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Catastrophes in the insurance industry create a ripple effect throughout the business infrastructure. This article addresses one of those issues faced by policyholders and insurance entities directly impacted by the recent California wildfires as all parties work to come to grips with the aspects of keeping the operational side of their businesses flowing. In this instance, the payment and processing of premiums are addressed by the NAIC to help provide a cushion to those directly affected.
The unexpected Camp, Hill and Woolsey fires caused a devastating amount of damage and loss in California. The coverage on national and local news, online and on social media platforms made it easy to experience and empathize with the human suffering. The impact on families who lost their homes and belongings was obvious, but equally impacted were insurance companies with policyholders in affected zones. The magnitude of these fires has impacted virtually every aspect of the insurance business which also includes financial accounting/reporting. Last week the Statutory Accounting Principles Working Group (SAPWG) met to discuss permitting a temporary 60-day extension of the normal 90-day rule outlined in paragraph 9 of SSAP No. 6. At issue was whether such an extension for premium receivables for impacted policies or agents should be permitted, past precedents for such a change and how to implement an extension. Below is a brief summary of the meeting outcome along with supporting details.
60 Day Extension
SAPWG reached a tentative agreement permitting public comment on a one-time 60-day extension for the non-admission of uncollected premium balances, bills receivable for premiums, and amounts due from agents and policyholders directly impacted by the California fires. The fine print outlines the specifics including;
- For policies in effect as of the declaration of a major disaster or a state of emergency by either the state or federal government, as described in paragraph 1 and 2, insurers with policyholders or agents in areas impacted by the California fires may wait for a total of one hundred and fifty days (90 days per existing guidance, plus a 60-day extension = 150 days), before non-admitting premiums receivable from those directly impacted policyholders or agents as required per SSAP No. 6, paragraph 9. This option and a temporary extension for affected policies and agents is not to extend past April 24, 2019.
- Existing impairment analysis remains in effect for these affected policies.
Public Comment Period
The public comment period is currently open through February 15, 2019. Those interested in commenting can find the relevant details on agenda item 2019-01 (tentative INT 19-01) on the Exposure Drafts tab of the SAPWG website.
If you have questions about this proposed change and how it may impact your insurance company, JLK Rosenberger can help! For additional information call us at 818-334-8623 or click here to contact us. We look forward to speaking with you soon.