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Opinion

Life’s so short, says Reg XXX

According to the latest research from Lehman Brothers “the life insurance industry appears to be vying with the Pentagon to see who can turn out more acronyms”.

Life insurance acronyms, it seems, are a big growth area, with new expressions to describe a new product, product feature, accounting construct, or distribution channel regularly appearing. Although designed to ease communication, the result has been investor confusion.

Lehman lists and explains 51 new acronyms and cites Prudential Financial and Hartford Life as among the most prolific coiners. Prudential Financial came up with such catchy phrases as Dac (deferred acquisition costs), a concept that appears uniquely in US Gaap, and Voba, (value of business acquired) which Lehman explains is just CIP (cost of insurance purchased) by another name. Hartford's latest coinages – GMWB (guaranteed minimum withdrawal benefit) and GMLBs, which even Lehman fails to explain – do not roll off the tongue as easily.

Some like Big (below investment grade) may make perfect sense to those in the know; others simply add to the confusion. Reg XXX refers to a regulatory change passed by the National Association of Insurance Commissioners (NAIC) that raised the reserve requirements for some insurance products.

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