A.M. Best has released a new report exploring the impact of a new captive reserve financing framework for certain products subject to XXX and AXXX reserve requirements.
Actuarial Guideline XLVIII (AG 48), which was adopted by the National Association of Insurance Commissioners (NAIC) in December 2014, defines the rules for new life XXX and AXXX reserve financing transactions executed after 1 January 2015.
The report has stated that this new framework is essentially a ‘stopgap’ measure intended to regulate captive financing structures until the implementation of a principles-based reserving (PBR) framework, which could significantly diminish the need for XXX and AXXX captive financing structures for new business issued after the implementation date.
The NAIC's XXX and AXXX reserves financing framework includes a sunset provision tied to the implementation of PBR.
