Life insurers near accord over redundant reserves.
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.
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|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|
|Date:||Feb 1, 2006|
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