Statutory accounting and annual statement support for small insurers

The Model Audit Rule requires an insurer to have an annual audit by an independent CPA and file the audited statutory financial report with the commissioner by June 1, with extra duties that scale with premium. The rule is the NAIC's Annual Financial Reporting Model Regulation (#205). The text read on 2026-10-19 is the 3rd Quarter 2015 edition, and its own history lists amendments in 2014 and editorial changes in 2015. Each state adopts its own version, so the domicile's rule governs.

States differ. On the NAIC's Summer 2026 state page, Texas's 28 TAC 7.85 is listed as a previous version of the model and Arizona has related activity only. Vermont's Regulation I-2009-06 (Revised) repeats the June 1 date and the exemption test.

Possibly, but only if both tests are met for the year. Section 2 of the model exempts an insurer with direct premiums written in the state of less than $1,000,000 in the calendar year and fewer than 1,000 policyholders or certificate holders of direct written policies nationwide at year-end, unless the commissioner makes a specific finding that compliance is necessary. An insurer with assumed reinsurance premiums of $1,000,000 or more is not exempt.

You may see a "$500,000 exemption" quoted. It is not in the model. The text read on 2026-10-19 has no $500,000 figure; the nearest numbers are the $1,000,000 premium test and the $500,000,000 internal control line, and the two get confused. Four Illustrative cases, with made-up numbers:

The exemption applies "for the year", so retest each December, and read the domicile's adopted wording before relying on it.

It applies at $500,000,000 or more of annual direct written and assumed premium, excluding premium reinsured with the Federal Crop Insurance Corporation and the Federal Flood Program. Section 17 then requires management to prepare a report on internal control over financial reporting as of December 31 and file it with the commissioner along with the section 11 communication.

The report states management's responsibility, its assertion on whether controls are effective, how it evaluated them, the scope, any unremediated material weaknesses, the inherent limits of controls and the signatures of the CEO and CFO. Management may not conclude controls are effective if a material weakness remains. The commissioner can also require the report from a smaller insurer in a risk-based capital level event or one deemed in hazardous financial condition (17B), and an insurer subject to SOX section 404 may file that report with an addendum (17C).

The model asks for no auditor attestation of the report; section 9 has the auditor consider the report in planning the audit. Below the threshold there is no section 17 report, but section 11 still has the auditor communicate unremediated material weaknesses.

For a small insurer, readiness means documentation: process narratives, control matrices, and reconciliations with preparer and reviewer evidence. Finbryn organizes those records; management writes and signs any report.

Yes, from one general ledger and a mapping of each account to both bases. The ledger closes once. A list of adjustments moves the statutory balances to GAAP: acquisition costs that SSAP No. 71 expenses and ASC 944-30 capitalizes, nonadmitted assets that SSAP No. 4 charges to surplus, and reinsurance recoverables that SSAP No. 62R nets against reserves.

Each adjustment gets a schedule, a preparer, a reviewer and a reference to the guidance. The bridge from statutory surplus to GAAP equity is the page the auditor and the lender ask for first, and the worked example, with made-up numbers, is in the statutory accounting vs GAAP guide.

The model also asks the notes to the audited report to reconcile any differences between the audited statutory statements and the annual statement filed with the state (section 5F). Keeping the mapping current through the year makes both reconciliations a roll-forward instead of a year-end rebuild. Your auditor tests both sets of numbers; Finbryn does not describe either set as meeting a standard. The ASC 944 changes for long-duration contracts are in the IFRS 17 vs LDTI guide.

The annual statement is due March 1 unless the domicile says otherwise, and the quarterly statement 45 days after quarter-end. The management discussion supplement is due April 1 and, where the domicile requires it, the confidential Actuarial Opinion Summary March 15 (NAIC 2026 Property/Casualty Annual Statement Instructions, adopted June 2026). The audited report follows on June 1 under the model.

The diagram runs from the December 31 close to the June 1 audit report and marks the three signing steps: the officers who sign the statement, the actuary who signs the opinion attached to Page 1, and the independent CPA who signs the audit report. Dates vary by domicile, and the domicile's rule governs.

The insurer prepares it and its officers sign it. The instructions leave the jurat signatures to the appropriate corporate officers under the domicile state's requirements, and they name a statutory statement contact: the person responsible for preparing and filing all statutory filings with the reporting entity's regulators and the NAIC.

Many small insurers staff that role in-house. Others use a captive manager, an outsourced finance provider or statement-preparation software. Finbryn prepares the trial balances and schedules, and the officers review, sign and file. We do not sign or file, and we do not describe the statement as meeting any standard.

Finbryn's fee is quoted per engagement after we see the chart of accounts, the lines of business, the reinsurance program and the state filings. No amount appears on this page.

A startup carrier needs five things settled before its first audit: the auditor registered, the actuary appointed, opening support, a reinsurance file and a books-versus-auditor line.

• Register the independent CPA with the commissioner within 60 days of becoming subject to the rule (section 6A).
• The board appoints the appointed actuary by December 31 of the year the opinion covers, and the company notifies the domiciliary commissioner within five business days of the initial appointment (2026 instructions).
• Keep opening-balance support for capital and surplus; in the first year an audited report is required, the comparative column may be omitted (section 5G).
• Collect the reinsurance and fronting agreements and the MGA and third-party administrator contracts; Note 19 of the statement discloses direct premium written by MGAs and administrators.
• Keep the books with someone other than the auditor, because section 7G bars the auditor's bookkeeping.

An MGA is not an insurer and files no annual statement; the carrier it writes for reports MGA premium in Note 19. Finbryn prepares the carrier-side trial balances and schedules for the officers' review.