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NAIC Panel Exposes Interim Reserving Draft

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Insurance regulators are asking for comments about a proposed temporary regulation that could affect sellers of term life and universal life with secondary guarantees.

The Life and Health Actuarial Task Force of the National Association of Insurance Commissioners voted to “expose” a draft of the interim reserve proposal.

The exposure process gives members of the public a chance to react to a proposal before the NAIC acts on it.

The American Council of Life Insurers, Washington, developed the interim reserve proposal in an effort to come up with a placeholder regulation that could guide life reserving while officials at the NAIC debate permanent changes.

The ACLI proposal would make three major changes to the reserve standards in the Standard Valuation Law, the backbone of reserving for life insurance products.

These changes would include introducing preferred mortality rates as a valuation standard by splitting the 2001 CSO Table into preferred and residual standard mortality; introducing lapse rates into the reserve calculation for UL policies with secondary guarantees; and allowing non-premium paying UL contracts with secondary guarantees to use the surrender charge offset to the additional reserve calculation.