We inadvertently posted a preliminary version of No. 287. The final version will be posted within a few days. We apologize for the error.
Americans are virtually united in support for regulatory enforcement. Polling shows Americans favoring tough regulatory enforcement by an 87-12 margin. Democrats (89), Republicans (85), Independents (87) all agree, as do Americans from all parts of the country: Northeast (86), Midwest (88), South (88), West (84). In focus groups, Americans connect proper and fair enforcement of the rules to concerns about a rigged political and economic system. They favor enforcement to ensure that everyone has a fair shot in society. They want assurances that weak regulatory enforcement does not enable corporations and the rich to play by a different set of rules—with everyday people held to account, but the powerful able to disregard the rules because they know they won't be enforced against them. These views are durable, and withstand counter-messaging. Indeed, Americans express overwhelming support for stronger regulatory enforcement.
Americans' overwhelming support for tough law-and-order against corporate wrongdoers reflects three interconnected understandings. First, basic standards of justice require that the rules be enforced equally against powerful corporations as they are against vulnerable individuals. Americans of all political stripes perceive that the system is rigged, creating both a crisis of political legitimacy and a pervasive sense of injustice. Second, justice requires that wrongdoers be punished—and corporate violators, who can inflict damage on a scale vastly greater than street criminals, must be punished commensurate with the scale of the harms they impose. Americans of all income brackets, for example, expressed strong support for prosecuting and seeking jail terms for high-level Wall Street executives in connection with the 2008 financial crash. Third, strong enforcement is needed to ensure compliance with the laws and regulations that protect Americans' quality of life, from clean air safeguards to protections against predatory lenders.
For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application of the amendments is permitted.
We are writing to express our significant concern with the effective date decision made at the June 6, 2018, meeting, which gives public companies just over 2 years to implement. We do not believe this date is realistic and strongly urge the Board to reconsider their decision prior to the issuance of a final standard by extending the effective date for at least one additional year. We do not believe it is advisable for the Board to "wait" and see if preparers will be able to implement by this date and "later" consider potentially extending the effective date.
The NAIC is aware of the recent news release from FASB. Much of the guidance is consistent with previous exposure drafts on the same topic. The NAIC, through its Statutory Accounting Principles (E) Working Group, will be reviewing it more closely in the near future to begin considering it for statutory accounting, consistent with what is described in the introductory paragraph of our most recent comment letter to FASB on the topic.
The Statutory Accounting Principles (E) Working Group of the NAIC is responsible for the development and enhancement of Statements of Statutory Accounting Principles (SSAPs) used by U.S. insurers in their statutory filings. Statutory Accounting Principles (SAP) presents an effective, comprehensive and understood approach, which has been built using the framework established by U.S. GAAP [Generally Accepted Accounting Principles]. Under the SAP process, all new GAAP issuances are considered and ultimately adopted, adopted with modification, or rejected. Although SAP may make some modifications, it is preferred to have minimal differences in accounting methodologies between SAP and GAAP, with as limited variations as possible to meet regulatory objectives. Consequently, proposals that significantly revise GAAP standards are a vital matter for U.S. regulators.
The Settlement reached after more than two-and-a-half years of hard-fought litigation provides the Class with a $91.25 million cash payment. The money will be distributed directly to Class members, with no need for claims forms and no funds reverting to John Hancock.
On preliminary approval, the question is whether the Settlement's substantive terms fall within the range of "possible" approval, such that notice should be sent to the Class and a full fairness hearing should be held. The substantial recovery obtained for the Class in light of the risks of continued litigation easily meets that test. Class Counsel researched and discovered this alleged breach of contract on their own, without any governmental investigation, and filed the first suit alleging that John Hancock failed to decrease its cost of insurance rates. At the initial conference in this case, the Court expressed concern regarding whether Plaintiff can sustain a breach of contract claim in light of a "fundamental issue about the language in the policy that could be dispositive," questioned whether the key contractual terms at the heart of this litigation were even "enforceable," and invited John Hancock to file "a dispositive motion addressing" whether Plaintiff can even "get at the issue of [John Hancock's] expectations of future mortality experience." After persuading John Hancock not to file a proposed motion for judgment on the pleadings, Class Counsel reviewed and analyzed over 340,000 pages of documents (including over 2000 spreadsheets), had its experts spend 23 days onsite at John Hancock's offices in Boston, Massachusetts extracting reams of data about tens of thousands of Class policies and working with and investigating John Hancock's policy administration systems, took and defended 16 highly technical depositions (some over multiple days) involving subjects such as insurance financial reporting, statutory accounting, mortality tables, and actuarial science, and prepared a motion for class certification and supporting expert reports that totaled over eleven thousand pages. These efforts ultimately culminated in a mediation on May 24, 2018, which took place before Judge Theodore Katz (Ret.), a retired magistrate judge in this District, and resulted in an extraordinary amount of cash relief for the Class. The $91.25 million settlement fund will be used to compensate tens of thousands of elderly insureds, and is a remarkable result for an alleged breach of a contractual promise that this Court had preliminary concerns about being "awfully vague" and "almost sounds illusory."
At the final approval hearing, the Court will have before it more extensive submissions in support of the Settlement and will be asked to make a determination as to whether the Settlement is fair, reasonable, and adequate in light of all of the relevant factors. At this time, Plaintiff requests only that the Court grant preliminary approval of the Settlement so that Class members can receive notice of the Settlement and the final approval hearing.