Actuaries led a Webcast last week to provide an update on work on the principles-based reserving project.
Participants in the workshop, which was sponsored by the American Academy of Actuaries, Washington, included actuaries, regulators and insurance company representatives.
Donna Claire, a life actuary with Claire Thinking, Fort Salonga, N.Y., and AAA member who is spearheading the project, said the project is basically on schedule for completion and noted that, as planned, as the actuarial work is completed, the project is increasingly being put in the hands of regulators.
Leslie Jones, vice chair of the Life & Health Actuarial Task Force, the group of regulators of the National Association of Insurance Commissioners, Kansas City, Mo., that is handling the PBR project, said work on revisions to the Standard Valuation Law, should be finalized in September.
If the SVL is adopted by LHATF in December, then it could be fully adopted by the NAIC by year-end, according to Claire.
Another component of PBR, the Valuation Manual, which details how PBR works, should be ready in 2009, she continues.
Elements of the Valuation Manual that are still being worked on include VM 20, which addresses risk transfer in reinsurance contracts. A subgroup of regulators looking at the issue intends to make sure that risk transfer requirements are retained, according to Sheldon Summers, a life actuary with the California insurance department who is spearheading an AAA subgroup.
If the risk transfer rule is included, reinsurance agreements that do not comply would only be included in PRB calculations if it would reduce reported surplus.
Outstanding issues on VM 20 include determining whether a risk margin should be used to protect against non-payment by a counterparty. Currently, VM 20 only requires a margin if the assuming company is known to be financially impaired.
Other steps that still need to be looked at, according to the discussion during the Webcast, include the use of a statistical agent for actuarial filings.
The issue will receive further discussion both at the summer NAIC meeting and at an AAA seminar on the issue scheduled to start June 9 in Orlando, Fla.