Principle-based approach (PBA) project

The Academy has been instrumental in the ambitious effort to modernize the framework for determining life insurers' statutory required capital and reserves in the United States.

The proposed method, which is intended to be principle-based, uses risk analysis and risk management techniques to capture underlying life insurance and annuity risks more accurately than the current rule-based, one-size-fits-all approach.

PBA resources

The following information contains extensive material about the principle-based approach project.

• Recent reports from Life Practice Council groups to the NAIC on the principle-based project.
• The latest LHATF exposure drafts (a link to the NAIC website's Life and Health Actuarial Task Force page)
• SOA PBA Research Projects:
  • Cost of Implementing a Principle-Based Framework for Determining Reserves and Capital Survey Results - (April 2010)
  • Analysis of Proposed Principle-Based Approach - (Sept 2009)
  • Analysis of Methods for Determining Margins for Uncertainty under a Principle-Based Framework for Life Insurance and Annuity Products - (April 2009)
  • Z-Factor Analysis Under A Principles-Based Approach For U.S. Life Insurance Products - (Oct 2007)
• Webcast updates on the Life Practice Council's principle-based efforts:
  • Slides from April 6, 2010 post-NAIC webcast
  • Slides from December 2009 post-NAIC webcast.
• PBA Seminars:
  • How Will PBA Rock Your World? Seminar
    May 19, 2010 - Slides
• The Academy's Modeling Efficiency Work Group has released a bibliography of efficient modeling techniques in their ongoing effort to streamline the modeling requirements that companies will face under principle-based reserving.
• PBA Practice notes:
  • A Practice Note on Applying Principles of the September C3 Phase III Report to the NAIC (December 2009)
  • Practice note and addendum on applying C3 Phase 2 and AG 43 (July 2009)
• C3 Phase II and Phase III.
• An ASB task force's November 2007 discussion draft on principle-based reserve standards.
• An ASB task force's May 2007 discussion draft on independent reviews of principle-based valuations.

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