Your "Other" Holiday List

All Statements

Balance Sheet

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New instructions for the Receivable for Securities line on the Assets Page reflect a change in the measurement date to determine the receivables treatment. If payment is received within 15 days of the settlement date, report on Line 9. If payment is received beyond that time period, report the amount on Line 24 and then nonadmit the amount. Previously the measurement date had been 15 days with the statement date.

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Another instructional change on the Assets page addresses the reporting of premiums receivable from government insured plans. Line 15, Premiums and Other Considerations, should include fixed one-time premium payments such as those for Medicaid low birth weight and Medicaid maternity delivery. Other non-premium amounts due from government insured plans from A&H contracts should be reported in Line 24, Health Care and Other Amounts Receivable.

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A new disclosure for accrued Medical Loss Ratio rebates is required on the Liabilities Page. The disclosure will be in the form of a new inset amount on one of the existing reserve lines:  Line 9.2 in the LAH statement; Line 4 in the Health statement; and, Line 9 in the Property/Casualty statement. Crosschecks have also been added, checking the disclosed amount to other parts of the statement. No A&H business? Forget I mentioned it.

General Interrogatories

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Holding letters of credit (LOCs) not related to reinsurance contracts?  The regulators want information regarding them if the bank issuing the LOC carries the equivalent of an NAIC designation 3 or less. Where do you find the bank ratings? If the bank appears on the SVO’s bank list, it has an NAIC designation of 1. Not all banks are listed; in fact most aren’t. Has the bank issued some debt that is rated?  If yes, use that rating for conversion to an NAIC designation. However, most banks won’t fall into either of these categories. What to do?  According to conversations with the NAIC, companies should list all LOCs that are issued by an unrated bank (but not associated with reinsurance contracts). You may aggregate LOCs issued by the same bank.

Notes to Financials

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Remember those last-minute changes the NAIC tried to implement in Note 9A last year?  Now they have been formally adopted. The order of disclosures in the Note has been rearranged, the new pieces will be data captured.  Oh, and just to keep things interesting, the NAIC added some crosschecks.

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Got guarantees to subsidiaries, controlled or affiliated companies? Then you need to put a statement in Note 10 indicating that discussion will occur in Note 14.

And speaking of Note 14, there are three new sets of changes here.

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14A requires new disclosures of guarantees to third parties.

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14B disclosures have been revised for the new requirements under SSAP No. 35R.

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14E provides product liability information, which has been specifically excluded from 14A. Of course this one only applies to P&C companies.

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Companies now need to identify lease agreements that have been terminated early or for which the lessee is no longer using the property in Note 15. While you’re at it, disclose the liability recognized in the financial statements under those agreements. 

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Most of you need to check the To Do box here. Note 20 was new last year and has undergone some changes for this year. Many of the revisions were those the NAIC attempted to implement last year in February (for the March 1 filing). In addition, the reporting format for level 3 activity has been reformatted and contains revised instructions.

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Check To Do here if your company has Health business subject to the MLR rebate!  A new Note 24D required disclosure of some MLR rebates amounts: incurred, paid and unpaid.  Heads up here!  Although the Note is formatted with a prior year and current year section, you need only complete the current year section for 2011. Although you completed the associated Supplement last year, that was just a trial run and no rebates were actually incurred or needed to be paid. 2011 is the real thing! There are also crosschecks from the Note to the Liabilities page and the Supplement.

Reinsurance Schedules

Two different sets of changes here.  New line numbers apply only to the LAH and Health entities, while the LOC disclosure affects everyone.

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 A new line numbering system within the LAH and Health statements further sub-divides reported business into US and non-US business.

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Three new columns and a new footnote have been added to Schedule S – Part 4 for the LAH, Fraternal, and Health statements; Schedule F – Part 5 for the Property/Casualty statement; and Schedule F – Part 3 for the Title companies. Using the combination of the columns and the footnote, companies are to provide information regarding LOCs that are connected to their ceded reinsurance,

Schedule T

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If your company writes business outside of the US, read on. Otherwise, skip this. If there’s no specific reporting line in Schedule T for a jurisdiction in which your company writes business,  it needs to be reported as a write-in line. The NAIC has clarified that you must create a separate line for each non-US jurisdiction reported, rather than one aggregate line reporting all such business. There are some exceptions to this new rule, so review the instructions carefully.

Schedule Y – Part 1A  (New schedule)

Not only is there a new reporting format named Schedule Y – Part 1A, but there are also instructional changes applicable to all of Schedule Y – Part 1.  Let’s start with the instructional changes first.

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All companies that are part of the holding company group must now be shown in the organizational chart (Schedule Y – Part 1) and included in the new Schedule Y – Part 1A. Previously, there had been some exclusions allowed on the organizational chart. That is no longer the case.  Yes, the NAIC is aware of the size of the organizational charts they will be receiving in some cases. So bring it on. (Note: the exclusions are still applicable to Schedule Y – Part 2.)

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Schedule Y – Part 1A requires a lot of additional information regarding the companies in the group. However, not all of the columns will apply to all listed companies.  Review the instructions carefully. Don’t overlook the footnote for Part 1A. Some columnar instructions require additional information regarding the listing entity to be disclosed in the footnote.

Schedule Y – Part 1A will not be identical for all reporting entities. The NAIC suggests that you prepare one Part 1A for all companies, and then customize Column 10 information for each reporting entity.

During December conference calls, both the Blanks Working Group and the Statutory Accounting Principles Working Group adopted a Q&A for Schedule Y. The document is posted as unofficial guidance on both of the groups’ websites.

Supplemental Interrogatories

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New questions ask about any specific waivers your company has been granted from the Annual Financial Reporting Model Regulation (the Model Audit Rule). These are Yes/No questions, so everyone should mark this one To Do.

Investment Schedules

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Two new indicators have been adopted for use in the Foreign Code column of each of the investment schedules.  No foreign investments? Skip this one!

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The bond reporting category of All Other Governments has been expanded by definition. Companies can now include corporate securities fully guaranteed by non-US governments.

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In all of the schedules using the bond categories, the former category of Credit Tenant Loans has been deleted. Bonds previously reported in this category should be re-classified into the Industrial & Miscellaneous category.

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The number of bond sub-categories has been reduced from six to four. Please review the new sub-categories carefully when reclassifying bonds; not all of the new categories are a direct match for the old categories.

Schedule B

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A revision to the instructions for the category of Mortgages with Restructured Terms, eliminates the reference to the benchmark commercial loan pricing matrix, since the matrix is no longer provided by the NAIC. This change eliminates one option for being able to remove a loan from this category.

Schedule D

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There are two new bond suffixes to be used this year.  AM indicates bonds that are ARO rated, but the designation has been modified (modified FE) and FM indicates those CMBS and RMBS that have been financially modeled for valuation. Remember, CMBS and RMBS are no longer under regulatory review; modeling has become their permanent method of valuation. Therefore, do not use the Z* suffix this year when reporting those securities. Instead use the new FM suffix. Additionally, the Valuation of Securities Task Force has modified those loan-backed and structured securities that are required to use the modified FE process. Review the new SVO manual carefully for those modifications.

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Companies reporting long-term certificates of deposit (CDs) on Schedule D – Part 1 (that is the correct reporting for long-term CDs) that meet the FDIC limitations, should insert a dollar sign ($) in the Code column and use an NAIC designation of 1. 

Over the FDIC guarantee limit? If the CD is publically traded (and it probably is not), use the FE process to decide upon a NAIC rating. Does the issuing bank have debt that is rated?  If so, convert that rating for the CD. Still not covered? Then technically, you are supposed to file with the SVO to have the bank rated. 

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The bond collateral type codes have changed again. One previous code was deleted, one new code was added, and many of the previous codes were changed. Please review your ABSs for a possible reporting change in the type code.

Schedule D – Part 1A

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In both Sections 1 and 2, prior-year columns will need to be restated if your company previously had Credit Tenant Loans that now have to be reported as Industrial and Miscellaneous. No CTLs? No problem.

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Since Section 2 was reported by bond sub-category, and almost all those sub-categories have changed, the prior-year column will have to be restated to use the current reporting sub-categories.  Sorry.

Schedule DL

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This schedule has some new asset categories that can be used for reporting. In addition, it seems the NAIC was not too happy with the reporting they received on this schedule last year (it was new), so they have fortified the instructions for clarity. Since all the rest of the investments schedules contain a Code column and DL did not, it was also added this year. 

Summary Investment Schedule

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New lines were added for the reporting of derivatives (Line 7) and securities lending collateral reinvested (Line 9). This now bring the Summary up to date with the investment reporting categories used on the Assets page.

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Two new columns were also added to the reporting format. Column 4 is to be used to report the types of investments that have been reported in the aggregate on Line 9, Column 3.  Be carefully how you tie everything together in Column 5 (Total). For Lines 1 through 8, 10, and 11, Column 5 will equal Columns 3 + 4, as stated on the reporting format.  However, Line 12, Column 5 is calculated as Line 12, Columns 3 + 4 minus Line 9, Column 3.

Supplements

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New last year, the Supplemental Health Care Exhibit has been extensively revised, and the instructions expanded for more clarity. Please review all instructions carefully, as the NAIC has clarified the use of definitions for terms used in the supplement. Companies are to use definitions provided in this Supplement’s instructions, instead of definitions that may exist elsewhere for the same phrase. Remember, the definitions for this Supplement were provided by the federal government and were not created with statutory reporting in mind. Be careful! The NAIC has added several crosschecks to other parts of the statement and/or other supplements that were not included last year.

LAH/Fraternal Statements

Five-Year Historical Data

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Instructions now clarify that realized and unrealized gains and losses reported should be net of taxes and after any transfers to the IMR. Crosschecks were also added to stress that point.

Notes to Financials

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Note 21H on retained asset accounts will now be data-captured, so don’t forget to go to that part of your filing software and enter the required information.

Supplemental Interrogatories

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A new question asks whether a company will be filing the 2001 Preferred Class Tables actuarial certification.

Workers’ Compensation Supplement

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It took years to get the P&C companies to complete the prior year lines correctly on Schedule P. Now the NAIC is trying to get the LAH companies that complete Schedule P as a part of this supplement to provide quality information. Look for a lot of new instructions and some examples.