IMPORTANT NOTIFICATIONS THAT WILL IMPACT YEAR END BUSINESS
All Life insurance carriers are currently tasked to update their product portfolio to the new Principle-Based Reserving (PBR) and the new standard mortality table, the 2017 Commissioners Standard Ordinary (CSO) Table. Products that are not updated by January 1, 2020 cannot be sold. Pending policies must be funded and placed inforce no later than December 31, 2019.
Carriers product portfolios fall into one or more of the following phases.
- All products are updated with the new CSO table/PBR regulation
- Have products are updated with the new CSO table/PBR regulation and no plan in place for existing products.
- Have an established transition period for products to be updated and replaced.
- Withdraw products completely.
HOW THIS IMPACTS LIFE INSURANCE PRODUCTS.
Principle-Based Reserving (PBR)
The existing PBR is outdated and static that left the life insurance carriers with excessive reserves for certain insurance products and inadequate reserves for others. The solution is to "right-size" reserve calculations by replacing a rule-based approach with a principle-based approach.
The new requirement will be required to hold the higher of
- reserves using prescribed factors or
- reserves which consider a wide range of future economic conditions and is computed using credible insurer experience factors specific to an insurer, such as mortality, policyholder behavior and expenses.
2017 CSO table will have significant impacts in the following areas:
- it becomes the mortality standard for calculating minimum cash values,
- minimum statutory reserves,
- the minimum death benefit to premium/account value relationship for federal tax law compliance as life insurance.
- will lower statutory reserves at most durations
- will lower tabular cash values
- price sensitive products like term and universal life secondary guarantee contracts will generally benefit from the lower reserves
- maximum premium that can be paid per dollar of death benefit is lower
Please review the below hyperlink that lists current carrier non-complaint, complaint, and sunsetting products.