The American Council of Life Insurers has promised state insurance regulators it will offer a short-term reserving solution for term and universal life products with secondary guarantees by the end of the year.[@@]
During a meeting in Minneapolis of the National Association of Insurance Commissioners, Kansas City, Mo., on Aug. 22-23, the ACLI reiterated its support for a principle-based reserving system.
The meeting drew around 100 interested parties, including approximately 9 state insurance commissioners, all of whom are members of the NAIC’s Life & Annuities “A” Committee, where the reserving issue is under discussion. Actuaries and industry representatives also attended.
The state commissioners are interested in ways to develop more efficient reserving for life insurance products. The system currently uses formulaic reserves that some maintain are inefficient. The current system also has its supporters, however, who argue it affords a necessary degree of conservatism and safety.
The interim session of the NAIC’s “A” Committee was held to prepare for a general discussion of a work timetable that could advance more efficient reserving, North Dakota Commissioner Jim Poolman told National Underwriter (see NU’s print edition, Aug. 22-29).
The issue has implications for consumers, the life insurance market and solvency oversight, Poolman said.
As the ACLI develops its solution, another short-term solution that sunsets in 2007, Actuarial Guideline 38, is being readied for the NAIC’s review and possible adoption at its fall meeting in New Orleans Sept. 10-13.
The effort will parallel work being done on principle-based reserving by the American Academy of Actuaries, Washington, says Paul Graham, ACLI vice president-insurance regulation and chief actuary. If the Academy’s work advances more quickly, then the ACLI will put its work aside, he explains.
But the need to work on an immediate solution is important because the earliest that states’ standard valuation law could be changed would be 2009. In the interim, the need for reasonably priced products to offer the underinsured continues, Graham says.