2014 NAIC Spring Meeting Review
Update
Thursday, April 24, 2014
@ 2:00 PM EDT
2014 NAIC Spring Meeting Review Update
Introduction
 Welcome
 Beech Turner, VP-Finance – Assurant Solutions and VP-e-Learning - IASA
•
Housekeeping Items
 Q&A and Survey
 Turn off cell phones, pagers, etc.
 Q&A at the end of the session

Today’s Topic
 NAIC Spring Meeting Review Update

Today’s Speakers
 Carolyn Albertson, Product Marketing Manager – Merrill Corporation
 John Bauer, Vice President of Financial Reporting - Prudential Financial
 Dennis Lebar, Senior Regulatory & Accounting Specialist– SunGard iWorks Financials
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2014 NAIC Spring Meeting Review
Carolyn J Albertson, Merrill Corporation
•
Carolyn is well known in the statutory accounting segment of the insurance
industry, having spent many years in the financial print services industry providing
information and educational services such as newsletters, regulatory updates,
webinars and seminars for insurers. She is actively involved in monitoring the
activities of the National Association of Insurance Commissioners (NAIC) and
serves on many of the NAIC’s Interested Persons groups. Albertson is a regular
speaker at many insurance related conferences. She serves on a number of
committees for the Insurance Accounting and Systems Association (IASA).
Albertson currently serves on the Board of the Mid-Atlantic Chapter of the IASA,
having served previously as Secretary and President.
• Prior to joining the financial print services industry, she was Data Base Manager
for the NAIC. In that role, she oversaw the annual statement data base project
and served as staff support to a number of NAIC committees.
• Carolyn received a Bachelor of Arts degree from Hiram College in Hiram Ohio.
•
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2014 NAIC Spring Meeting Review
John J. Bauer, FLMI, Prudential Financial
• John is currently a Vice President, Financial Reporting with Prudential Financial,
Inc. and he has responsibility for all of Prudential’s NAIC/ACLI relationships with
external regulators and industry groups as they pertain to accounting and financial
reporting. John is also responsible for coordination of State Examinations for The
Prudential Insurance Company of America and any of Prudential’s domestic
insurance subsidiaries. John joined Prudential in 1981 as a Staff Accountant.
Until 1990, John worked in the Accounting areas of two Prudential subsidiaries,
Prudential Reinsurance Company (now Everest Reinsurance Company) and
Pruco Life Insurance Company. John transferred to the Comptrollers Department
of Prudential in 1990. John’s primary focus in these positions was statutory
reporting and disclosure.
• John also served as National President, for 2007-2008, of the Insurance
Accounting and Systems (IASA) organization.
•
John graduated from Rider University in 1981 with a Bachelors’ degree in
Accounting and currently resides in Milltown, NJ.
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2014 NAIC Spring Meeting Review
Dennis M. Lebar, CPA, Senior Regulatory & Accounting
Specialist , SunGard iWorks Financials
Dennis is the Senior Regulatory and Accounting Specialist for SunGard’s
insurance segment. He has been a member of the SunGard Development
team for over twenty years. During this time, he has been instrumental in
the successful development and deployment of several
investment/accounting related products. In his position, Dennis provides
accounting and regulatory expertise to ensure that SunGard’s insurance
products and services remain regulatory compliant. Dennis develops
regulatory documents to ensure SunGard’s client base is aware of current
and upcoming regulations. He attends all the NAIC National meetings, and is
involved in several “interested persons” groups providing feedback to the
various committees of the NAIC. Dennis is also an active member of NASVA
and participates in educational seminars sponsored by the IASA.
Dennis has a Masters Degree in Accounting from the University of Colorado,
and is an active CPA.
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Overview Summary
 Emerging Accounting Issues Working Group (EAIWG)
 Statutory Accounting Principles Working Group (SAPWG)
 Blanks Working Group
 Investment Reporting Subgroup
 Capital Adequacy Task Force (CADTF)
 Investment RBC Working Group
 Life Risk Based Capital Working Group
 Operational Risk Subgroup
 Valuation of Securities Task Force (VOSTF)
 Invested Asset Working Group
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Overview Summary (continued)
 Principles-Based Reserving Implementation Task Force
 PBR Blanks Reporting Subgroup
• Casualty Actuarial and Statistical Task Force
• Corporate Governance Working Group
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Emerging Accounting Issues Working Group (EAIWG)
• Adopted – INT 13-04: Accounting for Risk-Sharing Provisions
of the Affordable Care Act
• Exposed – No new issues were exposed.
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Statutory Accounting Principles Working Group (SAPWG)
The Statutory Accounting Principles Working Group met and
discussed positions. They primarily focused on the following:
1.
2.
3.
4.
5.
Structured Notes Disclosure
Investment Classification Review
SSAP No. 35 – Proposed ACA Roll Forward
ASU 2014-03 Derivatives and Hedging
2014-07 SSAP No. 11 Postemployment Benefits and
Compensated Absences
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Blanks Working Group
• Adopted
– Report from the Investment Reporting Subgroup
– List of eight editorial changes
• Discussed
– Five exposures from the Fall National Meeting
• Four adopted
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


Modification to the Supplemental Compensation Exhibit (All business types)
Modify Federal ID Column description on Schedule Y (All business types)
Add questions for Actuarial Memorandum to Supplemental Interrogatories Life and Fraternal only)
Move disclosure for Offsetting and Netting of Assets and Liabilities from Note 21 to Note 5 (All
business types)
• One deferred
 Add additional lines to AVR Default Component and Equity and Other Invested Assets Component
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Blanks Working Group (continued)
• Exposed fifteen new items (Comment deadline May 8):
– Clarify Schedule P instructions for re-stating data due to change in pool percentage (PC only).
– Move Note for Joint and Several Liabilities from 21 to 14 (All business types).
– Add column and instruction to Schedule S – Part 3 – Sections 1 and 2 for type of business
ceded. Add general interrogatory related to authorized captive reinsurers. (Life, Health and
Fraternal)
– Modify instructions for Exhibit 3a to incorporate guidance that was adopted last year (Health
only).
– Modify instructions for NAIC Company Code, Alien Insurer ID Number, Pool/Association
Number, and Certified Reinsurance Number for clarification. (All business types)
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Blanks Working Group (continued)
• Exposed fifteen new items (Comment deadline May 8):
– Add new disclosure to Note 5 for Structured Notes. (All business types)
– Modify Note 22, events Subsequent, to reflect additional disclosures related to ACA
assessment. (All business types)
– Add new line of business to the State Page and the IEE as Line 2.4 Private Crop (Health and
PC)
– Modify definition of contingent deferred annuities in the instructions for Exhibit 5 Interrogatories
(Fraternal, Health and Life)
– Modify Note 12, Retirement Plans, Deferred Compensation (All business types)
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Blanks Working Group (continued)
• Exposed fifteen new items (Comment deadline May 8):
– Add electronic only column to Schedules A, B, and BA for reporting postal code and property
type. Add electronic only column to Schedules B and BA for maturity date. (All business types)
– Add new disclosure to Note 24 related to the risk sharing provision of the Affordable Care Act.
(All business types)
– Modify Actuarial Opinion instructions. (Fraternal and Life)
– Modify the Actuarial Instructions regarding pooling arrangements. (Property and Title)
– Add new supplement with details of reinsurers aggregated on Schedule F. Add new note 23J.
(Property only)
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Investment Reporting Subgroup
• 2014 Charges:
• Review requests for investment schedule blanks and instructions changes in connection with the work
being performed by the Investment Risk-Based Capital (E) Working Group.
• Review changes requested by the Valuation of Securities(E) Task Force and the Invested Asset (E)
Working Group as it relates to their work on other invested assets reporting for technical consistency
within the investment reporting schedules and instructions.
• Recent Activities
– Review Investments reported on Schedule BA
• Relatively small amount of admitted assets
– But growing
• Possibly decrease the number of categories
• Provide for a more “risk-focused” view
– Hedge Funds
– Equity Funds
• Involve more states in a survey
• Probable modifications to Schedule BA
– Timeframe undetermined
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Capital Adequacy Task Force (CADTF)
• Broker Receivable RBC Proposal
• Wholly Owned Single Owner/Single Property Referral
• New Chair of CADTF
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Investment RBC Working Group
Update of C1 Factors for Corporate Bonds presented by the American Academy of
Actuaries (AAA)
• Simulations under various economic scenarios representing a 10 yr. horizon on a representative
Corporate Bond Portfolio
• Moody's Default Rates (1983 – 2012)
• S&P Recovery Rates (1987 -2012)
• Results
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Investment RBC Working Group
Update of C1 Factors for Corporate Bonds
• Recommendations
• 14 NAIC classes (designations) replacing the current 1 – 6 designations
– Use +/- suffix
• Breakout by 3 Collateral types
– Senior Secured Debt (represents 16% of industry holdings)
– Senior Unsecured Debt (78% of industry holdings)
– Subordinated Debt (6% of industry holdings)
• Change AVR factors to be consistent with C1 bond factors
• Further refinement and industry testing
• Continue with study of other non-modeled fixed income classes
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Investment RBC Working Group
Update of C1 Factors for Corporate Bonds
• Proposed Designations
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Life Risk Based Capital Working Group/Operational
Risk Subgroup
• Exposures (Life RBC)
– AVR in the Life RBC calculation
– C-3 Phase I Proposal
– C-3 Phase II Proposal
• Exposure (Operational)
– Operational Risk Component for RBC
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Valuation of Securities Task Force (VOSTF)
• New Working Group formed – Securitization Data Integrity Working Group
– Purpose is to develop data quality standards to assess whether new issues of RMBS and
CMBS are eligible for modeling
• Staff Report on Structured Notes
– Bloomberg maintains Structured Note Deals – definition is similar to that adopted by the NAIC
• Heard reports regarding non-US GAAP Standards
– Canada – two standards now in place
• Public Companies – IFRS
• Private Companies – Accounting Standards for Private Enterprises (ASPCE) – similar to
previous Canadian GAAP
– Request to add National GAAP/National IFRS or Netherlands and France to Permitted Financial
Performance Presentation Standards Country List
• Exempts from Foreign to GAAP reconciliation
• Includes Accounting Standards for: Canada, UK, Australia and Germany
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Valuation of Securities Task Force (VOSTF)
• Considered Amendments to the SVO Purposes and Procedures Manual
– Adopted the deletion of Short-Dated Non-Principal Protected instructions
– Deferred revisions to the methodology for determining NAIC Designations for
Principal Protected Notes
• Proposed weighted average method under further review
– Adopted amendment to the methodology for determining Designation for
Catastrophe Bonds
• Now eligible for Filing Exempt (FE) determination
– Adopted a proposal to delete expedited review text from the Regulatory Treatment
Analysis Service (RTAS) instructions for Emerging Investment Vehicles (EIV)
– Adopted a proposal to clarify instructions for Debt-Equity Hybrids
• Eligible for FE treatment if Rated by CRP
• Otherwise submit to SVO for Designation
– Exposed - Proposal to Update Description of NAIC and of NAIC Processes
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Invested Assets Working Group
• Structured Notes Reporting
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Principles-Based Reserving Implementation Task Force
• Rector & Associates Inc. Report on Captives
• PBR State status adoption
• Exposure of PBR Statistical Agent Framework
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Principles Based Reserving (PBR) Blanks Reporting
Subgroup
• Charge: Recommend changes regarding Blanks and instructions for PBR.
• Proposed Changes to Life Annual Statement:
•
•
•
•
•
–
Analysis of Increase in Reserves
Exhibit 5
Five-Year Historical Data Exhibit
Supplemental Exhibits and Schedules Interrogatories
Interest Sensitive Life Insurance Products Supplement
NEW 5 Part PBR Supplement
• Proposed Changes to Separate Account Statement:
• Analysis of Increase in Reserves
• Exhibit 3
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Casualty Actuarial and Statistical Task Force
• Adopted a response to the NAIC/AICPA Working Group
referral regarding Schedule P auditing.
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Corporate Governance Working Group
– Adopted revisions to the Annual Financial Reporting Model
Regulation
• Primarily focused on role of Audit Committee
• Referred over to E Committee
– Exposed Corporate Governance Model Act
• Eliminated the Guidance Manual
• Provides for Annual “Disclosure
– Not “Prescribed Practices”
• Exposure Period to 4/21/14
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‘
2014 NAIC Spring Meeting Review
Thank you for your attention of today’s presentation. For more information,
please contact:
Carolyn Albertson – Phone: 856-264-7572 Email: carolyn.albertson@merrillcorp.com
John Bauer - Phone: 973-802 5803
Email: john.bauer@prudential.com
Dennis Lebar - Phone: 303-689-1620 Email: Dennis.Lebar@sungard.com
And now, to our Q&A portion of today’s event.
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2014 NAIC Spring Meeting Review
Q&A with Today’s Speakers
Carolyn Albertson,
Product Marketing Manager,
Merrill Corporation
John Bauer, Vice
President, Financial
Reporting, Prudential
Financial
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Dennis Lebar, Senior
Regulatory & Accounting
Specialist, SunGard
iWorks Financials
2014 NAIC Spring Meeting Review
Thank you for joining us!
This presentation will be archived on the IASA website at www.iasa.org.
We are interested in your thoughts about this presentation and in topics
you may want to see covered in the future.
You will now be directed to a short follow-up survey which we hope you
will complete.
If you have difficulty viewing the archived presentation, or would like
further information about this and future topics to be covered, please
contact:
Kim Morris
Director of Exhibits – IASA
kmorris@iasa.org
919-489-0991 x208
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