N.Y. Finally Passes Accounting Bill

By E.E. Mazier

NU Online News Service, July 3, 3:07 p.m. EST?New York is finally catching up with other states that have adopted the National Association of Insurance Commissioners' recommendations for special treatment of deferred tax assets.

Late last night, the N.Y. Senate gave final approval to A11821/S 7790. Once signed into law by Gov. George Pataki, as anticipated, the measure would allow New York domestic insurers to include a portion of their deferred tax assets in their admitted assets.

Admitted assets, which are included in companies' annual statements, are looked on by regulators as a measure of company solvency. They include stocks, bonds, mortgages and real estate.

A deferred tax asset is created if income is recorded today for tax purposes, but in another year for statutory (regulatory accounting )purposes.

About two years ago, the NAIC issued recommendations for reconciling differences in the states' statutory accounting rules for insurers.

In response, most states changed their applicable statutes to allow domestic insurers to treat deferred tax assets as admitted assets, explained. James Olsen, director of financial regulation for the Alliance of American Insurers, Downers Grove, Ill.

The New York State insurance department adopted most of the NAIC recommendations by way of regulations, he continued. But, because the Assembly did not amend the insurance statutes, domestic companies were not able to include the deferred tax amount in their admitted assets.

This inability placed N.Y. domestic companies at a competitive disadvantage to other states whenever "someone was comparing surplus growth and the surplus-related statistics," Mr. Olsen said.

But once A11821/S 7790 is signed into law, N.Y. domestics will be able to include the deferred taxes in admitted assets under certain circumstances and within certain limitations, he said.

As stated in the bill, the overall amount of deferred tax assets that can be admitted is capped, and only certain deferred tax assets are eligible for the special treatment.

In Mr. Olsen's view, the new law will level the playing field for N.Y. insurers. "You're basically looking at comparable numbers now when someone wants to compare surplus size and gross statistics," he said.

"It makes everything much more comparable, which is the direction we want to go to from an accounting standpoint," Mr. Olsen stated, noting that transparency and comparability are two very important issues in the accounting field.

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N.Y. Finally Passes Accounting Bill

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