The body that represents all members of the National Association of Insurance Commissioners has adopted the NAIC’s life and annuity reserving rules.
The executive committee of the NAIC, Kansas City, Mo., and the plenary, or body that represents all voting NAIC members, have approved a package of provisions that includes adoption of Actuarial Guideline 38, which establishes reserves for variable annuities with guarantees.
The package also includes adoption of the Model Regulation Permitting the Recognition of Preferred Mortality Tables For Use in Determining Minimum Reserve Liabilities.
The preferred mortality table provision splits the existing 2001 Commissioners Standard Ordinary Table into 3 non-smoking and 2 smoking preferred mortality risk tables.
The NAIC’s Life Insurance and Annuities Committee endorsed the package at the end of August.
Regulars and insurance industry representatives describe the package as a collection of interim changes designed to tide the industry over while actuaries, regulators and others work on a shift to a new, more flexible, “principles-based” approach to setting and assessing reserve levels.
The American Academy of Actuaries, Washington, is developing a new preferred mortality risk table with updated data, but the American Council of Life Insurers, Washington, said temporarily adopting the split tables would be better for the life insurance industry than running the risk that completion of the new mortality table might be delayed.
North Dakota Insurance Commissioner Jim Poolman, who is chair of the Life Insurance and Annuities Committee, told fellow commissioners that the AG 38 component of the reserving package includes an asset adequacy test and a Dec. 31, 2010, sunset date for AG 38.
Advocates of a principles-based reserving system are hoping a principles-based system will be in place by that time.
Poolman has been promoting efforts to move to a principles-based system.
Regulators notice that work soon will begin on applying the principles-based reserving philosophy to long term care insurance.