Regulators Talk About PBR Nuts And Bolts

Should principles-based reserving permit regulators to look at the riskiness of an individual block of business, or should regulators have to look at an insurance company as a whole?

The subject of aggregation came up recently when members of the Life & Health Actuarial Task Force at the National Association of Insurance Commissioners, Kansas City, Mo., talked about a Valuation Manual that would help insurers and others implement a revised Standard Valuation Law.

Advocates of a PBR system want regulators, insurers and others to move toward relying on basic financial principles, actuarial judgment and statistical modeling methods, and away from the traditional reliance on detailed reserving rules and static reserving formulas.

Revising the Standard Valuation Law is an important step in shifting the U.S. insurance industry toward a PBR system.