Push To Get Work Done On Principles-Based Reserving

For instance, life actuaries at LHATF had a prolonged discussion on whether there should be aggregation of all product lines for reserving purposes or, as Fred Andersen, a New York regulator, argued, reserving should be done along individual product lines so that regulators could determine whether reserving was adequate. Some argued that an asset adequacy test could help resolve the issue of aggregation.

Larry Bruning, a Kansas life actuary and LHATF chair, described how limiting PBR to certain life products initially could foster unfairness in the marketplace, potentially giving those products an advantage over products not part of PBR.

The potential problem with a product phase-in, said Sheldon Summers, a life actuary, is that some products would have redundant reserves while others would not, and so depending on the product mix, certain companies might benefit more than others.

Another issue that needs to be examined is how a statistical agent that would receive actuarial data from companies would look, according to discussions. Bruning said it is a goal is to streamline the process so that each state would not have to contract with an agent. The issue of confidentiality is also a matter that will have to be taken up, he added. Utah Commissioner Kent Michie noted that some states have a constitutional provision that makes it unlawful to designate state authority.

Thomas Hampton, commissioner of the District of Columbia, and head of the PBR working group, said it is important to start looking specifically at the cost of a centralized statistical office so there would be more concrete figures available for the next NAIC meeting. Al Gross, Virginia insurance commissioner, recommended that the issue of potential liability created by the development of a central statistical office would need to be examined.