12 Days of SSAP: Bond Project Final Thoughts
JLK Rosenberger is carrying on our holiday tradition of taking a new perspective on a holiday classic – the Twelve Days of Christmas. Rather than filling your head with turtle doves and gold rings, we are focusing on the latest changes to SSAP and how they will impact your insurance entity in 2026 and beyond.
Welcome to Day 1 of our 12 Days of SSAP series and get ready for 11 more need-to-know summaries to follow. Our Day 1 post is a brief reminder of the recently finalized Principle-based Bond Project (PBBP) and the refined definition of what constitutes a bond that can be reported in Schedule D of the Statutory financial statements. Many of you have been through the webinars explaining some complex criteria related to proper classification of investment securities. The information provided herein will give you a refresher.
The updated Bond Project statutory accounting guidance became effective on January 1, 2025, so companies should already be operating under the new requirements. While the recognition and measurement changes may feel familiar at this point, the more significant challenge will be ensuring that financial statement disclosures are fully aligned with the new investment classifications, which may require additional analysis, coordination, and validation to ensure completeness and accuracy.
Bonds and Asset-Backed Securities (SSAP Nos. 26 and 43)
Updates to SSAP No. 26 introduced a new, principle-based definition of what qualifies as a bond. Related changes to SSAP No. 43 clarify the accounting and reporting requirements for investments that meet the updated definition of asset-backed securities.
Regulators have made it clear that investments that do not meet the new bond criteria after adoption may no longer be reported as bonds on Schedule D-1. There is no automatic grandfathering for existing investments. However, regulators acknowledged that certain practical accommodations may be available to help companies transition to the new guidance without undue burden.
Other Admitted Assets (SSAP No. 21)
Changes to SSAP No. 21 addressed how companies should account for debt investments that no longer qualify as bonds. In cases where repayment depends mainly on underlying collateral, the investment can only be admitted if that collateral itself qualifies as an admitted asset.
The guidance also updated how residual interests are measured, regardless of their legal structure. Following feedback from the industry, regulators allowed companies to use a more conservative and operationally simpler approach—the cost recovery method—as a practical alternative to a more complex yield-based calculation. Once elected, this method must be applied consistently to all residual interests, with any future changes applied only to new investments. Related impairment guidance was updated as part of these revisions.
Effective Date
January 1, 2025
Deep Dive
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