UPDATED: June 19. 2020 at 1:30 PM
We previously communicated that the NAIC Statutory Accounting Principles (E) Working Group (SAPWG) exposed for comment INT 20-08T: COVID-19 Premium Refunds, Rate Reductions and Policyholder Dividends. Refer to our blog post Accounting for COVID-19 Inspired Premium Relief dated May 8, 2020 for a background, overview and details of the interpretation.
The SAPWG adopted its final interpretation (INT 20-08) at its June 15, 2020 meeting, retaining the primary conclusions reached in the exposed interpretation. Specifically, responding to public comments, the SAPWG considered whether to allow reporting entities that filed policyholder endorsements, which allowed insurers to voluntarily provide a return of funds to policyholders, to report the payments either as a return of premium, as an “other underwriting expense” or in a different manner.
The SAPWG concluded existing statutory accounting guidance requires return of such amounts to policyholders be recognized as a reduction to premium and reporting any such voluntary or jurisdiction-directed refund as an expense is not consistent with statutory accounting guidance.
Full copy of the final interpretation is posted on the SAPWG website here.
To further discuss this interpretation or any other issues impacting your insurance company, please contact BSSF’s Property & Casualty Insurance Practice.
Disclaimer: This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our Firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.