During the NAIC Spring Meeting, the working group adopted several revisions to SSAP No. 25 – Affiliates and Other Related Parties. Even though these revisions were categorized as nonsubstantive, they resulted in significant changes to a definition of related parties in order to be consistent with U.S. GAAP and the SEC definition.
The revisions now include the following groups:
- any immediate family members of a principal owner, director or executive officer of the reporting entity;
- companies under common control (such as principal owners, directors, or officers), including situations where principal owners, directors, or officers have a controlling stake in another reporting entity;
- any direct or indirect ownership greater than 10% of the reporting entity, regardless of disclaimer of control or disclaimer of affiliation.
SSAP 25R now also includes illustration where the presumption of non-control may be in doubt: agreements where direct or indirect non-controlling ownership interest is less than 10% where the parties have structured the arrangement to avoid the 10% threshold and related party classification.
The Blanks Working Group adopted a related proposal that added a new Part 3 to Schedule Y to include all entities with ownership greater than 10% of an insurance entity, the ultimate controlling parties of those owners and other entities.
Additional revisions to SSAP No. 25 were submitted for comments by the working group during the December 2021 meeting. The proposed changes will further clarify applying the existing affiliate definition and reporting of related party/affiliate transactions within the reporting lines in the investment schedules. Revisions will also add new disclosure requirements for investments acquired through or in a related party, regardless of whether they meet the affiliate definition. If adopted, these changes will become effective for the 2022 year-end reporting period.