Life Perspectives, Fall 2023
Vol 6 | No. 3
Academy Presents on Life Issues at NAIC Summer Meeting
The Academy’s life presentations at the National Association of Insurance Commissioners (NAIC) Summer National Meeting in Seattle in mid-August included looks at key Life Practice Council (LPC) activity.
Presenters to NAIC’s Life Actuarial (A) Task Force (LATF) included Marianne Purushotham, a member of the Academy’s Life Experience Committee, who presented on the collaborative work between the committee and the Society of Actuaries’ (SOA) Mortality and Longevity Oversight Advisory Council (MLOAC) on a 2023 HMI and FMI scale update.
Academy Life Policy Analyst Amanda Barry-Moilanen and Ben Slutsker, vice president of the LPC, presented on current and future LPC workstreams, including ongoing work on stylized facts and acceptance criteria for the economic scenario generator (ESG) currently under development by the NAIC, revisiting the covariance methodology in life risk-based capital, and working on a fixed annuity principle-based reserving framework with LATF’s VM-22 (A) Subgroup. The presentation was well-received by the regulators, who continue to engage with the LPC on various issues related to actuarial work in the life insurance industry.
LPC members Maambo Mujala, Linda Lankowski, Sheldon Summers, and Bruce Friedland presented on the issue of pre-tax vs. post-tax Interest Maintenance Reserves (IMR) for principle-based reserving (not limited to VM-22). The group expanded on its August paper, Pre-Tax vs. Post-Tax Interest Maintenance Reserves in Stochastic Principle-Based Reserves, to present both sides of this argument to LATF regulators. The presentation was well-received and spurred several questions from LATF members. The LPC will continue to engage with LATF on this issue as the NAIC works through its plans for the treatment of IMR in principle-based reserving.
At the request of LATF, the Economic Scenario Generator Subcommittee has worked diligently on stylized facts and acceptance criteria for the new ESG currently under development. Chairperson Jason Kehrberg presented to LATF on interest rate acceptance criteria, and the subcommittee plans to present again on equity rate acceptance criteria in the coming weeks. LATF will also be provided with a comprehensive, calibrated spreadsheet containing all the acceptance criteria that the subcommittee has developed.
RBC Issues
Steve Smith, chairperson of the C1 Subcommittee, presented to NAIC’s Risk-Based Capital (RBC) Investment Risk and Evaluation (E) Working Group (RBCIRE) on principles for structured securities RBC. Senior Life Fellow Nancy Bennett joined him, serving as an additional resource for regulators’ questions.
The presentation’s intent was to generate discussion between regulators and interested parties on the principles that should be used in developing the capital requirements for structured financial products—e.g., collateralized loan obligations, residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities (ABS). With the increasing percentage of ABS in life insurers’ portfolios, questions have been raised regarding the adequacy of existing capital requirements.
The C1 Subcommittee developed a decision tree to help find an answer to the level of sophistication required in determining capital charges, ranging from factors applied to a group of assets with similar risks to a process wherein each individual security is individually modeled. The subcommittee encouraged the use of simpler methodologies whenever possible. This decision tree will help regulators decide when new C1 capital requirements need to be developed or if existing RBC factors can be used.
The RBCIRE will be scheduling future calls to continue discussions with the Academy, regulators, and interested parties.
SOA Life Meeting
As a follow-up to the NAIC Summer National meeting, the Academy shared highlights of its NAIC presentations and other activity at the Society of Actuaries’ (SOA) Life Meeting on Aug. 21 in New Orleans.
(L-R) Claire, Lankowski, and Morrow present at SOA
LPC members Donna Claire, Linda Lankowski, and Craig Morrow led a panel conversation that touched on the NAIC meeting and emphasized the range of LPC led Academy initiatives that impact and benefit the membership. Lankowski has led this year’s ongoing Principle-Based Reserving (PBR) Bootcamp webinar series, Claire is chairperson of the Life Experience Committee, and Morrow is chairperson of the Life Valuation Committee.
For those attending the SOA Life Meeting, the Academy provided printed materials related to the Claire, Lankowski, and Morrow presentation, information about the PBR Bootcamp series, and a reminder about the annual Call for Volunteers. To learn more, visit the Life public policy page.
Life VP Ben Slutsker Nominated as Secretary-Treasurer
SlutskerAcademy Life Vice President Ben Slutsker has been nominated to be the Academy’s next secretary-treasurer.
Slutsker, who is nearing completion of his two-year term as Life VP, has been a member of the Life Practice Council (LPC) and many of its committees and work groups over the past six years. He is past chairperson of the PBR Assumptions Resource Manual Work Group and chaired the Annuity Reserves & Capital Work Group.
Member-Selected Directors Process Underway
Selection of member-selected directors to the Academy’s Board of Directors began Sept. 6 and will run for two weeks, through Sept. 20. Members should have received a Sept. 6 email from our vendor, Intelliscan, via academy@intelliscaninc.net. The candidates are Lena Black, Donna Megregian, and Maambo Mujala—Megregian and Mujala are life volunteers. Visit the Board Selection Center, which includes links to their bios, statements, and more. All members are encouraged to take part in the selection process.
Webinar Looks at Non-Variable Annuity PBR Framework
Panelists in the Sept. 6 webinar
The Sept. 6 life webinar, “Non-Variable Annuity PBR Framework Updates,” offered information on the latest developments for the future non-variable annuity PBR framework. Presenters gave an overview of the proposed methodology, along with updates on regulatory discussions, field testing, project timelines, and outstanding framework elements yet to be determined. Slides and a recording are available as a complimentary member benefit.
Webinar Examines COLI—The life webinar “Holy Moly, Let’s Talk COLI,” held Aug. 29, examined corporate-owned life insurance (COLI), a niche product with unique features for the buyer and the seller. Presenters were Life Practice Council Vice Chairperson Matthew Monson, Academy member Jim Cristallo, and Finseca Chief Advocacy Officer Armstrong Robinson; Life Products Committee Chairperson Donna Megregian moderated. An on-demand recording is available as a free member benefit.
The latest installments of this year’s PBR Bootcamp Series examined liability modeling (July), in which PBR Implementation Work Group members presented on topics including updates to the Valuation Manual, and liability and asset assumptions; and combination products (August), which looked at options for reserving VM-20 and VM-21, assumption development; the impact of modeling and assumption decisions, and non-guaranteed elements (NGEs).
Upcoming PBR Bootcamp sessions include:
- Sept. 20: “PBR Bootcamp: Hedge Modeling”
- Oct. 18: “PBR Bootcamp: Reinsurance”
- Dec. 12: “PBR Bootcamp: Regulator’s Perspective”
- Dec. 20: “PBR Bootcamp: Hot Topics”
Academy Presents to ERISA Advisory Council
Academy Senior Life Fellow Nancy Bennett and Paul Navratil, chairperson of the Life Investment and Capital Adequacy Committee, presented on July 18 to the U.S. Department of Labor’s ERISA Advisory Council public meeting on pension risk transfers.
They gave an overview of life insurance regulations, with a focus on the regulatory framework governing solvency requirements. The overview included the establishment of liabilities and required capital for benefit obligations that are the result of a pension risk transfer. The Academy also submitted a pension issue brief, Buy-Out Group Annuity Purchase Primer, for the meeting record. Working with the Pension Practice Council, Bennett and Navratil continue to engage with ERISA council members and staff. Learn more during the cross-practice break-out session on pension risk transfers at the Academy’s annual meeting.
LHQ Seminar Coming in November
Past President D. Joeff Williams leads a session at last year’s seminar
There’s still time to register for the 2023 Life and Health Qualifications Seminar, to be held Nov. 6–9 in Arlington, Va. The annual LHQ Seminar delivers three days of training and instruction, an optional fourth-day exam, and offers up to 27 hours of continuing education credit. Register today.
- The Life Valuation Committee released a white paper, Pre-Tax vs. Post-Tax Maintenance Reserves in Stochastic Principle-Based Reserves, which discusses considerations of using various interest maintenance reserves in VM-22 applications.
- The Index-Linked Variable Annuity Work Group submitted a comment letter to the ILVA Subgroup of the Product Standard Committee of the Interstate Insurance Product Regulation Commission on 2023 Compact Requirements for Index-Linked Variable Annuity Products.
‘Envision Tomorrow’
Life Highlights
The agenda is set for the Academy’s Envision Tomorrow: 2023 Annual Meeting, being held Nov. 13–14 in the nation’s capital.
Life-focused attendees will hear the latest on structured assets and Actuarial Guideline LIII (AG 53), as well as a pension/life breakout session on “Group Annuity Contracts for Pension Risk Transfer.” Also of interest: back-to-back general sessions on Nov. 14 will offer perspectives from leading expert voices on the important and multifaceted issues raised by artificial intelligence (AI).
See the full agenda and the practice-area breakout sessions for details.
Legislative/Regulatory Activity
Federal
The IRS issued final regulations on June 7 relating to the use of actuarial tables in valuing annuities, interests for life or a term of years in property, and remainder or reversionary interests in property. The update is a federal mandate, requiring that the actuarial tables be revised at least once every 10 years.
State
The Colorado Division of Insurance on Aug. 11 issued a draft proposed rule establishing the governance and risk management requirements for life insurers that use external consumer data and information sources (ECDIS), as well as algorithms and predictive models that use ECDIS, in an effort to bar unfair discrimination. A hearing was held Aug. 31. The regulation becomes effective Oct. 30.
The New Hampshire Insurance Department published a rulemaking on July 20 seeking to revise Ins 305, which governs annuity transactions. The revised rule would require producers, as defined in this rule, to act in the best interest of the consumer when making a recommendation of an annuity and to require insurers to establish and maintain a system to supervise recommendations.
The District of Columbia City Council held a June 28 hearing to discuss B25-0126, legislation that would amend the Life and Health Guaranty Association Act by subjecting life insurers to assessments relating to long-term care insurance insolvencies. It would also modify the size of the Board of Directors of the Life and Health Insurance Guaranty Association and authorizes the filing of certain actuarially justified rate or premium increases.
The Indiana Department of Insurance on June 21 published its intent to adopt a rule that requires insurance producers to act in the best interest of consumers when making a recommendation of an annuity. It mandates that insurers establish, maintain, and utilize a system to supervise recommendations of annuities so that the insurance needs of consumers at the time of the transaction are effectively addressed. The rule would also require additional training for insurance producers selling annuities.
Rhode Island Gov. Dan McKee signed SB 1028 / HB 5489 on June 19, barring life insurers from refusing to issue, cancelling, or denying life coverage to anyone who is an organ or bone marrow donor. Violators could face injunctive relief or restitution.
The Michigan Senate passed SB 268 on June 14, a bill that would amend the state’s insurance code to remove a provision that requires the death benefit of a prepaid funeral contract to increase annually to account for inflation. The measure also would change certain dollar maximums provided in the statute to reflect mandated inflation adjustments that have been made since the maximums were first enacted.
The New Mexico Superintendent of insurance issued a notice of proposed rulemaking related to term and universal life insurance reserved financing on June 13. The new rule seeks to conform state regulations with established, uniform, national standards governing reserve financing arrangements pertaining to life insurance policies containing guaranteed nonlevel gross premiums, guaranteed nonlevel benefits, and universal life insurance policies with secondary guarantees.
Texas Gov. Greg Abbott signed legislation on June 9 that makes it easier for life insurance companies participating in a pension buyout to use separate accounts to separate the pension obligations from the insurer's normal operations. HB 1587 exempts from form filing and approval requirements under state law any group annuity policy, certificate, or contract written or issued by an insurer authorized to engage in the business of insurance in Texas that involves use of a separate account if benefits would also have guarantees from an insurer's general account.
The New York House approved a measure, S 5890, that would allow life insurance providers to establish a wellness program in conjunction with its issuance of life insurance policies on May 30. The insurer would be prohibited from increasing policy premiums as a result of participation or non-participation in the wellness program.