Since SSAP 35’s 2001 adoption, Interested Parties have provided information to the Working Group addressing difficulties applying the rule. The Interested Parties’ 2006 survey of industry application of SSAP 35 prompted the NAIC Statutory Accounting Principles Working Group to form a subgroup to reconsider the matter. The Interested Parties’ survey indicated property and casualty insurers did not appear to have any consistency in their estimates in applying the current SSAP 35 guidance.

 

In order to assist the Working Group, the NCIGF provided essential background information that supports modifying SSAP 35. The information presented by the NCIGF to the NAIC was included in the draft Issue Paper exposed for comment in November 2009. It is expected that the NAIC Statutory Accounting Principles Working Group will adopt the change to SSAP 35 in summer 2010; the change will then become effective later that year.

 

The November 2009 Issue Paper states “After considering the presentation by NCIGF, the Subgroup concluded that in addition to mirroring the GAAP requirements, adopting the approach within ACS 405-30 (SOP 97-3) would result with the recognition of liabilities that are better estimates, more consistently determined, and more verifiable than the existing statutory approach.” The Subgroup noted that the inconsistencies in reporting and the lack of verifiable information reduced the conservative benefits received under the existing guidance in SSAP No. 35.

 

The GAAP-based SOP 97-3 takes the approach that for prospective-based premium assessments, used by 54 of the 57 guaranty associations, two events must occur to trigger liability for post-insolvency assessments: 1) the insolvency itself and 2) the writing of the premium in the base year for guaranty fund assessments. The liability to be recorded is what can be reasonably estimated and relates to premium writings for the year preceding the year of assessments.