Within a cannonball shot of the Alamo, which San Antonio brochures are quick to point out is emblematic of the Texas Revolution, a quieter kind of revolution was recently debated.
Principles-based reserving, the plan to make reserves more reflective of actual risk, received yet another airing during the National Association of Insurance Commissioners’ winter meeting. Actually, it amounted to many airings, as several meetings, a seminar and a steady buzz in the halls between sessions attest to.
What makes this debate different than any of the other quarterly meetings over the last two years in which the PBR plan has been carefully cultivated?
Well, the plan might be getting closer to becoming a reality. But why, you might ask, should we believe we’re getting warmer?
For one, the American Academy of Actuaries is promising a final product in the first part of next year.
Another sign is North Dakota Jim Poolman’s promise that in 2007 he will focus on PBR at the NAIC meetings. Poolman has successfully negotiated several thorny issues, including a COLI/BOLI model, a Suitability model and a Viatical model that he has just shepherded out of the NAIC’s Life and Annuities “A” Committee, which he chairs, to the NAIC’s Executive Committee and Plenary. So, he has a track record.
And it seems from discussions among commissioners that they are, if not supportive, at least willing to listen to arguments for what really would be a revolutionary change in determining reserves.
Then, too, there is the rallying cry of Mike Batte, co-chair of the Life & Health Actuarial Task Force with Larry Bruning, another proponent. LHATF is the petri dish for PBR. Batte is saying that doubts about the system are starting to be voiced because it’s nearly ready to jump off the blueprints and become reality–blueprints that a legion of actuaries the size of Santa Anna’s army have spent countless hours assembling.