Hypothetically, a GAAP audit was performed and filed prior to COVID-19 being declared a pandemic. While the statutory Annual Statement was filed by March 1, 2020, the statutory audit has not yet been finalized. Could there be a different conclusion with r
In general, we believe that it is conceivable that the conclusion with respect to the reasonableness of loss and LAE reserves could be different on a GAAP versus SAP basis. We expect that this would result in considerations as to the need for restatement on a GAAP basis.
While the determination of the audit opinion is made by a certified public accountant (CPA) and not an actuary, it is always possible that the results could be different given additional information obtained between the audit dates. Companies are required to consider subsequent events through the date the financial statements are, or are available to be, issued. Under U.S. statutory accounting, specifically Statement of Statutory Accounting Principle (SSAP) No. 9, COVID-19 would be considered a Type II—Nonrecognized Subsequent Event. While not recorded in the financial statements, material Type II events are to be disclosed in the notes to the financials. SSAP No. 9 goes on further to say that consideration should be made for supplementing financials with pro forma data as if the event had occurred on the balance sheet date. SSAP No. 9 is available in Appendix IV of the 2019 COPLFR Practice Note on P&C Statements of Actuarial Opinion.
In these situations, consultation can be appropriately sought with an independent auditor.