Statutory reporting is the mandatory disclosure of financial and non-financial information by companies and organisations to designated government agencies and regulatory bodies. This legally required practice plays a pivotal role in fostering accountability, safeguarding stakeholders’ interests, and preserving the integrity of organisations. Statutory Accounting Principles or SAP refer to a set of accounting regulations issued by the NAIC or National Association of Insurance Commissioners for preparing the financial statements of an insurance firm. Gains and losses are amortized and reported as an adjustment to net investment income over the remaining life of the sold assets. This approach prevents insurers from artificially manipulating their reserve requirements by selling securities at the right time. As unrealized gains or losses occur, they’re reported as direct adjustments to surplus, retained earnings balance sheet not income.
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Life insurance companies have distinct accounting requirements due to the long-term nature of their policies. The statutory accounting procedures for life insurance companies differ not only from GAAP but also from property and liability insurers. Businesses must comply with statutory accounting principles to maintain their licenses and operate within their jurisdictions. This is particularly crucial for organizations that are publicly traded or regulated by government agencies.
- We summarize new and revised statutory accounting standards for 2023, 2024 and 2025 financial reporting by insurers.
- For this method to be compliant with the appropriate accounting standards and regulatory requirements, precise quantitative data from prior years is required.
- These filings include the Annual Statement, also known as the “Yellow Book,” which details financial condition, investment holdings, premium revenue, and surplus levels.
- Businesses must comply with statutory accounting principles to maintain their licenses and operate within their jurisdictions.
- For instance, JGL Pharma, a global pharma firm, saved 50% of its market consolidation preparation time and put an end to version mismatches by transitioning from Excel to an automated planning solution.
- CGAA will not be liable for any losses and/or damages incurred with the use of the information provided.
- To streamline the complex statutory reporting process, insurance companies can leverage technology and collaborate with their IT teams.
Key Components of Statutory Reports
The SAP income statement concentrates on reporting revenues and expenses that directly impact policyholders or contract holders. This method ensures that insurance companies maintain sufficient reserves to fulfill their legal obligations to policyholders. Due to these unique considerations, some GAAP-compliant revenue recognition methodologies may not be applicable to statutory accounting. Statutory accounting How to Invoice as a Freelancer principles provide a crucial foundation for comprehending the financial reporting requirements of international organizations. Realizing the importance of understanding the distinctions between statutory accounting principles and GAAP when drafting regulatory documents, it is essential to have this knowledge. Moreover, neglecting statutory reporting compromises an organization’s credibility and trustworthiness.
Data Calls
- Clarity should be the priority when producing reports for submission so that regulators and other stakeholders can quickly comprehend the information provided.
- Insurers must also report their financial instruments at their current market value rather than their historical cost.
- A multinational corporation’s subsidiary aligned statutory accounting principles across different jurisdictions.
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Statutory reporting can be a difficult and time-consuming process that forces firms to keep up with several rules. Thankfully, there are methods that can simplify the mandatory reporting procedure and lower compliance risks. The combined ratio is a crucial metric for evaluating an insurance company’s financial performance. It’s a way to get a more accurate picture of profitability by combining the loss ratio and expense ratio.
Financial Statements
Several factors influence the final surplus figure, including asset classification, liability recognition, and regulatory adjustments. We summarize new and revised statutory accounting standards for 2024 and 2025 financial reporting by insurers. Companies need to implement the appropriate strategies to optimize their statutory reporting processes in order to ensure compliance with constantly evolving requirements. Finance professionals may perform this crucial work more effectively with the use of technology. Cost, scalability, ease of use, and integration capabilities should all be considered when choosing a technological solution for statutory reporting. Software packages may offer a variety of characteristics that change depending on the requirements of a company.
These reports provide valuable insights into an organisation’s financial health, environmental impact, workforce management practices, and adherence to legal and regulatory requirements. Statutory accounts meet legal requirements and provide a https://www.bookstime.com/articles/statutory-reporting standardized view of a company’s financial performance to external stakeholders. They adhere to accounting standards such as IFRS or Generally Accepted Accounting Principles (GAAP) to ensure consistency and comparability across reporting entities.
Content Types
Insurance companies operate in a highly regulated industry, and accurate financial reporting is crucial for the protection of policyholders’ interests. Non-statutory accounts, also called internal or management accounts, are financial reports prepared for internal use rather than regulatory compliance. Unlike statutory accounts, which follow strict legal formats (such as GAAP or IFRS), non-statutory accounts are flexible. Companies use them to track performance, make strategic decisions, and assess financial health without the constraints of formal reporting standards. The use of technology has evolved into a crucial management tool for the intricate requirements of global statutory reporting.
GAAP vs Statutory Accounting: Difference and Comparison
Save time with automatic updates using the power of cloud technology, and increase accuracy with automatic rounding, numbering, referencing, and roll-forward processes. KPMG reports on actions taken and discussions held about ongoing projects on conference calls and at the Spring 2023 meeting of the National Association of Insurance Commissioners. We report on actions and discussions about ongoing projects on conference calls and at the NAIC 2023 Summer meeting. This granular insight helps me adjust pricing or negotiate supplier costs before year-end statutory reporting.