Accounting Standard Updates
NAIC’s COVID-19 Impact Decisions: Extension of 90-day Rule
Article reading time: 2 minutes 30 seconds
The NAIC Statutory Accounting Principles Working Group (SAPWG) met on April 15 to discuss four important topics and decisions of the Coronavirus impact on insurers’ financial processing. The key topic of immediate bearing addresses the need for relief on the potential of delinquent premium receivables challenging the current 90-day Rule incorporated under SSAP No. 6 – Uncollected Premium Balances, Bills Receivable for Premiums, and Amounts Due from Agents and Brokers, specifically paragraph 9. This article concentrates on the discussion and decisions surrounding premium-related receivables extending beyond the usual 90-day allowance period.
INT 20-02, Extension of the Ninety-Day Rule for the Impact of COVID-19 was approved by the SAPWG following further input and discussion from interested parties.
The general rule for premium receivables over 90 days due requires non-admitted status under traditional statutory accounting presentations. However, as a result of the many issues introduced by the COVID-19 situation, various states are either requiring or encouraging insurers to offer grace period extensions to premium due dates. INT 20-02 is a one-time optional extension promulgation covering uncollected premiums, bills receivable for premiums, amounts due from agents and policyholders, amounts due from policyholders for high deductible policies, and amounts due from non-governmental uninsured plans.
This ruling does not preclude the existing impairment analysis that is required within the SSAPs. If true impairment is determined, amounts should be written off against the applicable accounts.
Specifics of the ruling are as follows:
- For policies in effect and current prior to the date the U.S. federal government declared the state of emergency on March 13, 2020, and policies written or renewed on or after March 13; insurers may follow the timeline described below before non-admitting premiums receivable from policyholders or agents as required per SSAP No. 6, paragraph 9.
- This ruling further extends to policies included under SSAP No. 47, paragraph 10.a., SSAP No. 51R, paragraph 12, and SSAP No. 65, paragraph 37.
The extension is limited to the March 31 and June 30, 2020, quarterly financial statement periods and applies only to the premium-related assets previously noted. The temporary allowance will permit those defined assets that meet the timing constraints to be treated as admitted assets even if greater than 90 days past due. INT 20-02 is not applicable for the September 30, 2020, quarterly reporting period. However, SAPWG has noted the committee will assess and review circumstances coming into the 3rd quarter 2020 for further determination of extension if considered necessary.
Other SAPWG Conference Call Decisions:
Three additional INT promulgations were adopted during the April 15 conference call. You can click below to read more about each issue.
- INT 20-01 – Reference Rate Reform – relating to shifting from the previous London Interbank Offering Rate (LIBOR) used in many contracts to other reference interest rates;
- INT 20-03 – Troubled Debt Restructuring Due to COVID-19 – providing relief in determining whether loan modifications require reporting as troubled-debt restructuring under SSAP No. 36 – Troubled-Debt Restructuring.
- INT 20-04 – Mortgage Loan Impairment Assessment Due to COVID-19 – the purpose of this temporary INT is to assess the effect of loan forbearance or modifications on the statutory financial reporting requirements for mortgage loans, bank loans, and investment vehicles that carry underlying mortgage loans. Concentration will be on whether temporary relaxation of impairment assessment is warranted in specific circumstances.