At the Spring 2023 National Meeting of the US National Association of Insurance Commissioners ("NAIC"), the NAIC Statutory Accounting Principles (E) Working Group (the "SAP WG") met on March 22. As is customary, the SAP WG had a full agenda, but this update focuses on the agenda items of greatest interest to the insurance and investment community. Meeting materials and exposure drafts are available at the SAP WG web page.
- Affiliated Investments
The SAP WG adopted an amendment to Statement of Statutory Accounting Principles ("SSAP") No. 25 - Affiliates and Other Related Parties, clarifying the definition of an affiliated investment for statutory accounting purposes. The standard definition of an affiliate in SSAP No. 25 is "an entity that is within the holding company system or a party that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the reporting entity" (i.e., the insurance company). The SAP WG amendment added the following sentence to SSAP No. 25: "Any invested asset held by a reporting entity which is issued by an affiliated entity, or which includes the obligations of an affiliated entity is an affiliated investment" (emphasis added). This change has implications for securitizations where the issuer is not an affiliate of the insurance company because it is owned and controlled by an unaffiliated third party, but where the underlying credit exposures are those of an affiliate of the insurance company. The sentence added to SSAP No. 25 makes clear that those will be treated as affiliated investments.
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