The C-3 project addresses risk-based capital criteria for variable products with guarantees. Work is related to another project the Academy is involved in that looks at reserving for VA guarantees.
In time that framework may evolve and become more dynamic to satisfy consumers who will need more flexibility in product choices, she continues.
The framework should be such that consumers can buy exactly what they need to buy, according to Lautzenheiser. There is no reason, she says, why products that offer multiple benefits cannot be developed. Achieving that goal can be accomplished by taking a principle-based rather than strictly a formulaic approach where formulas would determine solvency and financial strength, she adds.
The Academy has looked at such an approach for several years when it worked on a unified valuation system for regulators at the National Association of Insurance Commissioners, Kansas City, Mo. That approach relied more on monitoring companies through dialogue with management and early warning systems than on using formulas to determine solvency.
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 2, 2004. Copyright 2004 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.