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Life Health > Life Insurance

Claire: Reserving Update Still On Track

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A leading actuary says work on a shift to a more flexible, principles-based approach to life reserving is going well.

The product “won’t be perfect from day 1,” says Donna Claire, chair of the risk management and financial soundness committee at the American Academy of Actuaries, Washington. “There might be some unexpected bumps.”

But the committee is still on track to complete the principles-based update by the end of the year, Claire says.

Claire is seeing strong interest in the project: she says an academy conference call on the project recently drew more than 1,000 participants.

Although the committee now is focusing on life insurance products, the next phase of the project will cover health insurance, says Claire, who is a life actuary with Claire Thinking Inc., Fort Salonga, N.Y.

Getting governance elements in the proposal, including a peer review system for actuaries, into better shape will be an important step, Claire says.

Regulators at the National Association of Insurance Commissioners, Kansas City, Mo., recently objected when the American Council of Life Insurers, Washington, tried to include lapse-supported formulas in a temporary reserving formula for universal life insurance policies with secondary guarantees.

One concern is prior weaknesses with lapse projections, Claire says.

In the long term care insurance market, for example, insurers have expected lapse rates of about 5%, but the actual lapse rates have been only about 1%, Claire says.

But Claire says she thinks regulators might be more comfortable with the idea of use of lapse-supported formulas if a good peer review process were in place.


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