WASHINGTON, D.C. - The National Association of Insurance Commissioners is on track to implement "principle-based reserving" by Jan. 1, NAIC President John Huff said today.
Speaking at the Insured Retirement Institute's Government, Legal and Regulatory Conference 2016, Huff said 45 states have the NAIC's standard valuation law.
"Today we stand on the cusp of implementation," added Huff, who is also director of the Missouri Department of Insurance.
Currently, insurers use a formula-based static approach to calculate reserves for products. However, insurance products have grown in complexity, which the NAIC maintains requires a new reserve method.
The NAIC adoption of the standard valuation law in 2009 introduced PBR as a new method for calculating life insurance policy reserves. The PBR approach more closely reflects the risks of the highly complex products, Huff said. The improved calculation is expected to “right-size reserves,” reducing reserves that are too high for some products and increasing reserves that are too low for other products.
The concept has drawn controversy, with opponents calling it a deregulatory move that will enable insurance companies to set their own reserves outside the scope of regulators' knowledge.
In addition, Huff said the NAIC is working on cybersecurity and product innovation concerns as it seeks a role to help find answers to the retirement readiness crisis.
"As a nation we've made too little incremental progress toward preparing Americans for retirement," he said. "The NAIC is committed to working with all stakeholders to see what we can do to move the ball forward on product innovation."
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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