Actuarial consultants at Oliver Wyman Inc. are clashing with the American Council of Life Insurers (ACLI) over how companies should verify whether they have enough capital to back their variable annuity obligations.
Oliver Wyman consultants say issuers should use a tougher forecasting method.
The ACLI says regulators should let issuers use a less harsh forecasting method.
Members of the Variable Annuities Issues Working Group, an arm of the of the National Association of Insurance Commissioners (NAIC), have talked about the two approaches during a conference call meeting earlier this month.
The NAIC is a group for state insurance regulators. It develops model laws and regulations, or sample documents, that states can use to develop their own insurance laws and regulations.
The NAIC and its member states have been moving away in recent years from use of static formulas for determining how much capital insurers should have, and toward use of modern statistical forecasting techniques, or “stochastic” methods, for analyzing reserve adequacy.
The new, “principles-based reserving” approach relies on actuaries’ ability use of reasonable forecasting assumptions.
Principles-based reserving advocates say the approach should help life insurers do a better job of tailoring reserves to meet their requirements, and, in some cases, free up reserves.