12 Days of SSAP: Restricted Assets Classification
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.
Our Day 5 post addresses a clarification by the Statutory Accounting Principles Working Group to solidify the recognition of assets that are projected to support the liability amounts reflected within a Modified Coinsurance contract or Funds Withheld agreements. Emphasis is placed on specific asset recognition to avoid a potential miscalculation of Risk-based Capital with respect to assets restricted in their availability to operations.
Restricted Assets Classification is clarified through recently adopted revisions that explain how assets held under modified coinsurance (Modco) and funds withheld (FWH) arrangements should be reported in restricted asset disclosures under SSAP No. 1 and Note 5L of the statutory financial statements. These updates are designed to give readers a clearer, more complete picture of all restricted assets and to help explain any differences between restricted asset disclosures and the amounts used in RBC calculations. The revisions also update the life RBC instructions, making it clear that assets pledged as collateral for purposes unrelated to a reinsurance agreement do not qualify for Modco or FWH-related RBC charge reductions.
These changes do not include Modco or FWH assets in restricted asset reporting that flows through to the general interrogatories, which would otherwise trigger an additional noncontrolled asset RBC charge. While the RBC formula already provides credit for Modco/FWH assets, classifying them as noncontrolled assets would have added complexity and required further adjustments to preserve that credit.
Instead, the revisions enhance the existing restricted asset disclosure in SSAP No. 1, which currently focuses on collateral reported on the balance sheet when a related liability exists. By expanding this disclosure to include Modco/FWH assets and providing a clearer comparison of restricted assets to total and admitted assets, the approach avoids unintended RBC impacts while giving regulators improved visibility into assets that are pledged, not fully controlled, or otherwise earmarked for a specific purpose.
Effective Date
December 31, 2025
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