NAIC Spring 2016 National Meeting Update – Statutory Accounting Principles Working Group

At the NAIC Spring 2016 National Meeting, the Blanks Working Group (BWG) focused on electronic-only columns guidance, foreign codes, and more.

Removal of “Non-Rated” from Footnote: Adopted Item 2015-25 BWG

This item removes the reference to “non-rated” from the instructions for footnote “D” on Schedule D – Part 1A, Section 1 and Schedule D – Part 1B footnote “A.” This item includes a new cross-check that ties the footnote in total to Schedule DA and Schedule E – Part 2. For Schedule D – Part 1A, Section 1, the footnote will now read, “Includes the following amount of short-term and cash equivalent bonds by NAIC designation.” This change is in effect for 2016 annual reporting.

Electronic-Only Columns Guidance: Exposed Item 2016-02 BWG

This item incorporates the 2015 application guidance and combines the Senior Subordinated Debt and Junior Subordinated Debt codes in the electronic Capital Structure Column (34). The options for Column 34 – Capital Structure Code now read:

1. Senior Secured Debt
2. Senior Unsecured Debt
3. Subordinated Debt
4. Other

This also modifies the instructions for Schedule D – Parts 2 through 6, to reflect changes made on Schedule D – Part 1 for both CUSIP and Description columns. For purposes of consistency, this item also adds electronic-only columns for Issuer, Issue, and ISIN to those schedules.

Foreign Codes: Exposed Item 2016-06 BWG

This item reduces the current foreign codes from twelve to four for Schedule D. Industry has been asking for this update for a long time, as the previous foreign matrix table was confusing and cumbersome. Reducing the number of foreign codes significantly simplifies the process. The new options are as follows:

• “A” – For Canadian securities issued in Canada and denominated in U.S. dollars
• “B” – For those securities that meet the definition of foreign provided in the Supplemental Investment Risk Interrogatories and pay in a currency OTHER THAN U.S dollars
• “C” – For foreign securities issued in the U.S. and denominated in U.S. dollars
• “D” – For those securities that meet the definition of a foreign as provided in the Supplemental Investment Risk Interrogatories and denominated in U.S. dollars (e.g. Yankee Bonds or Eurodollar bonds)

All other types of securities should be left blank.

Bond Characteristics: Exposed Item 2016-07 BWG

This is another item aimed at providing Industry with clarification on what should be provided in the Bond Characteristic column (column 5). This proposal completely eliminates the eight previous codes and replaces them with ten new codes. The purpose of these changes is to more accurately reflect a more detailed explanation of the types of information regulators are examining. Click here for a full list of the proposed codes (starting on pg. 117).

Restricted Assets Disclosure: Exposed Items 2016-12 and 2016-21 BWG

This item is the result of the adoption of SAPWG Ref # 2015-19 – Quarterly Reporting of Restricted Assets. It further clarified that Note 5H shall be included in the annual statement, as well as quarterly if significant changes have occurred. Further changes to note 5H concerning collateral received were exposed under item 2016-21 BWG. For more details on the SAPWG adoption of Ref # 2015-19, read the Clear Insights Statutory Accounting Principles Working Group (SAPWG) meeting update.

5*/6* Disclosure: Exposed Item 2016-14 BWG

This is another item that is the result of the SAPWG exposing Ref # 2015-41 on the use of 5*/6* securities. While the SAPWG has not passed the changes yet, they have moved forward with exposing the corresponding blanks change to ensure it will be complete in time for 2016 annual reporting deadlines. This item adds a new disclosure to Note 5 (investments) for 5* securities for data capture purposes. The pending disclosure would be as follows:

Short Sales: Exposed Item 2016-15 BWG

This item is a pending disclosure required as a result of SAPWG Ref # 2015-02. It adds a new disclosure to Note 5 for short sales for data capture reasons. It also adds a new code (SS) to the investment general instructions for short sales, which, by definition, impacts Schedules D (Part 1, Part 2; Section 1, Part 2; Section 2), DA, and E. The pending disclosures are as follows:

Class 1 Money Fund list: Exposed Item 2016-18 BWG

This item contains a number of changes that are the result of the SAPWG exposing Ref # 2016-05, which removes references to the Class 1 Money Mutual Fund List. Included in this item is the removal of the “*” and “#” from the code column on Schedule D – Part 1. This proposal changes references from “class one bond mutual funds” to “bond mutual funds” and adds a new section called “SVO designated Securities” as well as a new column (“no maturity date”) to Schedule D – Part 1A. Furthermore, it makes changes to the Supplemental Investment Interrogatories and AVR schedules. This project is outlined in more detail in the Clear Insights Valuation of Securities Task Force Update.

ADDITIONAL RESOURCES

http://www.naic.org/meetings1604/committees_e_app_blanks_2016_spring_nm_materials.pdf