Life insurers are having trouble using VM-20, a section of a draft valuation manual that applies a principles-based approach to reserving.
John Bruins, a representative from the American Council of Life Insurers (ACLI), Washington, reported that finding in a presentation given to the Life Actuarial Task Force, an arm of the National Association of Insurance Commissioners (NAIC), Kansas City, Mo
The NAIC has been working on principles-based reserving (PBR) projects for years.
A shift to a PBR approach would involve a move away from reliance on unchanging financial safety formulas, toward analyses based on modern statistical forecasting techniques and actuarial judgment.
The VM-20 draft gives life insurers advice on how to put a PBR approach into actual use.