NAIC Set to Approve Small Life Company Exemption From Principles-Based Reserving Requirements
March 30, 2015 by Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com
PHOENIX – Two National Association of Insurance Commissioners panels have cleared a path for several hundred small life insurance companies to receive exemptions from principles-based reserving requirements.
NAIC’s Executive Committee conceptually approved the plan, and the group’s life insurance and annuities committee approved the details of the plan during the NAIC’s Spring National Meeting on March 29. The exemption is set for final approval during the NAIC Summer Meeting in Chicago in mid-August. Paul Graham, senior vice president, insurance regulation at the American Council of Life Insurers, said his group desires a quicker approval if possible.
When the ACLI first proposed the exemption in early 2014, the group said it was necessary to help state lawmakers pass principle-based reserving legislation (Best’s News Service, Feb. 6, 2014).
But Tennessee Insurance Commissioner Julie Mix McPeak, a co-chair of the principles-based reserving task force that had been debating the topic, told the Executive Committee that states should instead include the language in valuation manuals that states automatically can incorporate.
She told Best’s News Service the reason for the change resulted from concerns about efforts to pass the small company exemption in state legislatures. In some instances, states choose thresholds for exemption that were divergent enough for the NAIC to be concerned about whether they would meet NAIC’s “substantially similar” criteria for approval.
The life insurance and annuities committee approved an exemption-eligibility threshold, allowing it for companies that have less than $300 million of ordinary life premiums along with NAIC life insurer groups that have combined ordinary life premiums of less than $600 million.
The exemption means that small companies that likely would not use XXX term-life reserves, and AXXX universal term life with secondary guarantee reserves likely would not have to pass a series of exemption tests companies who cannot meet the threshold must undergo (Best’s News Service, Aug. 20, 2014).