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Old 11-22-2018, 06:11 PM
DonnaClaire DonnaClaire is offline
Join Date: Apr 2005
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Default LATF Nov 2018

LATF and LTC/HATF NAIC Update – San Francisco; November 13-14, 2018
By Donna R. Claire

The Fall LATF/LTC/HATF meetings were held in San Francisco, CA, (As long as one doesn’t mind breathing in some smoke (the air quality is unhealthy due to the nearby fires) but it’s a great city to visit.)

Below are highlights of the meetings I attended:


Simplified Issue: Brian Bayerle (ACLI) discussed an APF (Amendment Proposal Form) on how to handle simplified issue. The real problem is how to define simplified issue, so the proposed APF simply states to use anticipated experience to adjust underlying mortality tables. LATF voted to expose this APF for comment until January 3.

Valuation Analysis Working Group’s Public Principle-Based Review Report and Its Recommendations/Referrals to the Task Force: Pat Allison (NAIC) reviewed the 36 recommended changes to VM-20 and VM-31, mostly in terms of descriptions in the VM-31 documentation and documentation of management controls that are in place.

Adoption of the LATF Experience Reporting Subgroup Report: Fred Andersen (MN) chairs the LATF subgroup on this topic. He, along with Laura Hanson (Academy), developed an APF for VM-51 to better identify what type of plans (e.g., UL, single pay, single premium), are covered. This APF was proposed for comment thru January 31, 2019. The next project the group is taking on is variable annuity data e.g., lapses in-the-money; out-of-the-money, etc.

Report on the RBC C-3 Phase 2/VM-21 (AG 43) Subgroup: Pete Weber (OH) is chair but was not there. Mike Boerner gave an update of the work of this RBC C-3 Phase 2/AG 43 subgroup on the implementing a new variable annuity framework. The subgroup has been working on the rewrite due to the proposal that came out of the Oliver Wyman work. The group is being renamed Variable Annuity Capital and Reserve group. The goal is to get the VM-21 changes adopted for 1/1/2020.

Longevity Risk: Rhonda Ahrens (NE) chairs the LATF group on this. They are following the longevity risk work of the Academy group, headed by Paul Navratil. The Academy has received data from a field test. Once the Academy has finished analyzing this, they will recommend a factor for longevity, and a covariance correlation factor regarding mortality risk.

Annuity Nonforfeiture: Tomasz Serbinowski (UT) heads a NAIC group to review the prospective test for deferred annuities (Model 805/806). There was a draft proposed actuarial guideline exposed. There were 8 comment letters received; the comments were uniformly negative. Therefore, the Compact IIPRC group will follow one set of uniform requirements, while, by not becoming an Actuarial Guideline, the states can have their own rules. This may be revisited in a couple of years.

SOA Research, Education and Implementation Update: Dale Hall (SOA) gave an update on some of the SOA activities. For example, they recently did a UL lapse and premium persistency study. It was a joint SOA/LIMRA study. The products included UL, IUL and VL. This covered 11 companies representing 39% of industry in-force data. This is available on the SOA website.

Update on Life Mortality Improvement Scale for AG-38 and VM-20: Dale Hall (SOA) gave an update on how mortality improvement factors were determined for use in VM-20 valuation by the joint SOA/Academy group on mortality. There are slightly lower expectations for mortality improvement than in the past couple of years since the factor has been negative the past three years.

Reinsurance Allocation: Arnold Dicke and Sheldon Summers from the Academy’s Life Reinsurance Committee gave a presentation on a problem involving the allocation of reinsurance to go from gross to net reserves under VM-20 (one can wind up with net REINSURANCE RESERVE CREDIT/DEBITSs on blocks that do NOT HAVE REINSURANCE if one followed the current rules in VM-20). The Academy has asked LATF for direction on how to solve this issue. There was also an APF that allows for negative reinsurance credit. This was exposed until the end of January.

YRT Reinsurance: Mike Boerner discussed another reinsurance issue: Under VM-20, there are mortality margins and no mortality improvements allowed. With YRT reinsurance, the premiums may be based on different margins and may implicitly include mortality improvements. The net impact is that, under VM-20, the net premiums paid may be less than the assumed reinsurance claim reserves under VM-20, which means reinsurance could be viewed as a profit center. However, reinsurers generally have a right to raise premiums, and would likely do so if they were losing money. There will be a LATF conference call on this in the late fall.

Consider Adoption/Exposure of Valuation Manual Amendments: Several Amendment Proposal Forms (APFs) were discussed:
a) The first 5 amendments were from California and could be considered language clarifications. These were adopted.
b) Another amendment from California was to define term insurance (this has gone through about 7 iterations). Another was to clarify term lapse rules. These will be revised based on comments received and brought back to LATF in the future.
c) Another amendment was to expose for comment definitions of various types of insurance. This was exposed for comment until the end of January.
d) There was a discussion regarding YRT reinsurance. Northwestern and New York Life recommended that effectively close to ½ cx be used for reinsurance credit. This was exposed for comment until the end of January 2019.
e) A proposal by California built on the work of the Academy’s Life Reserve Work Group further detailed what could be included in aggregation of mortality. This amendment had five prior exposures. This amendment was adopted.
f) Another amendment that was adopted was one that allows substandard PBR reserves to be shown separately.
g) Another amendment that was put out for re-exposure was that, for alternative investment strategies, the word “maturity” was replaced by “weighted average life”.
h) Another APF was on indexed benefits option costs for IUL. This was exposed for comment until January 3, 2019.

Compact (IIPRC): Katie Campbell (Compact) provided an update on the work of the Interstate Insurance Product Regulation Commission. This is an interstate commission that can be used for certain life, annuity and LTC product filings. The product standards committee works on uniform standards, e.g., group annuities; they have also recently worked on over-loan; and Waiver of Premium standards. Everything is posted on the IIPRC website ( As of Oct 2018, 228 companies have filed; there have been over 1100 product forms submitted so far; average turnaround time is 22 working days; 45 states are members of the Compact. Many are 2017 CSO filings.

Update on International Insurance: Josh Windsor (NAIC) gave an update on international issues. The major issues are on Systemic Risk and the International Capital Standard. Final decisions are about to be made on these topics. The International Capital Standard will likely apply to the about 15 US Insurers (need at least $50 billion in assets and have business in at least 3 countries.) It is expected that it will become an unofficial requirement in 2020 and official in 2025. The target confidence level of capital would be a margin on top of the 99.5% of VaR on a one-year basis.

VM-22 Subgroup Report: John Robinson (MN) chairs the LATF group on this. He gave an update of the LATF VM-22 (general account annuities) subgroup. There is an Academy group working on the interest rates for non-variable annuities and another working on model methodology. A time-line is to have everything read for 1/1/22. With regard to SPIA reserve methodology with respect to Actuarial Guideline 9B on non-level payments (or as I call it, the lumpy parts), it was questionable what methodology would be used to determine interest rates. Therefore, John recommended that the methodology be included into the Valuation Manual as opposed to referring back to old Actuarial Guidelines.

Annuity Methodology Update: John Miller co-chairs the Academy’s [non-Variable] Annuity Reserve Work Group. They are working on VM-22 (PBR for non-Variable annuities). They are considering allowing exclusion tests for simple annuities which would continue to use the current reserving methodology. For other policies, the modeled reserve would be done similarly to AG43/VM21 and VM-20. The goal is to get approval of the overall methodology from LATF by the end of 2019, and work on the details in 2020. They will be looking to do a field test during this period.

Standard Valuation Law Modernization: Chris Conrad, vice chair of the Academy’s Interest Rate Modernization work group, is working on valuation rates for annuities (other than the payout annuities, which were adjusted starting in 1/1/18). The expectation is that the rates will be updated quarterly. This is more complex than setting payout annuities, since there are more options and more variability in these products, e.g. guarantee period, surrender charge period, market value adjustments, partial free withdrawals, guarantees on future premiums and guaranteed living benefits. They are looking to develop rates based on Treasuries plus a spread (rather than the Moody’s rates used currently).

Group Life Waiver of Premium Results: Amy Whinnett (SOA) spell gave an update on group life disability work. The 1970 Kreiger Table, in use for 35 years, was based on 125,000 lives; the 2005 GL was based on 750,000 lives; the 2018 Study is based on 2.8 million lives with contributions from 20 companies. They noticed major differences. They had 150,996 deaths, 199,110 recoveries and 60,110 expirations. The mortality rates went up from the last study partially due the second fact, the recoveries doubled. The next steps are to form a Group Life Waiver Valuation Table Committee, which will be a joint effort of the SOA and Academy.

PBR Resources from the Academy’s Life Practice Council: Donna Claire, chair of the Academy’s PBR Governance Committee, gave an update on various activities the Academy’s Life Practice Council has undertaken regarding PBR. The goal is to provide assistance to the regulators and practicing actuaries with regard to implementation and review of PBR. One of the items mentioned is a 2.5 day PBR Boot Camp for April 8-10, 2019 (Mon-Wed) in Universal Studios Orlando, right after the Spring NAIC meeting. This boot camp is for people who have not yet implemented PBR, as well as those who have but want to do it better, as well as regulators. It will be limited to the first 100 registrants in order to have good audience/speaker interaction. One can pre-register at
and you will get first notice when the boot camp officially opens for registration.

Professionalism: Mary Miller (past-President of the Academy), Beth Fitzgerald (ASB) and Godfrey Perrott (chair of the ABCD) gave reports. Beth highlighted new ASOP drafts. ASoP 17 Expert Witness Testimony and ASoP 54 Life Insurance Pricing will go into effect the end of this year. There is a third exposure draft on Capital Adequacy will be out in the next few weeks. There are several life practice ASoP being revised, including #2 Nonguaranteed Elements, #11 Reinsurance and #22 Actuarial Opinions and Memorandums. With regard to the ABCD, Geoffrey went through the process at the ABCD in the life area. In the last 6 months there was a question on plagiarism, and a few conduct complaints, such as an actuary who was convicted in soliciting a minor, and one who deserted from the army 35 years ago, changed his name, became an actuary and retired. In addition, Mary Miller will be joining the ABCD. (For those of you who do not know her, Mary is a CAS actuary, former OHIO regulator and a lot of fun.)

Retirement – This was Larry Bruning’s (NAIC) last NAIC meeting before retirement. You may be most familiar with Larry in terms of NAIC PBR model analysis, the year end PBR spreads and the new VM SPIA rates. Before that, he did NAIC International Work and prior to that he was the Kansas actuary. He is a winner of the NAIC Dineen Award. We wish him the best of luck.

LONG TERM CARE: Perry Kupferman (CA) chairs

Academy Update: The Academy gave a report on their LTC projects. These projects are in process – nothing was presented for adoption by the regulators at this time.

LTC Pricing Report: Paul Lombardo (CT) gave a report of the regulatory LTC pricing group. He is a new chair, and is working on figuring out what limitations, i.e. caps, states have - official rules, “desk drawer rules”, political rules - that may cap rate increases. However, the states may not want this info to become public. Of course, eventually companies learn these rules based on past experiences.

LTC Valuation Report: Fred Andersen (MN) gave a report of the regulatory LTC valuation group. One issue is opening up Model 10, e.g. to reflect PBR. They determined not to do this at this time, but instead are working on VM-25 for PBR. They will also work on the persistency info. With regard to LTC, what the regulators want the companies to file for year-end 2018 is listed on the NAIC website under the LTC area. The group will also look at morbidity improvement. Morbidity improvements are only related to incidence rates, not length of claim, etc.

SOA Report on LTC Mortality Improvement Research: Matt Morton and Dale Hall (SOA) gave an update on SOA research on LTC. They will be looking for trends in rates.


Update from the Federal Center for Consumer Information and Insurance Oversight (CCIIO): Samara Lorenz (CCIIO) gave a report. For the first time since ACA Exchanges began, the rates on average went down. They have changed the template format regarding rate changes, which they expect to publish in December.

LTC – Perry Kupferman (CA) gave an update on the LTC meeting above.

Professionalism (Academy): This report was similar to the one given to the Life Actuarial Task Force (see above), but with a health emphasis. It was given by Mary Miller, Beth Fitzgerald and Godfrey Perrott. Beth gave an update on ASoPs: e.g.#33 Social Insurance is expected to come out soon. They are working on the CCRC revision, which is expected to be released in mid-2019. Godfrey gave an update on the ABCD: most complaints are resolved by Counseling. In the health area, a number of issues have arisen on ACA; another included LTD valuation in a religious organization where the bishop decided who should receive payments.

Academy Health Practice Council: Barb Klieber have been active in a number of areas. These can be found in the Health area of Academy website.

SOA on Health Research: Dale Hall (SOA) gave a general update on health research, including a report on hospice care.

Group Life Waiver of Premium Results: This report by Amy Whinnett (SOA) was the same as the one given to the Life Actuarial Task Force (see above). HATF will eventually vote if there should be should be further work done to see if this should be turned into a valuation table.


The next NAIC LATF/LTC/HATF meeting is April 2019 in Orlando, with the PBR Boot Camp (April 8-10) right afterward. Stay tuned!
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Old 11-23-2018, 11:02 AM
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campbell campbell is offline
Mary Pat Campbell
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Thanks for the update, Donna -- and best wishes to Larry Bruning!

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