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

NAIC Executive Committee and
Plenary Approve PBR Implementation

The National Association of Insurance Commissioners’ (NAIC) Joint Executive (EX) Committee and Plenary approved a recommendation on June 10 affirming that legislation adopted by 45 states were “substantially similar” to the NAIC’s model Standard Valuation Law (SVL), thus completing a final step needed for principle-based reserving to become effective on Jan. 1, 2017.

For the Valuation Manual (VM) to become operative by Jan. 1, 2017, at least 42 states and territories with 75 percent of written premium were required to adopt new SVLs by June 30. Additionally, the SVLs passed in those state had to be deemed “substantially similar” to the model SVL. The Principle-Based Reserving Implementation (EX) Task Force reported on June 6 that 45 states had adopted SVLs that were substantially similar.

The latest NAIC decision marks a more than 10-year effort by the NAIC, and one initiated by the Academy, to incorporate a PBR methodology into life products. The Academy held its first PBR “boot camp” earlier in June to provide information and instruction to help actuaries and regulators transition to the new reserving paradigm. (See PBR ‘Boot Camp’ below.) Starting Jan. 1, there is an optional three-year transition period for implementing PBR, which applies to prospective business only.

While the operative date is now set, the task force said in its recommendation that each state still must determine that all the requirements of the VM have been met, and that the NAIC recommendation can be used to support state regulatory action. While not all states have additional requirements that must be met to adopt the VM, the task force encouraged all states to take proactive steps through regulations, bulletins, or other means.


PBR ‘Boot Camp’
The Academy’s Life Practice Council (LPC) held its first PBR Boot Camp June 6-8 in Chicago that was attended by 100 actuaries and featured two dozen sessions devoted to modeling, assumptions, and case studies related to PBR. Attendees received instruction and participated in intensive, focused work groups providing insight and hands-on modeling instruction to use in meeting the Jan. 1, 2017, PBR implementation date. The seminar was so popular that the Academy will hold a second “boot camp” in September (See Upcoming below).

VM-20 Product Aggregation
The Life Reserves Work Group submitted comments in July to the NAIC’s Life Actuarial Task Force (LATF) on the exposed NAIC staff amendment proposal form (APF) on VM-20 product aggregation. 

LPC Comments on Qualified Actuaries
The Life Practice Council submitted comments to LATF in June on qualified actuaries’ responsibilities to the interests of the company versus the commissioner.

Guaranteed Issue, Preneed Mortality
The Joint American Academy of Actuaries Life Experience Committee and Society of Actuaries Preferred Mortality Oversight Group provided an update in June on guaranteed issue and preneed mortality to LATF.

Comments on VM-G, Consolidated ACLI-Academy APF
The Role of the Actuary Subgroup submitted letters to LATF with comments on combined revisions regarding VM-G of the Valuation Manual, comments on recommendations made in amendment proposal forms regarding VM-G of the Valuation Manual, and comments on the consolidated ACLI and Academy APF.

Post-Level Term Profit Assumptions
The Life Reserves Work Group (LRWG) submitted comments to LATF in May on the Minnesota Department of Commerce amendment proposal form on post-level term profit assumptions.

Statutory Valuation Interest Rates
The SVL Interest Rate Modernization Work Group submitted comments to LATF’s VM-22 Subgroup in April in response to statutory regulations regarding the determination of statutory valuation interest rates.

Net Premium Reserves, Term and ULSG
The Life Reserves Work Group submitted comments in April to LATF on currently exposed amendment proposal forms on net premium reserves, and additional comments on currently exposed amendment proposal forms on term and universal life insurance with secondary guarantees.


Pennsylvania adopted a new SVL this month, bringing the total to 46 states, representing more than 85 percent of U.S. direct written premiums. This exceeds the threshold of 42 states and territories with 75 percent of written premium set by the NAIC for implementation of the VM. Legislation is pending in Massachusetts to adopt a new SVL. Additionally, the new superintendent of the New York Department of Financial Services recently signaled her support for PBR, but legislation to adopt a new SVL that was introduced this year failed to pass.


Alabama 1.27
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
Minnesota 2.06
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
Pennsylvania 6.22
Rhode Island 0.49
South Carolina 1.16
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


Post-NAIC Webinar
The Life Practice Council will hold a webinar on Sept. 15 after the NAIC’s summer meeting. 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 annuities, and other major topics. Speakers will include Mike Boerner, chair of LATF, Tom Campbell, chairperson of the Academy’s AG 43/C3 Phase II Work Group, and Richard Daillak, chairperson of the Academy’s Life Reinsurance Work Group. Watch for the registration email or check back on the Academy website soon to sign up.

Second PBR Boot Camp Seminar Set
Don’t miss out on the Academy’s second “PBR Boot Camp: Basic Training and Beyond for Principle-Based Reserving Implementation,” which will be held Sept. 21-23 in Orlando, Fla. 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 and to register.