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Old 12-05-2017, 10:02 AM
ColinForhan ColinForhan is offline
Join Date: Feb 2017
Posts: 15
Default VA Contracts with AV = 0 still under AG43?

Is there any particular guidance or any general “industry” insight into how companies deal with WB contracts once account values drop to 0 and the income payout period begins?

Do they continue to include these contracts with other accumulating VAs and incorporate into the CTE70 calc / Standard Scen calc under AG43? Or is a new SPIA certificate issued and then this “new” policy is lumped with other SPIAs for ALM/other purposes?

Article links or insight appreciated. Thanks!
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Old 12-06-2017, 11:19 AM
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Minnesotah Minnesotah is offline
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My understanding is that these policies would need to continue to be included in the CTE70 and standard scenario calculations. That's strictly from a regulatory/reporting standpoint. I think it is common (and convenient!) to lump these in with SPIAs for other (non-regulatory) purposes.
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Old 12-06-2017, 03:15 PM
Steve Grondin Steve Grondin is online now
Join Date: Nov 2001
Posts: 6,451

It is possible that there are some companies that have a material enough portion of contracts in this situation to have considered the issue, but not every company is there (yet).

It is reasonable to assume AG43 may not apply. The liability (on our contracts/riders at least) looks a lot like a fixed SPIA once the AV is gone.

However, assuming AG43 does apply:
From a CTE 70 perspective, I would expect the policy cash flows to be scenario invariant, but the assets may be from a different portfolio than those supporting VAs with AV depending how they are managed. Differences compared to SPIA would be mortality table (prescribed for AG33 (at least pre-VM) vs prudent estimate for AG43) and discount rate.

On the Std Scen side, you could argue that all guarantees are covered by BAR and default back to pre AG43 CARVM. Alternatively if you counted the benefit as excess of AV, then the BAR should be 0. I don't see anything on the revenue side. The disconnect would be between AG43/AG33 discounting and mortality.
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Old 12-12-2017, 01:49 PM
MathGeek92 MathGeek92 is offline
Join Date: Jul 2004
Posts: 714

i think your practice on what you do is highly dependent upon what really happens when the AV = 0. Does the contract state that once the Av =0, a SPIA will set up to pay on a monthly basis the GMWB amount?

If so, then exclude from Ag43, because there is no "flexibility". Otherwise, its Ag43 (IMO).
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Old 01-26-2018, 01:14 PM
rhoucag rhoucag is offline
Join Date: Oct 2001
Posts: 274

A rose by any other name I guess....

I wonder if you had a VA where the riders all dropped at a certain age and you required them to be all in the fixed account, could you argue the same and treat it as fixed DA?

Some company is going to discover a weird loophole one day and basically get around AG43 and then we'll have the XXX version of AG43 and then it'll all be offshore
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