"Toxic" VAs Need Careful Reserving: Regulator

Allan Elstein, a Connecticut regulator, said during the discussion that an exposure draft should include a strong standard scenario.

The standard scenario, first proposed by the New York department, is designed to ensure a minimum degree of reserving safety. VA companies have argued, however, that it is too conservative and creates unnecessary reserving.

In response, Tom Campbell, a life actuary with Hartford Life Insurance Co., Simsbury, Conn., said that if the task force really believes VAs with guarantees are toxic, then it should communicate that. If it doesn’t believe that, and it believes that the reserves are redundant, that should also be communicated, said Campbell, who is chair of the American Academy of Actuaries’ variable reserve working group.

Hartford Life also submitted its own suggestions for shaping the draft.

John Bruins, an actuary with the American Council of Life Insurers, Washington, said the ACLI views VAs with guarantees as “reasonable but risky products in which we are looking to establish reasonable reserves. If LHATF thinks that these products are toxic, then we’d like to hear that.”