AG 38: S.C. Contends Proposed 'Framework' Doesn't Comply with SVL for In-Force Business

Of course, the LATF statement would create a level playing field if it were accepted by all states, but that is unlikely. 

It is the multiple state interpretations of AG 38, some very stringent and some worried about redundant  reserving, by different states that drove the need for compromise such as the Framework document, as well as the outcry by some  insurers that the LATF statement was in some way accusing them in the press, especially, of being under-reserved.

Jones repeatedly underscored the need for each state to interpret its own valuation laws in her letter and addendum comments to Kitzman, who has so far declined to be interviewed on the subject. 

Jones also told Kitzman, who has served before as South Carolina's insurance commissioner before landing in Texas, that she things that LATF or a subgroup of LATF is the appropriate NAIC body to develop guidance on a unified regulatory approach to AG 38.

Insurers and trade groups had written in their comment letters that they support consulting or outside actuaries for the framework process, reportign to the commissioner-level Joint Committee.

The fact that the Kitzman framework offered up the option likely means consulting actuaries are very much part of the plan. The Alaska Department, who also serves on LATF,  wrote in its comments to Kitzman  that the "industry "input provided by the framework document be deleted, noting an insurer should not determine who the state hires to examine them.

LATF initially issued a statement on Sept. 9–the one adopted at the NAIC Fall Meeting in early November otuside Washington, D.C.– that held that "some companies are holding reserves for universal life insurance products with shadow account secondary guarantees that do not fully reflect the benefits of the secondary guarantees as required pursuant to the NAIC model laws, regulations and actuarial guidelines…These reserves do not properly reflect the full benefits of the secondary guarantee as required by the law, regulation and guideline."

The American Council of Life Insurers (ACLI) took issue with the direction of the task force in the fall and told it so.

"These statements are likely to be interpreted by outside parties to imply that some companies are holding inadequate reserves for these products," it said in a letter Oct. 19.

"…The assertions in the Exposure are potentially very damaging and could have serious negative consequences with various audiences (including rating agencies, analysts, agents, policyholders, etc.)," the ACLI stated.

"Such assertions have no place in a public document issued by the NAIC," the association admonished. 

The letter was written by ACLI actuary John Bruins and addressed to Jones.

"This is clearly an actuarial issue," Alaska has written in its comment letter. It goes on to  say that once the framework is adopted in concept and consulting actuaries have been selected, it is LATF who will develop and present recommendations to the commissioner-led Joint Working Group for approval.

UPDATE: Since this story's initial publication, both South Carolina and Alaska have been removed from the Life Actuarial Task Force.