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Clearwater Analytics is dedicated to keeping insurers updated on the latest regulatory guidance changes regarding investment accounting and reporting. In order to provide readers with a comprehensive view of these changes, our insurance experts attended conference calls and tracked guidance as it was adopted and discussed. The following market insight paper is a summary of the NAIC’s updates pertinent to investment accounting and reporting.

Statutory Accounting Principles Working Group

Call date: Thursday, July 30, 2020


Adopted items effective immediately unless specified otherwise

Ref #2019-04: SSAP No. 32 – Investment Classification Project

During a March 18 conference call, the SAPWG exposed an issue paper and substantial revisions to SSAP No. 32R – Preferred Stock. The revisions apply to the definitions, measurements, and impairment guidance for preferred stock pursuant to the investment classification project.

Interested parties support the revisions, as well as the January 1, 2021, effective date. They also suggest revised wording to the footnote regarding preferred units issued by SSAP 48 entities, as follows:

“Certain legal entities captured in SSAP No. 48 such as LLCs that are corporate-like do not issue preferred stock in legal form, but instead issue identical instruments labeled preferred units, interests, or shares. These instruments shall be captured in this statement provided they meet the structural characteristics as defined in paragraph 3.

Additionally, these instruments shall not be in-substance common stock in which the holder has risk and reward characteristics that are substantially similar to common stock.”

NAIC staff recommended the issue paper be adopted, along with the revised footnote.

The effective date is January 1, 2021.

Ref #2020-02: Accounting for Bond Tender Offers

On the March call, the SAPWG exposed revisions to SSAP No. 26R—Bonds to clarify that the guidance for called bonds can also be applied to tendered bonds, which differ only in that the bond holder must elect to accept the repurchase offer in a tender offer or the original terms of the bond are not modified.

Interested parties asked that the effective date be set to January 1, 2021. This will provide enough time for insurers to make the system changes necessary to account for the change.

NAIC staff recommended adopting the item. They also proposed edits that allow for the January 1, 2021, adoption date, with the option to apply early.

Ref #2019-38: Financing Derivatives

During the March call, the SAPWG exposed revisions to SSAP No. 86—Derivatives to require gross reporting of derivative activity for financing derivative transactions (i.e., without the inclusion of financing premiums).

Derivatives with premiums not remitted at acquisition are considered “financed derivatives.” A financed derivative transaction is “one in which the premium to acquire the derivative is paid throughout the derivative term or at maturity of the derivative.” Premiums payable and receivable shall be separately reported as “Payable for securities” and “Receivables for securities.”

NAIC staff recommended the exposed, nonsubstantive revisions to SSAP No. 86—Derivatives be adopted with an effective date of January 1, 2021.

Ref #2020-01: Update/Remove SVO Listings

The VOSTF referred the following two proposed amendments to the P&P Manual to the SAPWG:

  • Rename “The U.S. Direct Obligations/Full Faith and Credit Exempt List” to “NAIC U.S. Government Money Market Fund List”
  • Discontinue the “NAIC Bond Fund List” and create a new “NAIC Fixed Income-Like SEC Registered Funds List”

NAIC staff recommended adopting the exposed, nonsubstantive revisions to SSAP No. 26R—Bonds and SSAP No. 30R—Unaffiliated Common Stock to eliminate references to the bond list; and adding a reference within SSAP No. 30R to the “NAIC Fixed Income-Like SEC Registered Funds List.”

Ref #2020-03: Enhanced Goodwill Disclosures

Nonsubstantive revisions to SSAP No. 68 – Business Combinations and Goodwill were exposed during the March call to gather additional goodwill information and clarify reporting on Schedule D, Part 6, Section 1 – Valuation of Shares of Subsidiary, Controlled and Affiliated Companies.

Feedback on the proposed edits (e.g., column name changed from “Intangible Assets” to “Goodwill”) to Schedule D – Part 6 – Sections 1 and 2 was also requested.

Interested parties asked that the proposal be revised to exclude “pushdown” goodwill until the SAPWG reaches a decision on that issue. They also noted a minor correction.

NAIC staff emphasizes this agenda item did not propose any new guidance on the determination of the calculation or the admissibility of the goodwill. It intends to enhance the disclosures of existing reported goodwill. NAIC staff recommends adopting the current form and letting the pushdown goodwill get flushed out through this disclosure.

It is adopted and this disclosure will be effective for the year-end 2021 financial statements.

INT 20-09: Basis Swaps as a result of the LIBOR transition

Basis swaps are considered compulsory derivatives issued by Central Clearing Parties (CCP) in response to the market-wide transition away from LIBOR and toward the SOFR. They shall be reported as “Hedging – Other” and reported at fair value. Basis swaps cannot be reported as “effective” hedging derivatives unless they meet the criteria as a highly effective hedge pursuant to SSAP No. 86.

As part of a market-wide transition away from LIBOR and toward the SOFR, US Central Clearing Counterparties (CCPs) will shift their discounting rate from the Effective Federal Funds Rate (EFFR) to the SOFR using a one-time special valuation cycle on October 16, 2020. CCPs will revalue existing cleared swaps and issue basis swaps on a mandatory basis to all parties that clear swaps on the CCPs to restore a counterparty’s original risk profile. Financial Conditional (E) Committee issued a memorandum to indicate the Committee’s support for allowing insurers to hold such swaps as “permissible derivative investments” for up to one year. This is because the insurers have no control over the distribution of such basis swaps to them, and recognizing that insurers may incur loss if required to dispose of such basis swaps upon receipt.

INTs 20-04 and 20-05
INT 20-04: Mortgage Loan Impairment Assessment Due to COVID-19

This item provides temporary relief for the assessment of impairment for bank loans, mortgage loans, and investments which predominantly hold underlying mortgage loans, SEC-registered investments (e.g., mortgage-backed mutual funds); loan-backed and structured securities (e.g., residential and commercial mortgage-backed securities, credit risk transfers issued through government- sponsored enterprises); and joint ventures, partnerships, and limited liabilities companies (e.g., private equity mortgage loan funds) if the loans are impacted by forbearance or modifications due to COVID-19 and the borrowers were current as of December 31, 2019. It would not delay the recognition of other-than-temporary impairments (OTTI) if the entity decided to sell the investment or there is evidence that it would not recover the reported carrying value of the investment (e.g., the debtor filed for bankruptcy).

INT 20-05: Investment Income Due and Accrued

This provides a limited-time collectability assessment and admittance exceptions for SSAP No. 34—Investment Income Due and Accrued. It stipulates that:

  1. The interpretation would continue with existing guidance for the recognition of investment income
  2. The interpretation would continue with requirements to assess collectability of investment income, with a presumption that mortgage loans, bank loans and investment products with underlying mortgage loans impacted by forbearance or modifications that were current as of Dec. 31, 2019, were not experiencing financial difficulties at the time of the loan modification. For these items, further evaluation of collectability would not be required for the first and second quarter financial statements unless other indicators that interest would not be collected are known (e.g., entity has filed bankruptcy).
  3. The interpretation provides an exception for the nonadmittance of recorded investment income due and accrued deemed collectible and over 90 days past due. With the exception, reported investment income that becomes over 90 days past due in the first or second quarter may continue to be admitted in the second quarter financial statements.

The above interpretations (INT 20-04 and INT 20-05) have been extended to December 30, 2020 (they will not be applicable for year-end 2020).

NAIC received informal comments regarding possible extension to 2020 Annual, especially for INT 20-04. The Chair of the Working Group will discuss that recommendation during the fall meeting.


Exposed items with comment deadline September 18, 2020

Ref #2019-34: Related Parties, Disclaimer of Affiliation and Variable Interest Entities

This agenda item clarifies “identification of related parties and affiliates in SSAP No. 25—Affiliates and Other Related Parties and to incorporate new disclosures to ensure regulators have the full picture of complicated business structures.”

Previously, the SAPWG outlined the following aspects they hoped to address via their revisions:

  • Clarify the identification of related parties and ensure that any related party identified under U.S. GAAP or SEC reporting requirements would be considered a related party under statutory accounting principles.
  • Clarify that non-controlling ownership over 10%  results in a related party classification regardless of any disclaimer of control or disclaimer of affiliation.
  • Clarify a disclaimer of control or disclaimer of affiliate impact holding company group allocation and reporting as an SCA under SSAP No. 97, but do not eliminate the classification as a “related party” and the disclosure of material transactions as required under SSAP No. 25.
  • Proposes rejection of several US GAAP standards addressing variable interest entities.

The revisions include changes based on comments from interested parties, as well as a new disclosure recommended by the Group Solvency Issues (E) Working Group (e.g., new disclosures that would provide information on minority ownership interests and significant relationships between minority owners and other US domestic insurers or groups).

Interested parties provided extensive feedback.

NAIC staff recommends re-exposing the revised agenda item.

Ref #2020-17: Updating the SCA Review Process

The edits proposed by this item would update the current SCA filing review process as is required by SSAP No. 97— Investments in Subsidiary, Controlled and Affiliated Entities, thereby removing manual steps. Adoption of this item would generate significant savings for the NAIC on the administrative side. For example, NAIC staff reviewed more than 825 filings during the calendar year 2019.

Moving forward, financial statement filers for Sub 1 & 2 filings would be responsible for retrieving their finalized SCA review information from VISION. As a benefit, this would result in fewer emails for regulators. They would still receive the review information from the NAIC staff in a monthly email. Regulator access to VISION will be unaffected.

NAIC staff requested this item be exposed for regulator feedback on whether this new process would adversely impact operations.

Ref #2020-18: SSAP No. 97 Update

This item follows up on changes made by adopted agenda item 2018-26: SCA Loss Tracking – Accounting Guidance, for SSAP No. 97—Investments in Subsidiary, Controlled and Affiliated Entities.

A minor revision would be made to paragraph 9 to corroborate the revisions made in that agenda item and remove a lingering reference to negative equity value that can result for a subsidiary controlled or affiliated entity (SCA). Specifically, the statement that “guarantees or commitments from the insurance reporting entity to the SCA can result in a negative equity valuation of
the SCA” would be removed.

Ref #2020-19: Clarifying Edits – Participation in Mortgages

This item affects SSAP No. 37— Mortgage Loans. NAIC staff noted questions regarding the scope of “financial rights and obligations” in a participation agreement for a reporting entity lender, and if these extend beyond the right to receive contractual cash flows.

Proposed clarifications include that a member of a participation agreement’s financial rights may include “the right to take legal action against the borrower or participate in the determination of legal action, but do not require that the participant have the right to solely initiate legal action, foreclosure, or under normal circumstances, require the ability to communicate directly with the borrower.”

Ref #2020-20: Cash Equivalent Disclosures

This item follows up on Ref #2019-20: Rolling Short-Term Investments, which was adopted by the working group in a May 20 conference call. That disclosure “only specifically stated that disclosure was required for short-term investments or substantially similar investments in which remain on the short-term schedule for more than one year,” according to the meeting documents.

Cash equivalent investments were referenced in that agenda but were not in the final disclosure.
To remedy that, this item proposes cash equivalents and short-term investments (or those that are substantially similar) be disclosed. To be disclosed, they would also have to have remained on the same reporting schedule for more than one consecutive reporting period.

Industry representatives also asked for additional clarification around the use of a designated code in the appropriate investment schedules of the statutory financial statements.

Ref #2020-21: SSAP No. 43R – Designation Categories for RMBS/CMBS Securities

During a spring conference call, the VOSTF adopted an amendment to the P&P Manual to map financial modeled residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS). This affects the NAIC designations produced by the financial model and will now be mapped to a final NAIC designation category, which will be used for accounting and reporting purposes by reporting entities.

The edits proposed by this item would update the final NAIC designation category mapping instructions in SSAP No. 43R—Loan-Backed and Structured Securities for RMBS/CMBS investments.

Ref #2020-22: Accounting for Perpetual Bonds

This item proposes similar accounting and reporting treatment for perpetual bonds as perpetual preferred stock. As such, the guidance proposed by this agenda item is similar to the guidance up for consideration in Ref #2019-04: SSAP No. 32 – Investment Classification Project. This item would affect SSAP No. 26R—Bonds.

NAIC staff clarified that “perpetual bonds shall be reported at fair value, not to exceed any current effective call price.” To correlate with the expected updates to SSAP No. 32, NAIC staff suggested an effective date of January 1, 2021, with early application permitted.

Ref #2020-24: Accounting and Reporting of Credit Tenant Loans

During a spring conference call, the VOSTF sent a referral to the SAPWG to permit non-conforming CTLs that receive an NAIC designation from the SVO to be considered in scope of SSAP No 43R Loan-Backed and Structured Securities. This item intends to clarify the reporting of CTLs outside of the SSAP No. 43R project, which may extend past when CTL clarity is needed.

The NAIC recently identified that some insurers include CTLs that did not qualify under the SVO’s structural and legal analysis, or were not filed with the SVO, in Schedule D with filing exempt designations under SSAP No. 43R.

NAIC staff noted that once CTLs have been considered, other variations of similar investments should be named or addressed in the AP&P Manual, including ground lease financings and other lease-backed (non-ABS) securities.

This item would determine whether conforming CTLs should be captured by SSAP No. 43R or SSAP No. 21R— Other Admitted Assets. NAIC staff recommended the item be exposed for comment, with two general options:

  1. “Option 1: SSAP No. 43R for Conforming CTLs (this includes CTLs with SVO-identified bond characteristics acquired prior to Jan. 1, 2020, as detailed in the P&P Manual) and SSAP No. 37 or SSAP No. 21 for Non-Conforming CTLs”
  2. “Option 2: SSAP No. 21 for All CTLs”

Option 1 allows conforming CTLs to be reported as other Loan-Backed and Structured Security on Schedule D, and non-conforming CTLs be reported as Mortgage Loans on Schedule B or Other Invested Asset on Schedule BA. This option is inconsistent with SSAP No. 37 which explicitly excludes “securities” from the scope. To be eligible for conforming CTLs, SVO parameters permit a slight amount of residual real estate risk (e.g., 5%) or additional mitigation elements must be included in the structure. Non-conforming CTLs have higher residual risk which means the investor might receive ownership of the property in lieu of the remaining principal amount owed which is deemed unacceptable for bond reporting under the SVO parameters.

Option 2 removes CTLs from the scope of SSAP No. 43R. It allows all CTLs to be reported and the regulators to be able to see all CTLs in the same schedule (i.e., Schedule BA).

Current RBC charges for CTLs reported on Schedule BA are 30% for life filers and 20% for non-life filers. Life filers will be able to get RBC benefits if CTLs on Schedule BA can have NAIC designation. There would be no RBC benefit for non-life filers under the current RBC formula.

NAIC staff said this option seems consistent with the decision made for structured settlements in 2018. CTLs are similar to structured settlements because both are not bonds but reflect an investment in a cash flow stream that is subject to the underlying credit quality of the payer.

Ref #2020-28: ASU 2020-01, Investments ASU 2020-01, Investments—Equity Securities, Investments—Equity Method and Joint Ventures, and Derivatives and Hedging

NAIC staff recommended that this item be exposed to reject the FASB’s ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), clarifying the interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 addresses stakeholder questions about the accounting for the transition between the alternative measurement allowed by ASU 2016-01 (at cost, less impairments). ASU 2016-01, which allows an entity to measure certain equity securities at cost, less any impairments, was rejected for statutory accounting as SAP reporting classifications and valuation measurements differ from GAAP.

These revisions noting rejection are proposed to SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies, SSAP No. 97—Investments in Subsidiary, Controlled and Affiliated Entities and SSAP No. 86— Derivatives.


INTs 20-03 and 20-07
INT 20-03: Troubled Debt Restructuring Due to COVID-19

This item clarifies that a modification of mortgage or bank loan terms in response to COVID-19 will follow the provisions outlined in “the April 7, 2020 ‘Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus’ (detailed in paragraph 8) and the provisions of the CARES Act (detailed in paragraph 7) in determining whether the modification shall be reported as a troubled debt restructuring within SSAP No. 36.”

INT 20-07: Troubled Debt Restructuring of Certain Investments Due to COVID-19

This item provides “limited-time practical expedients” to determine whether a modification under SSAP No. 36 – Troubled Debt Restructuring is not significant, and therefore is not a concession. If a modification is not a concession, recognition of the modification as a troubled debt restructuring is not required. For practical expedients,
it was determined that:

“ ... if a restructuring 1) results with a change that reflects a 10% or less shortfall amount in the contractual amount due, and 2) results in an extension of the maturity of the debt by no more than three years, the modification shall be considered insignificant and thus not requiring troubled debt accounting. Additionally, the interpretation clarified that restructurings that solely modify debt covenants are not considered troubled debt restructurings.”

For the above interpretations (INT 20-03 and INT 20-07), NAIC staff noted that because the National Emergency is still ongoing, these interpretations are still in effect. If the National Emergency is not terminated by August 1, they will remain in effect through the third quarter. For that reason, the NAIC does not think an extension is needed at this time.

Ref #2019-21: SSAP No. 43R

This item considers revising SSAP No. 43R – Loan-Backed and Structured Securities to include concepts that will determine if an investment is within the scope of SSAP No. 43R and buckets or classifications for investments with similar characteristics. Once the buckets are agreed upon, the group would continue and determine applicable accounting and reporting changes.

An issue paper on the revisions was exposed in March. NAIC staff stated that they have had many conversations with members of industry and investment providers. Since the comment deadline for this paper was July 31, and the SAPWG met in a call July 30, a subsequent conference call will be scheduled to consider comments and continue discussion.

Valuation of Securities Task Force


Consider Adoption of a Proposed Amendment to the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual) to Map Short-term CRP Ratings to NAIC Designation Categories

Following a request by NASVA, the SVO drafted an update to the general mapping table so that Credit Rating Provider (CRP) ratings for short-term instruments are mapped to NAIC Designation Categories. In creating these updates, NAIC staff applied a mid-point approach to short-term mapping, because short-term ratings do not have a direct one-to-one set of ratings symbols that map to every NAIC Designation Category.

Staff recommended mapping the NAIC Designation Category to the mid-point of the range of long-term ratings covered by each short-term rating. The description of the mappings for both long-term and short-term rating symbols were also updated to indicate they are generic rating symbols, and staff recommended adding a footnote that describes where to locate on the SVO webpage the master list of credit ratings eligible for translation to NAIC Designations.

The task force did not receive any comments during the public comment period.

Consider Adoption of a Proposed Amendment to the P&P Manual to Add Supranational Entities Filed with the SVO to the Sovereign NAIC Designation Equivalent List

This proposal is to help with insurer reporting on the Supplemental Investment Risks Interrogatories (SIRI) Line 5 through 10, which requires insurers to list foreign investments by country sovereign rating if total foreign investments exceeds 2.5% of the total admitted assets. For countries that are not on the SVO’s Sovereign NAIC Designation Equivalent List, the current guidance requires them to be reported as an NAIC 3 or below. SVO staff recommended the inclusion of supranational entities on the Sovereign NAIC Designation Equivalent list if an insurer files the supranational entity with the SVO and the SVO can determine an appropriate NAIC designation equivalent.

A supranational organization is described as “an international group or union in which the power and influence of member states transcend national boundaries or interests to share in decision making and vote on issues concerning the collective body.” Examples include the European Union and World Trade Organization.

The SVO continues to work on a separate request from VOSTF to develop criteria for an acceptable sovereign rating exception methodology. The Task Force discussed earlier this year constraining all NAIC designations and NAIC designation categories that can be assigned by the SVO to the Sovereign NAIC Designation Equivalent List.

The task force did not receive any comments during the public comment period.


Exposed items for 30 days with comment period ending September 6, 2020

Receive a Proposed Amendment to the P&P Manual to Add Instructions for ETFs that Contain a Combination of Preferred Stocks and Bonds

Current guidance in the P&P Manual restricts the SVO from reviewing ETFs with both bonds and preferred stock when determining if a fund’s cash flow can be appropriately characterized as fixed income for regulatory purposes, assigning an NAIC Designation to reflect the credit risk associated with the fund’s cash flow, and including the name of the fund on the appropriate NAIC list. There has been no ETF on the SVO Identified List – Preferred Stock ETF since April 2020. With this proposed amendment, the SVO will be authorized to review these types of ETFs that contain both bonds and preferred stock for possible inclusion on the preferred stock ETF list.

Receive a Proposed Amendment to the P&P Manual to Update Guidance on Initial and Subsequent Annual Filings, and Methodologies and Documentation

The SVO proposed an amendment to the P&P Manual that reinforces the need for insurance companies to provide required information and documentation to the SVO in a timely manner. The amendment follows issues the SVO has had with insurance companies seeking clarification or not providing enough information for the SVO to complete its analysis.


The Director of Structured Securities Group reported they have started conversations with BlackRock, regarding the RMBS/CMBS modelling status. They will report the results to the task force in this fall.

Life Risk-Based Capital Working Group

Discuss the Industry Request for RBC Mortgage Reporting Guidance

Some risk-based capital reporting impacts of COVID-19 have been addressed in guidance for Troubled Debt Restructurings (TDRs) for March 31, June 30, and September 30 Statutory Financial Statements and Related Interim RBC Filings, issued and updated by the Financial Condition Committee in March and June 2020, respectively. The expiry date of the temporary relief guidance is the earlier of December 31, 2020, or 60 days after the National Emergency terminates.

Industry requested guidance on the application of 2020 RBC commercial mortgage reporting instruction on four items:

  • Net Operating Income
  • Contemporaneous Property Values
  • Construction Loans
  • Origination Date, Valuation Date, Property Value, and 90 days past due

The working group adopted three of these items during the previous call meetings and deferred one item.

They will resume the conversation once 2020 Annual RBC data is available.

Adopted on June 30, 2020

  • Construction loans
  • Origination and valuation date, property values and 90 days past due

The working group is comfortable extending the guidance provided by the Financial Condition (E) Committee until December 31, 2020. These requests are consistent with the intent of the guidance, which is to encourage insurers to make prudent loan modifications or forbearance for borrowers who are temporarily unable to meet their contractual payment obligations due to COVID-19.

A loan with “construction loan issues” would be required to have a CM5 rating and the filer would be required to update the origination and valuation date, property values when the loan is restructured, extended, re-written, or refinanced and specify if a loan is 90 days past due according to current RBC rules because a loan is traditionally treated as restructured when a loan is modified or forbearance occurs.

Adopted on July 10, 2020

Contemporaneous property values: This refers to the property value at origination or at revaluation, adjusted by applying the average of the 2019 and 2020 NCREIF price index.

RBC loan-to-value (LTV) is calculated as Total Loan Value divided by the Contemporaneous Property Value and it is used to determine the risk category (CM1 to CM5) for a loan that is not 90 days or more overdue. An interested party said using the 2020 NCREIF price index per existing RBC instruction would distort the market value of commercial properties because that index is based on appraisals that could create a prejudice that all properties have lost value as of the end of 2020 and cause the life insurers to show a corresponding prejudiced increase in credit risk for 2020. Incorporating those lowered property values into the RBC LTV calculation would result in higher capital requirement and would be against the intent of RBC Temporary Relief Guidance from Financial Condition (E) Committee.


2020 Net Operating Income (NOI) will be used in the RBC calculations for 2021, 2022, and 2023, and also used when new loans were created for 2020. Interested parties asked the working group to consider adopting the revised proposed formula (i.e., the greater of 2020 NOI or 85% of 2019 NOI). The working group has concerns with this proposal, which ignores the credit risk impact of temporary business shutdowns resulting from the COVID-19 pandemic, and they said they need 2020 annual data in order to make decisions.

Property and Casualty Risk-Based Capital Working Group

Discuss the Possibility of Using the NAIC as a Centralized Location for Reinsurer Designations

The SVO Director stated that the SVO receives issuer-level financial strength ratings from credit rating providers, but that data is not currently stored within the NAIC database. It would cost from $300,000 to $500,000 for the technology and additional licensing costs from the rating agencies in order to utilize this data for NAIC reinsurer designations. He also suggested this project be self-funded through a fee structure that allows the NAIC to recoup the costs from the industry.

Health Risk-Based Capital Working Group

Discuss Bond Factors

The American Academy of Actuaries (AAA) provided health-based risk factors over a two-year and five-year time horizon before any adjustments have been made to account for minimum risk factors. The current modeling for the Health RBC bond factors used a two-year time horizon. Moving forward, five years may be appropriate. A bond portfolio adjustment has been incorporated into the bond factors based on a portfolio of 382 issuers.

New bond factors for 20 designations will be proposed once an impact analysis is done based on the 2020 year-end data. The purpose of this exposed item is for the impact analysis and ultimately for the final bond RBC factors. An interested party asked the working group to also consider including investment income in the development of the underwriting risk component for the health RBC formula. The Chair agreed that they could handle these two issues concurrently.

The AAA letter on Draft Bond Structure and Instructions (Two- and Five-Year Time Horizon Factors) are exposed for 32 days with a comment deadline ending on August 31, 2020.

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