NAIC.APPM

This reading, NAIC Accounting Practices and Procedures Manual was the result of a task force to identify, investigate and develop solutions to accounting problems faced by insurers.

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Study Tips

Much of the content of this reading is discussed elsewhere in the syllabus (materiality, for example). Spend no more than 30 minutes reading the wiki article and studying the exam questions. There is a only a small amount to memorize.

BattleTable

Based on past exams, the main things you need to know (in rough order of importance) are:

• preparing Fin Stmts - sources of information, materiality considerations
• codification of SAP - reasons

reference	part (a)	part (b)	part (c)	part (d)
E (2015.Spring #18)	codification of SAP: - reasons	preparing Fin Stmts: - source publications	preparing Fin Stmts: - alternate publications	preparing Fin Stmts: - materiality of errors

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In Plain English!

Codification Project:

• This project produced a comprehensive guide to SAP that provided a consistent and comprehensive basis of accounting and reporting.
• The reasons of the codification of SAP are related to uniformity of reporting and are listed in part (a) of the 2015.Spring exam problem.

Statements of Statutory Accounting Principles (SSAPs):

• These principles constitute an accounting basis for the preparation of SAP statements where state regulations don't exist.
• The concepts underlying SSAPs are:

   - conservatism (estimates should be conservative to protect policyholders)

   - consistency (regulators need financial information that's comparable across companies)

   - recognition (solvency assessments are based on the balance sheet, the income statement is secondary)

Hierarchy of Accounting Rules: Higher levels take precedence over lower levels.

Level 1: SSAPs

Level 2: Emerging Accounting Issues Working Group

Level 3: NAIC Annual Statement Instructions

Level 4: SAP Statement of Concepts

Level 5: Sources of nonauthoritative GAAP accounting guidance & literature

(see parts (b) & (c) of the 2015.spring exam problem)

Deviations from NAIC APPM Accounting Practices and Procedures Manual )

• If an insurer wants to deviate from APPM or state prescribed accounting practices, the regulator must provide notice 5 days in advance of approval to all states where the insurer is licensed.
• This notice must disclose:

   - description of the request

   - quantitative impact

The first quiz is regurgitation of the bullet points from above.

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The second quiz cover the old exam questions.

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