In an effort to increase transparency and consistency to the financial guaranty industry, The Financial Accounting Standards Board introduced Statement No. 163 which will require insurance companies such as bond insurers to significantly modify their business processes. The new rule will require companies to report claim liabilities in circumstances of deteriorating credit, recognition of revenue for a cost of capital construct, and make public their risk management policies and provide more details on their watch list. Companies that write financial guaranty contracts should have a critical understanding of this new standard as it will have far reaching implications in their business model.
The Knowledge Congress is assembling a panel of distinguished professionals and key regulators to help you understand the Impact of Statement 163 on your firm and the broader market. The speakers will present their expert opinions in a two-hour LIVE Webcast.
Course Level: Intermediate
Prerequisite: None
Method Of Presentation: Group-Based-Internet
Developer: The Knowledge Conference
Recommended CLE/CPE Hours: 2.0
(Please note, your State Bar or Accounting Board will make the final determination with respect
to continuing education credit.)
Advance Preparation: Print and review course materials
Course Code: 083783
Joseph Fritsch
Director of Insurance Accounting Policy
Matthew T. O'Grady
Managing Director, Trading & Underwriting
Wallace Enman
Senior Accounting Analyst
Joseph Fritsch, Director of Insurance Accounting Policy, New York State Insurance Department
- Statutory Accounting is considering adoption of FAS 163
- We feel the increased disclosure is imperative due to the material changes and the need for transparency
- This will be a substantial change to statutory accounting is the following areas:
- Premium recognition for installment premiums will be recorded at inception
- Loss reserves - claim liability exists when monocline “expects” claim loss will exceed the unearned premium revenue for that contract.
- FAS 163 Does not require a contingency reserve
- Prepayment assumption allows the insurer to reduce the period of risk under financial guarantee contract to less than the contract
period due expected prepayments.
- I will give an overview of the changes from FAS 163 to NAIC Statutory Accounting SSAP 60 and the New York Insurance Law
- Adoption of the majority of FAS 163 and the required disclosure will result in more consistency between insurers and additional transparency
Wallace Enman, Senior Accounting Analyst, Moody's
- FAS 163 will negatively affect GAAP equity of guarantors by modestly decelerating premium earnings patters, potentially offset by decreases in loss reserves compared to
current practice.
- The standard should not affect Moody's assessment of the guarantor's fundamental claims paying ability.
- New disclosures will be useful to investors and analysts, however some of the required disclosures were already provided in non-GAAP supplements.
- Although fundamental claims paying ability is not affected by this accounting change, decreases in equity or earnings could affect guarantors' financial
flexibility by pushing equity closer to any trigger levels or further reducing the firms' attractiveness as investments.
Matthew T. O'Grady, Managing Director, Trading & Underwriting, Herbert J.Sims & Company, Inc.
- Increased disclosure is always welcomed by investors
- The insurance model for municipal bonds remains impaired and some could argue completely broken
- Additional reporting requirements and disclosure will do little to repair existing insurance companies
- Improved perceptions relative to disclosure could lay the framework for insurance to return but it will need to be accompanied by positive actions from the rating agencies
- In short, investor confidence will not return for insured municipal bonds until the rating agencies correct themselves and a more conservative insurance model is put forth
- Bond Insurers
- Bond Counsels
- Nonprofit organization Financial Executives
- Comptrollers
- Treasurers
- Fixed-Income Officers
- Wealth/Capital Market Officers
- Public Finance/Municipal Law Attorneys and Municipal Bond Executives
This is a must attend event to anyone interested in having full understanding about the New Rule for Bond Insurers.
- New guidance explained by the most qualified key leaders & experts
- Hear directly from key regulators & thought leaders
- Interact directly with panel during Q&A