Many insurance company executives are too unfamiliar with principles-based reserving efforts to answer basic questions about how their companies are preparing for the change.
Consultants from the Chicago, Washington and Richmond, Va., offices of Deloitte & Touche USA presented figures supporting that conclusion in a summary of results from a recent insurance company executive survey.
Members of national actuarial groups and regulators at the National Association of Insurance Commissioners, Kansas City, Mo., are developing new approaches to reserving requirements that would give companies more flexibility in exchange for requiring them to use more sophisticated statistical forecasting techniques.
Only 25% of the survey participants said their companies are following the looming change in actuarial requirements closely, and 48% said they did not know whether their companies were following the principles-based reserving efforts or were unable to provide any answer at all.
Similarly, although 34% of the participants said they are starting to gather the mortality, morbidity, persistency and election of benefits data necessary to set assumptions, 54% were unable even to answer the question. Another 12% of the survey participants said that their companies are not gathering what a new principles-based reserving regime would require.
The relatively low PBR awareness rate among survey participants confirms regulators’ concerns that the shift might be challenging, Steven Foster, a former Virginia insurance commissioner who is a director in Deloitte’s Richmond office, said during a Webcast held to discuss the principles-based reserving issue.