Members of the American Academy of Actuaries have drafted a statement of principles that actuaries, insurers and regulators can use to set and assess life insurance and annuity reserve levels.[@@]
Regulators at the National Association of Insurance Commissioners, Kansas City, Mo., have given the AAA, Washington, comments on the 10-principle draft, and academy members are preparing a revised version based on the comments. The principles team hopes to present the revision in August, at an interim NAIC meeting in Minneapolis.
Some actuaries, insurers and regulators have been promoting adoption of a reserving system based on principles and actuarial judgment, rather than specific formulas and ratios, since the mid-1990s.
Recent clashes over reserving requirements for universal life products with secondary guarantees have revived interest in the principles-based reserving concept.
The reserving principles included in the first AAA draft cover topics such as governance, evaluation of controllable risks, and the need to let reserving assumptions change as economic conditions change.
Actuaries and regulators are talking about ways to make sure that insurers use the same assumptions when valuing assets and liabilities, to avoid situations in which assets are priced at book value while liabilities are priced at market value.
