A team is trying to meet a mid-August deadline for drafting a new standard valuation law and a new valuation manual that will reflect the shift to a principles-based approach to reserving.
Regulators from Texas and New York and representatives from the American Council of Life Insurers, Washington, hope to present an SVL draft in a couple of weeks at a meeting of the National Association of Insurance Commissioners’ Life & Health Actuarial Task Force.
Mike Boerner, a Texas regulator and life actuary, says the SVL draft would require that a company hire an independent actuary to perform an annual review of PBA, which might include a review of capital valuations.
A commissioner could require an insurer to provide any information, including all work papers, relating to an independent actuary’s review.
An insurer would have to adopt internal controls to ensure that all material liabilities and risks subject to valuation were included in the valuation.
The SVL manual would specify the business for which a valuation would be required and establish a process to handle disagreements between a company and a commissioner.
New York has offered its own version of the SVL. That version includes a definition of conservatism that addresses the need to have sufficient margins to accommodate uncertainty.
Revenue should be recognized only as the earnings process of the underlying underwriting or investment business is completed, according to New York regulators.
The New York version would allow the commissioner to establish special requirements for asset adequacy opinions and analyses regarding PBA.
The effective date of the new model would be the Jan. 1, 2007, but a minimum number of states would first have to adopt the model, and the NAIC would have to adopt a valuation manual, Boerner says.