Securities Regulation Daily Wrap Up, ACCOUNTING AND AUDITING—Industry Letter presumptively grants permission for insurance companies to file SAP financial statements, (Apr 9, 2025)

By R. Jason Howard, J.D.

To receive permission, insurance companies must file on the EDGAR system a letter containing certain representations and acknowledgments.

The SEC Division of Investment Management has issued an Industry Letter titled “Permission for Insurance Company Issuers of Index-Linked Life Insurance Policies and Contingent Deferred Annuities to File Certain Financial Statements,” which provides that insurance companies can file SAP financial statements in lieu of GAAP financial statements for certain products.

The SEC’s letter states that pursuant to Regulation S-X 3-13 (Rule 3-13), insurance companies may “file financial statements prepared in accordance with statutory accounting principles prescribed or permitted by the insurance company’s domiciliary state regulator, audited by an independent auditor (SAP financial statements), in place of financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP financial statements),” in registration statements filed on Form S-1 for:

• non-variable, index-linked life insurance policies;

• combination life insurance policies that offer variable investment options as well as index-linked investment options (together, “RILUs”); and

• contingent deferred annuities (“CDAs” and together with RILUs, “Covered Insurance Products”), subject to the representations and acknowledgments.

The letter clarifies that for insurance companies to file SAP financial statements in Form S-1 for Covered Insurance Products, the insurance company must file a letter on the Commission’s EDGAR system.

The letter will be publicly available and must contain the following representations and acknowledgments:

1. The life insurance policies or annuity contracts, as applicable, for which the insurance company intends to rely on the permission are Covered Insurance Products;

2. The insurance company’s SAP financial statements are appropriate statements of comparable character to GAAP financial statements and their inclusion in the company’s Covered Insurance Products’ registration statements is consistent with the protection of investors;

3. (a) The insurance company would not be required to prepare audited GAAP financial statements except in connection with registering the Covered Insurance Products, and (b) any GAAP information relating to the insurance company that it otherwise prepares does not constitute a GAAP reporting package or partial GAAP financial statements;

4. While relying on the permission to file SAP financial statements, the insurance company will be eligible for and will rely on the exemption from filing periodic reports required by the Securities Exchange Act of 1934 (Exchange Act) as provided by Rule 12h-7 under the Exchange Act, and will comply with the conditions of Rule 12h-7;

5. The insurance company will indicate in a cover letter accompanying the filing of any new registration statement for a Covered Insurance Product, or any post-effective amendment to an existing registration statement for a Covered Insurance Product, that it is relying on the permission to file SAP financial statements consistent with its Letter; and

6. (a) Reliance on such permission is subject to the Commission staff’s assessment of the Covered Insurance Product’s registration statement(s) or post-effective amendment(s) thereto for consistency with the preceding representations, and (b) the insurance company may only file SAP financial statements consistent with such representations unless and until the Commission or its staff informs it otherwise.

The Industry Letter presumptively grants permission under Rule 3-13 for insurance companies “to file SAP financial statements in lieu of GAAP financial statements in registration statements filed for Covered Insurance Products on Form S-1,” based on the representations and acknowledgments in the letter filed on the EDGAR system.

The Division cautions, however, that “any different product types, representations or acknowledgements might require the Division to reach a different conclusion,” and that the “permission is subject to the Commission staff’s assessment of the Covered Insurance Product’s registration statement for consistency with the acknowledgements and representations in the Letter and the intended product type.”

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