Insurance Insights - October 2020 Edition

on 09/29/2020 10:20 AM

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Strohm Ballweg Operations Under COVID-19

Like many of you, Strohm Ballweg is operating on all cylinders during COVID-19, despite the need to comply with precautionary mandates and employees and clients working from home here in Wisconsin and across the country.  Our Madison, WI office is open, but employees have the flexibility to work from the office or from home.  Fortunately, as we head into fall preliminary audit season, much of our audit, accounting, and regulatory filing work is performed electronically, allowing us to work remotely from clients and from our office effectively.  We continue to make a strong effort to maintain regular communication with all of our clients through phone calls, emails, and virtual meetings using Zoom, Teams, Go To Meetings, and other services.  Employees have done a great job minimizing the impact of COVID-19 on our work efforts and we continue to be available to meet your expectations and deadlines. 

We truly appreciate all that you have done to help us serve you virtually/electronically over the past several months!  We expect more of the same at least through the end of 2020.


INTs Proposed to be Extended to September 30, 2020 (All Insurers)

The SAPWG adopted the extension of several INTs allowing further extensions to September 30, 2020, as follows:

  • INT 20-02: Extension of the Ninety-Day Rule for the Impact of COVID-19

  • INT 20-04: Mortgage Loan Impairment Assessment Due to COVID-19

  • INT 20-05: Investment Income Due and Accrued

These INTs are set to expire on December 30, 2020 – before 2020 annual statement reporting – and could be extended only by a subsequent action.


INT 20-08 – COVID-19 Premium Refunds, Limited-Time Exception, Rate Reductions, and Policyholder Dividends (All Insurers)

One of the more significant impacts of COVID-19 on insurance companies was adjustments made by insurers to provide some financial relief to its policyholders – either through premium rate reductions, premium refunds, or dividends.  INT 20-08 was adopted by the Accounting Practices and Procedures (E) Task Force on July 22, 2020.  It essentially provides guidance for how payments to policyholders resulting from COVID-19 should be accounted for, depending on the nature and intent of the payments, and whether such payments are required or not required under the policy terms.

If payments are made to policyholders under the terms of the policies, those policy terms would dictate the appropriate statutory accounting treatment.  For those payments made outside the terms of the policies, unless the exception below applies, the payments to policyholders would be treated as a reduction of premium written and the unearned premium reserved adjusted accordingly.

All COVID-19 inspired premium refunds, rate reductions, and policyholder dividends shall be disclosed as unusual or infrequent items in Note 21A of the Annual Statement, where they require a description of the accounting practice and the amount of COVID-19 payments to policyholders by major category (premium refunds, limited-time exception expense treatment, rate reductions, or policyholder dividends).

INT 20-08 also provided for a limited-time exception for insurers that made payments to policyholders outside of the policy terms to utilize expense reporting by recording as an aggregate write-in for other underwriting expenses.  This limited-time exception applies if the reporting entity filed policy endorsements or manual rate filings prior to June 15, 2020, which allow for discretionary payments to policyholders due to COVID-19 related issues.  If expense treatment is used, this accounting shall be disclosed as if it were a permitted practice and insurers must complete the permitted practice disclosure required by SSAP No. 1 – Accounting Policies, Risks & Uncertainties, and Other Disclosures in Note 1 of the Annual Statement (formal approval from the insurer’s domiciliary state is not required to apply the limited-time exception).  Additional disclosures are required in Note 1 if the limited-exception expense treatment is used.  This limited-time exception allowance for expense reporting is effective for second quarter reporting and will sunset on January 1, 2021.

The Working Group also noted that this INT is not intended to address premium taxation in any jurisdiction as the requirements vary by jurisdiction and is dictated by each jurisdiction.


SSAP 61R Life, Deposit-Type and Accident and Health Reinsurance (Life Insurers)

Effective December 31, 2020, audited financial statements (in a supplemental schedule) and the annual statement (in the notes) are required to include six new disclosures to capture “risk limiting” reinsurance contracts.  Examples of risk limiting include provisions such as a deductible, a loss ratio corridor, a loss cap, an aggregate limit, or similar effect.  The audited financial statement disclosures are limited to reinsurance contracts entered into, renewed, or amended on or after January 1, 1996.  This limitation applies only to the audited financial statements and does not apply to the annual statement interrogatories.  These disclosures were modeled on the SSAP 62R Property and Casualty Reinsurance disclosures.


Other SSAP Updates in 2020 (All Insurers)

Some of the updates that occurred in 2020 that may affect you include:

  • Issue 2018-26 – SCA Loss Tracking – Revisions to SSAP 5R and SSAP 97 – Effective March 18, 2020, this INT indicates that equity losses of an SCA cannot result in a negative investment (stops at $0).  However, liabilities should be recorded to the extent there is a financial guaranty or commitment for an affiliate.
  • Issue 2018-38 – Prepayment to Service and Claims Adjusting Providers – Revision to SSAP 55 – Revisions clarify that loss and loss adjusting expense liabilities are established regardless of payment to third parties (except for capitated health claim payments).  Example provided is roadside assistance coverage.
  • Issue 2019-33 – SSAP No. 25 Disclosures – Revisions data-capture disclosures from SSAP No. 25, which are currently in narrative format.  A referral will be sent to the Blanks Working Group to consider for 2020 annual reporting.
  • Issue 2019-47 - Valuation Manual 21 Grading – Revisions add reference, disclosures and accounting for Section 21 of the Valuation Manual, Requirements for Principle - Based - Reserves for Variable Annuities, and phase in requirements for reporting changes in the valuation basis for years beginning January 1, 2020.
  • Issue 2020-07 – Change to Summary Investment Schedule – Revisions add a line for Total Valuation Allowance to Appendix A-001, Section 3, Summary Investment Schedule, adopted effective May 20, 2020.
  • Issue 2020-14 – SSAP 26R – Assessment of OTTI Based on Original Contract Terms – Revisions clarify the assessment of other than temporary impairment (OTTI) in SSAP No. 26R — Bonds to require use of modified contract terms.  These revisions provide consistency with guidance in SSAP No. 36R — Troubled Debt Restructuring and SSAP No. 103R — Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, effective May 20, 2020.
  • Issue 2019-04 – SSAP 32 Investment Classification Project – Revisions update the definitions, measurement, and impairment guidance for preferred stock pursuant to the investment classification project, effective January 1, 2021.
  • Issue 2019-38 – Financing Derivatives – Revisions to SSAP 86 ensure reporting consistency in that derivatives are reported "gross,” adopted January 1, 2020.
  • Issue 2020-01 – Bond Mutual Fund Reference Removal – Revisions to SSAP 26R and 30R eliminate references to the NAIC bond fund list in SSAP 26R and add reference to the NAIC Fixed Income Like SEC Registered Funds List in SSAP Mo. 30, adopted effective July 30, 2020.
  • Issue 2020-03 – Accounting for Bond Tender Offers – Revisions to SSAP 26R clarify that the accounting and reporting of investment income and capital gains/losses due to the early liquidation either through a called bond or a bond tender offer shall be similarly applied.  Adoption effective January 1, 2021.
  • Issue 2020-03 – Enhanced Goodwill Disclosures – Revisions to SSAP 68 add disclosure elements for reported goodwill.  To correspond with Blanks changes, these disclosure revisions will be effective for year-end 2021.
  • Issue 2020-05 – Repeal the ACA – Revisions supersede SSAP 106 and nullify interpretation 18-02 ACA section 9010 assessment moratoriums.  With this adoption, a blanks proposal will be sponsored to incorporate reporting changes for 2021 reporting and recommend guidance for 2020 year-end reporting.

Strohm Ballweg New Employee and Promotions

SB is excited to announce the addition of Brian Bergman to our team in September.  Brian is a recent UW-Madison graduate coming to us from AON Risk Services, and will use his insurance and actuarial experience in serving one of our outsourced financial solutions clients, Municipal Property Insurance Company.  Welcome back to Madison, Brian!
Effective September 1st, the following employees earned promotions at SB:  Mario Prcic, CPA was promoted to Supervisor, Marissa Cook was promoted to Senior Accountant, and Tiffany Celmer was promoted to Senior Administrative Assistant (pictured below, left to right).  Congratulations to all for being promoted, which recognizes and rewards their dedicated and capable service to our clients!
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