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Old 04-14-2018, 05:16 PM
sKansKi sKansKi is offline
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Default VM-20 for dummies

I'm trying to read through http://actuary.org/files/imce/NAIC_V...20Products.pdf and I just get so confused. This document is so self-referential & uses so many words that I just don't understand.

We only have a small bit of term insurance. The rest is health.

The ordinary life premiums are less than $300M.
Obviously, since it's term there is no ULSG.
However, we don't meet the "Total Adjusted Capital of at least 450% of the authorized control level RBC" part as a company.

So, that means we are subject to PBR, right?

Next, I see some exclusion tests - stochastic & deterministic.

For stochastic, I think the key is "the group of policies is not subject to material interest rate risk or asset return volatility risk". How would one demonstrate this? Through the "stochastic exclusion ratio test? That test seems to reference the deterministic reserve.


Under the Deterministic Exclusion Test, it says "[DET] may not be used for term insurance policies subject to Section 3.A.1., and these policies may not be excluded from the deterministic reserve requirements of Section 4." so does that mean I'm not excluded there?


I'm just very overwhelmed by all of this. I don't even know if I'm asking the right questions...

How do you guys deal with this stuff?
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Old 04-14-2018, 07:59 PM
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El Actuario El Actuario is offline
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That document is outdated. Use this one:

http://www.naic.org/documents/prod_s...ion_manual.pdf

You can get around the 450% RBC ratio requirement if your life premiums are less than $50M (see page 8).

Regarding the exclusion tests:

Term and ULSG are never eligible for the DET (so at a minimum you will have to calculate the net premium reserve and the deterministic reserve).

As you mentioned, the stochastic exclusion ratio test is one option for passing the SET. You can also have a qualified actuary certify that the block is not subject to material interest rate risk or asset return volatility risk (see page 19).
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Old 04-14-2018, 09:26 PM
sKansKi sKansKi is offline
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Quote:
Originally Posted by El Actuario View Post
That document is outdated. Use this one:

http://www.naic.org/documents/prod_s...ion_manual.pdf

You can get around the 450% RBC ratio requirement if your life premiums are less than $50M (see page 8).
Thank you for that. [whine]why is it so difficult to find the most recent version of these things? what am I doing wrong when I search for them?[/whine]

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Regarding the exclusion tests:

Term and ULSG are never eligible for the DET (so at a minimum you will have to calculate the net premium reserve and the deterministic reserve).
assuming that my life premiums are more than $50M, right? If they're less than that, I'm done, right?

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Originally Posted by El Actuario View Post
As you mentioned, the stochastic exclusion ratio test is one option for passing the SET. You can also have a qualified actuary certify that the block is not subject to material interest rate risk or asset return volatility risk (see page 19).
What proof would this qualified actuary have to provide for this sort of certification? What would be the "documentation supporting the certification"?


Thank you very much for your help.
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Old 04-15-2018, 07:27 AM
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Thank you for that. [whine]why is it so difficult to find the most recent version of these things? what am I doing wrong when I search for them?[/whine]
The NAIC site will have an updated version of the Valuation Manual if you follow the appropriate working group page. Additionally, the Academy puts out a Valuation Law Manual (which is different and more voluminous than the NAIC Valuation Manual) annually that may help with statutory valuation/reserving topics.

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assuming that my life premiums are more than $50M, right? If they're less than that, I'm done, right?
That seems to be a reasonable interpretation of the Life PBR Exemption (formerly known as the Companywide Exemption), though don't take this as official actuarial advice. Also note that there is a 3-year transition period (2017-19) where you may not have to use VM-20 for policies sold during the period. This is separate from the Life PBR Exemption - this applies to all companies.

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What proof would this qualified actuary have to provide for this sort of certification? What would be the "documentation supporting the certification"?
Examples of this can be found under the "Stochastic Exclusion Test" (page 57 of the document previously linked).
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Old 04-15-2018, 10:34 AM
sKansKi sKansKi is offline
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Quote:
Originally Posted by sKansKi View Post
assuming that my life premiums are more than $50M, right? If they're less than that, I'm done, right?
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That seems to be a reasonable interpretation of the Life PBR Exemption (formerly known as the Companywide Exemption),
Oh, also, I work for ABC Inc. Within ABC Inc. are two life insurance entities - QWERTY Co & XYZ Co. Is that $50M limit for ABC Inc or for QWERTY Co & XYZ Co?


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though don't take this as official actuarial advice.
Of course not.

Thank you for your help.
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Old 04-15-2018, 06:43 PM
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Oh, also, I work for ABC Inc. Within ABC Inc. are two life insurance entities - QWERTY Co & XYZ Co. Is that $50M limit for ABC Inc or for QWERTY Co & XYZ Co?
In the link that El Actuario provided, under "Life PBR Exemption", you have to also determine that if you are a part of a NAIC group of insurers, that the group has combined ordinary life premiums of less than $600M. In other words, if ABC's annual term premiums are $30M, while QWERTY is a fairly big player in the ULSG market and has $1B of ord life premiums annually, then you may not qualify for the Life PBR Exemption.
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