New Principles-based statutory reserving (PBR) standards will have mixed implications for US life insurers, according to Fitch Ratings.
In June, the National Association of Insurance Commissioners (NAIC) adopted a recommendation for PBR standards for statutory reporting.
The revised reserving standard will become effective 1 January 2017, with a three-year transition period.
The new standards will mean reduced reserving requirements for term policies, which, according to Fitch, should benefit companies that do not currently reinsure excess XXX reserves to captive insurers.
Fitch noted that for companies that use captives to finance term reserves, the impact of PBR could be negative due to the effect on tax reserves.
However, Fitch also argued that PBR will reduce, but not completely oust, the industry’s use of captive insurers to finance excess XXX/AXXX reserves.
