Principles-Based Valuation System

Dec 12th, 07
New life reserve methodology

The NAIC’s Principles-Based Reserving Working Group continues its push to develop a reserve methodology for life insurance products that results in a reserve that is closer to economic reality.  The new method is intended to allow companies to develop a reserve for its products that matches its risk.  The method would apply prospectively to new products, and would be more consistent with how life insurers in other countries are reserving for products.  It does come with the added rigor of an actuarial peer review of the assumptions used in the reserving process, as well as additional internal actuarial costs.  The NAIC has yet to resolve several issues related to PBR, among them, small company issues and tax considerations.  Stay tuned!