At its Winter National Meeting in San Francisco, the National Association of Insurance Commissioners (NAIC) formalized changes to its Statement of Statutory Accounting Principles (SSAP) No. 10-Income Taxes.
The changes concern the appropriate amount of conservatism in the calculation of an insurer's admissible deferred tax assets, which are allowed under both Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). With the adopted change, the amount of deferred income tax assets is still significantly limited, but some of the over-conservatism has been reduced, NAIC says.
"Insurance regulators have long understood the need for conservatism in insurer's financial statements as evidenced by our current conservative reserving requirements, disallowance of assets for acquisition costs and non-admission of many other assets," said Roger Sevigny, NAIC President and New Hampshire Insurance Commissioner. "This change recognizes that fact, but also recognizes that overconservatism can actually be detrimental to consumers."
New York Insurance Superintendent James Wrynn added the changes will result in more accurate financial statements from insurers.
"The change provides for uniformity and consistency in the use of deferred tax assets, increasing transparency and thus helping to further strengthen the industry and ultimately the protection of insurance consumers," Wrynn said. "This change, when coupled with an explicit valuation allowance requirement on such assets, and increased disclosure on these assets, better depicts the true economic condition of the insurer in the statutory financial statements."
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