12 Days of SSAP: SSAP No. 56 – Separate Accounts

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 4 discussion brings us to a narrow but important area of Statutory financial reporting – the Separate Account financial statement. For those that do prepare a Separate Account statement, there are several interesting changes being made available. The typical process of transferring assets at market value between the General and Separate Accounts has been revisited.  With the increasing occurrences of Separate Account fixed income assets being held at book value versus market value, regulators have requested clarification in the transfer process to present uniform accounting among insurance entities. This briefing provides the general approach recently accepted for Statutory reporting.

Attention Green Book filers! Recent regulatory discussions surrounding SSAP No. 56 highlight that existing guidance does not clearly prescribe how asset transfers between separate and general accounts should be executed when the assets will continue to be held and reported at book value. Specifically, current guidance does not clarify whether assets should be transferred at fair value—resulting in the recognition of gains or losses before applying general account measurement requirements—or whether the transfer should occur at the carrying value reflected in the originating account.

Because the transfer approach may affect gain or loss recognition and the Interest Maintenance Reserve (IMR), regulators emphasized the importance of clearly defining and consistently applying the transfer methodology to promote uniform reporting.

The industry has observed an increasing number of “book value” instruments being held in separate accounts that are not tied to an underlying investment portfolio and instead function more like fixed interest rate guarantee products. This raised questions about the appropriate treatment of transfers between the general and separate accounts.

Under the final adopted guidance, transfers may be recorded at book value in those limited situations where the investment experience of the underlying assets is not passed through to the policyholder.

The revisions become effective on January 1, 2026, with early adoption permitted. Regulators acknowledged that an increasing number of assets measured at book value are currently reported within separate accounts under state-approved prescribed practices issued by an entity’s domiciliary regulator. The January 1, 2026 effective date is intended to give reporting entities sufficient time to update their separate account product plans or memoranda of operation, as needed, and obtain the appropriate approvals from their state of domicile to align with the revised guidance. Beginning January 1, 2026, reporting entities must have an approved permitted or prescribed practice in place to apply a book-value measurement approach or any alternative method for asset transfers and the recognition of IMR or AVR that differs from the requirements outlined in the revised SSAP.

Effective Date

January 1, 2026

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