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Old 08-07-2018, 07:20 PM
DonnaClaire DonnaClaire is offline
Join Date: Apr 2005
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Default LATF and LTC NAIC Update - Boston Aug 2018

LATF and LTC NAIC Update – Boston; August 2-3, 2018
By Donna R. Claire

The Summer 2018 LATF meeting was held in Boston, MA (I missed the Spring meeting due to a snowstorm in New York.)

Below are highlights of the meetings I attended:


Delphi Study on Accelerated Underwriting and Accelerated Underwriting Data Elements : Mary Bahna-Nolan, Matt Monson and Lauren Cross of the Joint Academy/SOA mortality committee gave a presentation on a study done by the SOA. The study consisted of asking various industry experts from companies and consulting firms on accelerated underwriting. The study found that there were substantial differences in what the various companies were doing in this field. Some of the accelerated underwriting will supplement current methods and potentially improve mortality; some will replace current rules, which may cause mortality to increase a bit. Mary also gave a presentation on accelerated underwriting data elements. Mary wants her group to meet with Fred Andersen’s Experience Reporting subgroup to discuss possible changes to the data collection to cover accelerated underwriting.

Adoption of the LATF Experience Reporting Subgroup Report: Fred Andersen (MN) chairs:
He gave an update on this group. They have several projects going on. One in a request from NY to gather data on simplified issue and guaranteed issue (note that NY is currently working with MIB to start gathering SI and GI data in the next 6 months or so). A second is with regard to how companies are using accelerated underwriting. A third is to collect data on guarantees on variable annuities.

Standard Valuation Law Modernization: Chris Conrad, vice chair of the interest rate modernization work group, is working on valuation rates for those annuities other than the payout annuities (as the payout annuity rates have been 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.

Annuity Exclusion Tests: John Miller and Matthew Coleman, co-chair 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 be continuing to use the current reserving methodology; otherwise there would be more modeling required. It is expected that the modeled reserve would be done similarly to AG43/VM21.

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. The rates for the new valuation for payout annuities, which become effective 1/1/18, are published by the NAIC process at the start of each quarter for the non-jumbo contracts for that quarter; for jumbo contracts, the NAIC is published on a one-day lag. Note that the VM-22 section of the Valuation Manual has been revised to take care of some clarifications needed. In general, this group is following the Academy work on the non-variable annuities.

Longevity Risk Survey: Paul Navratil chairs the Academy’s Longevity Risk Task Force. A field study has been conducted by the Academy on the impact of shocks in base mortality rates and mortality improvement rates. The results (from 19 companies) are currently being compiled. The Longevity Risk group will analyze the results to develop potential proposed risk charges to RBC on longevity risk. This group will also look into developing a potential proposed covariance correlation factor for mortality and longevity. They expect to provide the proposals at the next LATF meeting in November 2018.

Longevity Risk: Rhonda Ahrens (NE) chairs the LATF group on this: They are following the work on the Academy group, headed by Paul Navratil on longevity risk. They do have concerns on how to set up a covariance correlation factor.

Reinsurance Allocation: Rich Daillak 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 reserve credits if one followed the current rules in VM-20). The Academy group was asked to develop an issue paper with possible solutions so that industry and regulators can consider this issue..

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 conference call on this in the fall.

Generally Recognized Expense Table: Leon Langlitz, chair of the SOA Committee on Life Insurance Committee Expenses, gave an update on the GRET. This table can be used in self-support testing of life insurance policies. About 25% of companies surveyed use these factors for at least one product.

Consider Adoption/Exposure of Valuation Manual Amendments: Several Amendment Proposal Forms (APFs) were discussed:
a) Use of Aggregate Mortality for VM-20 Credibility. Leonard Mangini, chair of the Academy’s Life Reserve Working Group, gave a presentation on this. The proposal will be reviewed and will be discussed on a conference call.
b) A second amendment proposal form was on adjustments to company experience mortality rates when Company experience is worse than the industry table for grading. Dave Neve, member of the Academy’s Life Reserve Working group (and VP of the Academy’s Life Practice Council), discussed this issue. The change is that the ultimate mortality used is not better than expected. This was exposed for comment for 30 days.
c) A third proposed amendment was on Indexed UL Equity Returns. Chris Whitney, member of the Life Reserve Working Group, and Dave Neve discussed this amendment. This is to develop a new deterministic scenario based on the accumulated option cost, with the option cost definition being 105% of the projected cost, and the accumulation rate equal to the projected 1year Treasury rate. This was exposed for comment for 30 days.
d) Brian Bayerle of the ACLI discussed an amendment clarifying when riders should be valued with the base policy. The proposal was adopted.
e) There were a number of amendments suggested by California. Rachel Hemphill (CA) discussed these. One was exposed for comment: the requirement removed guaranteed issue from various requirements under VM-20. Another, which had already been exposed, addresses definitions of starting assets; this was adopted.

Discuss VM-20 Edits Submitted to Blanks: Mike Boerner discussed some VM-20 edits submitted to the NAIC Blanks committee, needed to the Annual Statement and Annual Statement instructions for PBR.

Discuss Plans for the Economic Scenario Generator: Larry Bruning of the NAIC gave a discussion on this. Specific economic scenario generators are not required in asset adequacy testing. On the RBC front, RBC C3PI requires a specific generator to be used; it is an old generator with a 6.55% mean reversion parameter. In RBC C3PII, no specific economic scenario is prescribed, but calibration criteria are specified. VM-20 does require specific scenarios. VM-21 currently does not currently require a specific generator. Under the proposed changes to VM-21 and RBC C3PII, a specific generator is prescribed, with the possibility of using a different generator as long as the company can approve each year that the economic generator does not materially reduce the Total Asset requirement. The big questions are whether a single economic scenario generator be used or should proprietary economic scenario generators be used provided they meet the calibration criteria?

Compact (IIPRC): Jeanne DeHarsh 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 is looking at products which do not yet have standards, e.g., group annuities. The product standards get reviewed on a 5-year cycle, e.g. on individual disability income. Everything is posted on the IIPRC website ( As of June 2018, 209 companies have filed, there have been over 631 product forms submitted in 2018; average turnaround time is 20 working days; 45 states are members of the Compaq. Most filings were for life insurance. Most 2017 CSO were for term and WL, but they are seeing more VUL and UL filings.

Update on Academy’s Life and Health Valuation Manual: Laura Hanson chairs the Academy’s Life and Health Valuation Manual Task Force. This task force is revising the manual to make it more user friendly.

Annuity Nonforfeiture: Tomasz Serbinowski (UT) heads a NAIC group to review the prospective test for deferred annuities (Model 805). There was a draft proposed actuarial guideline exposed. There were 8 comment letters received. There will be a conference call on this issue.

Status Report on the RBC C-3 Phase 2/VM-21 (AG 43) Subgroup: Pete Weber (OH) gave an update from the RBC C-3 Phase 2/AG 43 subgroup on the implementing a new variable annuity framework in RBC C-3 Phase 2/AG43. The framework exists and was adopted by the various committees. There are 28 items. There is a VM-21 (AG43) document and RBC C3P2 document with some edits; these are being worked on. There is also a drafting group for VM-31 on reporting requirements for variable annuities that have been set up.

SOA Research, Education and Implementation Update: Dale Hall (SOA) gave an update on some of the SOA activities. For example, they are working on a group life premium study; 20 companies contributed, the experience report will be released in the third quarter of 2018 (quick overview – higher mortality and higher recoveries compared to the last study). There was an Individual Life Waiver of premiums survey – they will be doing a study on this area shortly. They are also looking at LTC. It was also noted that the exam syllabus has been revised.

Professionalism: Mary Miller (past-President of the Academy), Beth Fitzgerald (Actuarial Standards Board) and Godfrey Perrott (chair of the Actuarial Board for Counseling and Discipline Committee) gave reports. Beth highlighted new ASOP drafts. For example, ASoP 17 on Expert Witness Testimony and ASoP 54 on Life Insurance Pricing will go into effect the end of this year. There are several life practice ASoP being revised, including #2 on Nonguaranteed elements, #11 on reinsurance and #22 on Actuarial Opinions and Memorandums. With regard to the ABCD, Geoffrey went through the process at the ABCD – a complaint is reviewed by an Academy lawyer, then the ABCD management, then, if appropriate, investigated thoroughly, then a hearing is held. The ABCD also answers requests for guidance, typically within a few days. They handle 15-20 complaints a year (only 1 life actuarial complaint currently outstanding), and about 100 requests for guidance a year.

PBR Resources from the Academy’s Life Practice Council: Donna Claire chair of the Academy’s PBR Governance Committee (me!) 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. There is an Academy website on all things PBR.

LONG TERM CARE (partial attendance): 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: Jan Graeber (TX) gave a report of the regulatory LTC pricing group. They have an exposure draft out for comment. They have commented that companies are improving the data being provided at the time of a rate increase.

LTC Valuation Report: Fred Andersen (MN) gave a report of the regulatory LTC valuation group. There are some issues that are getting attention: the level of morbidity and whether morbidity improvements should be included and the way future rate increases should be included. They are reviewing around 50 rate filings, and they anticipate that the reviews may lead to a guidance document to supplement AG 51.

SOA Report on LTC Research: Dale Hall gave an update on SOA research on LTC.


The next NAIC LATF meeting is in San Francisco in November 2018. Stay tuned!
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Old 08-08-2018, 12:52 PM
WhatsGolden WhatsGolden is offline
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Thanks for the summary.
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Old 08-08-2018, 03:29 PM
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Mary Pat Campbell
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Thanks, Donna!

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Old 08-10-2018, 06:37 PM
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Mary Pat Campbell
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Some of the links for the reports are in the Academy update:

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