Insurance Insights – December 2023 Edition

New Statement on Auditing Standards (SAS)

These changes are effective in 2023 for 2023 audits:

  • SAS 143 – Accounting Estimates and Related Disclosures
    • This auditing standard addresses the auditor’s responsibilities relating to accounting estimates and the related disclosures and specifically requires auditors to understand the process for developing accounting estimates and the oversight of accounting estimates.  The standard also provides guidance for determining whether specialized skills or knowledge is required in evaluating accounting estimates.  For 2023 audits, you can expect some questions on this matter from your auditors and in some cases, some more specific questions on this process during audit planning and more in-depth communications with your actuary(ies) on how that accounting estimate is developed and monitored.
  • SAS 144 – Amendments to AU-C Sections 501, 540 and 620 Related to the Use of Specialists and the Use of Pricing Information Obtain From External Information Sources
    • This standard enhances the guidance for an auditor’s evaluation of management’s use of an external specialist such as an actuary for claim reserves and pension obligations. SAS 144 also enhances guidance on the use of pricing information (fair market values) from external sources as audit evidence. You can expect your auditors to perform more procedures relating to the use of specialists, more documentation on the usage of any pricing sources and inquiries relating to your oversight relating to third party pricing information.
  • SAS 145 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement
    • This standard enhances the audit risk assessment process to focus on audit risks that are more significant and present a greater degree of risk to the audit and introduces new definitions for a significant audit risk and formalizes the concept audit scalability (that is the size of an entity does not, in all circumstances, drive the audit complexity of that entity).  The changes that became effective with SAS 145 are entrenched in the background of the audit process but in general, you can expect your auditors to increase focus and be more responsive to additional material current audit period issues.

NAIC Meeting Updates

During the December 2023 NAIC meeting, the following items were adopted by the Statutory Accounting Principles Working Group (SAPWG):

  • A revision to the annual statement instructions to specify AVR treatment when an ‘acute credit event’ exists, but a rating downgrade has not yet been issued. (2023-15)
  • A revision to SSAP 2R, Cash, Cash Equivalents, Drafts, and Short-Term Investments, restricting 2R reporting for any item that would be included in Schedule BA, regardless of maturity date. (2023-17)
  • A revision to SSAP 54R, Individual and Group Accident and Health Contracts, clarifying that gross premium valuation, under Appendix A-010, and cash flow testing, under Actuarial Guideline LI: The application of Asset Adequacy Testing to Long Term Care Insurance Reserves (AG) 51, are both required if indicated.  Therefore, reserves must be accrued if gross premium valuation is deficient even if cash flow testing is adequate. (2023-22)
  • A revision to SSAPs 30R, Unaffiliated Common Stock and 32R, Preferred Stock, clarifying that naming convention does not direct investment classification, and that the substance of residual interests should be reported on Schedule BA. (2023-23)


Additionally, SAPWG issued an exposure draft (2023-24) to reject the GAAP Guidance ASU 2016-13, Measurement of Credit Losses on Financial Instruments, commonly referred to as Current Expected Credit Losses (CECL).  The exposure draft is expected to be adopted in early January, retaining current statutory guidance for other than temporary impairments.

Partner Farewell

In 2024, SB will mark a significant milestone:  its 25th anniversary.  However, amidst the celebrations, 2024 also marks a poignant moment as Gary Strohm prepares to bid adieu in September, retiring after serving clients in the insurance industry for over 40 years and, most notably, shaping SB into the reputable firm it is today.

The year was 1999 – Gary founded SB with one other partner, backed by seven professionals and a courageous cohort of 40 clients.  It was a leap of faith, a departure from the established national accounting firm RSM, but one that paved the path for a remarkable journey.  Today, SB has six partners, a dedicated team of 25 professionals, and a roster of over 150 clients—each a testament to the trust and confidence in the Firm’s expertise and service.

Throughout his tenure, Gary’s commitment to excellence, professionalism, and dedication to our clients has set an extraordinary standard within our Firm.  His genuine care for the well-being of both clients and colleagues has left a lasting mark on our organization.

As Gary embarks on this new chapter in his life, we express our deepest gratitude for his invaluable contributions to SB’s success.  While we will miss his expertise and presence dearly, we wish him an incredibly fulfilling and joyous retirement.  May this new phase be filled with relaxation, exciting experiences, and cherished moments with family and friends.