The Fall Meeting of the National Association of the Insurance
Commissioners (NAIC) generated some controversy on two topics.
First, regulators addressed a major change for life
insurers—how reserves for many products will be determined.
Although the change was accepted by the majority of the NAIC,
certain key regulators did not accept it. Second, the use of
captive insurers to fund reserves under existing reserving rules
was questioned by some regulators, and defended by others. Both
issues may engender further discussion.
Principles-Based Reserves
The adoption of the new Valuation Manual will likely result in
life insurers using "principles-based reserves" (PBR) for
life insurance products. PBR will replace the current formulaic
reserve computation method with a new method based on, among other
things, complex company-based models. The new reserving methodology
has long been in the development phase, but the process is now
closer to fruition: The manual, along
