NAIC Discussions Continue On Market Conduct, Nonforfeiture

Discussions are favoring looking at all companies domiciled in the 10 states participating in the pilot rather than leaving out companies with small amounts of premium. Although the volume of data regulators would receive was cited as a potential problem, several arguments were made for including all companies.

These said the pilots results would be diminished if companies were excused from participating and that total inclusion would provide a complete market picture.

Another NAIC project being discussed is how to approach reserving for nonforfeiture values.

Among the issues here is whether nonforfeiture values should be examined product by product or more generally.

The question of the rate used to determine an annuity nonforfeiture value was also broached. Some regulators maintain the interest rates used to determine minimum nonforfeiture values was more an intermediate than a short-term problem. Changes to regulation that include a 2004 sunset provision are being put in place with some states lowering the interest rate used to 1.5% from 3%.

Some companies are currently crediting rates around 5%, a far cry from 1.5%, and an indication that a potential problem may be overstated, according to Allen Elstein, a life actuary representing the Connecticut department.

Finding a more lasting solution could include either a specific guaranteed rate, an index that would be a guideline for rates, or both, according to discussions of regulators and insurers.

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 5, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.