View Full Version : XXX reserves for Term Joint 2nd to Die?
02-08-2002, 11:21 AM
How does it work? Do we use the single life X factor for both lives then fraserize?
02-08-2002, 01:48 PM
I don't think there are any set rules. As I recall, joint plans weren't actually discussed. But, if the reg talks about "multiplying the X Factor by your expected mortality" (and I don't recall offhand the exact wording), then I think you need to frasierize your mortality first. Then your valuation actuary needs to create a set of X-factors for use with 2nd-to-die plans.
More likely, this will be one of those gray areas. Use professional judgement, document well, and be prepared to justify your decisions if one of the states should call you on it.
02-08-2002, 02:22 PM
This was actually covered in the Practice Notes for XXX. See question #12.
Double High C
02-08-2002, 06:28 PM
I was going to reply, but thank you Captain and Uri for doing so succinctly.
On a related note, when you are looking at your Anticipated mortality for second-to-die products, you should theoretically consider the nonindependence of the two lives (in most cases, joint accident risk and Heartbreak Syndrome). To reflect this in a Frasierized calculation could potentially be quite complicated due to the fact that these risks are highly dependent on the status (both alive, x alive / y dead, or x dead / y alive). Of course, there is no joint accident risk for a 1 alive / 1 dead status. In practice, a simple adjustment would probably be used. Furthermore, since the "compliance tests" are aggregate tests, this may not be that much of a concern; also, I suppose that one might argue that the mortality of each of the 2 lives in a second-to-die policy is likely to be more favorable than the mortality of typical insureds of e.g. similar ages / sexes on single life policies.
Having said all that, based on the Practice Note and the fact that the mechanics required to reflect the nonindependent risks are not reflected in any codified (small c) statutory rules, it seems not to make sense to adjust the results of the Frasierization of the single life valuation q's (which reflect X-factors) to come up with valuation mortality for second-to-die policies.
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