Actuarial Notes

Accounting Practices and Procedures Manual: Preamble

By National Association of Insurance Commissioners · 2025

Study guide: Exam 6U

The Preamble to the NAIC's Accounting Practices and Procedures Manual, which opens Volume One of the manual ahead of the Statements of Statutory Accounting Principles. It sets out the history of the NAIC's accounting practices and procedures and the codification of statutory accounting principles, how accounting for insurance companies differs from commercial accounting, the Statement of Concepts, the statutory hierarchy, materiality and permitted accounting practices.

On the syllabus

  • Exam 6U — objectives A2, C2 and C4; NAIC Accounting Practices and Procedures Manual, 2025, Preamble (as the content outline states it)

I History of Accounting Practices and Procedures Promulgated by the NAIC

  • A Background
  • B Purpose of Codification
  • C History of Codification
  • D Result of Codification Project

II Accounting for Insurance Companies

  • A Environment
    • Insurance is regulated state by state, and insurance commissioners are charged with overseeing the financial condition of insurers; statutory accounting principles have been established by statute, regulation and practice in recognition of these concerns.
  • B Statutory Accounting Principles (SAP)
    • In simplest terms, SAP has been those accounting principles or practices prescribed or permitted by an insurer's domiciliary state.
    • SAP attempts to determine at the financial statement date an insurer's ability to satisfy its obligations to its policyholders and creditors.
  • C Comparison of U.S. Generally Accepted Accounting Principles (GAAP) and SAP
    • GAAP stresses measurement of emerging earnings (matching revenue to expense), while SAP stresses measurement of the ability to pay claims in the future.
    • Policy acquisition costs are expensed as incurred under SAP, whereas GAAP defers qualifying costs and amortizes them over the expected life of the contract.

III Development of Ongoing Accounting Practices and Procedures

IV Statutory Accounting Principles Statement of Concepts

  • A Purpose
  • B Objectives of Statutory Financial Reporting
  • C Concepts
  • D Conclusion

V Statutory Hierarchy

  • Level 1 is the SSAPs, including the U.S. GAAP reference material adopted by the NAIC from the FASB Accounting Standards Codification.
  • Level 2 is the consensus positions of the Emerging Accounting Issues (E) Working Group (INTs adopted before 2016) and interpretations of existing SSAPs adopted by the Statutory Accounting Principles (E) Working Group (INTs adopted in 2016 or beyond).
  • Level 3 is the NAIC Annual Statement Instructions and the Purposes and Procedures Manual of the NAIC Investment Analysis Office.
  • Level 4 is the Statutory Accounting Principles Preamble and Statement of Concepts.
  • Level 5 is the Statutory Accounting Issue Papers and sources of nonauthoritative GAAP accounting guidance and literature.

VI Statements of Statutory Accounting Principles

VII Materiality

VIII Relationship to GAAP

IX Relationship to Developments within NAIC

X Permitted Accounting Practices

XI Financial Statements

  • A Annual Financial Statement
  • B Interim Financial Statements

Sources

  • Accounting Practices and Procedures Manual (NAIC), Preamble — the document: the Preamble's section headings and the text of Sections II and V (pp. P-1 to P-15 of the file the NAIC serves at this address, 2,117 pages, sha256 572b86e1e45582656f23d218d4695ba5a102e5f13f00c4cb34ae68e54d3830a0); the file now served is headed "As of March 2026" and marked © 1999-2026, not the 2025 edition the syllabus prescribes, which could not be reached, so the Preamble's wording in 2025 may differ from what is listed here
  • CAS Exam 6U Content Outline, Fall 2026 — the citation (Accounting Practices and Procedures Manual, 2025, Preamble) and the objectives it serves