Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Life
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions


Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 12-05-2017, 09:02 AM
ColinForhan ColinForhan is offline
SOA
 
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!
Reply With Quote
  #2  
Old 12-06-2017, 10:19 AM
Minnesotah's Avatar
Minnesotah Minnesotah is offline
Member
SOA AAA
 
Join Date: Aug 2008
Location: The Gopher State
Favorite beer: Rush River: The Unforgiven Amber Ale
Posts: 1,019
Default

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.
__________________
No art, however minor, demands less than total dedication if you want to excel in it. -- Alberti
Reply With Quote
  #3  
Old 12-06-2017, 02:15 PM
Steve Grondin Steve Grondin is offline
Member
SOA AAA
 
Join Date: Nov 2001
Posts: 6,369
Default

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.
Reply With Quote
  #4  
Old 12-12-2017, 12:49 PM
MathGeek92 MathGeek92 is offline
Member
 
Join Date: Jul 2004
Posts: 709
Default

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).
Reply With Quote
  #5  
Old 01-26-2018, 12:14 PM
rhoucag rhoucag is offline
Member
 
Join Date: Oct 2001
Posts: 274
Smile

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
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 12:05 PM.


Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.17529 seconds with 9 queries