ACLI Board OKs Principle-Based Approach

Many actuaries and some regulators want to shift to a flexible approach for monitoring capital levels that would emphasize use of fundamental actuarial principles rather than traditional formulas. Other actuaries and some regulators say they are still more comfortable with the traditional formulas for calculating RBC requirements.

The proposal that the 10 insurance companies developed calls for regulators to adopt short-term solutions and long-term solutions.

The 10-insurer group recommends that regulators adopt the current draft of AG 38 with an April 1, 2007, sunset provision. The 10-insurer group also recommends including an actuarial calculation that would add a 7% load to the net single premium used in the denominator in one of the steps used in calculating reserves.