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