Regulations addressing risk-based capital for variable annuities, reserving for universal life insurance, and small face amount life insurance policy disclosure are among measures adopted by the National Association of Insurance Commissioners during a conference call on Oct. 14.
The actions taken by state insurance regulators were anticipated and, in general, well received by insurance representatives, according to interviews conducted by National Underwriter.
The issues were supposed to be addressed during the fall meeting of the NAIC, which was scheduled to be held in New Orleans, but Hurricane Katrina forced the cancellation of that meeting.
The C-3, Phase II project, which establishes a modeling approach for risk-based capital requirements for variable annuities with guarantees, was adopted during the joint executive committee/plenary session of the NAIC.
Lou Felice, a New York regulator and chair of the NAIC’s Capital Adequacy Task Force, explained that the new approach will be tempered by a standard scenario that creates a minimum RBC requirement. That requirement creates an element of conservatism in company modeling until regulators become more comfortable with the new approach, he added.
A reserving component of C-3, Phase II for VAs is currently being developed by the American Academy of Actuaries, Washington, to complement the C-3, Phase II RBC part of the project.
Jim Poolman, chairman of the NAIC’s Life & Annuities “A” Committee and North Dakota insurance commissioner, said Actuarial Guideline 38, which the executive committee and plenary approved, was a temporary solution for reserving for products including universal life products with guarantees until a principles-based approach to reserving can be applied. He urged that the model be adopted uniformly among states because it is a reserving issue.
Ultimately, it is anticipated that a principles-based approach could be applied broadly to all products.
The American Council of Life Insurers, Washington, supports the actions on AG 38 and C-3, Phase II taken by the NAIC, according to Whit Cornman, a spokesman.
ACLI also supports the NAIC’s full adoption of work on a regulation addressing small face amount policies developed in the “A” committee, says Patricia Parachini, ACLI senior director-insurance regulation. “To the extent that a state sees a problem on this issue and wants to adopt the model, we will support it,” she adds.