Publications

• 30 Second Ideas
• Accounting Updates
• Alerts
• Articles
• Business Surveys
• Construction Edge
• Healthcare Edge
• Insurance Edge
• Legal Talent
• Manufacturing Edge
• Not-for-Profit Edge
• Quick Links & Good Ideas
• SEC Edge
• Strategy Insights Blog
• Surviving the Upturn
• Tax Highlights

Article Author:

NAIC Adopts Temporary Changes to SSAP 10

Listen to or download the February 11, 2010 SSAP No. 10R webinar recording.

At the winter meeting in San Francisco, California on December 5–9, 2009, the National Association of Insurance Commissioners (NAIC) adopted changes to Statutory Statement of Accounting Principles (SSAP) 10 – Income Taxes and issued SSAP 10R.

The adoption is meant to provide some added relief to insurers who have suffered surplus depletion over the past two years due to economic conditions in the global economy. These perceived benefits however, may not last long. The changes will be effective for year-end December 31, 2009 and for interim periods in 2010 and will sunset on December 31, 2010 unless the NAIC acts again.

What’s New?

SSAP 10R has implemented 3 new items to consider:

• Similar to FAS 109, a statutory valuation allowance should be considered.  This allowance, if necessary, would be considered prior to the admissibility test in SSAP 10, paragraph 10.
• Under admissibility test 10c and 10e.iii an entity must consider the character (ordinary v. capital) where off-setting would be permitted in the tax return under existing tax laws.
• Risk Based Capital (RBC) requirements may limit additional admissibility.

What’s Changed?

• Under SSAP 10R, admissibility test 10 e.i. increases the loss carry-back allowance from one year to that allowed under current Internal Revenue Service tax loss carry-back provisions, not to exceed three years.
• Under SSAP 10R, admissibility test 10 e.ii b the 10 percent of capital and surplus limitation has been increased to 15 percent.

To take advantage of these increased admissibility provisions, an insurer’s RBC needs to be above the trend-test threshold (if subject to it) or above the maximum RBC level where a regulatory action level could occur, which is 250% for life and fraternal entities and 300% for property/casualty and health entities.  Additionally, the added benefit of the changes under 10 e admissibility tests is to be shown as an aggregate write-in for surplus, rather than as unassigned funds.  See SSAP 10R for additional disclosure requirements as well.

For additional information on SSAP 10R please contact Jeff Dertz, Partner at 312-980-3224 or jdertz@BlackmanKallick.com.
 

 

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.