Shifting to a principles-based approach to reserving would change the environment for reinsurers and ceding insurers.
Sheldon Summers made that prediction here at the fall meeting of the National Association of Insurance Commissioners, Kansas City, Mo.
Summers, a life actuary with the California Department of Insurance, appeared on behalf of the American Academy of Actuaries, Washington, to present an AAA paper on principles-based reserving at a session of the NAIC’s Life & Health Actuarial Task Force.
Advocates of PBR want to shift to requirements for insurers to make intelligent, responsible use of modern statistical forecasting methods and keep away from reliance on simple, unchanging formulas.
Members of the LHATF approved a motion to seek public comments on the AAA paper.
At the LHATF session, Summers said adopting a PBR system would free ceding companies and reinsurers from the strictures of current regulations.