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Life Health > Life Insurance

NAIC Arm OKs Preferred Tables, AG 38

By Jim Connolly

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A key panel of regulators has endorsed a multipart measure that could affect both issuers of universal life policies and insurers that use preferred mortality tables.

Members of the Life and Health Actuarial Task Force, an arm of the National Association of Insurance Commissioners, Kansas City, Mo., voted 12-4 with 2 abstentions for the proposal today during a conference call.

All members of the LHATF were present, and more than 75 people were listening in on the call.

One section of the proposal would create interim preferred mortality tables, and another section would tighten the rules for insurers that incorporate assumptions about policyholder lapse rates in valuation and reserve calculations for UL policies with secondary guarantees.

The proposal must go through several more rounds of review and receive approval from the NAIC plenary, the body that represents all NAIC members, before it can take effect.

LHATF Chair Mike Batte apologized to task force members after the vote and said the LHATF should practice sound “actuarial science,” not undertake work that is “politically expedient.”

Completion of new preferred mortality tables is just 3 to 6 months away, and it would have been better to wait until those tables were available to act on the issue, Batte said.

The American Council of Life Insurers, Washington, has been asking the NAIC to act immediately, by splitting the current 2001 Commissioners Standard Ordinary mortality table into 3 non-smoking preferred and 2 smoking preferred tables, rather than waiting for the completion of a new preferred mortality table.

Batte also raised concerns about the UL component of the proposal that was approved today. That component would update and extend Actuarial Guideline 38, which is set to expire in April 2007.

It should have been made clear that using lapse assumptions when setting reserve levels for UL products with secondary guarantees is inconsistent with the Standard Valuation Law as it exists today, Batte said.

If commissioners wanted discretion over what they felt was best for the public, the matter should have been addressed at the Life Insurance and Annuities Committee level of the NAIC and not by a technical actuarial group, Batte said.

Some regulators expressed concerns during the conference call about whether using lapse assumptions to value UL policy secondary guarantees and reserve for the guarantees complies with the current Standard Valuation Law.

NAIC Vice President Sandy Praeger, the Kansas insurance commissioner, said Kansas abstained from the vote on the proposal not because it was opposed to the proposal, but because the Kansas Legislature would have to change the current version of the SVL in order for the revised version of AG 38 now under consideration to be consistent with Kansas law.

Texas asked the LHATF to hold separate votes on the preferred mortality table measure and the AG 38 measure.

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