TALLAHASSEE, Fla. – Florida is among seven states currently considering bills to approve use of principles-based reserving for use by life insurers.
SB 1308 is sponsored by Sen. David Simmons along w ith the Banking and Insurance Committee he chairs and the Judiciary Committee. It contains a host of updates to insurance statutes, including an update of the Standard Valuation Manual to address principles-based reserving. The bill has moved unanimously through three committees and is poised to be heard on the floor.
The PBR changes are part of the valuation manual, w hich a Senate analysis of the bill said preserves states’ authority to require insurers to change any assumption or method and allow s regulators to hire an actuary at insurer expense to review compliance w ith the manual provisions, including PBR.
PBR w ill impact policies issued on or after the date the manual legislation is signed. Insurers can opt to phase in PBR requirements over a three-year period after the revised manual takes effective, w hich is no earlier than Jan. 1, 2017, the bill said.
Under PBR, insurers face numerous requirements in the bill. For instance, they must qualify the benefits, guarantees and funding associated w ith policies and their risks at a level of conservatism reflecting various conditions. These conditions include unfavorable events that have a reasonable probability of occurring during the life of the policy. Also, insurers w ill be required to incorporate assumptions, risk analysis methods, financial models and management techniques that are consistent w ith those used in an insurer’s overall risk assessment process.