Attorneys from Edwards Wildman attended the Principle-Based Reserving Implementation (EX) Task Force (“Task Force”) meeting of the National Association of Insurance Commissioners (“NAIC”) in Houston on April 6, 2013, where the Task Force released a new draft of its principle-based reserving (“PBR”) implementation plan (“Plan”) for comment. The Plan calls for replacement of the current formulaic approach to determining life insurance policy reserves with the PBR approach, a reserving methodology which more closely aligns policy reserves to product risks. The Valuation Manual setting forth the PBR reserving requirements was adopted by the NAIC in December 2012. The Plan varies from prior drafts in certain respects, including addition of a new Section IV calling for the NAIC to further examine the solvency implications of life insurer-owned captive insurers and other alternative mechanisms, such as special purpose vehicles in the context of PBR. It notes that this will largely be based on the report of Captives and Special Purpose Vehicle Use (E) Subgroup's Report, and that a new working group will likely be created to focus on this issue. The attendees of the meeting discussed the captive issue in some detail, and noted that reserve redundancies expected to be eliminated upon implementation of PBR may reduce the need for captives and SPVs. The draft Plan also covers the resources necessary to implement and administer the new reserving regime, among other things.The comment period for the Plan is 30 days.
Click here for a copy of the draft Plan.