Accounting Practices Preamble

Question 1

considerations for conservatism in accounting practices (3)

Answer 1

• conservatism when developing estimates provides a margin of protection
• accounting should be conservative over the span of economic cycles
• valuation procedures should prevent sharp fluctuations in surplus

Question 2

considerations for consistency in accounting practices (2)

Answer 2

• development and application of statutory accounting principles should be consistent
• framework should be responsive to regulatory concerns and address emerging issues

Question 3

statutory heirarchy

Answer 3

• Level 1: SSAPs
• Level 2: positions of Emerging Accounting Issues Working Group and interpretations of existing SSAPs by SAP Working Group
• Level 3: NAIC Annual Statement instructions
• Level 4: SAP Preamble and Statement of Concepts
• Level 5: non-authoritative GAAP literature

Question 4

permitted accounting practices

Answer 4

practices specifically requested by the insurer, that are inconsistent with NAIC SAP and the state prescribed accounting practices, and that have received approval from the domiciliary state’s DOI

Question 5

what a state regulator should do before approving an insurer’s request for permitted accounting practices

Answer 5

provide notice 5 days in advance to other states where the insurer is licensed and the NAIC