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

PBR Reaches VM Threshold

On March 31, Washington Governor Jay Inslee signed into law Senate Bill 5180 to revise the state’s standard valuation law (SVL) for life reserves (you can find out more about this legislation at the Academy’s StateScan tool here). With his signature, principle-based reserving (PBR) met a key milestone in more than decade of development. Forty-two states representing 75.003 percent of premium have now adopted new SVLs—the threshold set for the Valuation Manual (VM) adopted by the National Association of Insurance Commissioners for PBR to become operative.

With this threshold met, the newly adopted laws of these states will now have to be deemed “substantially similar” by July 1, which would allow PBR to become effective Jan. 1, 2017. Even in this event, there would be a three-year transition period when PBR is optional before it becomes required, and it would be for prospective business only.

The NAIC has developed a process for evaluating state laws to determine whether states’ SVLs are substantially similar to the NAIC’s model SVL. A group of regulators will present the list of states that it determines to be substantially similar to the NAIC’s model SVL to the Principle-Based Reserving Implementation (EX) Task Force, according to the updated PBR Implementation Plan, which was approved by the task force on April 5. A regulator-only call of the Task Force was held on April 18 to discuss these determinations further.

According to the updated implementation plan:

  • Results of the PBR pilot project are expected to be available before the end of the year.
  • The PBR Review (EX) Working Group will coordinate the development of financial analysis, examination and actuarial review procedures, and evaluate actuarial staff resource requirements at the NAIC and state insurance departments.
  • The PBR Blanks (EX) Subgroup is completing annual financial statement PBR blanks and instruction changes, and creating a VM-20 Reserve Supplement.
  • The PBR Review Procedures (EX) Subgroup is drafting changes to the Financial Analysis Handbook, drafting changes to the Financial Condition Examiners Handbook, creating a data collection template for reporting of company modeling and modeling assumptions, and developing some new regulatory tools.
  • The Life Actuarial (A) Task Force (LATF) will be discussing proposals to improve the PBR methodology and the VM, and NAIC staff will update the asset spread PBR data tables quarterly and the default cost PBR data tables on a yearly basis.
  • LATF will propose revised accreditation standards for the SVL that will be sent to the Financial Regulation Standards and Accreditation (F) Committee this year.
  • The PBR Implementation Task Force will create an experience reporting framework that includes procedures and timing for collection, cost control, dissemination of data, and funding.


The Executive/Plenary adopted:

  • Valuation Manual Amendments to adopt the 2017 Commissioners Standard Ordinary (CSO) mortality table.

The Executive (EX) Committee adopted:

  • A motion expressing a preference for the NAIC to serve as the reporting agent to collect experience data from life insurers on behalf of the states and pursuant to the VM in order to support implementation of PBR, and directing NAIC management to conduct further research and to participate in the PBR pilot project in order to complete a proposed implementation plan to be presented to the Executive (EX) Committee.

The PBR Implementation Task Force adopted:

  • The report of the PBR Review (EX) Working Group that included a proposal to the Blanks (E) Working Group to accept PBR blanks changes and instructions, and a proposal to the Financial Analysis Handbook (E) Working Group to adopt the PBR Financial Analysis Handbook changes.


Update on PBR Training Inventory
Cande Olsen, PBR Strategy Subgroup chairperson, provided an update on the Academy’s Principle-Based Reserves Training Inventory to LATF in March.

PBR Discussion
Dave Neve, Life Reserves Work Group chairperson, and Wayne Stuenkel, Life Capital Adequacy Committee chairperson, responded to New York Life’s discussion paper “Implementing Principle-Based Reserves for Life Insurers” during the LATF meeting in March.

Comments to LATF on the VM
In March, the Role of the Actuary Subgroup submitted proposed revisions to Section VM-31 of the Valuation Manual to LATF. The revisions, relating to qualified actuaries, were submitted for clarification and consistency with the Standard Valuation Law. The Subgroup also submitted proposed revisions to the Corporate Governance Guidance Appendix, Section VM-G, of the Valuation Manual.

Joint Committee Comments on the VM
The Joint Academy Life Experience Committee and SOA Preferred Mortality Oversight Group submitted comments in March to LATF on the removal of the provisions for unisex rates as applied to reserves.

Work Group Comments on AG 49
The Life Illustrations Work Group submitted comments to the NAIC’s IUL Illustration (A) Subgroup in March on revisions to Actuarial Guideline (AG) 49.


Post-NAIC Webinar
The Life Practice Council will hold a post-NAIC webinar on April 19 from noon to 1:30 p.m. EDT. Dave Neve, chairperson of the Academy Life Reserves Work Group, will moderate the discussion that will provide an overview of the LATF meeting, activity in other groups regarding PBR and related considerations for reinsurance, updates on variable annuity and life RBC issues, and other major topics. Speakers will include Mike Boerner, chair of LATF, Philip Barlow, chair of the NAIC Life RBC (E) Working Group, and Richard Daillak, chairperson of the Academy’s Life Reinsurance Work Group. For more information on the webinar, please click here.

PBR Boot Camp’ Seminar Set
Get a head start on understanding PBR before it takes effect at the Academy’s “PBR Boot Camp: Basic Training and Beyond for Principle-Based Reserving Implementation,” which will be held June 6-8 in Chicago. Presented by the Life Practice Council, this seminar will include instructional sessions and interactive case studies to provide attendees with key learning experiences before PBR implementation begins. Please visit the Academy’s website for more information but note that registration for this event is at capacity.

Due to high interest, the Academy is scheduling a second seminar to be held in September, although the date and location have yet to be announced. If you would like to be put on the waiting list for the June seminar, receive advance notification of the September event, or if you are a regulator wishing to attend the June seminar, please contact Leiloni Hayward at 202-223-8196 or hayward@actuary.org.


Washington state pushed the PBR count over the line as 42 states, representing 75 percent of U.S. direct written premiums, have adopted new SVLs. In addition, the South Carolina legislature has passed a new SVL, which was awaiting the governor’s signature as of April 15. PBR will be effective only after a supermajority of states and territories (42), representing 75 percent of written premium, adopt the revised law. It will apply only to new life insurance business.


Arizona 1.73%
Arkansas 0.62
California 6.79
Colorado 1.69
Connecticut 1.78
Delaware 0.58
Florida 6.77
Georgia 2.57
Hawaii 0.59
Idaho 0.39
Illinois 4.01
Indiana 1.81
Iowa 1.01
Kansas 0.87
Kentucky 1.09
Louisiana 1.31
Maine 0.40
Maryland 1.88
Michigan 3.74
Mississippi 0.60
Missouri 2.00
Montana 0.22
Nebraska 0.59
Nevada 0.69
New Hampshire 0.45
New Jersey 3.96
New Mexico 0.59
North Carolina 2.54
North Dakota 0.23
Ohio 4.15
Oklahoma 0.87
Oregon 1.41
Rhode Island 0.49
South Dakota 0.26
Tennessee 1.79
Texas 6.27
Utah 0.73
Vermont 0.19
Virginia 2.54
Washington 2.12
West Virginia 0.50
Wisconsin 2.20

*Percentage of U.S. life underwriting