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Accounting for other than temporary impairments (OTTI) are offset against amortized cost, and the maximum amount of the impairment recognized does not exceed the current amortized cost. You can impair a lot up to the amortized cost. In addition, you can use the Impairment Reason (tag 2921) to further clarify the reason for the impairment.
About Credit and Non-Credit Loss for Debt Securities
For STAT accounting bases used in Eagle's Insurance Accounting solution, the non-credit loss is considered part of the total impairment recognized as a reduction in amortized cost. For Life and Fraternal companies, credit losses are recognized through the Asset Valuation Reserve and non-credit losses on debt securities (interest related losses) are recognized through the Interest Maintenance Reserve. For Property and Casualty, Health and Title companies, you do not have to identify if the impairment is credit or non-credit as the Asset Valuation and Interest Maintenance Reserves do not apply to these companies. Therefore for these companies you can simply identify the impairment amount.
For the STAT accounting basis, the sum of the credit loss (tag 7358) and non-credit loss (tag 7359) must be equal to the total impairment amount. See the following example.
STAT Accounting Basis | |
|---|---|
Local Cost Adjustment (tag 7350) | 900 |
Credit Loss Local Adjustment (tag 7358) | 500 |
Non-Credit Loss Local Adjustment (tag 7359) | 400 |
For comparison: For Non-STAT accounting bases, the credit loss field (tag 7358) must be equal to the local cost adjustment (tag 7350). Additionally, edits to the Book Impairment Adjustment panel prohibit the non-credit amount (tag 7359) from exceeding the amortized cost value on the lot. See the following example.
Accounting Basis Other than STAT | |
|---|---|
Local Cost Adjustment (tag 7350) | 900 |
Credit Loss Local Adjustment (tag 7358) | 900 |
Non-Credit Loss Local Adjustment (tag 7359) | 400 |