Insurers may soon benefit from reporting revisions to diversify and strengthen investment portfolios and enhance managing Risk Based Capital (“RBC”). As part of the ongoing National Association of Insurance Commissioners (“NAIC”) Investment Classification Project it is proposed that RBC for NAIC designated mutual funds be based on the underlying holdings of the funds.
The Statutory Accounting Principles Working Group (SAPWG) recently exposed an issue paper that substantially revises the Statement of Statutory Accounting Principles (“SSAP 30”) for Unaffiliated Common Stocks. The issue paper updates the definition of common stock in scope of SSAP 30 and includes SEC registered closed-end funds and unit investment trusts. Also the issue paper embraces industry and regulatory support where RBC for mutual funds within the scope of SSAP 30 and reported on Annual Statement Schedule D – Part 2-2, could be based on the underlying assets. It is anticipated the result will be consistent and reliable financial reporting of these funds along with recognition of their appropriate risk sensitivity.
Within the NAIC process, SAPWG does not have the authority to implement RBC or reporting changes. Therefore, these revisions have been referred to the Valuation of Securities Task Force (VOSTF), Casualty Actuarial Task Force (CATF) and the Blanks Working Group (BWG).
The issues paper comment period ends October 5, 2018. Soon after, we should know more on the timing for implementing the substantive revisions to SSAP 30 and the look-thru for mutual fund assets.
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