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Life Health > Life Insurance

NAIC Panel OKs Valuation Law Changes

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The National Association of Insurance Commissioners has released the text of the proposed Standard Valuation Law revisions.

This comes after a recent vote by members of the Life Insurance and Annuities Committee of the NAIC to endorse the proposed revisions.

Before the proposed changes can take effect, they must be approved by the NAIC’s executive committee and by the NAIC’s plenary-the body that includes all voting members of the NAIC.

The SVL is a model that states can use when setting standards for life reserve calculations. If the proposed revisions are approved, the SVL would embody a “principles-based” approach to calculating reserves.

Advocates of principles-based reserving want life insurance reserving decisions to be based on modern statistical forecasting techniques and sound actuarial judgment, rather than on static formulas. Advocates say a PBR approach would force insurers to think more carefully about risk while increasing their flexibility; critics say a PBR approach might let some insurers be unreasonably optimistic about product and company performance.

The American Academy of Actuaries, Washington, put out a statement welcoming the Life Committee’s support for the SVL changes.

The proposed revisions would help consumers by establishing a reserve system that recognizes all the benefits, guarantees, and funding associated with life insurance contracts and their risks, AAA members write in a letter to the NAIC.

Applying principles-based reserving principles to the SVL would define “a framework that [would] enable companies to price products with reserves more closely aligned to the assumed risks,” AAA members write.


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