Updates from the Statutory Accounting Principles Working Group’s Aug. 13 summer national meeting and the NAIC/AICPA (E) Working Group

SSAP No. 19—Furniture, Fixtures, Equipment and Leasehold Improvements and SSAP No. 73—Health Care Delivery Assets and Leasehold Improvements in Heath Care Facilities  

During the 2024 spring national meeting, SAWPG exposed revisions to adopt, with modification, Accounting Standard Update (ASU) 2023-01, Leases (Topic 842), Common Control Arrangements. This ASU was issued as part of the Financial Accounting Standards Board’s (FASB) post-implementation review to address issues that have been found during the implementation of the new lease guidance from ASU 2016-02, Leases (Topic 842). As a reminder, ASU 2016-02 was rejected for statutory accounting and the operating lease treatment was retained.   

ASU 2023-01 focuses on two issues that are both related to private company stakeholders’ concerns about applying Topic 842 to related party arrangements between entities under common control. The first issue provides a practical expedient for private companies and not-for-profit entities that are not conduit bond obligors. The second issue involves the accounting for leasehold improvements associated with a lease between entities under common control.  

At the 2024 summer national meeting, SAPWG adopted, with modification, ASU 2023-01 in SSAP No. 19—Furniture, Fixtures, Equipment and Leasehold Improvements and SSAP No. 73—Health Care Delivery Assets and Leasehold Improvements in Heath Care Facilities. The practical expedient for private companies and not-for-profit entities was rejected.  

SSAP No. 20 – Nonadmitted Assets  

During the 2024 spring national meeting, SAPWG exposed revisions to adopt, with modification, ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60), Accounting for and Disclosure of Crypto Assets in SSAP No. 20—Nonadmitted Assets and to also nullify INT 21-01: Accounting for Cryptocurrencies. As background, on May 20, 2021, SAPWG adopted INT 21-01: Accounting for Cryptocurrencies, which established statutory accounting for crypto assets. This ASU establishes the accounting and reporting for crypto assets, which are defined in U.S. Generally Accepted Accounting Principles (GAAP) as assets that:  

• Meet the definition of intangible assets as defined in the codification  
• Do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets  
• Are created or reside on a distributed ledger based on blockchain or similar technology  
• Are secured through cryptography  
• Are fungible  
• Are not created or issued by the reporting entity or its related parties 

Readers are encouraged to review the SSAP revisions on SAPWG’s website; key elements of the revisions are summarized below.  

It should be noted that while there are some digital assets which are not crypto assets under the definition of ASU 2023-08 or the SAP revision above – (e.g. NFT’s and stablecoins) which are not specifically nonadmitted under these revisions – a reporting entity would more than likely still nonadmit these assets because they are not specifically admissible under other SSAPs.  

At the 2024 summer national meeting, SAPWG adopted the exposed revisions to SSAP No. 20 —Nonadmitted Assets which adopt with modification ASU 2023-08 to clarify that directly-held crypto assets are nonadmitted assets for statutory accounting and to define crypto assets using the definition from ASU 2023-08. NAIC staff also recommend that the Working Group nullify INT 21-01, Accounting for Cryptocurrencies, upon the adoption of this agenda item as the revisions to SSAP No. 20 also incorporate guidance and expand guidance which was previously in INT 21-01.  

Appendix A-791 Life and Health Reinsurance Agreements (A-791)  

On March 16, 2024, the Working Group exposed revisions to Appendix-791, paragraph 2c’s Question and Answer. This agenda item was developed in response to the Valuation Analysis (E) Working Group’s (VAWG) referral to the Statutory Accounting Principles (E) Working Group which recommends making a clarifying edit to Appendix A-791 Life and Health Reinsurance Agreements (A-791), Section 2.c’s question and answer by removing the first sentence, which reads, “unlike individual life insurance where reserves held by the ceding insurer reflect a statutorily prescribed valuation premium above which reinsurance premium rates would be considered unreasonable, group term life has no such guide.”  

At the 2024 summer national meeting, SAPWG adopted the SAP clarification to remove the first sentence of A-791 paragraph 2c’s questions and answer as it is unnecessary.   

During the 2024 spring national meeting, SAPWG exposed revisions to incorporate consistency revisions for residual tranches and residual security interests. Over the last couple of years, a variety of revisions have been incorporated for residual interests. These began with revisions to clarify the reporting on Schedule BA (instead of Schedule D-1) along with the residual definition and guidance within each investment SSAP to highlight that residuals shall be captured on Schedule BA. Although these revisions were necessary to immediately address the reporting of residuals, the discussion that accompanied these revisions have noted that conforming revisions would be needed coinciding with the effective date of the principles-based bond definition guidance to have consistency of guidance location, terminology and definitions.  

With the revisions to SSAP No. 21R—Other Admitted Assets to provide the accounting and reporting for residuals, all residuals, regardless of investment structure, shall follow the guidance detailed in SSAP No. 21R and be reported on Schedule BA.  

To ensure consistency in definitions and guidance, this agenda item proposes to centralize residual guidance within SSAP No. 21R and use a consistent approach in the other investment SSAPs to exclude residuals from their scope and direct companies to SSAP No. 21R.  

At the 2024 summer national meeting, SAPWG adopted the exposed revisions, to be effective on Jan. 1, 2025. These changes incorporate consistency revisions for residuals so that all SSAPs refer to SSAP No. 21R for the formal definition and accounting and reporting guidance. This adoption also includes revisions to SSAP No. 26R—Bonds (Effective 2025), SSAP No. 30R—Unaffiliated Common Stock, SSAP No. 32R—Preferred Stock, SSAP No. 43R—Asset-Backed Securities (Effective 2025), and SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies. The effective date of Jan. 1, 2025, is necessary to mirror the effective date of the SSAP No. 21 guidance.  

Appendix D - Nonapplicable GAAP Pronouncements   

Revisions to Appendix D reject the referenced ASU as not applicable to statutory accounting.  

SSAP No. 2R – Cash, Cash Equivalents, Drafts and Short-Term Investments  

During the 2024 spring national meeting, SAPWG exposed revisions to SSAP No. 2R—Cash, Cash Equivalents, Drafts and Short-Term Investments. The agenda item was developed to update the guidance in SSAP No. 2R to remove a lingering reference to items that have been removed from scope pursuant to the bond project (asset-backed securities) or from agenda item 2023-17 (mortgage loans and Schedule BA assets). The edits are focused on the guidance that addresses ‘rolling’ cash equivalents and short-term investments in which there is a continued reference to SSAP No. 43R—Asset-Backed Securities investments and “other invested assets.” This guidance has been revised to only reflect items in scope of SSAP No. 2R.  

At the 2024 summer national meeting, SAPWG adopted the exposed revisions to SSAP No. 2R—Cash, Cash Equivalents, Drafts and Short-Term Investments to eliminate lingering references that imply that asset-backed securities, mortgage loans or other Schedule BA items are permitted to be reported as cash equivalents or short-term investments.  

SSAP No. 15 - Debt and Holding Company Obligations and SSAP No. 86- Derivatives, and No. 103R- Transfers and Servicing of Financial Assets and Extinguishments of Liabilities  

At the 2024 summer national meeting, SAPWG adopted, with modification, certain disclosures from ASU 2023-06, Disclosure Improvements, Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, for statutory accounting within SSAP No. 15—Debt and Holding Company Obligations and SSAP No. 86—Derivatives. The disclosure revisions recommended by NAIC staff for adoption, as detailed within the Form A, are:  

• Disclosures for unused commitments and lines of credit, disaggregated by short-term and long-term 
• Disclosure of the derivative cash flow accounting policy  

Remaining disclosures related to repurchase and reverse purchase agreements were added to agenda item 2024-04: Conforming Repurchase Agreements. Agenda item 2024-04 is intended to review and revise current statutory guidance for repos and secured lending, as such adoption of additional repo disclosures should be considered as a part of that project.   

At the May 15, 2024 meeting, SAPWG exposed updates to the draft issue paper for the principles-based bond project. The issue paper documents the discussions and decisions within the principles-based bond project and has been updated to reflect the final actions. Additionally, consistency edits and reorganization have been reflected as the authoritative SAP revisions have been adopted. (As a reminder, issue papers are not authoritative, and simply provide background and discussion elements for historical reference.) Changes from the prior exposed version are shown as tracked within the document.  

At the 2024 summer national meeting, SAPWG adopted the issue paper with modifications to reflect the interested parties’ comments. As a second action, it was recommended that SAPWG expose a Question-and-Answer Implementation Guide (Q&A) that addresses issues brought from industry to the Bond/AICPA small group. This Q&A details interpretations on how the SAP guidance should be applied to specific investment structures or investment characteristics.   

The Q&A is planned for exposure until Sep. 27 to allow for consideration at the 2024 fall national meeting.  

INT 03-02: Modification to an Existing Intercompany Pooling Arrangement 

INT 03-02 addresses the valuation of bonds in instances when bonds are used instead of cash for the payment among affiliates for amounts due on modifications to existing intercompany reinsurance pooling contracts. The recent deliberations on related party transactions highlighted a discrepancy between INT 03-02 and SSAP No. 25 - Affiliates and Other Related Parties. This agenda item proposed to nullify INT 03-02, as it is inconsistent with SSAP No. 25 guidance regarding economic and non-economic transactions between related parties. The guidance in INT 03-02 can result in unrecognized gains (dividends) or losses through the use of statutory book valuation when using assets (bonds) to make payments to affiliates for modifications to existing intercompany reinsurance pooling agreements.   

During the 2024 spring national meeting, SAPWG exposed its intent to nullify INT 03-02 and re-exposed revisions to SSAP No. 25 and SSAP No. 63:  

SAPWG adopted the exposed revisions to SSAP No. 63 with a modification to paragraph 13i, which is similar to the edit suggested by interested parties modified to note that disclosures should reflect the fair values that differ from statement values. With this adoption, INT 03-02 would also be nullified. 

SSAP No. 26R – Bonds  

During the 2024 spring national meeting, this agenda item proposed revisions to the principles-based bond definition guidance to clarify that debt securities issued by funds representing operating entities qualify as issuer credit obligations (ICOs). These revisions would be in effect pursuant to the effective date of the revised SSAP No. 26R guidance (i.e. the Bond Project), which is Jan. 1, 2025.   

During the 2024 summer national meeting, SAPWG re-exposed this item with a request for regulators and industry to provide comment on the proposed language that assists with clarifying the scope of guidance and to the types of debt securities issued by funds that should be considered as operating entities, and the proposed language to better define the extent of debt that may be issued to fund operations.   

On Sep. 12, 2024, SAPWG adopted via e-vote the exposed revisions to SSAP No.26 and Issue Paper No.169.  

With the adopted revisions, debt securities issued by non-SEC registered funds that reflect operating entities can qualify as issuer credit obligations. The guidance requires assessment to the purpose of the issued debt security, and it is explicit that debt securities issued for the raising of debt capital are required to be assessed as asset-backed securities.  

During the 2024 spring national meeting, SAPWG exposed this agenda item for comments, which had been developed in response to the January 2024 referral received from the Life Risk-Based Capital (E) Working Group (LRBCWG).The LRBCWG referral was sent for assistance to address an ACLI request to modify the treatment of repurchase agreements in the life risk-based capital (RBC) formula to converge with treatment for securities lending programs. As detailed within the ACLI-sponsored life RBC proposal, the request is to incorporate a concept of “conforming programs” for repurchase agreements, with the collateral attributed to these programs assigned a 0.2% (.0020) factor instead of a 1.26% (0.0126) factor. The NAIC staff has developed a memo that walks through the accounting and reporting for securities lending and repo agreements.  

SAPWG has exposed this memo with a request for feedback on the documented processes and the noted questions. NAIC staff has met with industry representatives in the interim and suggests continued interim discussion with the ACLI and other industry representatives on these transactions and appropriate accounting/reporting.  

The public comment period has been extended from Sep. 27 to Dec. 16.  

SSAP No. 61R - Life, Deposit-Type and Accident and Health Reinsurance  

During the 2024 spring national meeting, there were proposed revisions to SSAP No. 61R to incorporate guidance consistent with what is currently in SSAP No. 62R - Property and Casualty Reinsurance and also add a reference to A-791. This agenda item was developed to address a referral by the Valuation Analysis (E) Working Group (VAWG) regarding reinsurance risk transfer and reserve credit.  

The exposed SSAP No. 61R— Life, Deposit-Type and Accident and Health Reinsurance revisions were narrowly focused on risk transfer and incorporated guidance noting that interdependent contract features, such as a shared experience refund, must be analyzed in the aggregate when determining risk transfer. The SAPWG exposure was based on existing guidance that is in both U.S. GAAP and in SSAP No. 62R—Property and Casualty Reinsurance Exhibit A –Implementation Questions and Answers, question 10 which provides guidance on interdependent contract features, noting that contracts with interdependent features must be analyzed in the aggregate for risk transfer.  

The referral included risk transfer concerns regarding interdependent contract features which had been analyzed separately instead of in the aggregate for risk transfer. It also raised several concerns regarding the classification of reinsurance contracts and the size of the reinsurance credit taken.  

SAPWG discussed the comments received from the interested parties. After discussion, the NAIC staff re-exposed the agenda item for comments until Sep. 27 to allow for discussion at the 2024 fall national meeting with a request for 1) more detail on the extent that existing contracts would be impacted and 2) specific language regarding the concept that interdependent contract features should be analyzed in aggregate. It is also recommended that the Working Group direct NAIC staff to forward the comments received to the Valuation Analysis (E) Working Group, Life Actuarial (A) Task Force and the Reinsurance (E) Task Force.  

Annual statement blanks  

During the 2024 spring national meeting, there were proposed revisions that would 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. The new parts of these schedules would include all assets held under a funds withheld arrangement and would include a separate signifier for modified coinsurance (modco) assets.  

The initial recommendation was 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. The new part would be similar in structure to Schedule DL and would include all assets held  

under a funds withheld arrangement and would include a separate signifier for modco assets.  

SAPWG exposed the draft of the new reporting schedules and directed NAIC staff to continue working with interested parties on this proposal. This item was planned for exposure until Sep. 27, but has been extended to Dec. 16.   

SSAP No. 56 - Separate Accounts  

During the 2024 spring national meeting, an agenda item was proposed to expand the guidance in SSAP No. 56 to address situations and provide consistent accounting guidance for when assets are reported at a measurement method other than fair value. SAWPG exposed this agenda item and directed NAIC staff to work with industry in determining current application or differences in interpretations to present to SAWPG along with suggested revisions to SSAP No. 56.  

SAPWG exposed draft revisions to SSAP No. 56—Separate Accounts to allow for initial review and consideration of potential changes to update measurement method guidance and specify the process to transfer assets for cash between the general and book-value separate accounts.   

This item is proposed for exposure until Nov. 8 to allow more time for review and comment generation. Discussion of the comments is anticipated in the interim prior to the 2025 spring national meeting.  

SSAP No. 101 - Income Taxes  

At the 2024 spring national meeting, there were proposed revisions to SSAP No. 101 to adopt with modification ASU 2023-09 to remove disclosure of the cumulative amount of each type of temporary tax difference when a deferred tax liability is not recognized for undistributed foreign earnings and add the following disclosures:  

• income/loss before income tax expense/benefit, disaggregated by domestic and foreign  
• income tax expense/benefit and income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign  
• income taxes paid (net of refunds received) to each individual jurisdiction in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received)  
• Qualitative disclosures on tax rate reconciling items  

Interested parties suggest rejecting adoption of ASU 2023-09 and all modifications to SSAP No. 101, except for the deletion of SSAP No. 101, paragraph 23b.   

SAPWG exposed revisions to reject ASU 2023-09, Improvements to Income Tax Disclosures in SSAP No. 101—Income Taxes, and revisions to remove the disclosure detailed in SSAP No. 101, paragraph 23b.   

This item is planned for exposure until Sep. 27 to allow for consideration at the 2024 fall national meeting.  

SSAP No. 34 – Investment Income Due and Accrued, SSAP No. 48 – Joint Ventures, Partnerships and Limited Liability Companies, SSAP No. 93 – Investments in Tax Credit Structures and SSAP No. 94R – State and Federal Tax Credits  

During the 2024 spring national meeting, SAPWG adopted agenda item 2022-14: New Market Tax Credits which revised SSAP No. 93—Low Income Housing Tax Credit Property Investments and SSAP No. 94R—Transferable and Non-Transferable State Tax Credits. The issue paper documents the discussions and decisions within the New Market Tax Credit project and has been updated to reflect the final actions.   

SAPWG exposed the draft issue paper. This item is proposed for exposure until Nov. 8. As part of the New Market Tax Credit Project, SAPWG directed NAIC staff to work with industry and draft revisions to the annual statement and instructions. The agenda item addressing these changes, #2024-11BWG, was adopted by the Blanks (E) Working Group on Aug. 7.  

SSAP No. 34—Investment Income Due and Accrued, SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies, SSAP No. 93—Low Income Housing Tax Credit Property  Investments, and SSAP No. 94R—Transferable and Non-Transferable State Tax Credits  

During the 2024 spring national meeting, SAPWG adopted, as final, agenda item 2022-14 which exposed revisions to SSAP No. 34—Investment Income Due and Accrued, SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies, SSAP No. 93—Low Income Housing Tax Credit Property Investments, and SSAP No. 94R—Transferable and Non-Transferable State Tax Credits to expand and amend statutory guidance to include all tax credit investments regardless of structure and type of state or federal tax credit program, and all state and federal purchased tax credits.  

The NAIC received questions from public accounting firms on the accounting guidance and example journal entries provided in the new guidance. It was noted that the SSAP No. 94R accounting guidance appeared inconsistent with the journal entry examples, and the guidance in SSAP No. 93R for recognizing allocated tax credits was confusing when compared to the journal entry examples. Both interested parties and NAIC staff agreed that the journal entries accurately reflected the accounting for recognition and utilization of tax credits, as such revisions have been drafted to revise the accounting guidance to more accurately match up with the journal entry examples. It was also noted that a sentence in SSAP No. 48 was inadvertently not updated as part of the New Market Tax Credit project. Updates to this sentence are proposed in Form A.  

 SAPWG has moved this item to the active listing, categorized as an SAP clarification, and expose revisions to SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies, SSAP No. 93R—Investments in Tax Credit Structures, and SSAP No. 94R—State and Federal Tax Credit, to be effective as of Jan. 1, 2025.  

 This item is planned for exposure until Sep. 27 to allow for consideration at the Fall National Meeting.  

On Jan. 10, 2024, SAPWG adopted agenda item 2023-24: Current Expected Credit Losses (CECL) which rejects ASU 2016-13 Financial Instruments–Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments and five other related ASUs.   

SAPWG exposed the issue paper drafted to maintain pre-CECL U.S. GAAP impairment and OTTI guidance. This item is proposed for exposure until Nov. 8.  

SSAP No. 86—Derivatives  

During the 2024 summer national meeting, this agenda item was developed to consider new statutory accounting guidance for interest rate hedging derivatives that do not qualify as effective hedges under SSAP No. 86—Derivatives, but that are used for asset liability management (ALM). Specifically, industry has proposed two assessment metrics for macro-hedges. This includes the “ALM Risk Reduction Approach,” which is a hedging approach to reduce mismatches between identified assets and liabilities and the “ALM Target Management Approach,” which is a hedging approach to keep an asset portfolio aligned with a liability target. These programs do not qualify for effective hedge treatment under SSAP No. 86 (or any accounting regime) as they reflect macro-hedges.  

SAPWG has moved this item to the active listing, classified as a new statutory accounting concept, with exposure of this agenda item to obtain comments from SAPWG members, as well as interested regulators and interested parties on the potential to develop statutory guidance for macro-derivative programs that hedge interest rate risk for asset-liability matching purposes.   

This item is proposed for exposure until Nov. 8 to provide more time for review and comments. Discussion on this exposure is not planned at the 2024 fall national meeting. Discussion could occur via an interim call before the 2025 spring national meeting.  

SSAP No. 86—Derivatives  

During the 2024 summer national meeting, this agenda item was developed to address debt security investments with derivative components that do not qualify as structured notes. Although the original focus was on specific “credit re-pack” investments, the agenda item has been expanded to ensure that all debt security investments with derivative wrappers/components are captured.  

SAPWG has moved this item to the active listing as a new SAP concept and exposed proposed edits to SSAP No. 86—Derivatives, to establish guidance that requires separate accounting and reporting of derivatives that are captured in debt security structures.   

In addition to these changes, minor revisions are also proposed to SSAP No. 26—Bonds and to the annual statement instructions to clarify application guidance. NAIC staff will also draft an issue paper to document these revisions.  

This item is planned for exposure until Sep. 27 to allow for consideration at the fall national meeting.  

SSAP No. 108—Derivatives Hedging Variable Annuity Guarantees  

During the 2024 summer national meeting, there was an agenda item to update the guidance in SSAP No. 108—Derivatives Hedging Variable Annuity Guarantees for a clearly defined hedging strategy (CDHS) to mirror guidance adopted by the Life Actuarial (A) Task Force in 2022, and in effect starting with the 2023 version of the Valuation Manual. The guidance previously included in SSAP No. 108 referred to the CDHS defined in VM-21, and the actuarial guidance has been modified to ensure consistent definitions of a CDHS in both VM-20 and VM-21 and is now captured within VM-01.  

SAPWG has moved this item to the active listing and exposed revisions to SSAP No. 108 to update the definition of a clearly defined hedging strategy (CDHS) to reflect the revised guidance pursuant to VM-01.   

This item is planned for exposure until Sep. 27 to allow for consideration at the 2024 fall national meeting.  

The FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements, which removes references to FASB Concept Statements from the Codification. The main rationale for this amendment is to simplify the Codification by removing Concepts Statements in the guidance and draw a clear distinction between authoritative and nonauthoritative literature. The Board was concerned that references to Concept Statements would result in users incorrectly inferring that the referenced Concept Statements were authoritative.  

SAPWG has moved this item to the active listing, categorized as an SAP clarification, and expose revisions to Appendix D—Nonapplicable GAAP Pronouncements to reject ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements as not applicable to statutory accounting.   

This item is planned for exposure until Sep. 27 to allow for consideration at the 2024 fall national meeting. 

SSAP No. 21R - Other Admitted Assets 

During the 2023 fall national meeting, SAPWG exposed revisions would add a new disclosure in SSAP No. 21R, beginning with year-end 2024 reporting, with the disclosure being made in a new note and an expanded Schedule BA. The new note disclosure would identify, by the type of collateral that secures the loan, 1) the total amount of collateral loans and 2) the collateral loans admitted and nonadmitted by qualifying investment type. Schedule BA was proposed to be expanded with new reporting lines to separate collateral loans by the type of collateral investment that secures the loan.   

During its virtual meeting on Feb. 20, 2024, SAPWG separated the disclosure and Schedule BA changes of this agenda item for separate actions.   

• Adopted revisions to add the new data captured disclosure  
• Exposed proposed reporting lines to Schedule BA for collateral loans. While there are no asset valuation reserve (AVR) reporting revisions, the exposure specifically requested feedback from industry and regulators on whether collateral loans backed by certain types of collateral should flow differently through AVR for RBC impact  

During the May 15, 2024, meeting, the Working Group took two key actions which directed NAIC staff to prepare a memo to the Blanks (E) Working Group to incorporate an instructional change to the AVR instructions and to proceed with sponsoring a blanks proposal for the reporting of collateral loans  considering interested parties’ comments.   

SAPWG exposed this agenda item with a request for comments on certain BA collateral loan reporting lines. In addition, SAPWG sponsored a blanks proposal to Schedule BA and AVR that would occur with these changes.  

This item is proposed for exposure until Sep. 27 to allow for consideration at the fall national meeting.