The Hawkeye State is giving life insurers that use derivatives to hedge indexed annuity and life operations more flexibility.
The Iowa Insurance Division has announced the accounting change in Bulletin 08-18.
The bulletin, which applies to life insurers with domiciles in Iowa, affects treatment of derivatives hedging of the growth in the amount of interest credited to holders of indexed life insurance policies and indexed annuities.
Insurers can use a procedure described in the bulletin to shift to the “amortized cost method” for accounting for hedging arrangements, and to “change the indexed annuity reserve calculation methodology such that index credit returns will be included in the reserve only after crediting to the policy,” officials write in the bulletin.
What Your Peers Are Reading
But insurers also can stick with their current accounting and financial statement presentation methods for indexed product hedging arrangements, officials write.