So you want to go to Texas for the springtime to discuss reserves? Not oil reserves, actuarial.
The National Association of Insurance Commissioners (NAIC) is meeting next week in Houston for its Spring national meeting, where the spotlight will be on the progress of certain ongoing key product reserving and solvency-related initiatives which have garnered industry support even as the new products are defined.
The new Principle-Based Reserving (PBR) Implementation Task Force will meet and update the Life Insurance and Annuities Committee as it coordinates the work of NAIC technical groups addressing PBR issues such as further assessing the solvency implications of life insurer-owned captive insurers.
The group was given the green-light at the NAIC commissioner’s retreat this winter in St. Thomas, Virgin Islands, Feb. 1, 2013. The group is tasked with developing an NAIC support and peer review system for implementation of the PBR framework.
The new Task Force, chartered under the Executive Committee, will also be deployed to change blanks reporting, analysis procedures, examination procedures, and statutory accounting standards to work with PBR.
The task force, chaired by Rhode Island Superintendent Joseph Torti III (RI) and Tennessee Commissioner Julie Mix McPeak, also has its eye on the Captives and Special Purpose Vehicle (SPV) Use (E) Subgroup’s Report and its findings and recommendations in the context of the proposed PBR system.
Torti has been leading the charge on the Captives subgroup at the NAIC.
The Federal Insurance Office (FIO) also has just created a task force on use of captives and SPVs under its federal advisory committee. Washington, D.C. Commissioner William White, its chair, might report on this in Houston because of concern about the life industry’s risk and if they are properly presenting their capital and reserving situations. Basically, Treasury wants to know what’s being kept from its eyes, and to what extent. Its advisory group has passed around a sheaf of reading material on the subject.
The subgroup’s work is reviewing the life insurance industry’s offloading—sometimes it is felt away from the eyes of states regulators—of perceived excess reserves from Triple X and A Triple X actuarial reserve guidelines of certain life insurance policies and accompanying solvency concerns.
PBR is to address some of the perceived straightjacketing of the reserves by Regulation XXX (Triple X), which imposes conservative assumptions and valuation methodologies for determining the level of statutory reserves, which insurers are required to hold under statutory accounting principles for term life insurance policies with long-term guarantees of premium rates, as a seminal insurance securitizations of excess reserves paper by Stroock and Stroock structured finance and insurance lawyers stated.
Its sister, Guideline AXXX, AG 38, requires higher reserves for secondary guarantees on whole life insurance policies.