NAIC Panel OKs Valuation Law Changes

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.