Accounting Standard Updates

NAIC’S COVID-19 IMPACT DECISIONS: INT 20-05 – Investment Income Due and Accrued

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Hot Take:

Hot Take

On May 20, 2020, the NAIC Statutory Accounting Principles Working Group (SAPWG) held a conference call to address additional financial reporting issues created by the COVID-19 pandemic. In this post, we discuss the newly adopted Interpretation (INT) 20-05, Investment Income Due and Accrued.



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Background – INT 20-05, Investment Income Due and Accrued

This INT provides some relief to the traditional SSAP No. 34 – Investment Income Due and Accrued promulgation by continuing the existing direction of SSAP 34 for recognizing investment income. The INT provides a proviso to SSAP 34 for mortgage loans, bank loans, and other investment products with underlying mortgage loans that are affected through modifications or forbearance that were current as of December 31, 2019, and not experiencing financial problems at the date of modification.

So, what’s the rub?

If the aforementioned conditions are in place, INT 20-05 provides an exception to non-admitting recorded investment income due and accrued that is considered collectible and over 90-days in arrears. The INT will not require further evaluation of collectability for the 1st and 2nd quarter 2020 financial statements unless other matters threaten the collectability of the investment. The INT specifically excludes mortgage loans in default, which continue under the normal SSAP 34 direction. The Working Group will revisit the INT in August 2020 for possible extension.

Other SAPWG Conference Call Decisions:

Two additional INT promulgations were discussed during the May 20 conference call: