"Looking for Balance in Principle-Based Reserving," Law360 August 23, 2016

“In recent years, life insurers have expressed concern that the current formulaic (or rule-based) methodology for calculating product reserves does not take into account the increasingly complex, nonstatic nature of current life insurance products,” writes Aaron J. Aisen, an attorney in Goldberg Segalla’s Global Insurance Services Practice Group.

“In response to these concerns, the National Association of Insurance Commissioners conducted ‘an extensive analysis of amended Standard Valuation Laws passed by 45 states, representing nearly 80 percent of the U.S. life insurance market.’ The end result? On June 10, 2016, the NAIC announced it adopted the recommendation of the Principle-Based Reserving Implementation Task Force to switch to PBR starting Jan. 1, 2017,” he writes.

This article provides a comprehensive overview of what PBR is and the reasoning behind the NAIC’s decision to adopt the new system and explores why some states are criticizing the change and how PBR might affect some programs and initiatives.

“There are still a number of outstanding issues that will need to be addressed as this new methodology moves forward. In the end, PBR may strike the balance that industry and regulators are striving for in this climate.”

Read the full article here: