NAIC Backs Off On IUL Illustrations, Expected To Approve AG 48
December 9, 2014 by Arthur D. Postal
WASHINGTON – The National Association of Insurance Commissioners (NAIC) is backing off on its previous decision to move aggressively on implementing a compromise regulation governing the illustrations insurers and agents can use in marketing indexed universal life insurance (IUL) by late March.
At the same time, the NAIC executive committee is now expected to approve Actuarial Guideline 48, which is design to tighten the rules governing the use of XXX/AXXX captives by the life insurance industry. The approval is expected to occur at a meeting of the full body (plenary) either Dec. 16 or Dec. 19, staff officials said.
On the illustrations issue, the Life Actuarial (A) Task Force (LATF) moved back the deadlines for providing interested parties guidelines to be used in drafting a compromise IUL illustrations rule. The upshot of this is that the guidelines governing the talks will not be ready until January at the earliest.
The LATF delayed from Dec. 5 to Dec. 19 the deadline for interested parties to file comments. It also has decided not to hold a meeting on the issue until January, which means no final guidance will be provided to interested parties for “more than a month,” according to an industry lawyer.
During the fall NAIC meeting, the task force said it would establish guidelines that interested parties can use to craft a compromise by late December, and interested parties would have until early March to present a unified proposal to the task force.
However, the task force has now delayed the Dec. 5 deadline for comments and the preliminary conference call, although no reason has been cited.
Where AG 48 is concerned, the NAIC joins the Federal Insurance Office and the Federal Reserve in scrutinizing the issue of reserving for captives.
At the NAIC’s fall meeting on Nov. 17, the Principle-Based Reserving Implementation (EX) Task Force adopted a draft of AG 48.
NAIC staff officials said it is important that interested parties understand thatAG 48 is a new guideline – not an update;and it will not be considered adopted until a vote of the full NAIC (plenary).
The guidelines apply only to a specific set (XXX/AXXX) of captives used by the life insurance industry. They refer to level premium term life insurance policies and reserves required for universal life insurance policies with sold secondary guarantees – but not all captives, NAIC staff officials said.
In recent years, life insurers have increasingly turned to captives to finance purported reserve redundancies associated with requirements under Regulations XXX (the Valuation of Life Insurance Policies Model Regulation) and AXXX (Actuarial Guideline XXXVIII —The Application of the Valuation of Life Insurance Policies Model Regulation, or AG 38), according to the NAIC.
