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June 20, 2011 at 08:00 PM
Most North American life insurance chief financial officers are concerned about new principle-based statutory regulations, both in terms of their readiness and the impact on the regulations on the competitive landscape.
Towers Watson (NYSE, NASDAQ: TW), New York, published this finding in a summary of results from a survey of 25 CFOs The respondents are primarily CFOs from large and midsize life insurance companies in North America; 46% of the companies have assets of $5 billion or more, and 20% are multinationals.
Despite educational efforts by the National Association of Insurance Commissioners, less than 20% of responding CFOs consider themselves very knowledgeable about the new framework. And 24% say that key personnel within their company know very little about the structure.
The survey also funds that only 60% of respondents have started preparing for VM-20, the principle-based requirement for life reserves. And most of these have just begun testing the impact based on existing interpretations.
The remaining 40% of responding companies have not started planning or analyzing. But more than half (53%) expect to be ready to produce results under VM-20 by 2013 (assuming an adoption date of 2014).
“While somewhat alarming, these results may reflect the fact that effective dates for many of the principle-based requirements are either still unknown or at least three years away,” says Craig Buck, Americas Life practice leader. “It is critical for companies to evaluate the impact of the new reserving and capital requirements well in advance of the effective date to better understand the potential implications, including changes to their product-specific and overall reserve and capital position.”
