Date:March 1, 2001
To:Wisconsin Domiciled Worker's Compensation Insurers
From:Connie L. O'Connell, Commissioner of Insurance
Subject:Prescribed Accounting Practice, Audit Premiums Receivable

As you are aware, the NAIC's new accounting guidance (Codification) took effect on January 1, 2001. Statement of Statutory Accounting Principles #6 (SSAP #6), paragraph 7.d., addresses the due date for audit premiums (such as on worker's compensation policies).

7. The due date for all premium balances addressed by this statement is determined as follows:

d. Audit premiums and retrospective premiums - governed by policy or contract provisions. If the due date for receivables relating to these policies is not addressed by policy provisions or contract provisions, any uncollected audit premium (either accrued or billed) is nonadmitted.

Worker's compensation policies written in Wisconsin in prior years did not include a provision for the due date for the audit premium. On January 4, 2001, this office approved the Wisconsin Compensation Rating Bureau (WCRB) policy endorsement to establish a due date for audit premiums. Under the new policy language, the audit premiums are due when billed. Therefore, worker's compensation policies issued in Wisconsin, using the recently approved policy form, would comply with SSAP 6 requirements. However, for policies written on the old policy form, all audit premiums would be nonadmitted according to SSAP #6, unless this office prescribed a different accounting practice.

Please be advised that it is a prescribed accounting practice for Wisconsin domiciled insurers, for annual and quarterly statutory financial statements with "as of" dates in 2001 and 2002, to report worker's compensation audit premiums receivable as if the policy or contract contained a provision stating that audit premiums are due when billed. This accounting practice is prescribed for worker's compensation policies written in Wisconsin, and worker's compensation policies written in other states. This accounting practice does not apply to lines of business other than worker's compensation, because the company could have included a due date for audit premiums on policy forms other than worker's compensation. This accounting practice does not alter the application of SSAP #6, paragraphs 9-11, regarding impairment of premium receivables including audit premiums. This prescribed accounting practice is issued pursuant to s. 601.42 (3), Wis. Stat.

Domestic insurers may contact this office regarding requests for individual company permitted accounting practices.

Questions related to this bulletin may be directed to Peter Medley, Insurance Examiner Supervisor, Bureau of Financial Analysis and Examinations, at (608) 267-5030.