Hot Topic | July 2020

 

Insight

Statutory guidance for premium refunds adopted

The Accounting Practices and Procedures Task Force adopts statutory interpretation for COVID-19 related premium refunds.

The NAIC’s Accounting Practices and Procedures Task Force has adopted an INT that includes statutory accounting guidance for COVID-19 related refunds not required under policy terms. 

Applicability

  • All insurance companies 

Relevant dates

  • Effective immediately
  • INT adopted July 22, 2020
  • INT expires January 1, 2021

Key impacts

On a July 22, 2020 call, AP&P adopted INT 20-08, which includes statutory accounting guidance on premium refunds issued in response to COVID-19 that are not required under policy terms.

The INT provides guidance about how to account for refunds required under policy terms, rate reduction on inforce and renewal business, and policyholder dividends. It also states that premium payments not required under policy terms should be recorded as an adjustment to premium, unless the insurer is applying a limited-time scope exception for COVID-19 relief payment or has a different prescribed or permitted practice.

For property and casualty insurance policies for which insurers filed manual rate filings or endorsements before June 15, 2020, the INT provides a limited scope exception to record these payments as an expense.

The INT also requires disclosure of:

  • All COVID-19 related payments.
  • The application of the limited time exception in a similar manner as a prescribed practice. 

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