NAIC to Investigate Principles-based Reserving

The National Association of Insurance Commissioners (NAIC) will take a closer look at the impact of principles-based reserving (PBR) on the life insurance industry. PBR is intended to more completely account for the obligations created by every insurance policy written by an insurer, and to better identify tail risks, which are rare and extreme events that are not accounted for with current methods.

The NAIC Life and Health Actuarial Task Force (LHATF) formed the PBR Testing Subgroup to provide recommendations for consideration by the Principles-Based Reserving Working Group and the Life Insurance and Annuities Committee.

"As we near completion of the NAIC Valuation Manual, it seems prudent to study its impact on all major lines of life insurance to avoid different sets of rules among insurers writing different lines of products," said Adam Hamm, chair of the Principles-Based Reserving Working Group and North Dakota Insurance Commissioner. "Regulators believe that principles-based reserving will foster a more competitive playing field with better insurance products and prices for consumers."