A “geography of law” needs to be developed so that it is clear how principles-based reserving fits into a new Standard Valuation Law, says Larry Bruning, a Kansas regulator who is spearheading an effort by the National Association of Insurance Commissioners to change the law.
Mapping that geography entails answering a host of questions, he says. They include: how to ensure sound oversight; whether changes should be by law, regulation or other form of guidance; whether changes should be applied to products that are written after enactment of a change or all products; and how to ensure uniformity, discussions among regulators and actuaries during the NAIC’s SVL II subgroup of the Life & Health Actuarial Task Force suggests.
Bruning says that basic questions need to be answered in order to have a clear direction over how to proceed. Among the questions, he cited, are: what is the purpose of the law; who will monitor it; and, what remedies are there for cases of noncompliance.
Related issues, he continued, are whether a valuation actuary’s work is just accepted, whether there is peer review, and if there is regulatory review, is that in the state of domicile or the state of filing.
Starting with business going forward and then bringing in existing business over time, said Sheldon Summers, a life actuary with the California insurance department. “Since this is so new, we may not want to apply this all at once,” he added.
Achieving uniformity in the law will also be an important point, according to Summers. And, added Bruning, uniformity includes both uniformity of adoption as well as uniformity in compliance with the changes to the SVL.
In order to facilitate uniformity, John Bruins, a life actuary with the American Council of Life Insurers, Washington, suggested the development of a valuation manual which could become a technical basis for uniform adoption.