Broader suitability standards sailed toward full adoption by state insurance regulators, but principle-based reserving had a momentary hiccup during the spring meeting of the National Association of Insurance Commissioners here.

An amended model of the Senior Protections in Annuity Transactions regulation that would extend protections to all consumers was adopted by the Life Insurance and Annuities “A” Committee and now will be considered by the Kansas City, Mo.-based organization’s executive committee and plenary for full adoption. The measure could be voted on this spring by teleconference or at the summer NAIC meeting in June.

But the principle-based reserving project may be experiencing a hiccup, according to discussions during sessions at the meeting. Actuaries, regulators and insurers continue their work on the effort.

However, a CEO compromise reached by top executives of the American Council of Life Insurers, Washington, is at a delicate point, according to discussions held at the “A” Committee. The compromise, reached in April 2005, stated that a new system should include the development of preferred mortality tables as well as incorporate lapse rates into the reserving calculation for UL with secondary guarantees.

Prior to the compromise, the industry had been engaged in a fractious argument over Actuarial Guideline 38 and how it should be enforced.

During the Life & Health Actuarial Task Force meeting, regulators requested actuaries to review preferred actuarial tables developed by the ACLI. But, the hiccup is the use of lapse rates in the reserving formula. LHATF did not support the use of the lapse rates in the formula.

North Dakota Insurance Commissioner Jim Poolman, chair of the “A” Committee, directed regulators to find a solution. “If the lapse piece does not work, then find something that does,” he said. “The lapse rate piece won’t look the same but will meet the necessary timelines.”

Paul Graham, an ACLI life actuary, said there is no replacement solution at this point, but one will be developed because of the project’s importance.

The “A” Committee also adopted amendments to the Life Insurance and Annuities Replacement model regulation that would exempt term conversions among corporate affiliates from the model.

The NAIC’s executive committee and plenary fully adopted several life insurance initiatives including an extension of a sunset provision for Actuarial Guideline 39, which establishes reserves for variable annuities with guaranteed living benefits. The new sunset date is Jan. 1, 2008. The old sunset had been Jan. 1, 2006.