Life Perspectives, Summer 2021

Annual Meeting & Public Policy Forum to Be a Hybrid Event

Sessions to Look at Key Life Insurance Issues

Registration is open for the Academy’s 2021 Annual Meeting and Public Policy Forum, to be held as a hybrid event Nov. 4–5. Attendees will have the option to join us in person at the Fairmont Hotel in Washington, D.C., or virtually from your home or office.

The agenda will include practice-specific breakout sessions, with life breakouts providing:

• A look into index-linked annuities;
• Updates on emerging issues in life reinsurance; and
• A discussion of long-term care insurance from the life perspective.

Plenary sessions will cover cross-practice critical issues including COVID-19; diversity, equity & inclusion; insurance regulation at the state, federal, and international levels; and professionalism and ethical concerns relating to data analytics and artificial intelligence applications. All of these sessions will offer the opportunity to have a discussion directly with policymakers, subject-matter experts, and Academy leaders.

The Academy will also honor recipients of its annual service awards—the Jarvis Farley Service Award, Cande Olsen; the Robert J. Myers Public Service Award, Eli Donkar; and the Outstanding Volunteerism Awards, including Karen Rudolph.

The Academy is committed to following local health guidelines. We look forward to delivering a timely and topical event to you, and to seeing you in November. Register now for early registration savings.

Academy Holds Successful Virtual PBR Boot Camp: Registration Open Soon for Regulator-Focused Mini-PBR Seminar

The Academy held another successful multi-day Virtual PBR Boot Camp June 7–9.

Lankowski (bottom right) at a session on assets

Presentations covered a range of specifically tailored sessions relevant to the principle-based reserving (PBR) framework for life insurance (and variable annuities), including lessons learned through implementation of VM-20, mortality, liability assumption considerations, PBR life insurance asset modeling, reinsurance, model overview and model governance, variable annuities, and regulator and auditor reviews, among others.

While each session allowed attendees the ability to interact on the Boot Camp platform, the agenda also included interactive Q&A sessions driven by participants’ areas of interest, sharing insights, and learning from others’ experience of PBR in their practice.

“Our speakers were truly subject-matter experts who had done the modeling, followed governance procedures, and had been through PBR actuarial reviews, so had practical advice for participants,” said Linda Lankowski, a PBR Boot Camp presenter/moderator and chairperson of the PBR Strategy Subgroup.

“Judging from the number of questions posed by the attendees both during the sessions and at the end-of-day wrap-up session, the audience was engaged, active, and will apply the learnings in next year’s PBR reports,” she said.

Academy Resource: ‘PBR in Practice’ Webpage

Looking for a one-stop shop for your PBR-related resources? The Academy’s PBR in Practice webpage contains helpful materials to assist actuaries and regulators in their practice and oversight of PBR for life insurance and variable annuities, including a toolkit that provides resources.

Life Illustrations Work Group Updates Practice Note

The Life Illustrations Work Group updated the life insurance illustrations practice note to better reflect current practices actuaries are using when complying with ASOP No. 24, Compliance with the NAIC Life Insurance Illustrations Model Regulation, which was revised and adopted in December 2016.

Life Webinar Looks at Effects of COVID-19

The Academy’s May 25 Life Practice Council webinar, “The Impacts of COVID-19 on the Life Insurance Industry,” looked at the pandemic’s impacts on the life insurance industry and explored the possible near- and longer-term effects on life insurance. Panelists discussed the impact of COVID-19 on financial results, mortality experience, and considered possible impacts on life insurance operations including underwriting and pricing.

Presenters were Carmi Margalit, S&P Global Ratings; Carolyn Covington, SCOR Global Life Americas; and Catie Muccigrosso and Taylor Pickett, both with Reinsurance Group of America. Senior Life Fellow Nancy Bennett moderated. They discussed topics concerning 2020 financial results and observations, the impact of the novel coronavirus on mortality, and the overall impact of the pandemic on the underwriting process.

“With very few outliers, COVID-19 was a manageable earnings event,” Margalit said. Takeaways included:

• The impacts of COVID-19 on the life insurance industry are still being assessed, and we do not yet know the long-term effects.
• The industry has been adaptable in handling the immediate consequences, and certain markets, such as the bond market, were able to avoid a severe crash due to a quick fiscal and monetary stimulus.
• COVID-19 has led to visible impacts on death benefit payouts, with 2020 seeing a 16% increase in death benefits paid.
• Pandemic-related deaths are lower for the insured population compared to the general population.
• While there is reason for increased optimism, the pandemic is not yet over, and we will continue to see additional impacts on the industry and mortality rates from international exposure and international mortality. The industry did have enough capital buffers to navigate the impacts of COVID-19.
• Annuity sales declined in 2020 overall due to the operational factors of COVID-19, including access to new and existing consumers.
• We will have more knowledge regarding the final trajectory of the pandemic on mortality considerations closer to the third quarter; however, this could be impacted if new strains of the virus become prominent.
• Many tools exist to facilitate the underwriting process, and there is much variability within any given tool. Underwriting practices must adapt as a result of the impacts of COVID-19 and revised guidelines must be created.

Slides and audio are available free to Academy members.

Life Practice Council, CPC Comment to NAIC Special Committee

Laura Hanson, vice president, life, and Lauren Cavanaugh, vice president, casualty, co-presented verbal comments to the NAIC’s Special (EX) Committee on Race and Insurance regarding proposed charges being considered by the committee. Their remarks addressed the special committee’s property/casualty and life workstreams concerns addressed in comment letters previously submitted by Academy President Tom Campbell in April and May.

Work Group Submits Draft VM Wording to LATF

The Annuity Reserves & Capital Work Group (ARCWG) released its proposed draft Valuation Manual (VM) wording for VM-22 principle-based reserving (PBR) for non-variable annuities. The draft reflects changes in association with the recommendations in the ARCWG predecessor Annuity Reserves Work Group-proposed VM-22 presentation, exposed by the VM-22 Subgroup in October 2020. Each section shows markups compared to existing VM-20 or VM-21 wording, which is included as a draft note at the beginning of each section. ARCWG submitted the document to LATF’s VM-22 Subgroup in late July.

Life Reserves Work Group Comments to LATF on VM

The Life Reserves Work Group submitted a comment letter to LATF on a VM amendment proposal form regarding asset adequacy testing for reinsurance requirements.

Work Group Comments on VM-22

The ARCWG submitted a comprehensive proposed draft of revised NAIC VM-22 associated with its October 2020 framework for a fixed annuity principle-based reserving (PBR) framework.

The document offers recommendations on VM-22 principles, requirements, and guidance, and asks for the NAIC VM-22 Subgroup’s consideration of the proposed language changes, as it moves toward inclusion of fixed annuities in the NAIC Valuation Manual.

Academy Interest Rate Generator Updated

The annual update to the Academy Interest Rate Generator (AIRG), which is currently used in some regulatory reserve and capital calculations, is now available. A corresponding frequently asked questions document has been updated to reflect changes for 2021. Read the Academy alert.

Member Activity—Is Your Academy Member Profile Up to Date?

Collecting, maintaining, and analyzing various demographic information allows the Academy to better understand its membership specifically and the U.S actuarial profession in general. In recent years, the Academy has expanded the type of information requested and compiled, including allowing members to add another area of practice to their profile, ethnicity, and specializations within their practice area.

If you haven’t updated your member profile recently, please take a few minutes to make sure your information is current by visiting the “Update My Profile” section of the member section of the Academy website to review and add this optional additional information. If you need assistance in reviewing, updating, or adding specific demographic information to your Academy member profile, contact membership@actuary.org.