Summer 2017

PBA Perspectives is designed to keep you up to date on activities surrounding the implementation of the principle-based approach for life insurance.


Three of the 11 companies involved in the PBR Review (EX) Working Group pilot project have indicated they plan to value products in 2017 using principle-based reserving (PBR) with a fourth saying it might utilize the reserving methodology this year, according to the project’s final report. The information was provided by the working group at the NAIC’s Spring 2017 National Meeting in April.

The companies participating in the pilot were distributed across nine states of domicile and they tested term policies with a face amount of about $795 billion in term life policies and $34 billion in universal life with secondary guarantees over five years, although a single company only used one year of data. The working group also said it had an indication that as many as 16 companies—both involved and not involved with the pilot project—plan to value products using PBR in 2017.

Other highlights from the report include:

  • A Valuation Manual (VM) Review Drafting Group was formed at the NAIC that includes regulators, industry representatives, and Academy members to clarify language in various sections of VM-20 and VM-31. One example cited that may need clarification was a VM-20 provision regarding the aggregate level of mortality experience used for determining credibility percentage and the sufficient data period. The group will submit VM revision proposals to the Life Actuarial (A) Task Force (LATF) for consideration.

  • Regulators said the pilot project was extremely valuable by providing them opportunities to see the differences among companies in how experience assumptions and margins were established, according to the report. The project also allowed regulators to analyze actual company PBR results. The regulators said information from the project pointed out areas where the VM needed to be clarified and provided them with information on how PBR reviews might work.


Third PBR Boot Camp
The Life Practice Council hosted its third PBR Boot Camp in Orlando, Fla., May 22–24, which featured 18 dynamic, interactive sessions. The 105 attendees received targeted instruction and also participated in intensive, focused discussion groups, which provided an opportunity to share insights and learn from others’ experience following January’s PBR implementation.

Comments on PBR ASOP Exposure Draft
The PBR Governance Work Group submitted comments in May to the Actuarial Standards Board (ASB) on the exposure draft for a new ASOP, Principle-Based Reserves for Life Products.

PBR Under VM-20 Practice Note
The Life Principle-Based Approach Practice Note Work Group released the practice noteLife Principle-Based Reserves Under VM-20, in May to assist actuaries with the implementation of the PBR valuation approach adopted by the NAIC as detailed in the Requirements for Principle-Based Reserves for Life Products—VM-20.

APF on VM-20 Language on Policy Loans and Separate Account Assets
The Life Reserves Work Group submitted an amendment proposal form in May to LATF regarding the VM-20 wording on modeling of policy loans and separate account assets.

Comments on VM-20
The Life Reserves Work Group submitted comments in May on two LATF proposed amendments to VM-20—a comment letter related to additional definitions and another comment letter related to proposed changes to Section 2G.

Model Governance Practice Note
The PBR Model Governance Practice Note Work Group released a new practice note in April to provide additional information for practicing life actuaries seeking to better understand models, model risks, model governance, and related issues, as they implement PBR.

Simplified Issue, Guaranteed Issue, and Accelerated Underwriting Presentation
Mary Bahna-Nolan, chairperson of the Academy’s Life Experience Committee and SOA Preferred Mortality Oversight Group, presented updates to LATF in April on its work on guaranteed issue and preneed mortality tables, and simplified issue and accelerated underwriting mortality under VM-20.

Report on Guaranteed Issue Mortality Tables
The Life Experience Committee and SOA’s Guaranteed Issue/Simplified Issue/Preneed Working Group gave a report to LATF in April on 2017 guaranteed issue mortality tables, including spreadsheets with a blended mortality table, a male mortality table, and a female mortality table.

Post-NAIC Webinars
The Life Practice Council held post-NAIC webinars in April and January to give updates on the NAIC’s Spring 2017 and Fall 2016 national meetings that focused on LATF activities, and actions by other groups regarding PBR and other life topics.

Academy Launches ‘PBR in Practice” Resource
The Academy in January launched “PBR in Practice,” a web page that assembles materials to assist actuaries and regulators as actuaries in most states move into the implementation phase of PBR for life insurance.


At the NAIC’s 2017 Spring meeting, LATF adopted:

  • VM-22 Subgroup Report (pgs.111-136) that provides the methodology for determining valuation interest rates for income annuities.

  • Four amendments (pages 164-174) for non-substantive changes to the VM, including moving the tables from VM-20 Appendix 2 to the Related Documents tab on the task force web page.

  • Exposures:


A bill was introduced in the New York Senate in May that would enable life insurers to employ the VM for PBR, and similar legislation was pending in Massachusetts. In March, the governor of Wyoming signed legislation that allows insurers to start using the VM.

To date, 47 states representing more than 87 percent of U.S. direct written premiums have adopted a new Standard Valuation Law (SVL) to enact PBR. This exceeds the threshold of 42 states and territories with 75 percent of written premium set by the NAIC for implementation of the VM, and life insurers in most states can start utilizing PBR on Jan. 1, 2017.

States Not Yet Adopting New SVL (percent of direct written premium as of June 20, 2017)

Alaska 0.16%*
Massachusetts 3.27%
New York 9.20%

*Percentage of U.S. life underwriting


PBR Boot Camp for Regulators
The Life Practice Council is planning a regulator-only PBR Boot Camp in Las Vegas on Sept. 11–13. More details will be available shortly on the Academy’s website.

2017 Annual Meeting and Public Policy Forum