Source: http://www.tdi.texas.gov/rules/2001/statement2.html
Timestamp: 2018-06-24 03:23:56
Document Index: 266358690

Matched Legal Cases: ['§7', '§7', '§7', '§32', '§32', '§ 3']

The Commissioner of Insurance adopts amendments to §7.18 concerning the adoption by reference of the Accounting Practices and Procedures Manual (Manual). The adoption of the amendments is made with one change to the text as proposed in the November 9, 2001 issue of the Texas Register (26 TexReg 9029).
The amendment to §7.18 is necessary to update the version of the Manual previously adopted by the department. The Manual is designed to provide a nationwide standard method of accounting which most insurers, including health maintenance organizations, will be required to use for statutory financial reporting guidance, thus creating a more consistent regulatory environment. The section adopts the Manual by reference with deference to Texas statutes, regulations and to exceptions enumerated in the section. A new version of the Manual is published periodically by the National Association of Insurance Commissioners (NAIC) to update the guidance which addresses new statutory issues and new generally accepted accounting principles as they develop. A public hearing on the proposed amendments was held on November 26, 2001.
The adopted section provides more efficient regulation of insurance and a decrease in costs to insurers that are currently required to file multiple financial statements in multiple states. The adoption of the March 2001 Manual will provide for a more consistent regulatory environment and will provide a single source for accounting guidance. The amended section updates the adoption by reference of the Manual by adopting by reference the March 2001 version of the Manual. Seven new statements of statutory accounting principles (SSAPs) have been adopted by the NAIC and are included in the March 2001 version of the Manual. The adopted amendment also changes the list of exceptions and additions to the Manual as follows: SSAP No. 6 concerning uncollected premium balances is amended by clarifying the starting date used to determine the admissibility of uncollected premium balances. The Commissioner also adopts SSAP No. 81 concerning software revenue recognition; SSAP No. 82 concerning the costs of computer software developed or obtained for internal use and web site development costs; SSAP No. 83 concerning mezzanine real estate loans and SSAP No. 84 concerning health care receivables and receivables under government insured plans. While SSAP Nos. 81 - 84 are not included in the March 2001 version of the Manual, they are considered part of the March 2001 version of the Manual under the NAIC procedures for the adoption of SSAPs. Subsection (c)(1) is changed from the proposal to clarify that SSAP Nos. 81 - 83 are to be applied to examinations conducted as of January 1, 2002 and thereafter and also shall be used to prepare all financial statements filed with the department for periods after January 1, 2002. The adoption of the amendment repeals the deferment of the effective date for the establishment of an Interest Maintenance Reserve and an Asset Valuation Reserve for Texas domestic insurers which have not previously established the reserves by deleting these provisions in paragraphs (1) and (2) in §7.18 (c). The Commissioner deferred the establishment of the reserves for one year in response to comments when the adoption of the Manual was proposed in 2000; therefore, these subsections are no longer necessary. When new versions of the Manual are made available by the NAIC, the Commissioner will consider the new version and, if he deems appropriate, propose for public comment adoption of the new version, with any necessary modifications, by rule.
The amendment is adopted under the Insurance Code Articles 1.11, 1.15, 1.32, 3.01, 3.33, 5.61, 6.12, 8.07, 20A.22, 21.28-A, 21.39, 21.49-1, and §§32.041 and 36.001. Article 1.15 mandates that the department of insurance examine the financial condition of each carrier organized under the laws of Texas or authorized to transact the business of insurance in Texas and, by rule, adopt procedures for the filing and adoption of examination reports. Article 1.11 and §32.041 authorize the Commissioner to provide required financial statement forms. Article 21.39 authorizes the Commissioner to adopt rules for establishing reserves applicable to each line of insurance recommended by the NAIC. Article 1.32 authorizes the Commissioner to establish standards for evaluating the financial condition of an insurer. Article 20A.22 authorizes the Commissioner to promulgate rules as are necessary to carryout the provisions of the Texas Health Maintenance Organization Act. Article 5.61 provides that reserves shall be computed in accordance with rules adopted by the Commissioner for the purpose of adequately protecting insureds. Article 21.28-A authorizes the Commissioner to adopt rules necessary to accomplish the purposes of the article. Articles 6.12, 8.07 and 3.01 authorize the Commissioner to adopt rules defining electronic machines and systems, office equipment, furniture, machines and labor saving devices and the maximum period for which each such class may be amortized. Article 3.33 authorizes the Commissioner to adopt such rules, minimum standards, or limitations as may be appropriate for the implementation of the article. Article 21.49-1 authorizes the Commissioner to issue rules, and orders necessary to implement the provisions of the article. Section 36.001 authorizes the Commissioner to adopt rules for the conduct and execution of the powers and duties of the department only as authorized by statute.
(a) The purpose of this section is to adopt statutory accounting principles, which will provide independent accountants, industry accountants and department analysts and examiners guidance as to how to properly record business transactions for the purpose of accurate statutory reporting. The March 2001 version of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual (Manual) will be utilized as the guideline for statutory accounting principles in Texas to the extent the Manual does not conflict with provisions of the Texas Insurance Code or rules of the department. The Commissioner reserves all authority and discretion to resolve any accounting issues in Texas. When making a determination on the proper accounting treatment for an insurance or health plan transaction the Commissioner shall refer to the sources in paragraphs (1)-(6) of this subsection in the respective order of priority listed. Furthermore, §§ 3.1501-3.1505, 3.1605, 3.1606, 3.7004, 7.7, 7.85 and 11.803 of this title (relating to Annuity Mortality Tables, General Requirements, Required Opinions, Contract Reserves, Subordinated Indebtedness, Audited Financial Reports and Investments, Loans and Other Assets), preempt any contrary provisions in the Manual.
(b) The Commissioner adopts by reference the March 2001 version of the Accounting Practices and Procedures Manual published by the NAIC, with the exceptions and additions set forth in subsections (c) and (d) of this section, as the source of accounting principles for the department when examining financial reports and for conducting statutory examinations and rehabilitations of insurers and health maintenance organizations licensed in Texas, except where otherwise provided by law. This adoption by reference shall be applied to examinations conducted as of January 1, 2002 and thereafter and also shall be used to prepare all financial statements filed with the department for periods after January 1, 2002.
(1) In addition to the statements of statutory accounting principles in the Manual, Statement of Statutory Accounting Principle number 81 concerning software revenue recognition, finalized March 26, 2001, Statement of Statutory Accounting Principle number 82 concerning the costs of computer software developed or obtained for internal use and web site development costs, finalized March 26, 2001, and Statement of Statutory Accounting Principle number 83 concerning mezzanine real estate loans adopted by the NAIC Accounting Practices and Procedures Task Force dated October 18, 2001, are adopted by reference and shall be used to prepare all financial statements for years ending on and after January 1, 2002. Statement of Statutory Accounting Principle number 84, concerning certain health care receivables and receivables under government insured plans, adopted by the NAIC Accounting Practices and Procedures Task Force dated October 18, 2001, is adopted by reference and shall be used to prepare all financial statements for years ending on and after December 31, 2001.
(2) Retrospective premiums must be billed within 60 days of computation and audit premiums must be billed within 60 days of the completion of the audit in determining the beginning date from which the ninety day period is calculated to determine admissibility of uncollected premium balances under Statement of Statutory Accounting Principle number 6.
(8) Agents balances of insurers licensed only in Texas that use a managing general agency to produce a majority of their business are not subject to Statement of Statutory Accounting Principles number 6 until January 1, 2002.