NAIC Issues Exposure Draft for Extension of Ninety-Day Rule

On March 11, 2020, the World Health Organization (WHO) declared the outbreak of Coronavirus Disease 2019 (COVID-19) a global pandemic. On March 13, 2020, the U.S. federal government declared a national emergency concerning the COVID-19 outbreak.

Many states and municipalities in the U.S. have issued “stay-at-home” or “shelter-in-place” orders, which generally require the temporary closure of non-essential businesses and restrict the movements of the general population in an attempt to limit the spread of COVID-19. As a result of the outbreak and spread of COVID-19, as well as the actions taken by governments and businesses to limit the spread of COVID-19, U.S. economic activity has been significantly disrupted. Businesses, employees, customers and individuals alike are facing unprecedented challenges, including supply chain disruptions, sales and production impacts and high levels of unemployment.

On March 26, 2020, the National Association of Insurance Commissioners’ (NAIC) Statutory Accounting Principles (E) Working Group (SAPWG) released an exposure draft, INT 20-02T: Extension of Ninety-Day Rule for the Impact of COVID-19, which would provide exception to the ninety-day rule for nonadmittance of premiums under Statement of Statutory Accounting Principles (SSAP) No. 6, Uncollected Premium Balances, Bills Receivable for Premiums, and Amounts Due From Agents and Brokers, and for amounts due from policyholders for high deductible policies under SSAP No. 65, Property and Casualty Contracts.

SSAP No. 6 requires, to the extent there is no related unearned premium, uncollected premiums to be nonadmitted for any premium balances over ninety days past due, including all future installments that have been recorded on that policy. Bills receivable shall be nonadmitted if either 1) any installment is past due, the entire bills receivable balance for that policy is nonadmitted; or 2) the bills receivable balance due exceeds the unearned premium on the policy for which the note was accepted. The uncollected agent’s receivable on a policy by policy basis which is over ninety days past due shall be nonadmitted regardless of any unearned premium.

SSAP No. 65 requires that deductible recoverables that are greater than ninety days old shall be nonadmitted. However, if the reporting entity holds specific collateral for the high deductible policy, ten percent of deductible recoverable in excess of collateral specifically held and identifiable on a per policy basis shall be reported as a nonadmitted asset in lieu of apply the aging requirement; however, to the extent that amounts in excess of the ten percent are not anticipated to be collected, they shall also be nonadmitted.

The SAPWG reached a tentative consensus for a one-time optional extension of the ninety-day rule for uncollected premium balances, bills receivable for premiums and amounts due from agents and policyholders and for amounts due from policyholders for high deductible policies, as follows:

  • For policies in effect and current prior to the date as of the declaration of a state of emergency by the U.S. federal government on March 13, 2020, insurers may wait until Sept. 28, 2020, before nonadmitting premiums receivable from policyholders or agents as required per SSAP No. 6, paragraph 9.
  • For high deductible policies in effect and current prior to the date as of the declaration of a state of emergency by the U.S. federal government on March 13, 2020, insurers may wait until Sept. 28, 2020, before nonadmitting amounts are due from policyholders for high deductible policies as required per SSAP No. 65, paragraph 37.
  • Existing impairment analysis remains in effect for these affected policies.

INT 20-02T is applicable only for the first and second quarters of 2020 and expires on Sept. 28, 2020.

Further discussion is planned, and a date for a vote or call has not yet been determined.

The full document may be accessed here for download via the NAIC website.

ABOUT THE AUTHORS

Michael Wright
Partner, DHG Insurance
Michael.Wright@dhg.com

Matt Moffitt
Senior Manager, DHG Assurance

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