Among the actions taken by regulators at the National Association of Insurance Commissioners’ winter meeting were the adoption of the annuity nonforfeiture model regulation, a resolution on limited line term life insurance and the extension of the sunset provision of Actuarial Guideline 39, which establishes reserves for variable annuities with guaranteed living benefits.
The annuity nonforfeiture model and the limited line term life insurance resolution were adopted by the executive committee and plenary during the meeting here.
The annuity nonforfeiture model regulation was developed to implement changes to the Standard Nonforfeiture Law for Individual Deferred Annuities. These changes were adopted in early 2003. The model revised the 3% nonforfeiture rate to allow for a five-year constant maturity Treasury rate. The rate is subject to a 3% ceiling and a 1% floor, and permits a lower minimum nonforfeiture interest rate for equity-indexed annuities subject to the same ceiling and floor.
The change to the SNL was made in response to the continued decline in interest rates. Since that time, the Fed has started raising interest rates. According to some predictions, a key Fed rate could rise to 4.75% by early next year.
The limited line term life resolution states that the NAIC rejects the establishment of a limited line license for producers to sell term life insurance.
Iowa Insurance Commissioner Susan Voss explained that the resolution would reinforce the NAIC’s commitment to uniform standards.
During the meeting, the Life and Health Actuarial Task Force and then the “A” Committee adopted an extension of AG 39 from Jan. 1, 2006, through Jan. 1, 2008. The guideline is supposed to be an interim step until Actuarial Guideline VA-CARVM is completed. VA-CARVM establishes reserving that relies on a modeling approach rather than on a formulaic approach. A move toward more flexible reserving is part of a principle-based approach that is being considered by the NAIC and the American Academy of Actuaries, Washington.
Iowa Insurance Commissioner Susan Voss said the limited line term life resolution would reinforce the NAIC’s commitment to uniform standards.