New AOMR Draft Eliminates Exemption For Small Companies
Insurance regulators voted up a draft of a model regulation that would require all companies that want to use their domicile state’s actuarial opinion of memorandum in states where they have product filings to perform an asset adequacy analysis test.
Regulators adopted the model after agreeing that they could withdraw their approval if they decided they needed to do so.
The draft of the Actuarial Opinion and Memorandum Regulation that was unanimously adopted by the National Association of Insurance Commissioners’ “A” and “B” committees, one of the final steps before full adoption by the organization, eliminates an exemption for small companies.
The draft model is supported by regulatory actuaries and the Life Practice Council of the American Academy of Actuaries, but is opposed by the American Council of Life Insurers and the National Alliance of Life Companies.
The draft eliminates an exemption for a small company with under $100 million in assets from performing an asset adequacy analysis as part of its AOMR. Instead, small companies would be held to the requirements of Section 8 of the model with large companies.
The actuarial opinion is an actuary’s statement that reserves are adequate based on an asset adequacy analysis and actuarial standards of practice.
Life insurers argued that the requirement would place an undue cost on small companies to hire outside actuarial staff needed to perform the asset adequacy tests. The cost could be a minimum of $30,000 for companies under $100 million, according to Scott Cipinko, NALC executive director.
Cipinko told regulators at the “A” Life & Annuities Committee that benefits from requiring companies to perform such testing would not justify the cost. There has not been a rash of insolvencies, he added. “The cost of overregulation is a cost that we cannot and should not bear.”
He added that they needed to take a cue from NAIC leadership and its effort to simplify regulation to help insurers remain competitive. “They are trying to keep us in business,” he added.
Utah Commissioner Merwin Stewart assured Cipinko that no regulator wanted to burden small insurance companies.