Insurance regulators are wrestling over mortality guidelines and data credibility as part of the exposure draft for principles-based reporting system for life insurance products.
The subgroup of the Life Actuarial Task Force, created by the National Association of Insurance Commissioners to study the impact of principles-based reserving (PBR) on the life insurance industry, asked the American Academy of Actuaries to clarify the section they essentially wrote on mortality assumptions, especially the use of the terms "credibility segment" and "mortality segment."
On a teleconference call Sept. 29 as part of the cancelled Summer meeting lineup, the New York Insurance Department's Amanda Fenwick argued for her approach to simplification, and garnered a lot of feedback on her approach, which did not sound so simple, and which some worried could results in higher reserves for life insurance companies.
At issue is the size of the data available for companies and whether it is statistically credible. If it is deemed to not be statistically credible, the concern is the company would have to use industry data and higher margins, which would then mean higher reserves for companies. This could happen, some argue, if smaller groups' experience is looked at separately (i.e., the result will be less "credible" than if looked at in its entirety).
The PBR undertaking is a long process, already on its sixth year, of coming up with a model for a new way of reserving, from a prescriptions-based standard that is some 125 years old to a new principles-based system that takes into account modern life insurance products and ways of doing business.
A task force member, Kansas Insurance Department actuary Mark Birdsall, spoke toward the end of the discussion about whether regulators should require margins on each type of assumption and allow some adjustment in those margins, or if they should put an aggregate margin on the final reserve amount to adjust for all the tinkering of mortality data. Some in the industry support this approach, but most are awaiting the results of the impact study undertaken at NAIC's behest on the PBR draft as it stood nine months ago.
The study is being done by 
