The National Association of Insurance Commissioners (NAIC) voted to enhance consumer protections today with the adoption of the Valuation Manual. The manual contains details of a principles-based approach to establishing insurance company reserves. The manual was adopted by a supermajority of the membership during the Fall National Meeting.Members also voted to create an executive-level Joint Working Group of the Life Insurance and Annuities and Financial Condition Committees, which will require consumer participation in the design of the transition to the principles-based reserving (PBR) process.
"As state regulators, we take insurance company solvency very seriously. It is vital that consumers get the benefit of the promises made by their insurers," said Kevin M. McCarty, NAIC President and Florida Insurance Commissioner. "The adoption of this manual is a win-win for life insurance consumers, as we expect it will lead to more choices in the marketplace. Additionally, PBR was a key initiative identified by our members this year and its passage signifies our commitment to modernizing our regulatory system to meet the needs of the market. We are committed to providing all the resources necessary to a successful transition."
"Life insurance products are becoming increasingly complex," said Julie Mix McPeak, Chair of the NAIC Life Insurance and Annuities Committee and Tennessee Insurance Commissioner. "This modernization of our system should lead to industry innovation, allowing companies to develop products consumers want at more affordable prices."
The Valuation Manual defines the methods used by regulators and insurers to calculate the reserves of insurance companies. PBR incorporates factors beyond interest rates and mortality to better capture portfolio risks and ensure corporate solvency.
The new working group will focus on guidelines to ensure there are adequate resources for states to implement PBR, transitioning reserving practices, data compilation and engaging consumers. With the adoption of the Valuation Manual and the subsequent amendments, the Valuation Manual, along with revisions to the Standard Valuation Law and the revisions to the Standard Nonforfeiture Law for Life Insurance, can be presented to states as a package in time for the beginning of the 2013 legislative sessions for consideration.
About the NAIC
The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S. For more information, visit www.naic.org.