This week, the NAIC has reported corrections to the 2011 Annual Statement Instructions and posted the corrections to the Blanks Working Group website. Additionally, the NAIC has reported certain validations on the Supplemental Health Care Exhibit – Part 2 contain a logic error resulting in false failures. Other NAIC validations are also returning false failures (Note 9 Income Taxes if you report a Deferred Tax Liability and Life RBC Page 2 Bonds if you report short-term invested assets on SCDLPT1 Line 8999999).

First, let’s look at the Instruction corrections posted by the NAIC this week dated 02/12:

A correction to the Cash Flow instruction’s section for Cash from Investments Worksheet affects the NAIC statement types Fraternal, Health, Life, Property/Casualty and Title. Look under the heading titled Schedule A – Verification Between Years and you will see the reference “(Report on Line 13.4 of Cash Flow)”. This reference should follow the reference for Line 3, not precede it, which the NAIC correction resolves.

An additional instruction correction is found for the Health Statement to the Underwriting and Investment Exhibit – Part 2C – Section A and Section B. In Section A the correction is in the following sentence: “As an example, Column 2, Line 2 should be the claims incurred in 2007 and paid in 2008 2007 and 2009 2008.”

In Section B the correction is in the following sentence: For example, Column 2, Line 2 will be for claims incurred in 2007, paid in 2007 and 2008, and any remaining liability or aggregate claim reserve remaining on those 2007 claims as of year-end 2009 2008.”

The Title Statement Instructions for the Statement of Income Line 1.3 is also corrected as follows:  “The amount shown on this line should agree with the amount shown on the Operations and Investment Exhibit, Part 1A, Total of Line 3, 4, 5 and 6, Column 4.”

If you are completing the Supplemental Health Care Exhibit then be aware the following NAIC validations on Part 2 contain a logic error which results in a false failure. Subject to the Aggregate 2% Rule, a reporting entity has the option to report amounts in Column 11 or in Columns 8, 9, 10. The NAIC validation returns a false failure if you opt to report amounts in Columns 8, 9 and 10. Your software vendor may provide an update to correct these NAIC validations, otherwise; report the failed validations as bad NAIC checks in your April Filing. The rule numbers are _ZAAU900066, _ZAAU900070 thru _ZAAU900078, _ZAAU900092, _ZAAU900143 through _ZAAU900148.

And lastly, the NAIC is aware that on Note 9 a validation is returning a false failure if the reporting entity reports a net deferred tax liability. The validation fails when Note 9 line 09A01F, Deferred Tax Assets Non-admitted, equals zero and a Deferred Tax Liability is reported on the Liabilities schedule. As of today, the NAIC has indicated a correction to the validation or the Instructions is not planned. The rule numbers affected are Health Statement XZASN000028, Life Statement LZASN000033, Property/Casualty PZASN000147, and Title TZASN000014.

The NAIC is also aware that Life RBC validation LXARU900015 on Page 2 Bonds returns a false failure when short-term invested assets are reported on SCDLPT1 Line 8999999 as does validation LXARU900007 when long-term bonds are reported on SCDLPT1 Line 6599999. The validations do not include these amounts but should. The NAIC has not indicated if the validations will be corrected or removed. Report as invalid NAIC validations in your RBC Filing.