NAIC APPM Flashcards
Users of accounting info
management
investors
potential investors
regulators
customers
lenders
What should insurer accounting practices aim to prevent?
-sharp fluctuations in surplus
Key SAP principles
-admitted assets (liquid enough for PH needs), subtract things like encumbrances
-liabilities are recognized when they are incurred
-revenue recognized when earnings process is complete
Purpose of SAP Codification
done in 2001
-create a comprehensive guide to statutory accounting
before this, rules were not consistent
-insurers were unsure abt rules
-regulators were unfamiliar
-insurers statements were not always comparable
-RBC became more consistent, better accounting uniformity
Are SAP rules subject to state commissioner?
Yes, they can modify them
SAP Hierarchy
1- SSAPs
2- Consensus of Emerging Issues Group
3 - NAIC Annual Statement Instructions
4 - SAP statement of concepts
5- sources of non-authoritative GAAP guidance, or FASB, IFRS
What should someone do when an event is not covered by SSAP?
-may be appropriate to a comparable event
-consider other accounting literature, depending on relevancy
Permitted Accounting Practices
-specifically requested by insurer, inconsistent with NAIC SAP and state prescribed, but have received approval for dom com
Prescribed Accounting Practices
-included directly in state laws and applicable all domiciled insurers
How much notice should the domiciliary regulator provide when considering approval of a request to deviate from NAIC APPM?
5 days notice
What should the notice disclose (for approval of NAIC APPM deviation)?
to all other states in which insurer is licensed
-nature and clear descr of permitted accounting request
-quantitative impact
-any potential effects to each financial statement item
Interim Financial Statements
-need disclosures sufficient to prevent info from being misleading, may duplicate annual statement notes, still necessary if events have material impact
