In line with a charge from commissioners at the National Association of Insurance Commissioners, regulators are working on language that will temper broad principles that will be the framework for the new reserving system.
The charge was detailed during the summer NAIC meeting by District of Columbia Commissioner Thomas Hampton who outlined six overarching principles that are being used to create a new principles-based reserving system for life insurers.
In the outline of how commissioners would coordinate the large effort, Hampton, vice chair of the principles-based reserving (EX) working group and Al Gross, Virginia commissioner and working group vice chair, list the following categories:
–PBR framework, emphasizing that the reserve requirements should be based on regulatory principles.
–Reserve liabilities, stating that they must be based upon sound accounting and actuarial principles and guidance.
–Capital adequacy, ensuring sufficient capital to meet adverse conditions, policy claims and obligations,
–Corporate governance should include sound risk management practices.
–Public disclosure for certain solvency information and information not made public should be identified.
–Financial examinations, which would allow for on-site inspections to examine an insurer’s business and compliance with legislative and regulatory requirements.
In the guidance document, Hampton and Gross note that the principles are very much related to some of the international solvency principles being developed by the International Association of Insurance Supervisors, Basel, Switzerland. If deviations from the international principles are discovered in the ones being developed, the commissioners want them identified.