NAIC Life and Health Actuarial Task Force Subgroup Meeting Reports: October 15-16

On Wednesday, October 15 and Thursday, October 16, 2008, the National Association of Insurance Commissioners (“NAIC”) held meetings of the Valuation Method Principles-Based Reserve Life and Reinsurance Subgroups (“Life Subgroup” and “Reinsurance Subgroup”) of the Life and Health Actuarial Task Force to discuss proposed amendments to Valuation Method-20: Requirements for Principle-Based Reserves for Life Products (“VM-20”). To view the draft version of VM-20, click here.

Amendments to VM-20 discussed during the Life Subgroup meeting include:

• A cap on the default assumption for below-investment-grade assets
• Discount rate amendments
• Basing the stochastic exclusion test on anticipated experience assumptions
• Revisions to the treatment of non-guaranteed elements in the calculation of principles-based reserves
• Inclusion of a specification of gross reserve and the methodology for determining the credit for reinsurance in the reserve methodology

To view the complete list of proposed amendments discussed during the Life Subgroup meeting, click here. To view a summary table of all outstanding Life Subgroup issues, click here.

During the Reinsurance Subgroup meeting, the following amendments to VM-20 were discussed at length:

• Requirement that a reinsurance agreement must be in compliance with the risk transfer requirements in order to be included in the principle-based reserve calculation
• Preventing transactions that might result in a reduction of reserves, and addressing limitations included in the current risk transfer requirements
• Specification of the gross reserve and the methodology for determining the credit for reinsurance
• Addition of guidance for an appropriate assumption method to compute the minimum gross reserve and value of reinsurance credit

To view the complete list of proposed amendments discussed during the Reinsurance Subgroup meeting, click here.

No action was taken during either meeting. The draft version of VM-20 will remain open for comment until November 3, 2008. Comments should be sent to John Engelhardt at jengelha@naic.org.

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.

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