The exceptions state insurance departments are granting insurers reporting their capital and surplus under permitted practices rules will create a level of inconsistency and raise issues of comparability, an analyst with the rating agency Standard & Poor's Corp. said.
The observation came in response to questions asked during a teleconference call today addressing rating actions and related criteria on U.S. life insurers. However, the practice is also being applied to some property-casualty companies.
In response to a question over the "flurry of permitted practices" being granted by state insurance departments, S&P analyst Kevin Ahern said that S&P would look at companies on a case by case basis but did note that an issue of comparability is created.
Recently, Illinois joined other states in announcing that it is providing exceptions to capital and surplus requirements. The exceptions were given to Allstate Life Ins. Co., Northbrook, Ill., and Continental Casualty Co., Chicago, department bulletins state.
In respective Feb 11 and Jan. 28 letters, Allstate was granted relief in requirements for deferred tax assets and a switch from a market value approach to a book value approach for market value adjusted annuities.
The Feb. 11 letter to Allstate Life granted an exception on deferred tax assets, allowing the use of either the gross DTA expected to be realized within three years of the balance sheet date or 15 percent of statutory capital and surplus. The exceptions will be allowed for reporting from Dec. 31, 2008 through Dec. 30, 2009.
The Jan. 28 letter to Allstate allows the conversion of the accounting and valuation methodology for Allstate's market value adjusted annuities from a market value approach to a book value approach for the year ending 2008 through Sept. 30, 2009.
A spokesperson for the department could not immediately be reached for clarification.
The practices are being extended to property-casualty companies as well. For example, in Connecticut regulators granted Hartford Financial Services Group a capital and surplus dispensation under its permitted practices rules.
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