Statutory Reporting: Insurance's Financial Reporting Requirements

Statutory reporting in insurance is a complex process that involves finance, accounting, and risk management. It is regulated by the National Association of Insurance Commissioners (NAIC) and requires insurance companies to prepare quarterly and annual financial statements, adhering to statutory accounting principles (SAP). These statements assess an insurance company's ability to pay customer claims and focus on the company's balance sheet. The process can be challenging due to redundant information, disconnected documents, and varying state regulations. However, technology plays a crucial role in streamlining statutory reporting, and companies like Workiva have helped insurance companies save significant time in report preparation.

Statutory accounting standards

The NAIC promulgates the forms for financial statements, also known as the "convention blank," "statutory blank," or simply the "blank." These statements include the Annual Statement, which is used by state regulators to monitor the financial health of insurance companies and ensure their ability to meet policyholder obligations. The Annual Statement is typically due by March 1, and the statutory basis audited financial statements are generally due by June 1.

The specific standards and principles are outlined in the Statements of Statutory Accounting Principles (SSAP) and the Accounting Practices and Procedures Manual, which serves as the basis for state-based accounting frameworks. These standards are subject to revisions and updates, as evidenced by the summaries provided by KPMG for 2022, 2023, 2024, and 2025. For instance, SSAP No. 43R clarified the reporting of residual tranches or interests at the lower of amortized cost or fair value.

To streamline the complex statutory reporting process, insurance companies can leverage technology and collaborate with their IT teams. Automating tedious tasks and adopting innovative software can significantly improve efficiency, as demonstrated by Workiva's success in helping insurance companies save over 1,000 hours annually on report preparation.

Statutory reporting process

Statutory reporting in the insurance industry involves preparing financial statements in accordance with statutory accounting principles (SAP). These principles are set by the National Association of Insurance Commissioners (NAIC) and ensure insurer solvency to protect policyholders. While the NAIC sets standards nationally, insurance is regulated on a state-by-state basis, so state regulations may take precedence. Teams typically prepare statutory quarterly and annual financial statements, with the Annual Statement due by March 1 and the statutory basis audited financial statements generally due on June 1.

The Annual Statement is used by state regulators to monitor the financial condition of the reporting entity and obtain financial data to regulate the industry. To prepare these statements, insurance companies must gather data from several entities, which can be challenging without a centralized platform for data gathering. Another challenge is ensuring consistency across annual statements, audited financials, and management discussion and analysis (MD&A).

To streamline the statutory reporting process, insurance companies can adopt new technology to automate tedious and time-consuming manual tasks. This may involve working with their IT teams to evaluate and implement software solutions. By automating these tasks, companies can free up time to focus on rethinking business processes, collaboration, and communication.

It is important to prioritize the desired outcomes of implementing new technology and build a roadmap for implementation, innovation, and improvement. This can include creating a flowchart to map the current process, identify risks, and highlight opportunities for improvement. By adopting new technology and transforming how they work, insurance companies can become more efficient at statutory reporting.

Statutory reporting teams

In the insurance industry, statutory reporting teams play a crucial role in conveying an insurance company's ability to pay customers' claims. This means that their work is focused on a company's financial health, and they must ensure compliance with regulations set by governing bodies such as the National Association of Insurance Commissioners (NAIC). While the NAIC sets standards nationally, insurance is regulated on a state-by-state basis, so statutory reporting teams must also be aware of and adhere to state-specific regulations.

The work of statutory reporting teams is highly detail-oriented and involves gathering data from various entities. One of the challenges they face is ensuring consistency across annual statements, audited financials, and MD&A. Another challenge is managing redundant information presented in different, disconnected documents that must be updated individually across multiple entities.

To streamline their work and improve efficiency, statutory reporting teams can leverage technology to automate tedious parts of the reporting process. This may involve working closely with IT teams to evaluate and implement software solutions. By adopting new technology, statutory reporting teams can transform how they work, saving time and improving collaboration and communication.

In summary, statutory reporting teams in the insurance industry play a vital role in ensuring compliance with statutory accounting principles and regulations. Their work involves preparing financial statements, maintaining data consistency, and adhering to state-specific regulations. By leveraging technology and collaborating with IT teams, they can streamline their work and improve overall efficiency.

Statutory accounting principles

SAP focuses on three core values: conservatism, recognition, and consistency. Conservative valuation procedures provide protection to policyholders against adverse fluctuations in financial condition or operating results. Recognition refers to taking account of assets that are liquid and able to meet the firm's obligations when they are due. Any illiquid or unavailable assets due to other obligations should not be considered and should be marked against surplus. Consistency is important so that regulators can compare statements across the board in a meaningful way.

SAP is developed and maintained by the Statutory Accounting Principles (E) Working Group (SAPWG), which considers and concludes on individual Accounting Standard Updates (ASUs) and addresses new statutory accounting issues. The SAPWG reviews all U.S. GAAP guidance, which can be adopted, adopted with modification, or rejected for statutory accounting.

SAP applies to all insurers authorized to do business in the United States and its territories, and these companies must prepare statutory quarterly and annual financial statements in accordance with SAP. The Annual Statement is used by state regulators to monitor the financial condition of the reporting entity and to obtain financial data used to regulate the industry. The Annual Statement is due by March 1, with audited financial statements generally due by June 1.

Statutory reporting and IT

Statutory reporting in insurance is a complex process that requires collaboration between finance, accounting, risk, and IT teams. The IT team plays a crucial role in streamlining the reporting process and ensuring compliance with regulatory requirements.

One of the key challenges in statutory reporting is the need to gather data from multiple entities and ensure consistency across annual statements, audited financials, and management discussion and analysis (MD&A). A centralized platform for data gathering can greatly improve the efficiency of the process by allowing entities to enter information directly, reducing the burden on the core reporting team.

Dynamic linking is another important feature that can ensure consistency across documents, even as numbers change. This is particularly relevant when dealing with redundant information presented in different, disconnected documents that need to be updated individually.

When evaluating software solutions, it is important to involve the IT team to ensure that any technology adopted meets the company's security requirements and can integrate with existing programs. Additionally, the IT team can help identify opportunities to automate tedious parts of the statutory reporting process, such as through the use of flowcharts to map the current process, identify risks, and highlight areas for improvement.

By adopting new technology and transforming how teams work, organizations can improve collaboration and communication. Prioritizing the desired outcomes of new technology and creating a roadmap for implementation can help ensure a successful transition. For example, Workiva has helped insurance companies streamline their statutory reporting processes, resulting in significant time savings in report preparation.

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