Purposes And Procedures Manual Of The NAIC Investment .

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Purposes and ProceduresManual of the NAICInvestment Analysis OfficeNAIC Securities Valuation Office andNAIC Structured Securities GroupEffective for Statements ending December 31, 2019December 31, 2019(volume/issue 19/01)

The NAIC is the authoritative source for insurance industry information. Our expert solutions support the effortsof regulators, insurers and researchers by providing detailed and comprehensive insurance information. TheNAIC offers a wide range of publications in the following categories:Accounting & ReportingInformation about statutory accounting principles and theprocedures necessary for filing financial annual statementsand conducting risk-based capital calculations.Special StudiesStudies, reports, handbooks and regulatory researchconducted by NAIC members on a variety of insurancerelated topics.Consumer InformationImportant answers to common questions about auto,home, health and life insurance — as well as buyer’sguides on annuities, long-term care insurance andMedicare supplement plans.Statistical ReportsValuable and in-demand insurance industry-wide statisticaldata for various lines of business, including auto, home,health and life insurance.Financial RegulationUseful handbooks, compliance guides and reports onfinancial analysis, company licensing, state auditrequirements and receiverships.LegalComprehensive collection of NAIC model laws, regulationsand guidelines; state laws on insurance topics; and otherregulatory guidance on antifraud and consumer privacy.Market RegulationRegulatory and industry guidance on market-relatedissues, including antifraud, product filing requirements,producer licensing and market analysis.Supplementary ProductsGuidance manuals, handbooks, surveys and researchon a wide variety of issues.Capital Markets & Investment AnalysisInformation regarding portfolio values and procedures forcomplying with NAIC reporting requirements.White PapersRelevant studies, guidance and NAIC policy positions ona variety of insurance topics.For more information about NAICpublications, view our online catalog at:NAIC ActivitiesNAIC member directories, in-depth reporting of stateregulatory activities and official historical records ofNAIC national meetings and other activities.http://store.naic.org 1990-2019 National Association of Insurance Commissioners. All rights reserved.ISBN: 978-1-64179-057-4Printed in the United States of AmericaNo part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic ormechanical, including photocopying, recording, or any storage or retrieval system, without written permission from the NAIC.NAIC Executive Office444 North Capitol Street, NWSuite 700Washington, DC 20001202.471.3990NAIC Central Office1100 Walnut StreetSuite 1500Kansas City, MO 64106816.842.3600NAIC Capital Markets& Investment Analysis OfficeOne New York Plaza, Suite 4210New York, NY 10004212.398.9000

TABLE OF CONTENTSSPECIAL NOTICE .IHOW TO CITE TO THE PURPOSES AND PROCEDURES MANUAL OF THE NAIC INVESTMENT ANALYSIS OFFICE . IIRECENT CHANGES TO THE P&P MANUAL . IIIPREVIOUSLY ADOPTED AMENDMENTS TO THE P&P MANUAL EFFECTIVE IN 2019 . VIPART ONE POLICIES OF THE NAIC VALUATION OF SECURITIES (E) TASK FORCE . 1ABOUT THE NAIC, THE VALUATION OF SECURITIES (E) TASK FORCE AND THE SVO . 2The NAIC . 2The VOS/TF and the SVO Staff . 2ABOUT THIS MANUAL. 3Purpose . 3Expression of NAIC Standards in State Law and Regulatory Processes . 3Procedures to Amend This Manual . 4Prohibition on Use of NAIC Designation in a Covenant. 8POLICIES PERTAINING TO SVO AND SSG OPERATIONS . 10Policy Objective. 10NAIC Policy Statement on Coordination of the Accounting Practices and Procedures Manual and the Purposes andProcedures Manual of the NAIC Investment Analysis Office . 10NAIC Designations Do Not Communicate Statutory Accounting or Reporting . 10Sources and Application of Statutory Accounting Guidance. 11Impact on SVO Operations . 11Communication and Coordination Between the SVO and Statutory Accounting Principles (E) Working Group Staff . 11Securities Valuation Office (SVO) . 12Ongoing SVO Operations . 12NAIC Designations . 13Other Non-Payment Risk in Securities . 13Authority to Direct Insurers on Reporting. 14Use of Generally Accepted Techniques or Methodologies . 14Structured Securities Group (SSG) . 14Ongoing SSG Operations . 15SSG Regulatory Products . 15

Main Table of ContentsOther Applicable Policies . 15Policy on Documentation and Data . 16FILING SECURITIES WITH THE SVO . 17Obligation to File Securities with the SVO. 17Who Must File . 17States May Require a Filing of Exempt or Other Transactions . 18Filing Requirements . 18THE USE OF CREDIT RATINGS OF NRSROS IN NAIC PROCESSES. 19Providing Credit Rating Services to the NAIC . 19Policy and Legal Disclosure Pertaining to the NAIC Credit Rating Provider (CRP) List . 19No Waiver/Express Reservation of Authority . 20FILING EXEMPTIONS . 21Certain Separate Accounts . 21Filing Exemption for Public Common Stock . 21Filing Exemption for Certificates of Deposit Reported as Bonds under SSAP No. 26R . 21Filing Exemption for U.S. Government Securities . 21Initial Filing Conventions and Documentation . 21SVO Publishing Conventions for Filing Exempt U.S. Government Securities . 22Other Filing Exempt U.S. Government Securities. 22Filing Requirements for U.S. Government Securities . 22Subsequent Filing . 23Filing Exemption for Direct Claims on, or Backed by Full Faith and Credit of, the United States. 23Definitions . 23Filing Exemption for Other U.S. Government Obligations . 25Policies Applicable to the Filing Exemption (FE) Process . 25Determinations . 26Directives . 26Policies Applicable to Filing Exempt (FE) Securities and Private Letter (PL) Rating Securities . 26Filing Exemption. 26Policy Considerations . 27Application of the FE Procedure to Specific Populations . 27Securities No Longer Assigned an Eligible NAIC CRP Credit Rating . 28 2019 National Association of Insurance Commissionersii

Main Table of ContentsLimitations on Use of NAIC CRP Ratings . 28NAIC DESIGNATIONS. 29Definitions . 29NAIC Designation Subscript S . 29NAIC General Interrogatory . 30NAIC PLGI . 30Monitoring of SVO-Designated Securities . 30AUDITED FINANCIAL STATEMENTS . 31General Rule on Presentation of Financial Results . 31Definitions . 31Procedure. 32POLICIES APPLICABLE TO SPECIFIC ASSET CLASSES . 33Schedule BA Assets . 33Credit Tenant Loans. 33CTL Categories. 33Intent . 33Presumption of Eligibility . 34Ground Lease Financing Transactions . 34GLF Overview . 34Subsidiary, Controlled and Affiliated Investments . 35Investments in Funds . 36Purpose . 36Condition to Eligibility . 36Regulatory Transactions . 37Defined. 37Intent . 37REVIEW OF SVO DETERMINATIONS . 38Condition to Filing of an Appeal . 38Status of NAIC Designation During Appeal. 38Task Force Review for Alleged Violations of Procedures . 38 2019 National Association of Insurance Commissionersiii

Main Table of ContentsSPECIAL INSTRUCTIONS. 39Short-Term Investments . 39Circular Transaction . 39Mandatory Convertible Securities . 39Unrated Hybrid Securities . 40Sub-paragraph D Company . 40Capital and Surplus Debentures . 41PART TWO OPERATIONAL AND ADMINISTRATIVE INSTRUCTIONS APPLICABLE TO THE SVO . 43OPERATIONS . 44Organization . 44IAO Departments . 44Credit Committee. 44COMPILATION AND PUBLICATION OF THE SVO LIST OF INVESTMENT SECURITIES. 45Directive . 45VOS Process . 46Filing Exempt Securities Process . 46RMBS/CMBS Modeled Securities Process . 46U.S

Purposes and Procedures Manual of the NAIC Investment Analysis Office NAIC Securities Valuation Office and NAIC Structured Securities Group Effective for Statements ending Decembe

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