Statutory Accounting Principles Working Group (SAPWG) Adopts Revisions Effective for Year-End 2021

Thoughtware Alert Published: Jan 31, 2022
Authors
Connie Jasper Woodroof, Thomas Wheeland
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Tax FVS Paperwork Forensics

During a January 27, 2022, meeting, SAPWG adopted two items with an effective date of December 31, 2021. Both newly adopted items should be reviewed carefully and applied to year-end 2021 accounting and reporting. 

Revisions to SSAP No. 108 – Derivatives Hedging Variable Annuity Guarantees via reference #2021-18 were originally proposed by the Life Actuarial Task Force with interested parties making some further suggestions. The adopted revisions provide consistency between the SSAP and revisions to the VM-21: Requirements for Principle-Based Reserves for Variable Annuities. In paragraph 14 of the SSAP regarding deferred asset and deferred liability amortization, reference to the standard scenario was removed from the SSAP. Taking its place is a new footnote discussing the use of the conditional trial expectation (CTE) 70. Please review the entire revision carefully for applicability. 

SSAP No. 61R – Life and Health Reinsurance, reference #2021-31, was also amended. These revisions were the result of questions received from the American Institute of CPAs’ (AICPA) NAIC Task Force regarding life reinsurance disclosures and related audited notes that were first put into place in December 2020. Disclosure preparers and auditors found several items in the disclosure requirements that they felt needed clarification. In the Life statutory statement, the revisions apply to Note to Financials #23H. Within the SSAP, revisions were adopted for paragraphs 78 to 83 and provide the following: 

  • Clarification that the disclosure is not comparative and applies only to reinsurance contracts in effect for the statement reporting date; 
  • Explanation that if no reinsurance contracts were identified for applicability, a statement indicating that should be included in the notes to the financial statements or the supplemental schedules of the audited statement; 
  • Instructions that the disclosure applies to ceded reinsurance;
  • Stresses that references within paragraph 83 to GAAP are U.S. GAAP, and if the reporting entity does not prepare U.S. GAAP financial statements or its financial statements are not part of upstream U.S. GAAP financials, the paragraph 83 disclosure can be answered as not applicable. 

NAIC staff indicated that since these revisions were adopted after the normal cutoff period for the production of the 2022 Accounting Practices & Procedures Manual, these revisions will be included in the updates section of the new manual when released. A guidance document regarding these changes will be forwarded to the Blanks Working Group for posting on their website and SAPWG’s disclosures checklist will also be updated. 

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