With the March 1 statutory financial statement deadline days away for insurers, states continue to weigh in on how variations from prescribed capital and surplus requirements will be treated.

In Virginia, the Bureau of Insurance of the State Corporation Commission issued a bulletin on Feb. 23 which addresses how it will handle permitted practices of foreign insurers, those not domiciled in Virginia.

"It is my understanding that the Bureau has not nor does it intend on issuing any permitted accounting practices," said Ken Schrad, a spokesperson for the commission.

The bulletin states that the bureau will be "closely monitoring Footnote #1 of the filed Annual Statements" which discloses variations from the NAIC's accounting practices and procedures manual.

The disclosure, according to the bulletin, "shall include a description of the accounting practice, a statement that the accounting practice differs from NAIC statutory accounting practices and procedures, and the monetary effect on net income and statutory surplus as a result of using an accounting practice that differs from NAIC statutory accounting practices and procedures."

According to the bulletin, "if an insurer's risk-based capital would have triggered a regulatory event had it not used a prescribed or permitted accounting practice, that fact should be disclosed in the annual statement."

Finally, the Virginia Bureau states that if the permitted practice is deemed "material" then the practice may not be allowed and the insurer could be required to re-file its annual statement.

In California, no requests from the state's domestic insurers have been received, said Molly DeFrank, department spokesperson. A request for use of permitted practices would be reviewed according to the particular facts and circumstances of the insurer making the request, she noted. That review would look at the appropriateness of the request and whether documentation indicated that the practice is "defensible and makes good economic sense," she added.

In Nebraska, one company has requested and will receive some capital and surplus relief, Nebraska Director Ann Frohman confirmed. Ms. Frohman added that until financial statements are filed and made public, she is limited on the information that can be made public. However, she did say that the relief was not associated with deferred tax assets. She added that it did involve work underway at the National Association of Insurance Commissioner's Life & Health Actuarial Task Force.

Jim Connolly is senior editor for National Underwriter Life & Health magazine.

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States Continue To Review Capital And Surplus Relief For Insurers

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