Principles-Based Reserves Effective-Date Update (Nov. 2011)

Members of our staff attended the latest American Academy of Actuaries-sponsored webinar on the topic of the Principles Based Reserving (PBR) initiative working its way through the industry. While the development of this initiative has been deliberate and complex, of importance to many life companies and Fraternals is the likely implementation effective date.

Based on the statements of a presenter with knowledge of the project's current timeline, those working on the initiative hope for state legislatures to begin the adoption process in 2013. Our understanding is that ratification requires adoption of the initiative by 42 states representing 75% of written-premium volume in order to become effective. If this benchmark is achieved by July 1, 2013, the new reserving requirements would be effective January 1, 2014; if it is met after that date, the requirements would be effective January 1, 2015.

We note, however, there is still much work to be done-- and many legislative and regulatory hurdles to overcome-- in order for this timeline to be met.

The next NAIC meeting is scheduled for March, 2012, at which time more information on the status of PBR-impacting items-- including the development of the proposed Valuation Manual and results from various impact studies-- will be presented.

We will continue to post updates related to these topics regularly.

For more information on this issue, please go here.