The NAIC Executive Committee has established a new working group to tackle the issues surrounding statutory reserve requirements for companies offering universal life with secondary guarantees, with an eye toward establishing interim guidelines and/or regulatory “tools” to apply ULSG products, in the future or even in force now.
In doing so, the NAIC Exec Committee on Friday took the contentious product from the purview of the life actuarial task force, putting it under the stewardship of New Jersey Insurance Commissioner Thomas Considine, as part of a working group that combines both master committees, the Life Insurance & Annuities Committee and the Financial Condition Committee, pointing toward concern for company reserving.
The tumult surrounding Actuarial Guideline 38–for geeks, AG 38 section 8, Step 1–packed interested parties into already cavernous conference rooms at the NAIC fall national meeting outside of Washington. Actuaries held court, if that is even possible, explaining the issue to lawyers, reporters and other “laymen,” and the state insurance department even issued a consumer alert to support the solvency of its chief domiciled underwriter of the product, Lincoln Financial.
The controversy over the USLG products this time around–for they are not new to controversy–center around calculations of minimum premium.
There are ways of establishing ratios where the product can have less than the minimum premium and still not be underfunded under the Model Law 830. Some key state actuaries brought the reserving issue to the attention of the NAIC’s actuarial task force back in March, where the concerns caught fire among the members, some of whom even wanted to bring the crafting actuaries up on disciplinary charges.
Of course, this would rope in the state that approved these products.
And, when principles-based reserving (PBR) is finally implemented in a few years or so, after a final valuation manual is adopted, the reserving to prescriptive guidelines will become moot, thus the charge for possible “interim” measures.