Officials at the U.S. Treasury Department seem to be more interested in hearing updates on efforts to modernize life insurance reserving methods.
Actuaries and trade group representatives gave that assessment here this week during a session of the Life and Health Actuarial Task Force, at the fall meeting of the National Association of Insurance Commissioners, Washington.
Actuaries trying to develop a new, more flexible, “principles-based” approach to life reserving said worries about income tax implications and questions about whether to evaluate reserves on a product-by-product or companywide basis still require further consideration.
The U.S. Treasury Department has a new secretary.
In the past, Treasury officials seemed to be interested in reserving tax issues only when the LHATF had a completed document or almost-completed document in hand, according to Dave Neve, co-chair of the life reserves working group of the American Academy of Actuaries, Washington.
Today, Neve said, Treasury officials want to hear regularly about what insurers and regulators are thinking about efforts to develop a principles-based reserving system.
Insurance industry officials will be heading to Treasury for another informal meeting on the efforts later this month, Neve said.
The ACLI will be trying to educate Treasury officials about principles-based issues, but Treasury officials will be preoccupied with developing a budget, said Gregory Jenner, ACLI executive vice president for taxes and retirement security.
The ACLI has a strong incentive to try to work within the scope of current laws, because asking Congress to change the laws could open up a “Pandora’s box” of problems, Jenner said.
Although the ACLI is “highly optimistic” that the tax issue will be addressed by the end of the year, Treasury feedback could lead to tweaking of the final proposal, Jenner said.
“Fluidity is the key word here,” Jenner said.
Neve, who works for Principal Financial Group Inc., Des Moines, Iowa, said completion of the principles-based reserving project also hinges on discussions of whether companies should be able to use the risk profile of one product line to offset the risk profile of another product line.
Neve said he believes allowing risk offsets could be appropriate.