1. An applicable company using a principle-based valuation must establish reserves that:
(a) Quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions which include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, the valuation must reflect conditions appropriately adverse to quantify the tail risk.
(b) Incorporate assumptions, risk analysis methods and financial models and management techniques that are consistent with, but not necessarily identical to, those utilized within the company’s overall risk assessment process while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods.
(c) Incorporate assumptions that are:
(1) Prescribed in the Valuation Manual; or
(2) Established utilizing the company’s available experience, to the extent that it is relevant and statistically credible or established utilizing other relevant, statistically credible experience.
(d) Provide margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.
2. Except as otherwise provided in NRS 681B.310, the provisions of this section apply only on or after the operative date of the Valuation Manual.
(Added to NRS by 2015, 3396)
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