Purposes and Procedures Manual of the NAIC Investment ...

1 Purposes and Procedures Manual of the NAIC Investment Analysis OfficeNAIC Securities Valuation Office and NAIC Structured Securities GroupEffective for Statements ending December 31, 2019 December 31, 2019 (volume/issue 19/01)Accounting & ReportingInformation about statutory accounting principles and the Procedures necessary for fi ling fi nancial annual statements and conducting risk-based capital InformationImportant answers to common questions about auto, home, health and life insurance as well as buyer s guides on annuities , long-term care insurance and Medicare supplement Regulation Useful handbooks, compliance guides and reports on fi nancial analysis, company licensing, state audit requirements and collection of NAIC model laws, regulations and guidelines; state laws on insurance topics.

2 And other regulatory guidance on antifraud and consumer RegulationRegulatory and industry guidance on market-related issues, including antifraud, product fi ling requirements, producer licensing and market ActivitiesNAIC member directories, in-depth reporting of state regulatory activities and offi cial historical records of NAIC national meetings and other more information about NAIC publications, view our online catalog at: Special StudiesStudies, reports, handbooks and regulatory research conducted by NAIC members on a variety of insurance-related ReportsValuable and in-demand insurance industry-wide statistical data for various lines of business, including auto, home, health and life ProductsGuidance manuals, handbooks, surveys and research on a wide variety of Markets & Investment AnalysisInformation regarding portfolio values and Procedures for complying with NAIC reporting Papers Relevant studies, guidance and NAIC policy positions on a variety of insurance topics.

3 1990-2019 National Association of Insurance Commissioners. All rights : 978-1-64179-057-4 Printed in the United States of AmericaNo part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any storage or retrieval system, without written permission from the Executive Offi ce444 North Capitol Street, NWSuite 700 Washington, DC 20001 Central Offi ce1100 Walnut StreetSuite 1500 Kansas City, MO Capital Markets& Investment Analysis Offi ceOne New York Plaza, Suite 4210 New York, NY NAIC is the authoritative source for insurance industry information.

4 Our expert solutions support the efforts of regulators, insurers and researchers by providing detailed and comprehensive insurance information. The NAIC offers a wide range of publications in the following categories: TABLE OF CONTENTS SPECIAL NOTICE .. I HOW TO CITE TO THE Purposes AND Procedures Manual OF THE NAIC Investment ANALYSIS OFFICE .. II RECENT CHANGES TO THE P&P Manual .. III PREVIOUSLY ADOPTED AMENDMENTS TO THE P&P Manual EFFECTIVE IN 2019 .. VI PART ONE POLICIES OF THE NAIC VALUATION OF SECURITIES (E) TASK FORCE .. 1 ABOUT THE NAIC, THE VALUATION OF SECURITIES (E) TASK FORCE AND THE SVO .. 2 The NAIC .. 2 The VOS/TF and the SVO Staff .. 2 ABOUT THIS Manual .

5 3 Purpose .. 3 Expression of NAIC Standards in State Law and Regulatory Processes .. 3 Procedures to Amend This Manual .. 4 Prohibition on Use of NAIC Designation in a 8 POLICIES PERTAINING TO SVO AND SSG OPERATIONS .. 10 Policy Objective .. 10 NAIC Policy Statement on Coordination of the Accounting Practices and Procedures Manual and the Purposes and Procedures Manual of the NAIC Investment Analysis Office .. 10 NAIC Designations Do Not Communicate Statutory Accounting or Reporting .. 10 Sources and Application of Statutory Accounting Guidance .. 11 Impact on SVO Operations .. 11 Communication and Coordination Between the SVO and Statutory Accounting Principles (E) Working Group Staff.

6 11 Securities Valuation Office (SVO) .. 12 Ongoing SVO Operations .. 12 NAIC Designations .. 13 Other Non-Payment Risk in Securities .. 13 Authority to Direct Insurers on 14 Use of Generally Accepted Techniques or Methodologies .. 14 Structured Securities Group (SSG) .. 14 Ongoing SSG Operations .. 15 SSG Regulatory Products .. 15 Main Table of Contents 2019 National Association of Insurance Commissioners ii Other Applicable Policies .. 15 Policy on Documentation and Data .. 16 FILING SECURITIES WITH THE SVO .. 17 Obligation to File Securities with the 17 Who Must File .. 17 States May Require a Filing of Exempt or Other Transactions .. 18 Filing Requirements.

7 18 THE USE OF CREDIT RATINGS OF NRSROS IN NAIC PROCESSES .. 19 Providing Credit Rating Services to the NAIC .. 19 Policy and Legal Disclosure Pertaining to the NAIC Credit Rating Provider (CRP) List .. 19 No Waiver/Express Reservation of Authority .. 20 FILING EXEMPTIONS .. 21 Certain Separate Accounts .. 21 Filing Exemption for Public Common Stock .. 21 Filing Exemption for Certificates of Deposit Reported as Bonds under SSAP No. 26R .. 21 Filing Exemption for Government Securities .. 21 Initial Filing Conventions and Documentation .. 21 SVO Publishing Conventions for Filing Exempt Government Securities .. 22 Other Filing Exempt Government Securities.

8 22 Filing Requirements for Government Securities .. 22 Subsequent Filing .. 23 Filing Exemption for Direct Claims on, or Backed by Full Faith and Credit of, the United 23 Definitions .. 23 Filing Exemption for Other Government Obligations .. 25 Policies Applicable to the Filing Exemption (FE) Process .. 25 Determinations .. 26 Directives .. 26 Policies Applicable to Filing Exempt (FE) Securities and Private Letter (PL) Rating Securities .. 26 Filing Exemption .. 26 Policy Considerations .. 27 Application of the FE Procedure to Specific Populations .. 27 Securities No Longer Assigned an Eligible NAIC CRP Credit Rating .. 28 Main Table of Contents 2019 National Association of Insurance Commissioners iii Limitations on Use of NAIC CRP Ratings.

9 28 NAIC DESIGNATIONS .. 29 Definitions .. 29 NAIC Designation Subscript S .. 29 NAIC General Interrogatory .. 30 NAIC PLGI .. 30 Monitoring of SVO-Designated Securities .. 30 AUDITED FINANCIAL STATEMENTS .. 31 General Rule on Presentation of Financial Results .. 31 Definitions .. 31 32 POLICIES APPLICABLE TO SPECIFIC ASSET CLASSES .. 33 Schedule BA Assets .. 33 Credit Tenant Loans .. 33 CTL Categories .. 33 Intent .. 33 Presumption of Eligibility .. 34 Ground Lease Financing Transactions .. 34 GLF Overview .. 34 Subsidiary, Controlled and Affiliated Investments .. 35 Investments in Funds .. 36 Purpose .. 36 Condition to Eligibility .. 36 Regulatory Transactions.

10 37 37 Intent .. 37 REVIEW OF SVO DETERMINATIONS .. 38 Condition to Filing of an Appeal .. 38 Status of NAIC Designation During 38 Task Force Review for Alleged Violations of Procedures .. 38 Main Table of Contents 2019 National Association of Insurance Commissioners iv SPECIAL INSTRUCTIONS .. 39 Short-Term Investments .. 39 Circular Transaction .. 39 Mandatory Convertible Securities .. 39 Unrated Hybrid Securities .. 40 Sub-paragraph D Company .. 40 Capital and Surplus Debentures .. 41 PART TWO OPERATIONAL AND ADMINISTRATIVE INSTRUCTIONS APPLICABLE TO THE SVO .. 43 OPERATIONS .. 44 Organization .. 44 IAO Departments .. 44 Credit 44 COMPILATION AND PUBLICATION OF THE SVO LIST OF Investment SECURITIES.