266 Codification of statutory accounting principles; insurance department notice no. 2000-02

Codification of Statutory Accounting Principles; Insurance Department Notice No. 2000-02

[30 Pa.B. 840]

   The National Association of Insurance Commissioners (NAIC) adopted the Codification of Statutory Accounting Principles at its March 1998 National Meeting. The adoption of the codified principles successfully concluded an extensive effort begun in 1994 to produce a comprehensive guide to statutory accounting principles for use by insurance departments, insurers and auditors.

   The codified principles are not intended to preempt state legislative and regulatory authority but to establish a comprehensive basis of accounting recognized and adhered to in the absence of conflict with, or silence of, state statutes and regulations. The American Institute of Certified Public Accountants determined that it will not be necessary to grant the codified principles status as an Other Comprehensive Basis of Accounting and that auditors will be permitted to continue to provide audit opinions on practices prescribed or permitted by the insurance department of an insurer's state of domicile.

   By Department Notice No. 1998-04, dated July 20, 1998, the following types of domestic insurers were advised initially that they will be required to adhere to the codified principles in preparing financial statements to be filed with the Pennsylvania Insurance Department (Department):

   1.  Life, accident & health, property & casualty, title, financial guaranty, mortgage guaranty, surety and other insurance companies, associations or exchanges subject to section 320 of The Insurance Company Law (40 P. S. § 443)

   2.  Pennsylvania Fair Plan under section 206 of The Pennsylvania Fair Plan Act (40 P. S. § 1600.206)

   3.  State Workmen's Insurance Fund, employers mutual liability associations and other entities subject to section 2 of the Act of May 9, 1949, P. L. 1025 (40 P. S. § 1262)

   4.  Coal and Clay Mine Subsidence Insurance Fund under section 14 of the Act of August 23, 1961, P. L. 1068, as amended (52 P. S. § 3214)

   5.  Joint Underwriting Association under section 809 of the Health Care Services Malpractice Act (40 P. S. § 1301.809)

   6.  Health maintenance organizations under section 11 of the Health Maintenance Organization Act (40 P. S. § 1561)

   7.  Hospital plan corporations and professional health services plan corporations under 40 Pa.C.S. §§ 6125 and 6331

   8.  Risk-assuming PPOs under 31 Pa. Code § 152.21

   Since that time, the NAIC considered whether the codified principles should also be applied to financial statements filed by fraternal benefit societies. Participating in the NAIC codification project and, in speaking engagements and other discussions, has provided input on the codified principles from Pennsylvania fraternals. The NAIC has concluded that the principles should be applied to fraternals.

   Therefore, this notice is to advise all Pennsylvania domestic fraternal benefit societies that, under section 602 of the Fraternal Benefit Societies Code (40 P. S. § 1142-602), fraternal benefit societies will be required to adhere to the codified principles in preparing financial statements to be filed with the Department. The codified principles will be effective January 1, 2001, and will apply to quarterly financial statements filed as of March 31, 2001.

   The codified principles were initially adopted and published as the NAIC's Accounting Practices and Procedures Manual--Effective January 1, 2001, Version 1999. The NAIC Accounting Practices and Procedures (EX4) Task Force is responsible for the maintenance of the codified manual, and the 2000 version will be available in the spring of 2000. The 1998 version will be maintained and published until December 31, 2000. Work on updating the annual statement blank and instructions to reflect the codified principles has been completed, and all NAIC publications are to be consistent with the codified principles as of January 1, 2001.

   Further information on the NAIC codification project may be obtained by contacting the following NAIC staff:

Jane Kipper, Senior Life Insurance Accountant
David Christensen, Property/Casualty Accountant
Michele Pope, Health Insurance Accountant
National Association of Insurance Commissioners
20 West 12th Street, Suite 1100
Kansas City, MO 64105-1925
Phone: [phone]/Fax: [phone]
Internet: [e-mail]; [e-mail];
   [e-mail]

   The Department is conducting a comprehensive review of Pennsylvania's laws and regulations to identify provisions that may be inconsistent with the codified manual and will be seeking industry comments on whether those laws and regulations should be amended or repealed prior to the January 1, 2001 effective date. Insurers must receive the Department's written approval to implement any of the codified principles prior to the January 1, 2001 effective date.

   Questions concerning this notice may be directed to Stephen J. Johnson, CPA, Deputy Insurance Commissioner, Regulation of Companies, 1326 Strawberry Square, Harrisburg, PA 17120, Phone: [phone]/Fax: [phone], E-mail: [e-mail].

M. DIANE KOKEN,   
Insurance Commissioner

[Pa.B. Doc. No. 00-266. Filed for public inspection February 11, 2000, 9:00 a.m.]