During the NAIC Summer 2021 meeting, SAPWG adopted the revisions to SSAP No. 48 Joint Ventures, Partnerships and Limited Liability Companies and SSAP No. 97 Investments in Subsidiary, Controlled and Affiliated Entities.
The revisions in SSAP No. 48 clarify that the equity method valuation referenced in SSAP No. 97 can result in a negative equity valuation regardless of whether the investment is supported by an audit. However, investments not supported by an audit may cause reporting entities difficulty calculating the required adjustments under SSAP No. 97, paragraph 9 (limited statutory adjustments, which intentionally do not stop at zero). SSAP No. 48 requires an audit to be considered for admittance. The revisions in SSAP No. 97 clarify that when applying the “limited statutory accounting adjustments” to foreign insurance subsidiaries, the resulting equity value shall stop at zero (and thus not be subject to negative equity valuations) in cases where the foreign insurance subsidiary is not providing services to, or holding assets on behalf of, U.S. insurers.