Principles-Based Reserving (EX) Working Group
March 30, 2008

The Principles-Based Reserving (EX) Working Group met on Sunday, March 30, 2008. During this meeting, the Working Group:

• Reviewed a position paper regarding assurance of company reserve calculations. The position incorporates the review of principles-based reserving into the existing risk-focused examination and analysis function. The document was exposed for comment.
• Received status updates from the Life & Health Actuarial Task Force (LHATF) regarding:
• Standard Valuation Law -The report indicated LHATF has reviewed and considered approximately 2/3 of the issues dealing with revisions to the standard valuation law. The report indicated that LHATF hopes to have the revised standard valuation law completed, or substantially completed by the Summer National Meeting. Any issues remaining after the Summer National Meeting are expected to be limited. The report indicated that LHATF has currently drafted language that provides for a uniform effective date, but would like input from the Working Group on the premium threshold aspect of that language.
• Valuation Manual -The report indicated LHATF has made considerable progress in the last quarter and expects to complete the initial version of the manual by the end of 2008.
• PBR Process and Coordination -The report including an update on the coordination that is occurring between LHATF and Statutory Accounting Principles (E) Working Group and the Blanks (E) Working Group. The report noted that a substantial portion of the changes needed to the annual statement have been drafted, but that they are still drafting proposed changes for an expected to actual schedule as well as changes to the current page 7, which rolls forward reserves from one year-end to the next.
• Received a status update from the Corporate Governance Subgroup. The update included a summary of the discussions that took place on two interim conference calls, including work prepared by the American Academy of Actuaries on the topic. The Working Group will hold conference calls this next quarter to consider the corporate governance guidance contained in the Model Audit Rule and the Examiners Handbook.
• Requested NAIC staff to update and distribute the timeline based upon the status report from LHATF and other input received from parties subsequent to the meeting.
• Received a status update from the American Council of Life Insurers (ALCI) on the recently issued Treasury Notice and its impact on the current principles-based reserve proposals. The update included a high level summary of changes the ACLI proposes to make to the current proposal that will help ensure a minimum level of tax deductibility for the reserves and preserve the current definition of life insurance in Section 7702.

Action Items:

• Exposed a position paper regarding assurance of company reserve calculations;
• Received a status report from LHATF regarding the revised standard valuation law, the valuation manual, and coordination with the Blanks (E) Working Group and the Statutory Accounting Principles (E) Working Group.
• Received a status report from the Corporate Governance Subgroup;
• Received a status update from the ACLI on the recently issued Treasury Notice and the response to the notice;
• Requested NAIC staff update the timeline based upon the status updates provided by LHATF;
• Received minutes from a February 21, 2008 conference call and adopted a February 4, 2008 e-mail vote.
• Agreed to review the revised standard valuation law simultaneously with the Life Insurance (A) Committee once its completed.