In the matter of financial statements, accounting practices and procedures, and valuation of securities

Issued and entered January 6, 1997 by D. Joseph Olson, Commissioner of Insurance

INFORMATIONAL STATEMENT ISSUED PURSUANT TO ACT 306 OF THE PUBLIC ACTS OF 1969 AS AMENDED

The 1996 Forms with Instructions for Filing Financial Statements in Michigan (Instructions) was mailed to insurers with Bulletin 96-03. Bulletin 96-03 was an informational statement concerning the format and content requirements of annual statements filed by insurers eligible or authorized to transact business within Michigan. Under separate cover, the National Association of Insurance Commissioners mailed related information including a November 25, 1996, letter from the commissioner. Questions concerning Bulletin 96-03 and the related materials require the clarifications made herein.

Diskette Filings

Page 1 of the Instructions has a summary list of significant filing requirements. The first listed requirement states that Òfiling of annual and quarterly diskettes with the Michigan Insurance Bureau is required. Correctly stated, the requirement to file diskettes applies only to certain companies.

The requirements for diskettes were detailed in the commissioner's November 25, 1996 letter. Those requirements appeared as follows:

Annual Statement Filing Requirements: Insurers subject to Michigan Section 500.438a are required to submit one legal-sized copy of your 1996 annual statement, along with any other requested supplements which you are required to file with the Michigan Insurance Bureau, to the NAIC Support and Services Office (SSO), using the enclosed label. While your filing is not required to include the annual statement on diskette (unless you are required to make such a filing with this Bureau), I encourage you to submit a diskette to the NAIC/SSO in the same packet as the hard copy filing. Special care should be taken to verify the accuracy of your filings by properly utilizing the cross check features available on all diskette software.

Companies are required to make annual and quarterly statement diskette filings with the Bureau unless such a filing has been made with the company's domiciliary state. If such a filing has not been made, a diskette must be included in the filing with Michigan. Those companies required to make a diskette filing with Michigan are also required to include the annual and quarterly statements on diskette in the submissions to the National Association of Insurance Commissioners (NAIC). While Health Maintenance Organizations are not required to make a diskette filing this year (although they will be next year), those organizations are encouraged to also submit diskettes this year, to both the Bureau and the NAIC in the same package as the hard copy filings.

NAIC Filing Fees

Each Michigan insurer must evaluate the utility of the filing fees charged to insurers by the NAIC. The fees support NAIC solvency activities designed to benefit the public, regulators, and companies. The commissioner's November 25, 1996, letter clarified the matter as follows:

Michigan statutes do not require any insurer to pay a filing fee to the NAIC for this material. These fees support NAIC solvency activities. If you choose to pay a fee, your filing fee should be mailed to the NAIC/SSO Lock Box in the envelope included in this packet. The filing fee structure this year has not changed from last year. The filing fee structure is included in the attached material.

Valuation of Investments

The special procedures for Schedule D securities set forth in Bulletin 96-03 were designed to provide relief to insurers seeking to avoid the costs and charges associated with valuation services provided by the NAIC Securities Valuation Office (SVO). An insurer seeking to avoid those expenses should make written request to the commissioner. Written requests must be submitted within 120 days of the purchase of a security, state the security's rate and value, and contain the rationale and reference to the factors outlined in Bulletin 96-03. Where applicable, specific reference to the SVO's standards for valuation and rating of the affected security should be included.

This bulletin supplements, but does not supersede, Bulletin 96-03.

D. Joseph Olson
Commissioner of Insurance