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February 28, 2008 at 11:27 AM
Committees at the National Association of Insurance Commissioners are working on a document that could help insurers and others shift to a principles-based approach to reserving.
The committees are looking at the Valuation Manual, a set of guidelines for implementing principles-based reserving, in preparation for detailed PBR discussions likely to take place during the upcoming NAIC spring meeting, which is set to start March 28 in Orlando, Fla.
Advocates of principles-based reserving rules say they want to replace reliance on static reserving formulas with a shift toward depending on sound actuarial judgment and use of modern statistical forecasting techniques.
Regulators are thinking about removing references to “actuarial opinion memorandums” from the Valuation Manual. An AOM gives regulators an actuarial opinion about an insurance company’s reserving practices.
Regulators also are thinking about applying the Valuation Manual guidelines only to business placed after the manual takes effect, not to business in force before the effective date.
During a recent conference call, some participants suggested that states should occasionally be able to change the reserving rules that apply to in-force business, if states agree to the changes by a unanimous vote.
John Rink, a Nebraska regulator, said he has concerns about the possibility that a single state could impede the will of the majority of states on a particular in-force decision.
