The Financial Condition Committee at the National Association of Insurance Commissioners is seeking comments on a proposal that could change the way insurers handle deferred tax assets.

The committee has exposed proposed temporary revisions to Statement of Statutory Accounting Principles Number 10 — Income Taxes – Alternative Language Proposal – for public comment.

The proposal, SSAP No. 10R, is an alternative to another revision proposal that was exposed Sept. 24, committee officials say.

If implemented as currently written, the latest proposal would affect insurance company statutory accounting in 2010 and would not apply to subsequent annual and interim periods, according to the proposal text.

The proposal deals with topics such as accounting for deferred income taxes, admissibility of income tax assets, intercompany income tax transactions, intraperiod tax allocations, and disclosures.

“For purposes of this statement, only adjusted gross deferred tax assets that are more likely than not (a likelihood of more than 50%) to be realized shall be considered in determining admitted adjusted gross deferred tax assets,” according to the proposal text.

If a reporting entity believed that there was a less than 50% chance that it would end up realizing the DTA, it should adjust the total DTA amount by a statutory valuation allowance, to come up with a new, lower amount that is “more likely than not to be realized,” according to the proposal.

Under the rules given in the September proposal, an insurance commissioner could decide, by regulation, whether a reporting entity could include DTAs in admitted asset and surplus totals in connection with determining “regulatory triggers,” or percentages or other amounts that might affect whether a regulator took major actions such as restricting extraordinary dividend payments or putting a company in rehabilitation.

The rules given in the new version appear to indicate that the reporting entity could include the DTAs, even if regulatory trigger matters were involved, but would have to report the DTAs separately.

The Consumer Federation of America, Washington, and the Center for Economic Justice, Austin, Texas, have written to oppose the idea of increasing the amount of DTAs that insurers could include in statutory surplus.

The proposed change seems to have more to do with puffing up insurer credit ratings than with improving recognition of good assets, the groups write.

“The proposed changes represent another giveaway to insurers at the cost of consumer protection, by allowing insurers to reduce the protection provided by statutory surplus with an increased portion of surplus compromised of non-liquid assets,” the groups write.

Comments on the latest proposal are due Nov. 19.

The Financial Condition Committee at the NAIC, Kansas City, Mo., plans to consider comments during a conference call at noon Nov. 24 and may adopt the proposal during that call, officials say.