There has been wide disagreement in select reserve approaches and mortality assumptions among the industry and regulators going into Principles-Based Reservings’ (PBR) Valuation Manual, just as it is slated to be adopted.
Support is needed for the Standard Valuation Law (SVL) enabling PBR when it is introduced in state legislatures beginning in 2013.
The AAA proposal was developed after a huge NAIC-private impact study determined that the original mortality approach was overly complicated, difficult to understand, and contributed to excess conservatism.
“There is no reason to ignore credible mortality experience when there is 100% credibility... There is ample evidence that preferred mortality and residual mortality do not converge for many years into the future, if ever... The Academy’s proposal gives credence to this evidence, but still requires complete convergence with industry mortality data within 25 years,” the ACLI states.
USAA says that it believes that the changes that were made in the latest exposure draft concerning schedules for grading company mortality experience into industry tables were not reasonable.
“This is especially true for companies with a highly credible book of business where the actual experience is different from the industry experience for a significant number of years,” wrote Shawn Loftus, USAA’s chief actuary.