Implementation of International Accounting Standards by ijk77032


									   ACLI Reinsurance Committee
   An Overview of Issues and Projects

   presented to:

   Society of Actuaries
   October 2002


  § Accounting and Tax Issues
  § Collateralization
  § Optional Federal Charter
  § NAIC Interstate Compact
  § Money Laundering and Terrorism
  § International Accounting Standards
  § ACLI Treaty Sourcebook

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NAIC Accounting/Actuarial Issues

  § Determining existing blocks of business and
    application of A-791 to YRT reinsurance.
    – NAIC accepted ACLI request that interpretation
      be applied prospectively after Jan 1, 2003.
  § SSAP 72 amendment regarding whether ceding
    company surplus should be segregated because of
    retroactive insurance.
    – ACLI opposing amendment because NAIC is
      inaccurately equating retroactive reinsurance with
      reinsurance of in-force blocks.

NAIC Accounting/Actuarial Issues

  § Application of 90-day non-admission rule for
    reinsurance recoverable balances.
    – ACLI representative included in industry group
      assisting the NAIC with the redrafting the issue.
  § Proposed changes to RBC instructions and formula
    for modco transactions.
    – ACLI monitoring regulators’ concerns around
      perceived mismatch of ceding and assuming
      company’s RBC calculations.

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US Tax Issues

  § Congress is examining structure of corporate transactions that
    attempt to organize a company’s structure, country of domicile,
    and matching income and deductions to minimize company’s
    global taxes.
  § Treasury wants international tax reform to keep US companies
    competitive overseas. Also wants to be able to raise revenues
    in tight budget times.

  § ACLI is organizing an industry response and devoting
    necessary resources to steer federal premium taxation away
    from life insurers. Undertaking examination of worldwide best
    tax practices to use in debate.


  § Global initiative to better understand & regulate
  § Critical review taking place at state (NAIC), federal
    (Congress) and global level (IAIS/EU).
  § Two major approaches emerging: US
    “collateralization” approach and EU “prudential
    supervision” approach.
  § ACLI drafting white paper to develop position on
    whether and how to commit resources.

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Optional Federal Charter

  § Creates federal regulator (Treasury) to ease
    regulatory, administrative burdens and level playing
    field with banks and securities firms.
  § Bills in House (LaFalce) and Senate (Schumer).
    House Financial Services Committee on Capital
    Markets (Baker) Hearings in June.
  § ACLI will seek bill sponsorship from key legislators
    and support from Chairman Oxley. Senator Dodd
    promised hearings next year.

NAIC Interstate Compact

  § NAIC attempts to counter federal regulation by
    creating a one-stop, national filing system.
  § Compact focuses on product filing process.
  § Could be passed by NAIC in December.
  § ACLI Board resolution instructs staff to seek
    enactment of legislation in states where insurance
    commissioner is actively supporting the legislation.

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Money Laundering/USA PATRIOT Act

  § Congress passed law to strengthen anti-money
    laundering laws, particularly crimes by foreign
    nationals and financial institutions. Section 352
    requires procedures by financial institutions.
  § Effective dates and final rules are yet to be issued from
  § Met with Treasury in April to brief them on reinsurance
    business. Drafting comment letter to Section 352 (due
    Nov 25th). ACLI will seek carveout for life reinsurers.

Terrorism Legislation

  § Congress is considering legislation to provide a federal backstop.
    Some Congressional will to pass bill, but election and tort reform
    are barriers.
  § HR3210 in House (2001) & S2600 in Senate (2002).

     – House conferees: Oxley, Baker, Ney, Kelly, Shays, Fossella,
       Ferguson, LaFalce, Kanjorski, Bentsen, Maloney, Hooley.
     – Senate conferees: Sarbanes, Dodd, Reed, Schumer, Gramm,
       Shelby, Enzi.

  § ACLI is seeking formal study on effects of terrorism on life

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International Accounting Standards

  § IASB is attempting to develop globally acceptable
    accounting standards for adoption by local standards
    setters (FASB in US).
  § EU and Australia have committed to adopting by 2005.
  § ACLI has joined with Japan and German trades in
    proposing alternatives to Fair Value; insurers pick
    between FV and Book Value with testing for

ACLI Life Reinsurance Treaty Sourcebook

  § Developed over three-year period with participation of
    major direct life insurers and life reinsurers.
  § Sets forth “best practices” for drafting reinsurance
    treaties with the necessary provisions.
  § Contains a sample treaty with clearly written articles
    with explanatory notes and options.
  § Copies of the Sourcebook can be purchased by
    contacting 1.800.589.2254.

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ACLI Reinsurance Committee

  § Visit the Reinsurance section of the ACLI website at
  § Contact Don Preston at 202.624.2163 or

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