Principles-Based Reserving (EX) Working Group
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Executive (EX) Committee Task Forces and Working Groups Summary Report
Winter 2009 Meeting Summaries Index

The Principles-Based Reserving (EX) Working Group met Dec. 5, 2009. During this meeting, the Working Group:

• Received a status update from Larry Bruning (KS), chair of the Life and Health Actuarial Task Force (LHATF), regarding the Valuation Manual. The update indicated that on Dec. 4, LHATF adopted a Valuation Manual that includes five sections. Work is nearing completion on other more anticipated sections of the manual, including VM-20, which is the principle-based valuation approach for life insurance products. While VM-20 currently contains a minimum reserve floor, work is being done by the American Council of Life Insurers (ACLI) on a net premium reserve that will serve as a formulaic floor in VM-20. The ACLI has indicated that they will present the details of this floor by Jan. 1, 2010. The update noted that if it is the desire of the Life Insurance (A) Committee to wait until VM-20 and VM-25 are complete, prior to sending the amendments to the Standard Valuation Law (#820) and Valuation Manual to state legislatures, then LHATF requested that the date for completion of the Valuation Manual be extended to no later than the August 2010 national meeting. The Working Group noted that it believes the later date was appropriate, given the lack of state legislatures meeting in 2010 and the importance of providing a complete product.

• Reviewed and discussed comments received on a draft memorandum to the Executive (EX) Committee with regard to the statistical agent process and, more specifically, the NAIC’s role in that process. The memorandum was drafted and previously exposed by the Working Group at the Fall National Meeting, with the intent of gathering input from all parties on the topic. The Working Group received three comment letters on the proposal. The comment letters from Commissioner Kent Michie (UT) and State Farm supported the NAIC being involved in the process, as the data repository for the information that is gathered and scrubbed by a third-party agent. The ACLI’s comment letter, and related suggested revisions to the letter, stressed the importance for the statistical data process to be streamlined, but recommend against the NAIC’s involvement in the process. The ACLI also suggested that the discussion by this Working Group might be premature until LHATF works out some of the related details. Mr. Bruning summarized some of the views of LHATF, but noted that some of those details could be contemplated further by LHATF. The Working Group charged NAIC staff with modifying the draft memorandum to incorporate the comments received from the Working Group members, as well as some of the other nonsubstantive comments, and then distribute the revised memorandum to LHATF for further discussion and consideration of a proposed process.

• Adopted minutes from a July 8 conference call.