On May 20th, 2020, the National Association of Insurance Commissioners’ (NAIC) Statutory Accounting Principles Working Group adopted revisions to Statutory Accounting Principles No. 105 – Working Capital Finance Investments. The seven changes to the regulation will go into effect on June 30th, 2020.
At the NAIC 2019 Fall National Meeting industry representatives noted that the implementation of Statutory Accounting Principles (SSAP) No. 105 – Working Capital Finance Investments had not been successful and adoption of working capital finance investments low, offering markups with “ten required items” to increase investment. At the meeting, the Statutory Accounting Principles Working Group exposed substantive revisions to SSAP No. 105, with staff endorsing six of the ten industry-proposed changes including:
1. Authorizing functionally equivalent foreign regulators to oversee working capital finance investments, as opposed to only relying on domestic regulators;
2. Eliminating commingling of investment prohibitions;
3. Eliminating requirements for investor certification of perfected investment interests;
4. Clarifying finance agent requirements on these investments;
5. Standardizing the default enforcement rights date;
6. Eliminating duplicative investor rights language.
In written comments submitted ahead of the recent May 2020 NAIC meeting, interested industry parties reiterated their opinion that working capital finance investments will remain underinvested until all industry-requested items were approved and asked the working group to consider incorporating the remaining four changes into SSAP No. 105. At that meeting, NAIC regulators proposed a “friendly amendment” to SSAP No. 105 and authorized to remove the provision that “initial permission to invest in Working Capital Finance Investment Programs may be required by the domiciliary commissioner”. This change is one of the remaining four that industry had requested.
Fermat's Adam Dener spoke on these issues on behalf of the American Council of Life Insurers at a NAIC public technical meeting on the topic in August 2019 and provided written comments to the working group.