Retrospective

c. Retrospective Valuation and Nonforfeiture Value Procedures
At its meeting in December 1982, the (A) Committee expressed an interest in retrospective valuation procedures,
and asked the group to begin working on such a topic. As assigned to the group, the topic would involve a study
of whether the traditional prospective methods used to determine minimum reserves should be replaced by
retrospective methods. ("Prospective" implies looking forward from the valuation date to future benefits the
insurance company will provide and future premiums to be paid by the policyholder. "Retrospective" implies
looking back from the valuation date to benefits already provided and premiums already paid since the contract was
issued.) Retrospective methods seem to be better suited to certain newer life insurance plans, such as universal life
plans, where it is difficult to place a value on future benefits that would be provided. The group considered this
topic for the first time in March 1983, and noted that, if retrospective procedures are used to define minimum
reserves, then the retrospective procedures should also be used to define minimum cash values and other minimum
nonforfeiture values. Therefore, the adoption of retrospective procedures would probably require extensive revision
of both the standard valuation law and the standard nonforfeiture law for life insurance. Perhaps, complete
redrafting of these model laws would be needed. Since this is a new topic, it is not mentioned in the Winter 1982
report of the group under the heading "Other Topics."
1983-2