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House 11-13-2017 02:09 PM

AG 49 Question
In the following excerpt from AG 49, what are other companies assuming to be the definition of Assumed Earned Rate?

"If an insurer engages in a hedging program for index-based interest, the assumed earned interest rate underlying the disciplined current scale shall not exceed 145% of the annual net investment earnings rate (gross portfolio earnings less provisions for investment expenses and default costs) of the general account assets (excluding hedges for index-based credits) allocated to support the policy."

We initially used the maximum illustrated rate under our cap and had some testing issues, but then adjusted it to include our target spread but bumped into the limit. So are the only options to either pass testing with spread compression forced by the 145% limit or reduce the illustrated credited rate?

urysohn 11-14-2017 10:24 AM

I don't work with IUL, but what you're describing sounds like the primary intent of AG49 -- placing restrictions on the maximum crediting rates which can be illustrated for IUL. Simply from that perspective, it makes sense that you're having some difficulty passing.

It doesn't mean you can't offer more, you just can't illustrate it in the non-guaranteed illustration ledger. I believe (but am not certain) that you could still market that additional crediting strategy in some manner, just not in the illustration.

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