Universal life products with secondary guarantees (ULSG) have been the subject of actuarial scrutiny for more than five years now, with assertions dating from at least 2005 that their design can have lower reserves than defined premium designs, possibly violating the spirit of a key actuarial guideline.
However, the issue has reared its head to the point where it is on the lips of top regulators and trade association officials at the NAIC Fall national meeting, which has been running this week outside of Washington, D.C.
AG 38, or Actuarial Guideline 38 for UL policies with secondary guarantees, "is the biggest issue of this conference," New York's relatively new Superintendent of Financial Services Benjamin Lawsky told National Underwriter Thursday, after the opening session of the national meeting, now held three times per year.
Lawsky has already made a big impact –and major headlines — on the state insurance industry with a massive initiative, first opposed but later endorsed by major health insurers, that individual health insurers make their rate filings public. When he spoke with National Underwriter, he stressed that when it came to this issue of ULSG and insurer reserves, he was not taking the matter lightly.
"It's a huge product, with billions and billions going into it," Lawsky said of ULSG, and added he wanted to know more. He will get his chance.
Lawsky oversees about 4,400 financial companies managing more than $6.2 trillion in assets and is "a prosecutor at heart" who will take an aggressive tack in regulatory lapses, according to a Bloomberg News profile.
Insurers who sell ULSG include MetLife (domiciled in New York), The Principal Financial, Lincoln Financial, which is an active marketer of the product, Protective Life and others.
"There's a real problem with the reserves," said Lawsky, who was approached by big industry representatives to discuss the matter. Lawsky was just named by the U.S. Treasury Department to an advisory panel of insurance talent to help Federal Insurance Office Director Michael McRaith.
