December 2024 NAIC-Related Activity

Although there were not a lot of scheduled meetings that occurred in December, there was email activity that resulted in some last-minute statutory accounting and reporting changes.

Blanks Working Group (BWG) – Various December 2024 Emails

BWG didn’t meet during December, but that doesn’t mean it didn’t generate some activity.

Reference	Subject	Disposition
Editorial Change	Deletion of Notes to Financials #12(A)18 in the defined benefits section.	Adopted, effective immediately.

Those who have purchased the Annual Statement Instructions (for any of the statements) will not see the above deletion. It has been posted, however, to the BWG website as part of its editorial changes document. This deletion officially occurred at year-end 2023 and was so stated in the end-of-year memo that Statutory Accounting Principles Working Group (SAPWG) issued to BWG in December 2023. However, when the 2024 statement instructions were compiled, the deletion was overlooked. This corrects that situation.

Reference	Subject	Disposition
SAPWG Memo	Handling of de-activated Lloyd’s (Lloyd’s) of London syndicates.	Posted, effective immediately.

Earlier this year, Lloyd’s de-activated more than 200 of its syndicates, which means the syndicates were deleted from the NAIC’s Listing of Companies. This NAIC publication is used to determine which of the Lloyd’s syndicates were considered authorized reinsurers versus unauthorized reinsurers. As part of the de-activation process, Lloyd’s transferred those syndicates’ liabilities to other existing Lloyd’s syndicates through “reinsurance to close” transactions. Lloyd’s has posted a listing of those transfers on its website. Companies should use that list to determine if any of their risks were transferred and to which syndicate. If a transfer occurred, the new syndicate number should be used for reinsurance reporting in the statements. The easiest way to find the Lloyd’s listing is to perform an internet search for “Lloyd’s reinsurance to close report.” The listing is an Excel spreadsheet that can be downloaded. SAPWG sent a memorandum to BWG regarding the handling of the Lloyd’s de-activations, since it will affect the reporting of reinsurance in the statement. BWG has posted this memorandum to its website under the Documents tab.

Reference	Subject	Disposition
2024-21	Updates Schedule D – Parts 3 and 4 instructions for the reporting of a sale and consequent reacquisition with different terms of the same investment.	Exposed for comment through February 6, 2025.
2024-22	Refines the definition of Surplus Debentures and Capital Notes for Schedule BA reporting.	Exposed for comment through February 6, 2025.

Note: Normally in December, SAPWG sends an end-of-year memo to BWG regarding disclosures that need to be included in the year-end statutory statement resulting from SAPWG adoptions that occurred after the statement had been finalized for the year. At the time of this writing, that memo had not yet been posted. Hopefully, the posting will occur in January. Companies should monitor the BWG website regularly for the memo.

Statutory Accounting Principles Working Group – December 17, 2024

SAPWG often conducts December meetings each year to wrap up pending issues. This year was no exception. The below actions took place.

Reference #	Subject	Disposition
2024-10	Revises Statement of Statutory Accounting Principle (SSAP) No. 56 - Separate Accounts regarding the process to transfer assets between the general account and book-value separate accounts.	Re-exposed for comment through January 31, 2025.

The above was more than just an exposure of specific revisions to SSAP No. 56. The NAIC had incorporated questions specific to separate accounts to receive industry input. The revised proposal incorporated some of these responses, but also now requests feedback on some additional specific issues.

Reference #	Subject	Disposition
2024-15	A new statutory accounting concept for asset-liability management (ALM) derivatives.	Deferred.
2024-26EP	Editorial revisions to SSAP No. 26 – Bonds clarifying the annual audit disclosure for bonds, beginning with the 2025 year-end audit.	Adopted. Effective with the audit report for year-end 2025.

The intent of the above editorial revision was to update one paragraph in SSAP No. 26 to reflect the new reporting of bonds beginning in 2025. Industry had requested a deferral of this item. In particular, interested parties (IPs) were concerned that the terms “categories” and “sub-categories” were not defined. Evidently, from the regulator discussion that occurred during the meeting, regulators too had some confusion over the definitions. The conversation clarified that “categories” referred to the division of bonds as issuer credit obligations (ICOs) or asset-backed securities (ABSs). “Subcategories” were then the classifications within the categories of ICOs and ABSs used for reporting purposes on Schedule D – Part 1 beginning in 2025.

Reference #	Subject	Disposition
2024-05	Revisions to Appendix A-791 Life and Health Reinsurance Agreements (A-791, section 2c’s question and answer (Q&A)).	Deferred.
2024-06	SSAP No. 61 – Life, Deposit-Type and Accident and Health Reinsurance (SSAP No, 61) regarding risk transfer analysis of combination reinsurance contracts.	Deferred.

These two items are intertwined and originally were developed because of a referral to SAPWG from the Valuation Analysis Working Group (VAWG). The proposed A-791 revisions would delete one sentence from the first paragraph of the response in the Q&A. Industry previously commented that this revision should be adopted only if industry-proposed revisions for 2024-06 also are adopted for SSAP No. 61.

The exposed proposal 2024-06 provides that contracts with interdependent features must be analyzed in the aggregate for risk transfer. VAWG indicated regulators had observed that some companies have assessed the contracts with the interdependent features as separate agreements for analyzes of risk transfer. VAWG feels this is not the correct approach for risk transfer assessment.

The discussion on both will continue and may include a joint call with the Life Actuarial Task Force.

Reference #	Subject	Disposition
2024-27	Proposal to designate issue papers in the Statutory Hierarchy as Level 5.	Exposed for comment through January 31, 2025.
2024-28	Incorporates revisions to SSAP No. 41 – Surplus Notes to clarify capital note references and guidance for holders of capital notes. (BWG exposure also exposed for comment through February 6, 2025. See above BWG discussion.)	Exposed for comment through January 31, 2025.
2024-16	The handling of repack and derivative investments. (Related BWG exposure 2024-21 also was exposed for comment through February 6, 2025. See above BWG discussion.)	Exposed for comment through January 31, 2025.

This issue developed from an earlier decision by SAPWG to reject bifurcation of debt securities with derivative wrappers or comments. Consequently, debt securities with derivative components that reflect structured notes will be retained in SSAP No. 86 – Derivatives, while all other debt securities with derivative components and wrappers will be assessed under the principles-based bond definition. Debt securities that do not qualify as bonds will be reported as non-bond debt securities in Schedule BA and fall under the guidance of SSAP No. 21 – Other Admitted Assets.

SAPWG announced that although several previous items had been exposed for comment through December 16, 2024 and others with a comment deadline of January 31, 2025, none of these proposals will be discussed until 2025.

If you have any questions or need more information, please reach out to a professional at Forvis Mazars.

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