UL Nonforfeiture Model Scuttled

The draft provided methods and standards to determine minimum nonforfeiture values for UL products with secondary guarantees, which are provisions that ensure the policy will remain in force if, in the absence of a guarantee, it would have terminated. The regulation would have applied only to secondary guarantees that extended over 20 years.

After the vote, regulators cited various reasons for not proceeding with the model. These ranged from a simple, “its not needed” to concerns that the model would become part of the NAIC Codification of Statutory Accounting Principles, and, consequently, a criterion for accreditation.

Insurers for their part, roundly opposed the draft, citing the cost of reserving for guarantees and the possibility such products would not be sold if secondary guarantees had to be reserved for and treated as guarantees instead of shadow accounts.

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 16, 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.