United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office General Government Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 1994-06-03 monographic deposited born digital GA 1.13:GGD-94-124 https://www.govinfo.gov/app/details/GAOREPORTS-GGD-94-124 P0b002ee180389b27 f:gg94124 DGPO 2010-08-12 2011-03-23 GAOREPORTS-GGD-94-124 machine generated eng fdlp REPORT GAOREPORTS-GGD-94-124 GGD-94-124 Insurance companies Insurance regulation Accounting procedures Financial disclosure reporting Reporting requirements Financial management Life insurance Investments Losses Letter Report GGD An adequate asset reserve is crucial to insurer solvency and for early detection of deteriorating financial conditions. Inappropriate asset reserving methods can mask an insurer's true condition and the potential need for regulatory intervention. GAO reviewed the new methods of calculating statutory asset reserves for life insurers to determine the extent to which they overcome the shortcomings of the old method, the mandatory securities valuation reserve (MSVR). The National Association of Insurance Commissioners (NAIC) termed GAO's earlier criticisms of the MSVR "moot" because NAIC replaced the MSVR method with the asset valuation reserve and the interest maintenance reserve methods. The new asset valuation reserve serves to buffer capital against fluctuating asset prices caused by changes in the credit quality of an insurer's portfolio. The new interest maintenance reserve serves to buffer capital against losses caused by general interest rate changes. This report evaluates how these two methods overcome the MSVR's shortcomings, which were that it (1) did not cover all types of risky investments and accumulated slowly; (2) buffered capital and surplus from changes in the value of assets, masking the true financial condition of the insurer; and (3) had a poorly defined purpose, hindering regulators' assessment of capital adequacy. https://www.govinfo.gov/content/pkg/GAOREPORTS-GGD-94-124/html/GAOREPORTS-GGD-94-124.htm GAO/GGD-94-124 https://www.govinfo.gov/app/details/GAOREPORTS-GGD-94-124 Letter Report GAO/GGD-94-124; Insurance Regulation: Shortcomings in Statutory Asset Reserving Methods for Life Insurers; Insurance companies Insurance regulation Accounting procedures Financial disclosure reporting Reporting requirements Financial management Life insurance Investments Losses