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LHATF Fine Tunes VM-20

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Members of a National Association of Insurance Commissioners panel talked Thursday about topics such as experience credibility and projection length while going over proposed amendments to a valuation manual draft.

The NAIC’s Life and Health Actuarial Task Force reviewed VM-20, a section of the valuation manual draft, during a conference call.

The Valuation Manual gives specific details about how readers should use the Standard Valuation Law model, another document developed by the NAIC, Kansas City, Mo., to set and implement insurance reserve requirements.

The VM-20 section would establish requirements for principle-based reserving. Advocates of the principles-based approach want to shift toward use of actuarial judgment and risk-based valuations to set reserves, and away from reliance on rigid reserving formulas.

One topic that came up during the LHATF call was efforts to set assumptions with less than fully credible experience. Call participants talked about the process of blending company experience and industry experience to set an assumption based on established ideas of credibility.

Call participants also talked about a proposed manual amendment that deals with the length of the VM-20 projection period. The amendment was changed to say that cash flows should be projected far enough into the future that no obligations remain.

Links to documents related to the VM-20 conference call and other LHATF calls are available here.