New York Heavily Involved in Drafting AG 38 Requirements

Washington, D.C., (Sept. 12, 2013) - It is both inaccurate and disappointing that New York Financial Services Superintendent Benjamin Lawsky would suggest in a September 11 letter to fellow insurance commissioners that planned changes to life insurer solvency regulation would put at risk policyholders and taxpayers.

The life insurance industry is financially strong, perhaps stronger than it has ever been. 

But what should be most troubling to regulators and consumers is that the Superintendent’s letter reflects a complete failure to recognize life insurers’ unwavering support for strong solvency regulation and consumer protection. If a life insurer fails, competing life insurers must pay the tab for the insolvency. It is in the interest of the entire industry and its policyholders that companies are well capitalized.

And keep in mind: Regulators oversee a vast array of activities, including insurer reserving and investments. Companies are subject to rigorous oversight by regulators to ensure solvency and protect customers.

Changes to reserving regulation that the Superintendent opposes did not take place overnight. Principle-Based Reserves (PBR), which forms the basis for the regulation the Superintendent is challenging, represents an eight-year regulatory process that was validated by actuarial experts and approved by a super-majority of the National Association of Insurance Commissioners.

In fact, New York was intimately involved in developing a retroactive test for Actuarial Guideline (AG) 38, which establishes reserve requirements for certain types of life insurance policies. AG 38 was based on PBR. It was designed to assure that the industry was adequately reserved for its future claims. New York signed off on the test, along with 49 other state commissioners. For New York to now backpedal on using the test under some pretense of an estimate of expected reserve increases is discouraging.

Life insurance industry regulation, including PBR, will continue to evolve to address the ever-changing regulatory, business and marketplace environment. As it evolves we look forward to rationale debate on the topic. Unfounded comments like those of the Superintendent do not contribute to this effort. 

The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with more than 300 member companies operating in the United States and abroad.  ACLI advocates in federal, state, and international forums for public policy that supports the industry marketplace and the 75 million American families that rely on life insurers’ products for financial and retirement security. ACLI members offer life insurance, annuities, retirement plans, long-term care and disability income insurance, and reinsurance, representing more than 90 percent of industry assets and premiums. Learn more at www.acli.com.