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BLOG. 3 min read

Success Tips for Annual Statutory Statement Filing in 2023

All licensed US insurers must file their annual statutory statement with the National Association of Insurance Commissioners (NAIC) no later than 12 p.m. on March 1.

This annual statement requires the focused work of multiple employees for many weeks throughout January and February—a huge undertaking that is both expensive and strenuous. This effort has been exacerbated over the last few years as insurance investment portfolios have diversified and expanded into more complex and alternative investments—each of which comes with unique statutory accounting requirements as well as distinct reporting schedules.

In order to avoid getting into hot water with regulators or auditors, insurers should try to minimize mistakes or reporting errors ahead of filing submission.

If like many insurers in 2023, you have exposure to private assets—private credit, derivatives and other investment vehicles outside of exchange-traded publicly listed instruments—you are likely dealing with new levels of complexity as you work to complete the quarterly and annual filing process.

To that end, SS&C’s statutory preparation and filing service experts have outlined four tips to help you reduce errors and inquiries related to your 2022 NAIC annual filing, and ensure a smoother audit process come June.

Tip 1

Send out fair market valuation requests to investment companies and obtain fair market valuation policies from the investment companies.

With public investments, obtaining valuations is easy. You pull prices from a market data provider or custodian like Bloomberg or IDC as needed for each listed security, and you are done. With alternative or private investments, no such resource is available. Valuation is typically sourced directly from the company/asset where you are invested. Therefore, establishing a stringent valuation and pricing policy and cadence for your private investments and then proactively requesting the information you need to update those valuations is paramount and will enable you to avoid submitting a stale market value that you may likely have to adjust or restate later.

Tip 2

Communicate with the tax accountant on the timing of sending out financial statements to obtain correct Deferred Tax Asset calculation and disclosure.

Ensure you have correct values for deferred tax implications and disclosures from your tax accounting specialist based on your final pre-tax statutory filing. Taking this step proactively helps avoid the need to amend current year DTA/DTL positions after filing your Annual Audit due June 1.

Tip 3

Check with the NAIC and local filing preparer to ensure you have correctly taken into account any recent NAIC changes that might impact calculations on your holdings.

In light of diversifying insurance investment portfolios and increased interest rate volatility, the NAIC has made a number of recent and proposed changes to accounting and risk-based capital (RBC) treatment for certain asset types. Take the NAIC’s 2021 changes to RBC requirements and factors for direct real estate investment and partnerships, as an example. These changes were advantageous to insurers, allowing them to reduce the amount of capital held in reserve for Schedule BA partnership investments and direct real estate (Schedule A), impacting the calculations of how these investments must be reported on their respective schedules this year. In addition, insurers who missed the change when it became effective may also have missed an opportunity to increase yield or re-optimize their use of surplus capital.

Tip 4

Always go back into NAIC filing site to confirm that your submission has been accepted and placed correctly.

Now that filing is electronic, we often rely on email confirmations to demonstrate that documents are accepted. The email confirmation you receive is definitely a good sign, but verifying that the filing is accepted AND placed correctly in the data warehouse is the only way to know for sure that you have met your obligation to file on time. This extra step allows you to state with 100% confidence that the filing is complete and on time.

SS&C provides a rigorous set of quality control review services, statutory statement preparation and filing assistance for clients, a specific set of expertise around the accounting, financial and regulatory reporting for complex and alternative investments, and we have tax specialists on hand to help provide guidance on tax basis accounting matters, as the March 1 filing deadline draws near. To learn more, contact us.

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