PA 07-27—sSB 1102
Insurance and Real Estate Committee
Labor and Public Employees Committee
AN ACT REQUIRING THE USE OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR CERTAIN AUDITS
SUMMARY: This act permits the insurance commissioner to accept from certain “employers' mutual associations” financial statements that use generally accepted accounting procedures (GAAP) if the statement includes a conversion to statutory accounting procedures (SAP). The association must submit the financial statements quarterly and annually.
EFFECTIVE DATE: October 1, 2007
EMPLOYERS' MUTUAL ASSOCIATION FINANCIAL STATEMENTS
The act permits the insurance commissioner to accept financial statements prepared using GAAP if the statements include a conversion to SAP from an employers' mutual association that (1) was organized before June 6, 1996, (2) is composed exclusively of health care providers, and (3) derives its premiums entirely from health care organizations.
Annually by March 1, the association must submit to the commissioner a financial statement covering the preceding calendar year that:
1. is audited by an independent certified public accountant;
2. is prepared in a manner the commissioner prescribes;
3. is signed and sworn to by the association's president or vice president and secretary or assistant secretary; and
4. includes an actuary's or reserve specialist's certification of reserve liabilities prepared in accordance with Insurance Department regulations.
The association must also submit quarterly, unaudited financial statements using GAAP if the statements include a conversion to SAP.
Employers' Mutual Associations
An employers' mutual association is a mutual association formed by a group of employers in the same or similar trade or business with substantially similar degrees of risk of injury to employees to insure the employers' liabilities under the state Workers' Compensation Act. This is an alternative to the employers purchasing commercial insurance.
By law, the insurance commissioner has financial oversight of these associations and periodically conducts a financial examination of them following the statutorily prescribed standards applicable to licensed insurance companies.
Statutory Accounting Principles
Insurance companies prepare their financial statements using SAP, a set of accounting regulations the National Association of Insurance Commissioners developed. The SAP method of preparing financial statements is regarded as more conservative than the GAAP method.
OLR Tracking: JLK: KS: JL: RO