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PA Bulletin, Doc. No. 05-2144


Financial Statement Filing Requirements for 2006; No. 2005-11

[35 Pa.B. 6392]

   Under section 320 of The Insurance Company Law ( 40 P. S. § 443) insurers licensed to transact business in this Commonwealth are required to file financial statements with the Insurance Department (Department) using the statement blanks, instructions and accounting practices and procedures prescribed by the National Association of Insurance Commissioners (NAIC). This notice is being issued to alert all domestic insurers of this Commonwealth to the following developments in financial statement filing requirements that will become effective beginning with statements reporting an insurer's financial condition as of December 31, 2005.

1.  Property and Casualty Actuarial Opinions

   Changes to the NAIC Property/Casualty Annual Statement Instructions (Instructions) for reporting year 2005 include new requirements for actuarial opinions. In addition to Statements of Actuarial Opinion filed with annual financial statements on or before March 1 each year, the new Instructions require, among other things, the filing of an Actuarial Opinion Summary (AOS) by March 15 each year. The AOS must be prepared as prescribed by the Instructions, including, but not limited to:

   *  The actuary's range of reasonable estimates and/or point estimates for loss and loss adjustment expense reserves.

   *  The difference between the insurer's carried reserves and the point estimate and/or range of reasonable estimates.

   *  An explanation of any exceptional adverse development.

   Further, the new Instructions require an insurer to notify the Department if its appointed actuary is replaced, including notice of disagreements with the former appointed actuary regarding the content of the actuarial opinion.

   Property/casualty insurers will be required to file two copies of the AOS with the Department by March 15, 2006. Because the AOS will be filed separate from the Statement of Actuarial.

   Opinion that is due by March 1, the NAIC has developed the following recommended format for the actuary's cover note to the AOS:

Subject:Actuarial Opinion Summary
Company:XYZ Insurance Company
Appointed Actuary:Janet Actuary
I have attached a copy of the Statement of Actuarial Opinion that I signed on XXX to this Actuarial Opinion Summary. These two documents are closely linked; the Actuarial Opinion Summary is an extension of the Statement of Actuarial Opinion. Therefore, all limitations, caveats and reliances in the Statement of Actuarial Opinion should also be applied to the Actuarial Opinion Summary. Moreover, it is my understanding that, consistent with the Annual Statement Instructions, the Actuarial Opinion Sum- mary will be held confidential by state regulators and is not intended for public inspection.

   As with documents, materials or other information in the possession or control of the Department that are considered actuarial reports, workpapers or other materials provided in support of Statements of Actuarial Opinion, the AOS will be maintained as confidential by the Department under 40 P. S. § 443(d).

2.  Timely Filings of Annual Audited Financial Reports

   Chapter 147 of 31 Pa. Code (relating to annual audited insurers' financial report required), commonly referred to as the ''CPA Audit Rule,'' requires insurers to have annual audits of their year-end statutory financial statements performed by independent certified public accountants. The annual audited financial reports are required to be filed with the Department by June 1 each year. In 2005, the Department received an unusually high number of requests for 30-day extensions of the filing date under 31 Pa. Code § 147.3(b) (relating to filing and extensions for filing of annual audited financial report). Therefore, beginning in 2006, if any extensions are warranted, the Department intends to limit the number of extensions granted to one 30-day request. Failure to file annual audited financial reports within the time provided will subject insurers to late filing penalties of up to $200 each day under 40 P. S. § 443(e)(1). The Department encourages all chief executive officers or presidents of domestic insurers in this Commonwealth to meet with the insurer's independent certified public accountant early in the engagement and regularly thereafter to monitor the progress of the annual audit and take whatever steps may be necessary to assure the submission of a timely filing.

   Questions concerning this notice may be directed to Stephen J. Johnson, CPA, Deputy Insurance Commissioner, Office of Corporate and Financial Regulation, 1345 Strawberry Square, Harrisburg, PA 17120, (717) 783-2142, fax (717) 787-8557,

Insurance Commissioner

[Pa.B. Doc. No. 05-2144. Filed for public inspection November 18, 2005, 9:00 a.m.]

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