential review and comment.

The following is a summary of the adoptions and modifications made:

New SAP Concept to Statutory Accounting Guidance

The SAPWG adopted the following new SAP concept to statutory accounting guidance:

• SSAP No. 2R – Short-Term Investments – Adopted revisions further restrict the investments that are permitted for cash equivalent and short-term reporting. Revisions exclude all Schedule BA: Other Long-Term Investments and mortgage loans. This new SAP concept is effective on January 1, 2025.

SAP Clarifications to Statutory Accounting Guidance

The SAPWG adopted the following SAP clarifications to statutory accounting guidance:

• Annual Statement Instructions – IMR / AVR Specific Allocations – Adopted revisions address guidance that has permitted allocation of non-interest-related losses to the interest maintenance reserve (IMR) for mortgage loans with valuation allowances and debt securities with known credit events. This clarification is effective January 1, 2024.
• SSAP No. 54R – Actuarial Guideline 51 and Appendix A-010 Interaction – Adopted revisions clarify that gross premium valuation (under A-010, Minimum Reserve Standards for Individual and Group Health) and cash-flow testing (under Actuarial Guideline LI-The Application of Asset Adequacy Testing to Long-Term Care Insurance Reserves) are both required if indicated. This clarification is effective immediately (December 1, 2023).
• SSAP No. 30R & SSAP No. 32R – Residuals in Preferred Stock and Common Stock Structures – Adopted revisions clarify that investments that are in-substance residual interests shall be reported on Schedule BA on the dedicated reporting line for residuals. This clarification is effective December 31, 2023.

Next Steps for the Insurance Industry

We will continue to monitor development from the SAPWG when additional meetings are held. The next SAPWG meeting is scheduled for March 2024 in Phoenix, Arizona. If you have any questions regarding how these changes will affect your organization, please reach out.