New York state’s top financial regulator, Maria Vullo, agreed to adopt new industry-supported reserve requirements for life insurers, departing from a predecessor who derided the shift as ” unwise.”
The move aligns the state watchdog with the National Association of Insurance Commissioners, which last month approved the rules, effective in January. Vullo will adopt the rules in 2018 and create a group of insurance leaders including TIAA’s Roger Ferguson and New York Life Insurance Co.’s Ted Mathas to offer input, her department said Wednesday in a statement. Birny Birnbaum, executive director of the Center for Economic Justice consumer-advocacy group, is also on the panel.
Vullo, who was approved last month as superintendent of the New York Department of Financial Services, is diverging from predecessor Benjamin Lawsky who expressed concern that the new method could weaken protections designed to make sure there are enough funds to honor obligations to policyholders. Principles-based reserving, he said, won’t “quell the gamesmanship and abuses” that the industry can use to free up capital.
The proposed method departs from formulas governing how much money must be set aside to back future payouts, and the NAIC has said it will reduce reserves that are too high on certain products while increasing them on others.
“The adoption of principle-based reserving in New York will keep the state at the forefront of insurance regulation,” Vullo said in the statement. “DFS will continue to make certain that New York’s insurance market is fiscally safe and sound and that the reserves to back insurance policies are appropriately set to protect consumers.”
The American Council of Life Insurers praised the more flexible approach of principle-based reserving in a June statement. The industry group “strongly supports this modernized method,” ACLI Chief Executive Officer Dirk Kempthorne said at the time.
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