The Principle-Based Reserves (PBR) Valuation Manual finally got the nod from the NAIC's Life Insurance and Annuities (A) Committee when it was adopted by teleconference today after almost seven years to the day of work by regulators and interested parties at the task force level.
The motion passed with a "No" vote by New York and abstentions from Minnesota and California.
"It's been around since Moses was clean shaven," said Adam Hamm, in reference to all the work done on the manual and PBR. Hamm is the North Dakota Commissioner, former Life Committee chair and NAIC Vice President. "It's high time we put in place [a system] that right-size reserves." he said, noting it will keep the life insurance industry solvency and will help companies price their products, which will in turn help consumers.
The American Council of Life Insurers CEO Dirk Kempthorne said that the ACLI was supportive of PBR – and is committed to continue to work through those issues to make PBR a better product.
Kempthorne said that the ACLI has devoted much effort to the issue over the past seven years.
Cande Olson, a top life actuary with the American Academy of Actuaries (AAA) said that the AAA supports adoption of the manual with an ongoing review and improvement of its methodology.
"There is not a single NAIC project in which the ACLI and its member companies have devoted more resources. And I am sure that if you asked LATF members that they would all agree that this is the most time intensive project that they have worked on, and I hear that from our member companies," Kempthorne said.
PBR is the calculation of statutory reserves for life insurance under what many in the industry have called a more modern method to "right-size" reserves rather than the traditional, formulaic, approach, which doesn't anticipate unusual events. The manual, as adopted by the Life Committee, has PBR and non-PBR components. The manual has a three year transition. It also offers an opportunity for uniformity.
