On Tuesday, January 27, 2009, the NAIC Capital & Surplus Relief Working Group held a public hearing on its draft recommendations regarding nine insurance industry proposals designed to provide capital and surplus relief on life insurers' December 31, 2008 statutory financial statements. After spirited discussion among regulators, industry representatives, and consumer advocates, the Working Group formally approved each of its prior draft recommendations, with one modification - the recommendation to allow expanded recognition of deferred tax assets (DTA) was further modified to increase transparency. Specifically, upon motion of Wisconsin Insurance Commissioner Sean Dilweg, the following requirements have been added to the final recommendation:
1. Increased surplus for admitted incremental DTA would be recorded separately as a write-in on the aggregate addition to surplus line.
2. Total incremental DTA would be reported separately as a balance sheet write-in; the tax footnotes would be expanded to show incremental admitted DTA; and any company reporting DTA would be required to include a DTA calculation with its annual statement submission.
3. The NAIC will monitor the effect of the DTA changes, including the 3 year and 15% rule in the Working Group recommendation.
The Working Group has forwarded its final recommendations to the NAIC Plenary for consideration at a conference call scheduled for this Thursday afternoon, January 29, 2008. NAIC President and New Hampshire Insurance Commissioner Roger Sevigny has stated that the Plenary will individually consider and vote upon the Working Group's recommendations with regard to each of the nine industry proposals. Based upon comments at the public hearing, we anticipate that the Plenary's consideration of the recommendations will also include an inquiry into whether the respective Commissioners' "permitted practices" authority under existing law obviates the need for the proposals.
Our recent Client Alerts on this topic provide greater detail on the specific proposals, and are available here: Balance Sheet Relief for Life Insurance Companies? and NAIC Publishes Draft Guidance on Reinsurance Collateral Relief .