Some Insurers Want To Reopen Triple-X Model

- John Hartnedy, a regulator from Arkansas: Hartnedy argued against revisiting the model. “We don’t need another law or regulation that possibly limits what companies can do,” Hartnedy said. He suggested that in this case, the NAIC ought to emulate the regulatory approach used in the current C-3, Phase II project, which relies more on actuarial judgment and modeling than on formulas.

- Michael Streck, vice president and actuary in charge at Principal Life Insurance Company, Des Moines, Iowa: “Actuarial Guideline 38 stands by itself,” Streck said. “What is really needed is local supervision and a gathering of facts. There is no proof that a company has violated the letter or spirit of the law.” Streck added that the New York proposal focuses on reserving for lifetime guarantees when, in fact, 50% to 70% of consumers buy policies that are term to 65, 75 or 85 years of age.

- Bill Koenig, a senior vice president and chief actuary with Northwestern Mutual: Koenig said the principle of Triple-X and AG 38 is that reserves should be the difference between the present value of future guaranteed benefits less the present value of future premiums needed to support those benefits. “This is an urgent matter,” he said. “It is important that companies are regulated on a uniform basis and not on a state-by-state basis.” If there is an economic reason why companies feel that reserve requirements are too high, they should address the reserve requirements rather than creating new products that circumvent current regulations, Koenig said.

- Jim Van Elsen of Van Elsen Consulting, Pella, Iowa: Even though Triple X is a “flawed regulation,” it still “works better than most things on the table,” Van Elsen said. He said reopening the model would not be healthy for companies. “The more time you spend defining what companies can’t do, the more they will find ways around it.”

- Kory Olsen, a life actuary with a unit of Allstate Corp., Northbrook, Ill.: Olsen said regulators should review a reserve approach based on attained-age level reserves. The approach, described in a letter by Olsen and Edward Robbins, would fund the secondary guarantee on a levelized basis, would offer consistent treatment of specified premiums and shadow account secondary guarantees, and would be “relatively easy to audit and doesn’t appear to have generated significant abuses,” Olsen and Robbins write.

- Dave Nave, co-chairman of the universal life working group at the American Academy of Actuaries, Washington: Nave said the working group is looking at the possibility of replacing the formulas used to calculate reserve requirements with stochastic models.

- William Schreiner, a life actuary with the American Council of Life Insurers, Washington: Schreiner warned that stochastically determined reserves are not deductible for tax purposes. He said the tax treatment of stochastically determined reserves is an issue that needs more attention.