Implementation of International Accounting Standards by ijk77032

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									   ACLI Reinsurance Committee
   An Overview of Issues and Projects


   presented to:

   Society of Actuaries
   October 2002




Overview

  § 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.




Collateralization

  § Global initiative to better understand & regulate
    reinsurance.
  § 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
    Treasury.
  § 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
    insurance.




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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
    impairment.




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

  § GET INVOLVED
  § Visit the Reinsurance section of the ACLI website at
    www.acli.com.
  § Contact Don Preston at 202.624.2163 or
    donpreston@acli.com.




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