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NAIC Update

NAIC Update. SOUTHEASTERN ACTUARIES CONFERENCE MEETING  November 19-21, 2003 Presented By:  Matt McAllister, FSA, MAAA Actuarial Resources Corporation. Overview. Annuity Nonforfeiture Model Law/Regulation Regulation To Adopt 2001 CSO Table Revised AOMR Variable Annuity Reserves

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NAIC Update

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  1. NAIC Update SOUTHEASTERN ACTUARIES CONFERENCE MEETING  November 19-21, 2003 Presented By:  Matt McAllister, FSA, MAAA Actuarial Resources Corporation Actuarial Resources Corporation

  2. Overview • Annuity Nonforfeiture Model Law/Regulation • Regulation To Adopt 2001 CSO Table • Revised AOMR • Variable Annuity Reserves • Other Topics • Credit Insurance Mortality • Possible Revisions to SVL Actuarial Resources Corporation

  3. Annuity Nonforfeiture Model Law • Low interest rate environment • Many states have lowered the SNFL Interest Rate from 3% to 1.5% • In March 2003, NAIC adopted a new Model Law utilizing an indexed rate Actuarial Resources Corporation

  4. Annuity Nonforfeiture Model Regulation • Initial Draft Model Regulation already developed • Primary Issues • Setting Initial Rate and Disclosure of Method • Equity-Indexed Products Actuarial Resources Corporation

  5. Annuity Nonforfeiture Model Regulation • Guiding Principles for Setting Initial Rate • 1) Risk Management • 2) Administrative Ease • 3) Regulatory Involvement • Value triggered method Actuarial Resources Corporation

  6. Annuity Nonforfeiture Model Regulation • Initial Rate Disclosure Options • Contract • Actuarial Memorandum Only • No Disclosure • Cover letter/info. filing to Regulators Actuarial Resources Corporation

  7. Annuity Nonforfeiture Model Regulation • Allowable Additional Offsets for EIAs • Cost Basis Approach • Market Value Approach Actuarial Resources Corporation

  8. Revised AOMR Model • Adopted by the NAIC in Fall 2001 • Eliminated Section 7 Opinion • Some form of asset adequacy required for virtually all companies • Regulatory Asset Adequacy Issues Reserves Summary Actuarial Resources Corporation

  9. Revised AOMR Model • Few States have adopted new Model • Florida has adopted for year end 2003 (applicable to all companies doing business in Florida) • LHATF reviewing inconsistencies between AS Exhibits and New AOMR Actuarial Resources Corporation

  10. 2001 CSO Mortality Tables • Adopted by the NAIC in Summer 2002 • 4 States have adopted as of Oct. 2003 (including Texas) • Once 26 states have adopted, ACLI will most likely push the remaining states to adopt Actuarial Resources Corporation

  11. 2001 CSO Mortality Tables • Key issues being considered in adopting • Lower overall reserves • Asset adequacy requirement • Optional choice of blended tables developed by the Academy Actuarial Resources Corporation

  12. Variable Annuity Reserves • Variable Annuity Reserve Work Group (VARWG) • Formed in Jan. 2003 • Charge was to develop a reserve methodology applicable to all VA products using the principles of the proposed RBC C-3/Phase II approach by the Academy’s Life Capital Adequacy Subcommittee Actuarial Resources Corporation

  13. Variable Annuity Reserves • LHATF giving VARWG direction on following key issues: • Timeline • 12/03: LHATF exposes Draft • 6/04: LHATF adopts New Requirement • 12/04: Plenary/Exec. Committee Adopts • Regulatory form • Initially being developed as an actuarial guideline Actuarial Resources Corporation

  14. Variable Annuity Reserves • Applicability to in force contracts • Moving forward on the basis of including in force business • Possible grade-in period • Basic level at which reserves will be set • Review of modeling results and underlying assumptions Actuarial Resources Corporation

  15. Variable Annuity Reserves • MGDB Reserves • AG 33 and AG 34 not clear on treatment of “dollar-for-dollar” provision • Concern that AG 33 might require treatment as an elective benefit • AG 34 not clear on future partial withdrawals Actuarial Resources Corporation

  16. Variable Annuity Reserves • LHATF/AAA have developed on a short-term solution • No changes to AG 33 felt necessary • AG 34 modified to include a requirement for a stand alone asset adequacy analysis of all VA contracts with MGDBs • Plenary to vote on this matter at the Winter National Meeting Actuarial Resources Corporation

  17. Other Topics of Interest • Possible Areas of Revision to the Standard Valuation Law • Possible elimination of Certificate of Valuation • Other possible changes to be discussed at Winter National Meeting • Will be a lengthy process Actuarial Resources Corporation

  18. Other Topics of Interest • Proposed Model Regulation for Determining Credit Life Reserves • Applicability of CRVM to periodic premium plans • Deficiency reserves • NAIC Website – www.naic.org Actuarial Resources Corporation

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