With the NAIC 2011 March Annual Statement Filing behind us and the April Filing winding down we can turn our focus to the 2012 Quarterly Statement. Although the revisions to the Quarterly Statement are limited this year, and have a relatively minor impact, some revisions intended to be addressed in this release fell through the cracks and will have to wait until the 2013 Quarterly Statement for implementation.  Unfortunately, circumstances are such that it is not uncommon for the final release of the NAIC Annual or Quarterly Statements to not agree with the items adopted effective with that particular release of the Statement.  

These inconsistencies can generate confusion which we can dampen by knowing the NAIC’s intention to correct the inconsistency in a subsequent filing period.  The following list of issues is minor in nature in light of the fact the NAIC adopted the revisions effective for this period albeit the corresponding Blank or Instruction change was missed.   

• For General Interrogatory Part 1, due to an NAIC oversight, the following instruction on the Blank for Interrogatory 3 was not removed, "If yes, complete the Schedule Y - Part 1 - Organizational Chart". Beginning with the 2012 Quarterly Statement Schedule Y - Part 1A should be completed and the organizational chart attached each Quarterly Statement Filing regardless of whether there have been any substantial changes.

The NAIC has identified additional errors in the 2011 Annual Statement Instructions and cross checks for the Supplemental Health Care Exhibit. In early February, the NAIC reported validation corrections to the Supplemental Health Care Exhibit – Part 2, February 2012 - NAIC Reports Corrections Affecting 2011 Annual Statements. Now the NAIC reports corrections are needed to the Supplement’s Part 1 – Other Indicators table. The rule numbers affected are _XAAU900371, _XAAU900372, and _XAAU900373. The Instructions for Line 1, 2 and 4 also will be corrected.

Part 1 – Other Indicators - GT Page Line 1 Number of Certificates, Line 2 Number of Covered Lives and Line 4 Member Months are validated by the NAIC to the Accident and Health Policy Experience Exhibit. Currently, the NAIC validations and Instructions are balancing the amounts reported in Column 12 of Part 1 – Other Indicators with the same amounts reported in AHPEE. The AHPEE amounts, however; include uninsured plan amounts (Administrative Services Only and Administrative Services Contract Plans). To correct the imbalance the NAIC validation and Instructions should instead balance Column 14 of Part 1 – Other Indicators with AHPEE.

The NAIC Blanks Working Group plans to adopt this correction as an editorial revision to the 2011 Annual Statement Instructions during the NAIC National Meeting this weekend March 3 – 6. Following adoption the correction to the Instructions should then be posted to the Blanks Working Group website, which we will share on our blog once made available.

I thought I would provide a short and sweet response today to three questions I am receiving with relative frequency.

1. Why is the Colorado Business Only Schedule P no longer on the Colorado Checklist?
• Colorado repealed the requirement to file the Colorado Schedule P information. House Bill 11-1033 specifically repealed the requirement. Select this link to review the Bill, http://www.state.co.us/gov_dir/leg_dir/olls/digest2011a/INSURANCE.htm#11-1033.
2. For new General Interrogatory 15 how do I determine “an NAIC rating of 3 or below” when the bank does not have an NAIC rating?
• The NAIC SVO document NAIC ARO Rating Equivalent to SVO Designations provides information to map an ARO rating to the NAIC Designation. Select this link to review or download the document, http://www.naic.org/documents/svo_naic_aro.pdf.
3. Where can I find information on the 3 new supplemental filings relief from the five-year rotation requirement for lead partner, relief from the one-year cooling off period for independent CPA and relief from the requirements for audit committees?
• This information is found in the Accounting Practices and Procedures Manual, Appendix G – Implementation Guide for the Annual Financial Reporting Model Regulation (Model). The Implementation Guide is also available at http://www.naic.org/documents/committees_e_naic_aicpa_wg_model_audit_rule_imp_guide.pdf.

That’s all for now.  I will post new updates or information as I receive it.  Thank you for the great questions!

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.

Hello my name is Randy Hefel, welcome to my new NAIC Blog!  For my first entry, I thought I would give away something for free.  See, you like me already don't you? 

In all seriousness, the NAIC provides a vast amount of information and updates, especially for year-end.  I would like to invite you to register (for free) to listen to the following recorded webinar which provides an overview of the NAIC regulatory updates for 2011.  In this webinar, I review the final NAIC changes and how they are applied to the annual statement for the 2011 year-end processing season.  Please feel free to forward this link to your colleagues as well. 

NAIC Updates Recording: Run time approximately 1 hour 12 minutes