The NAIC Statutory Accounting Principles (E) Task Force last week adopted three interpretations related to COVID-19.
Statutory accounting exceptions allow insurance reporting entities to respond to policyholders’ needs for late premium payments and to respond to mortgage modification or forbearance requests, while alleviating reporting entities’ concerns assurance regarding the impact on the statutory financial statements.
The interpretations allow additional time for insurance reporting entities to collect premiums receivable before reporting the claim as disallowed in the statutory financial statements.
Additionally, the interpretations provide allowances to insurance reporting entities to classify a mortgage or bank loan, which has been amended in response to COVID-19, as a distressed debt restructuring.
Finally, the provisions allow deferred impairment assessments of the insurance reporting entity for bank loans, mortgages and investments, which primarily hold mortgages due to forbearance or changes, in response to COVID-19.
The interpretations are designed to provide time-limited exceptions, but the working group is committed to continuing to review the environment in response to COVID-19 and will consider whether additional extensions or interpretations are needed.
Here is a summary of the three changes:
INT 20-02: Extension of the ninety-day rule for the impact of COVID-19. This interpretation provides for an optional extension of the 90-day rule prior to the exclusion of premiums receivable and amounts receivable from uninsured non-government plans.
INT 20-03: Restructuring distressed debt due to COVID-19. This interpretation clarifies that a modification of the terms of a mortgage or bank loan in response to COVID-19 must follow the provisions detailed in the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” of April 7 and the provisions of the federal CARES (Coronavirus Aid, Relief, and Economic Security) Act to determine whether the change should be reported as a distressed debt restructuring.
INT 20-04: Mortgage depreciation assessment due to COVID-19. This interpretation provides time-limited exceptions to defer impairment assessments of bank loans, mortgages and investments, which primarily hold underlying mortgages, which are affected by forbearance or amendments in response to the COVID-19.