Printer Friendly

Life insurers near accord over redundant reserves.

The American Council of Life Insurers' recent proposal to provide short-term relief from redundant reserves for writers of term life and universal life with secondary guarantees is gaining steam. The move is part of the effort to change how U.S. life insurers set reserves via a switch to a principles-based system.

The ACLI proposal, presented to the National Association of Insurance Commissioners' Life and Health Actuarial Task Force at the NAIC's Winter National Meeting in December, would bridge the gap between Jan. 1, 2007, and the date that principles-based reserves are adopted in all 50 states, said Paul Graham, ACLI's vice president of insurance regulation and chief actuary. The goal for adoption is by the end of 2006.

Bill Koenig, senior vice president and chief actuary at Northwestern Mutual Life Insurance Co., said the company likes that the ACLI proposal offers sufficient reserve relief to companies that write term life and to those that write universal life with secondary guarantees. It also offers the potential to keep the industry together should the longer-term, full principles-based system not be ready by the April 1, 2007, sunset of the NAIC's Actuarial Guideline 38 in most states.

The first piece of the ACLI's interim relief proposal is an amended 2001 Commissioners Standard Ordinary Mortality Table, which would contain new underwriting classifications for preferred underwriting. "The amended table would primarily lower reserves for term insurance products but could have a slight impact on all types of policies" Graham said.

The second piece is an amendment to Actuarial Guideline 38. The NAIC passed this guideline In 2002 to provide guidance regarding Regulation XXX, which addressed reserve requirements for life policies with nonlevel premiums or benefits.

The amendment would allow the use of low-level lapse rates in calculating reserves for the secondary or no-lapse guarantee. It also would allow for a surrender-charge offset in calculating reserves for policies that are paid up, Graham said. The amended guideline would lower reserves for universal life policies with secondary guarantees but wouldn't impact term insurance reserves, Graham said.
COPYRIGHT 2006 A.M. Best Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2006, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Briefing; American Council of Life Insurers
Comment:Life insurers near accord over redundant reserves.(Briefing)(American Council of Life Insurers)
Author:Lysiak, Fran Matso
Publication:Best's Review
Geographic Code:1USA
Date:Feb 1, 2006
Words:340
Previous Article:UnitedHealth-PacifiCare merger receives approvals with some federal modifications.
Next Article:Best's insurance stock indices.
Topics:


Related Articles
Why the life insurance industry needs a watchdog.
Sale of a Lifetime.
New York Life's Sternberg favors reform over federal regulation.
Approaching immortality: insurers calculate how a new mortality table assuming life expectancy of 120 years would affect their reserves, pricing and...
Vigilance rewarded: with better technology and more attention to suitability issues, the writers of life insurance and annuities appear less likely...
Insurers in waiting: most insurers are biding their time as the new life insurance mortality table wends its way through the approval process, one...
ACLI opposes proposal for annuity sales.
Reserving clash: the life industry is divided over reserve requirements for certain UL policies with secondary guarantees.
Federal charter supporters willing to pay the price.
Alaska becomes the decisive state for interstate compact.

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters