Home ProfessionalismActuarial Standards Board (new)Glossary
Breadcrumbs
Home ProfessionalismActuarial Standards Board (new)Glossary

Glossary

This glossary is used in conjunction with the ASOPs listed on this website.

1980 CSO Valuation Tables

The Commissioners’ 1980 Standard Ordinary Mortality Table without ten-year select factors, incorporated in the 1980 amendments to the model NAIC Standard Valuation Law, and variations of the 1980 CSO valuation tables approved by the NAIC, such as the smoker and nonsmoker versions approved in December 1983. (ASOP No. 40)

A/E Analysis

The process of calculating and analyzing A/E ratios over a selected time period; for example, across different ages, genders and durations. This is also known as an A/E study. (ASOP No. 48)

A/E Ratio

Actual deaths, (either face amount or number of lives) in a group of lives being evaluated, over a specified period divided by the expected deaths over the same period. (ASOP No. 48)

Accounting Date

The stated cutoff date for reflecting events and recording amounts as paid or unpaid in a financial statement or accounting system. The accounting date is sometimes referred to as the “as of date.” (ASOP No. 36)

Accrued Benefit or Accumulated Plan Benefit

The amount of a participant’s benefit (whether or not vested) as of a specified date, determined in accordance with the terms of a retirement plan and based on compensation (if applicable) and service to that date. (ASOP No. 4)

Accrued Benefits

The amount of a participant’s benefit (whether or not vested) as of a specified date, determined in accordance with the terms of a retirement plan and based on compensation (if applicable) and service to that date (ASOP No. 4)

Activities of Daily Living (ADLs)

Basic functions used as measurement standards to determine levels of personal functioning capacity. Typical ADLs include bathing, continence, dressing, eating, toileting, and transferring (between bed and chair or wheelchair). (ASOP. No 18)

Actual Experience

Historical results and trends in those results.

Actual-to-Expected (A/E) Analysis

The process of calculating and analyzing A/E ratios over a selected time period; for example, across different ages, genders and durations. This is also known as an A/E study. (ASOP No. 48)

Actual-to-Expected Ratio

Actual deaths, (either face amount or number of lives) in a group of lives being evaluated, over a specified period divided by the expected deaths over the same period. (ASOP No. 48)

Actuarial

Actuarial Accrued Liability

The portion of the actuarial present value of projected benefits (and expenses, if applicable), as determined under a particular actuarial cost method, that is not provided for by future normal costs. Under certain actuarial cost methods, the actuarial accrued liability is dependent upon the actuarial value of assets.

Actuarial Appraisal

An appraisal of an insurance business presenting a set of actuarial appraisal values. A set of actuarial appraisal values is based on a range of discount rates or a range of assumption sets, but may, in certain circumstances, present a single unique value for the business. (ASOP No. 19)

Actuarial Appraisal Value

The present value, calculated as of the appraisal date, of projected distributable earnings of an insurance business where the distributable earnings are based on a set of assumptions. (ASOP No. 19)

Actuarial Assumptions

The value of a parameter, or other actuarial choice, having an impact on an estimate of a future cost, or other actuarial item, under evaluation.

Actuarial Balance Sheet

A measure of the assets and liabilities, as of the valuation date, associated with current residents.

Actuarial Central Estimate

An estimate that represents an expected value over the range of reasonably possible outcomes. (ASOP No. 43)

Actuarial Communication

A written, electronic, or oral communication issued by an actuary with respect to actuarial services. (ASOP No. 41)

Actuarial Conclusions

Conclusions that have been formed based on actuarial analysis of data or other information. Examples of such actuarial analysis include ratemaking, pricing, experience studies, reserving, valuation, cost estimates, financial audits/exams, asset/liability management, assumption setting, risk assessments, appraisals, and the review of such analysis.

Actuarial Contribution

The contribution a particular policy or class of similar eligible policies has made to the company’s statutory surplus and the asset valuation reserve, plus the present value of contributions that the same policy or class of similar eligible policies is expected to make in the future. (ASOP No. 37)

Actuarial Cost Method

A procedure for allocating the actuarial present value of projected benefits (and expenses, if applicable) to time periods, usually in the form of a normal cost and an actuarial accrued liability. For purposes of this standard, a pay-as- you-go method is not considered to be an actuarial cost method.

Actuarial Documentation

The documents (for example, workpapers, spreadsheets, text messages, emails, presentations) that the actuary determines to be relevant to specific actuarial findings. Such documentation may include documents that are not part of an actuarial report.

Actuarial Documents

An actuarial communication in any recorded form (such as paper, e-mail, spreadsheets, presentations, audio or video recordings, web sites, and court or hearing transcripts). Notes taken by someone other than the actuary are not considered actuarial documents. (ASOP No. 41)

Actuarial Findings

The results of professional services provided to a principal by an individual acting in the capacity of an actuary (including commentary on another actuary’s work). Such services include providing advice, conclusions, statements of actuarial opinion, other opinions, or recommendations, based upon actuarial considerations. (ASOP No. 41, Actuarial Communications)

Actuarial Gain (Loss)

A measure of the difference between actual experience and that expected based upon a set of actuarial assumptions, during the period between two actuarial valuation dates, as determined in accordance with a particular actuarial cost method. (ASOP No. 4)

Actuarial Liability

The portion of the actuarial present value of projected benefits (and expenses, if applicable), as determined under a particular actuarial cost method, that is not provided for by future normal costs. Under certain actuarial cost methods, the actuarial accrued liability is dependent upon the actuarial value of assets. (ASOP No. 4)

Actuarial Memorandum

A document that provides information regarding the analyses completed.

Actuarial Methods

A procedure by which data are analyzed and utilized for the purpose of estimating a future cost or other actuarial item.

Actuarial Opinions

A conclusion drawn by an actuary from actuarial knowledge or from the application of one or more actuarial methods to a body of data. (ASOP No. 17)

Actuarial Present Value

The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the application of a particular set of actuarial assumptions with regard to future events, observations of market or other valuation data, or a combination of assumptions and observations.

Actuarial Present Value of Projected Benefits

The actuarial present value of benefits that are expected to be paid in the future, taking into account the effect of such items as future service, advancement in age, and expected future per capita health care costs (sometimes referred to as the present value of future benefits).

Actuarial Reports

The set of actuarial documents that the actuary determines to be relevant to specific actuarial findings that is available to an intended user.

Actuarial Reserve

The portion of the actuarial present value of projected benefits (and expenses, if applicable), as determined under a particular actuarial cost method, that is not provided for by future normal costs. Under certain actuarial cost methods, the actuarial accrued liability is dependent upon the actuarial value of assets. (ASOP No. 4)

Actuarial Services

Professional services provided to a principal by an individual acting in the capacity of an actuary. Such services include the rendering of advice, recommendations, findings, or opinions based upon actuarial considerations.

Actuarial Soundness

The phrase “actuarial soundness” has different meanings in different contexts and might be dictated or imposed by an outside entity. In rendering actuarial services, if the actuary identifies the process or result as “actuarially sound,” the actuary should define the meaning of “actuarially sound” in that context. (ASOP No. 1)

Actuarial Standard of Practice

A statement, adopted by the Actuarial Standards Board, the Interim Actuarial Standards Board, or the Board of Directors of the American Academy of Actuaries (AAA) and binding on members of the AAA, that defines acceptable practices in actuarial work.

Actuarial Status

A measure of the relative value of program income and program assets to program costs over a specified period of time.

Actuarial Valuation

The determination, as of a measurement date, of the actuarial present value of a retirement plan benefit and any related benefits.

Actuarial Value of Assets

The value of pension plan investments and other property, used by the actuary for the purpose of an actuarial valuation (sometimes referred to as valuation assets or market-related value of assets). (ASOP No. 44)

Actuarial Values

A measure of the proportion of total covered medical costs that the health insurance plan is contractually obligated to pay. The actuarial value calculated by the AV Calculator is the percentage of total allowed costs a health insurance plan expects to pay for a standard population, using standard assumptions and taking into account cost-sharing provisions. The actuarial value includes only expected benefit costs paid by the plan and not premium costs paid by the enrollee. The ACA’s actuarial value represents an average for a population and does not reflect the actual or even expected cost-sharing experience for each individual. For example, a plan with an actuarial value of 70% means that for a standard population, the plan is expected to pay 70% of their health care expenses, while the enrollees themselves are expected to pay 30% through some combination of deductibles, copays, and coinsurance on average. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

Actuarial Work Product

The result of an actuary’s work. The term applies to the following actuarial communications, whether written or oral: statements of actuarial opinion, actuarial reports, statements of actuarial review, and required actuarial documents. (ASOP No. 9)

Actuarially Determined Contributions

A potential payment to the plan as determined by the actuary using a contribution allocation procedure. It may or may not be the amount actually paid by the plan sponsor or other contributing entity.

Actuarially Sound

Medicaid capitation rates are “actuarially sound” if, for business for which the certification is being prepared and for the period covered by the certification, projected capitation rates, and other revenue sources provide for all reasonable, appropriate, and attainable costs. For purposes of this definition, other revenue sources include, but are not limited to, expected reinsurance and governmental stop loss cash flows, governmental risk adjustment cash flows, and investment income. For purposes of this definition, costs include, but are not limited to, health benefits; health benefit settlement expenses; administrative expenses; government- mandated assessments, fees, and taxes; and the cost of capital. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Additional Fees

An amount that may be payable by a resident, in accordance with a residency agreement, for services made available but not covered by the advance fee and the periodic fees (such as guest meals, additional meals, barber/beauty shop, use of a carport, and non-covered health care services).

ADLs

Basic functions used as measurement standards to determine levels of personal functioning capacity. Typical ADLs include bathing, continence, dressing, eating, toileting, and transferring (between bed and chair or wheelchair). (ASOP. No 18)

Adult Day Care

A program of social and health-related services designed to meet the needs of functionally or cognitively impaired adults, provided in a group setting other than the adult client’s home. (ASOP No. 18)

Advance Fees

An amount payable by the resident at the inception of a residency agreement. The advance fee is usually specified in the residency agreement and is usually payable prior to the resident assuming occupancy of a living unit (sometimes referred to as an entrance fee, endowment fee, entry fee, or founder’s fee).

Adverse Capital Events

A modeled or actual event that either a) causes capital to be significantly less than the risk capital target(s) or b) causes capital to be less than the risk capital threshold(s).

Adverse Selection

Actions taken by one party using risk characteristics or other information known to or suspected by that party that cause a financial disadvantage to the retiree group benefits program (sometimes referred to as antiselection). (ASOP No. 6)

Advice

An actuary’s communication or other work product in oral, written, or electronic form setting forth the actuary’s professional opinion or recommendations concerning work that falls within the scope of this standard. (ASOP No. 12)

Age-or Service-Dependent Benefits

Benefits for which the amount or timing of benefit payments depends on the covered party’s age or length of service. (ASOP No. 34 Revision)

Aggregate Actuarial Cost Method

A method under which the excess of the actuarial present value of projected benefits of the group included in an actuarial valuation over the actuarial value of assets is allocated on a level basis over the earnings or service of the group between the valuation date and assumed exit. This allocation is performed for the group as a whole, not as a sum of individual allocations. That portion of the actuarial present value allocated to a valuation year is called the normal cost. The actuarial accrued liability is equal to the actuarial value of assets. (ASOP No. 4)

Allocation Dates

The date through which the benefits earned during the marriage are determined. Generally, this is the last day of the allocation period. (ASOP No. 34)

Allocation Methods

A method used to determine the portion of retirement plan benefits that is included in marital property. (ASOP No. 34)

Allocation of Retirement Plan Benefits

The allocation of retirement plan benefits into two or more portions: a portion that is fully considered to be marital property and a portion that is not marital property, and perhaps a portion that is determined to be partially marital property. (ASOP No. 34)

Allocation Period

The period over which the benefits earned during the marriage are determined. This is typically the period from the date of marriage (or, if later, the hire date or plan entry date) to the date of marital separation. (ASOP No. 34)

Amortization Methods

A method under a contribution allocation procedure or cost allocation procedure for determining the amount, timing, and pattern of recognition of the unfunded actuarial accrued liability.

Anticipated Experience Assumptions

An expectation of future experience for a risk factor, given available, relevant information pertaining to the assumption being estimated. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Anticipated Experience Factors

An assumption that reflects anticipated experience and may be used to determine nonguaranteed charges or benefits. A particular anticipated experience factor reflects future experience of a specific type. Examples of experience factors include investment income, mortality, policy termination, and expense rates.

Anticipated Experiences

An expectation of future experience for a risk factor given available, relevant information pertaining to the assumption being estimated. (Standards for Principle-Based Reserves for Life Products)

Anticipated Mortality

The appointed actuary’s assumption about the mortality to be experienced in the future on a group of policies. (ASOP No. 40)

Antiselection

The actions of individuals, acting for themselves or for others, who are motivated directly or indirectly to take financial advantage of the risk classification system. (ASOP No. 40)

Applicable Actuarial Guidelines (Applicable AG)

An NAIC actuarial guideline that provides guidance on the application of the Model. Such actuarial guidelines include NAIC Actuarial Guideline XLIX (AG 49) and Actuarial Guideline XLIX-A (AG 49-A).

Applicable Laws

Federal, state, and local statutes, regulations, case law, and other legal binding authority that may govern the actuarial work being performed. (ASOP No. 2)

Appointed Actuary

Any individual who is appointed or retained in accordance with the requirements set forth by applicable law. (ASOP No. 22)

Appraisal Dates

The date as of which an appraisal value is assessed. (ASOP No. 19)

Appraisals

An assessment of the value of an insurance business including, but not limited to, an actuarial appraisal. (ASOP No. 19)

Appropriate

For purposes of data quality, data are appropriate if they are suitable for the intended purpose of an analysis and relevant to the system or process being analyzed. (ASOP No. 23)

Appropriate Data

For purposes of data quality, data are appropriate if they are suitable for the intended purpose of an analysis and relevant to the system or process being analyzed. (ASOP No. 23)

Asset Adequacy Analysis

An analysis of the adequacy of reserves and other liabilities being tested, in light of the assets supporting such reserves and other liabilities, as specified in the opinion.

Asset Risks

The risk that the amount or timing of items of cash flow connected with assets will differ from expectations or assumptions for reasons other than a change in investment rate of return. Asset risk includes delayed collectability, default, or other financial nonperformance. This has been commonly referred to in actuarial literature as the C-1 risk or credit risk. (ASOP No. 7)

Asset Segmentation Plans

The plan by which an insurer allocates assets among lines of business for reporting investment income for statutory purposes. (Principle-Based Reserves for Life Products)

Asset Valuation Basis

The method used to determine the stated value  of  a  particular  asset. (ASOP No. 20)

Asset Valuation Methods

A method used by the actuary to determine the actuarial value of assets. (ASOP No. 44)

Assets

Any resource that can generate revenue or reduce disbursement cash flows.

Assisted Living Facilities

A facility that provides residents some assistance with activities of daily living. Residents have apartments, rooms, or shared dwellings and often share community living and dining areas with other residents. Usually meals, utilities, housekeeping, laundry, ambulation assistance, and personal care supervision are provided. Staff members may supervise the self-administration of medication.

Assuming Entity

The entity accepting insurance risk in a reinsurance agreement, such as an insurer accepting risk from a stop-loss program, a reinsurer accepting risk from an insurance company, or a retrocessionaire accepting risk from a reinsurer.

Assumption Format

The form in which a particular demographic assumption will be used or expressed. In some cases, the assumption will take the form of a table where the probability of the occurrence of a given event depends on parameters such as gender, age, service, or calendar year. In other cases, the assumption may be a point estimate, implying 100% probability of occurrence of a given event at the stated point. An example of a point estimate assumption is an assumption that 100% of the population will retire at age 62. The assumption format may include different tables or point estimates for different segments of the covered population.

Assumption Universe

For each demographic assumption, a universe consisting of the possible options that the actuary might reasonably use for the specific assumption. For example, an assumption universe for a mortality assumption might reasonably include relevant published or proprietary mortality tables and possible adjustments, such as projections of mortality improvement. For some pension plans, an assumption universe for a specific assumption might reasonably include a table or factors developed specifically for that plan.

Assumptions

A type of input to a model that represents expectations or possibilities based on professional judgment.

At Home Programs

An organization that provides social and health care services in return for some combination of an advance fee, periodic fees, and additional fees. At Home Programs differ from CCRCs in that they do not provide a direct independent living unit for members.

Attained Age Actuarial Cost Method

A method under which the excess of the actuarial present value of projected benefits over the actuarial accrued liability in respect of each individual included in an actuarial valuation is allocated on a level basis over the earnings or service of the individual between the valuation date and assumed exit. The portion of this actuarial present value, which is allocated to a valuation year, is called the normal cost. The actuarial accrued liability is determined using the unit credit actuarial cost method. (ASOP No. 4)

Audit

To conduct a formal and systematic examination of a set of data for the purpose of testing its accuracy, using techniques commonly employed by audit professionals. (ASOP No. 23)

Auditors

The firm or professional engaged to conduct an examination in accordance with generally accepted auditing standards for the purpose of issuing an opinion on a financial statement.

AV

A measure of the proportion of total covered medical costs that the health insurance plan is contractually obligated to pay. The actuarial value calculated by the AV Calculator is the percentage of total allowed costs a health insurance plan expects to pay for a standard population, using standard assumptions and taking into account cost-sharing provisions. The actuarial value includes only expected benefit costs paid by the plan and not premium costs paid by the enrollee. The ACA’s actuarial value represents an average for a population and does not reflect the actual or even expected cost-sharing experience for each individual. For example, a plan with an actuarial value of 70% means that for a standard population, the plan is expected to pay 70% of their health care expenses, while the enrollees themselves are expected to pay 30% through some combination of deductibles, copays, and coinsurance on average. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

AV Calculator

A spreadsheet released by Health and Human Services (HHS), used to determine the AV, is referred to as an “AV Calculator.” (Determining Value and Actuarial Value Under the Affordable Care Act)

Available Capital

The excess of assets over liabilities that is available to cover the required capital, calculated on a basis consistent with required capital.

AVC

A spreadsheet released by Health and Human Services (HHS), used to determine the AV, is referred to as an “AV Calculator.” (Determining Value and Actuarial Value Under the Affordable Care Act)

AVC-AV

The actuarial value calculated using the AV Calculator, including any adjustments for non-standard plan designs. (Determining Minimum Value and Actuarial Value under the Affordable Care Act)

Base Data

The base data represents the historical data set used by the actuary to develop the capitation rates. The data may be from Medicaid fee for-service data, MCO data, or from a comparable population data source. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Basic Reserves

Reserves calculated in accordance with section 5 of the model NAIC Standard Valuation Law. (ASOP No. 40)

Basis Risk

The residual risk that results from an imperfect risk offset or transfer process. For example, basis risk may arise from a hedge that pays off based upon an index while the exposure is an investment in a managed selection of individual stocks, or from a capital market hedge based upon industry-wide losses used to offset an insurer’s specific storm exposure. (ASOP No. 47)

Benefit Options

Choices that a benefit plan member may make under a benefit plan including basic coverages (for example, choice of medical plans) and additional coverages (for example, contributory dental coverage). (2nd Draft Proposed Revision of ASOP No. 6)

Benefit Plan Members

An individual covered by a benefit plan. (2nd Draft Proposed Revision of ASOP No. 6)

Benefit Plans

An arrangement providing medical, prescription drug, dental, vision, legal, death, long-term care, or other benefits (excluding retirement income benefits) to participants of the retiree group benefits program, whether on a reimbursement, indemnity, or service benefit basis. (2nd Draft Proposed Revision of ASOP No. 6)

Best-Estimate Assumptions

An assumption that reflects anticipated experience with no provision for risk of adverse deviation. (ASOP No. 10)

Best-Estimate Range

For each economic assumption, the narrowest range within which the actuary reasonably anticipates that the actual results, compounded over the measurement period, are more likely than not to fall. (ASOP No. 27)

Block of Business

All policies of a common coverage type (for example, major medical, preferred provider organization, or capitated managed care); demographic grouping (for example, size, age, or area, group, or individual policies); or other segmentation useful for estimating incurred claims for actuarial purposes.

Book Value

The value of an asset or assets, as included in a financial statement or other financial reporting context. (ASOP No. 20)

Bronze, Silver, Gold, and Platinum Levels

Benefit plans are categorized into levels in the non-group and small group markets as follows: bronze (60% AV), silver (70% AV), gold (80% AV), and platinum (90% AV). (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

Business Segments

A group of policies and associated assets that are modeled together to project future accumulated deficiencies. This grouping will generally follow the company’s asset segmentation plan, investment strategies, or approach used to allocate investment income for statutory purposes. (Standards for Life-Insurance Required Capital Levels)

Capital

The funds intended to assure payment of obligations from insurance contracts, over and above those funds backing the liabilities.

Capital Adequacy Assessment

An assessment of capital of an insurer relative to its risk capital targets or risk capital thresholds.

Capital Events

A modeled or actual event that either a) causes capital to be significantly above or below the risk capital target or b) causes capital to be below the risk capital base. (Capital Adequacy Assessment for Insurers)

Capitation

The amount of money paid to a provider by an exposure-based payment system to provide certain health care services to any Managed Care Health Provider members. The payment does not vary on the basis of the number or type of services actually rendered. The verb “to capitate” is used to indicate the act of entering into such an arrangement. Capitation is also sometimes used to mean the total medical cost or premium per enrollee, though it is not used in this manner in this document.

Capitation Arrangements

An arrangement that calls for periodic payments to a provider to cover specified services to certain members of a health benefit plan regardless of the number or types of such services provided. (ASOP No. 42)

Capitation Rates

A monthly fee paid for each member assigned or each event (for example, maternity delivery) regardless of the number or actual cost of services provided under a system of reimbursement for MCOs. Capitation rates can vary by member based on demographics, location, covered services, or other items. Capitation rates can be structured so that an MCO is fully at risk, or so that an MCO shares the risk with the state or with other MCOs. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Carriers

Any entity subject to state regulation that offers health benefit plan coverage for sale. Carrier includes an insurance company, a prepaid hospital or medical service plan, a fraternal benefit society, a health maintenance organization, and any other entity offering for sale a plan of health insurance or health benefits. (ASOP No. 26)

Carve-Out

Carve-outs are designated services provided by specified providers, such as prescription drugs or dental, or condition-specific services such as cancer, mental health, or substance abuse treatment. Carve-outs are often provided by a separate entity specializing in that type of designated service. (ASOP No. 42)

Carved-Out Services

Contractually designated services such as prescription drugs or dental, or condition-specific services such as cancer, mental health, or substance abuse treatment, excluded from a capitation, risk-sharing, or other contractual arrangement.

Cash and Investment Balances

The value of cash, cash equivalents, and marketable securities of a CCRC (historically referred to as cash balance by CCRC practitioners). This excludes the value of the physical property assets of the CCRC.

Cash Flow

Any receipt, disbursement, or transfer of cash.

Cash Flow Analysis

Any evaluation of the risks associated with the timing or amount of cash flows. (ASOP No. 7)

Cash Flow Model

A model designed to simulate asset and liability cash flows. (Principle-Based Reserves for Life Products)

Cash Flow Risk

The risk that the amount or timing of cash flows will differ from expectations or assumptions.

Cash Flow Testing

A form of cash flow analysis involving the projection and comparison of the timing and amount of cash flows resulting from economic and other assumptions.

Catastrophe

A relatively infrequent event or natural phenomenon that produces large aggregate losses.

Catastrophe Model

A representation of relationships among events based on statistical, financial, economic, or mathematical concepts and equations used to explain a system, to study the effects of different components, and to derive estimates based upon the future occurrences of large scale, low-frequency, high-severity events such as hurricanes, earthquakes, tornados, terrorist acts, and pandemics.

Catastrophe Ratemaking Procedures

Ratemaking procedures that adjust for the impact of catastrophe losses in the experience data and determine a provision for catastrophe losses and loss adjustment expenses.

CCRC

A residential facility that provides stated housekeeping, social, and health care services in return for some combination of an advance fee, periodic fees, and additional fees.

Ceding Entity

The entity that is transferring insurance risk in a reinsurance agreement, such as an employer transferring risk under a stop-loss arrangement, an insurance company transferring risk to a reinsurer, or a reinsurer transferring risk to a retrocessionaire.

Certifying Actuary

An actuary who meets the qualifications defined in the PBA Reserve Model, and who has certified that the reserves have been calculated in a manner consistent with the PBA Reserve Model and complies with all applicable actuarial standards of practice. (Independent Review of Principles-Based Valuations)

Claim Adjustment Expenses

The costs of administering, determining coverage for, settling, or defending claims even if it is ultimately determined that the claim is invalid. (ASOP No. 43)

Claim Estimates

An estimate on an undiscounted basis of the obligation for future loss and loss adjustment expenses resulting from claims due to past events or an estimate of loss and loss adjustment expenses associated with prospective property/casualty risk transfer or risk retention. Claim estimates may include elements, such as case reserves, developed by individuals other than actuaries.

Claims

A demand for payment under the coverage provided by a plan or contract.

Client

In this standard, the word includes the employing company of an employee actuary, as well as the client of a consulting actuary. (ASOP No. 1)

Closed Block

A mechanism to preserve (over time) the reasonable dividend expectations of policyholders with individual life, health, or annuity policies. A closed block comprises a defined, limited group of policies and a defined set of assets, and is governed by a set of operating rules. All cash flows arising from the closed block are exclusively committed to supporting the policies in the closed block as specified in the operating rules. (ASOP No. 33)

Coding

The process of recording and submitting information (for example, diagnoses or services provided) on claims forms. (ASOP No. 45)

Cognitive Impairment

A deficiency in a person’s short- or long-term memory; orientation as to person, place, and time; deductive or abstract reasoning; or judgment as it relates to safety awareness. (ASOP No. 18)

Cohort

A grouping of insurance contracts or policies for the purpose of measuring the liability for future policy benefits, DPAC, and any other related balances.

Cohort of New Contractual Residents or New Members

A hypothetical group of new contractual residents or members assumed to enter a CCRC or At Home Program over a specified period of time and assumed to have certain demographic characteristics.

Cohort of New Residents

A hypothetical group of new residents assumed to enter the CCRC over a specified period of time and assumed to have certain demographic characteristics. (ASOP No. 3)

Cohort of New Residents or New Members

A hypothetical group of new residents or members assumed to enter a CCRC or At Home Program over a specified period of time and assumed to have certain demographic characteristics.

Collectability

The likelihood of receiving the amount of money owed.

Collectability of Reinsurance Proceeds

The ability of the counterparty to obtain funds owed to it according to the terms of the reinsurance program.

Commission and Brokerage Fees

Compensation associated with the acquisition and service of business paid to agents, brokers, or other parties, including ceding insurance companies.

Complex Insurance Organizations

Affiliated group of individual organizations, primarily consisting of insurers, where the relationships among the organizations is constrained by governance, accounting, tax, foreign exchange, or legal or regulatory restrictions and considerations.

Composite Rating

A rating method that simplifies the calculation for large, complex entities. Instead of using multiple exposure bases to estimate the expected value of future costs, a single composite exposure base is used. (Property/Casualty Ratemaking)

Compound Events

Individual events that interact to yield outcomes that differ from what would be expected if they occurred with full independence.

Comprehensive

For purposes of data quality, data obtained from inventory or sampling methods are comprehensive if they contain each data element or record needed for the analysis. (ASOP No. 23)

Comprehensive Data

For purposes of data quality, data obtained from inventory or sampling methods are comprehensive if they contain sufficient data elements or records needed for the analysis. (ASOP No. 23)

Condition Categories

A grouping of medical conditions that have similar expected healthcare resource use or clinical characteristics. (ASOP No. 45)

Consideration

The  consideration  a  policyholder  receives  in  a  demutualization  in  exchange  for relinquishing membership rights (sometimes referred to as policyholder consideration.) (ASOP No. 37)

Contagion

A lack of independence between the occurrence of losses among different entities.

Contingency Provisions

A provision for the expected differences, if any, between the estimated costs and the average actual costs, that cannot be eliminated by changes in other components of the ratemaking process. (ASOP No. 30)

Contingent Participants

An individual who is not currently a participant but who may reasonably be expected to become a participant through his or her future action. (ASOP No. 6)

Continuing Care Retirement Community (CCRC)

An organization that provides contractual residential housing and stated housekeeping, social, and health care services in return for some combination of an advance fee, periodic fees, and additional fees. CCRCs are also known as Life Plan Communities (LPCs).

Contract Performance

The fulfillment of an entity’s obligations required by a contract, for example, compliance under the provisions of a reinsurance contract or under a contract that includes a retrospective rate adjustment or experience refund.

Contract Period

The time period for which a contract is effective. (ASOP No. 5 Revision – Incurred Health and Disability Claims)

Contract Reserves

A liability established when a portion of the premium due prior to the valuation date is designed to pay all or a part of the claims expected to be incurred after the valuation date (sometimes referred to as an active life reserve or policy reserve).  A contract reserve may or may not include a provision for the reserve for unearned premiums.

Contract Segmentation Method

The method of dividing the period from issue to mandatory expiration of a policy into successive segments, with the length of each segment being defined as set forth in section 4 of the Model and using the assumptions as set forth in section 4 of the Model. (ASOP No. 40)

Contractual Resident

A person who has signed a residency agreement.

Contribution Allocation Procedures

A procedure that uses an actuarial cost method to determine the periodic prefunding contribution for prefunding a retiree group benefits program. It may produce a single value, such as normal cost plus an amortization payment of the unfunded actuarial accrued liability, or a range of values. This term does not relate to the process of determining the participant contribution.

Contribution Principle

The concept that aggregate divisible surplus is allocated to policies to reflect the proportion that the policies, as part of their dividend factor classes, are considered to have contributed to divisible surplus. (ASOP No. 15)

Contribution Risk

The potential of actual future contributions deviating from expected future contributions, for example, that actual contributions are not made in accordance with the plan’s funding policy, that withdrawal liability assessments or other anticipated payments to the plan are not made, or that material changes occur in the anticipated number of covered employees, covered payroll, or other relevant contribution base.

Contributions

A potential payment to the plan determined by the actuary. It may or may not be the amount actually paid by the plan sponsor or other contributing entity. (ASOP No. 4)

Cost

The amount assigned to a period using a cost allocation procedure for purposes other than funding. This may be a function of plan obligations, normal cost, expenses, and assets. In many situations, cost is determined for accounting purposes.

Cost Allocation Policy

An actuarial cost method combined with defined procedures to account for plan assets (if any) and amortization of changes in plan obligations (such as those arising from plan changes, experience gains and losses, assumption changes, or changes in actuarial cost methods). (ASOP No. 6)

Cost Allocation Procedures

A procedure that uses an actuarial cost method, and may include an asset valuation method and an amortization method, to determine the periodic cost for a plan (for example, the procedure to determine the net periodic pension cost under accounting standards).

Cost of Capital

The rate of return that capital could earn in an alternative investment of equivalent risk. The source of the capital may be internal or external. (ASOP No. 26)

Costs

All benefit payments and expenses associated with issuing and maintaining a company’s insurance policies and contracts, with no provision for profit.

Costs of Capital

The rate of return that capital could earn in an alternative investment of equivalent risk. The source of the capital may be internal or external. (ASOP No. 26)

Counterparty

Another entity involved in the reinsurance program including, but not limited to, ceding entity, assuming entity, or a service provider.

Counterparty Risk

The risk that the party providing a risk offset or accepting a risk transfer does not fulfill its obligations.

Coverage

The terms and conditions of a plan or contract, or the requirements of applicable law, that create an obligation to pay benefits, expenses, or claims associated with contingent events.

Covered Individuals

An active participant, retiree, dependent, or surviving dependent. (Proposed Revision of ASOP No. 6)

Covered Party

The party in a domestic relations action who is covered by the retirement plan. (ASOP No. 34)

Covered Population

Active and retired participants, participating dependents, and surviving dependents of participants who are eligible for benefit coverage under a retiree group benefits program. The covered population may also include contingent participants. (ASOP No. 6)

Credibility

A measure of the predictive value in a given application that the actuary attaches to a particular set of data (predictive is used here in the statistical sense and not in the sense of predicting the future). (ASOP No. 12)

Credibility Procedures

A process that involves the following: a. the evaluation of subject experience for potential use in setting assumptions without reference to other data; or b. the identification of relevant experience and the selection and implementation of a method for blending the relevant experience with the subject experience. (ASOP No. 25)

Credit Risk

Risk associated with the possibility of a loss on an investment arising from a borrower who does not make payments as promised. (Draft Proposed Revision of ASOP No. 20)

Currently Payable Scale

A scale of nonguaranteed elements in effect for a policy form as of the preparation date of the illustration or declared to become effective within the next 95 days.

Custodial Care

Care to help a person perform ADLs and other routine activities; also known as personal care. It is usually provided by people without professional medical skills. It is less intensive or complicated than skilled or intermediate nursing care, and can be provided in many settings, including nursing homes, assisted living facilities, adult day care centers, or at home. (ASOP No. 18)

Data

Statistical or other information that is generally numerical in nature or susceptible to quantification.

Data Elements

An item of information, such as date of birth or risk classification. (ASOP No. 23)

Debits and Credits

The components of a system used by underwriters to determine a set of mortality multiples to apply to a base mortality table. Debits increase the mortality multiple due to various impairments that an insured may have; credits reduce the mortality multiple due to good health characteristics. (ASOP No. 48)

Dedicated Assets

Assets designated for the exclusive purpose of satisfying the retiree group benefits program obligations. Examples include the following:

a. life insurance policies held by the plan sponsor to cover some of the plan sponsor’s retired participant death benefits;

b. welfare benefit trusts (for example, voluntary employees’ beneficiary associations);

c. Internal Revenue Code section 401(h) accounts in a qualified pension plan; and

d. Internal Revenue Code section 115 trusts sponsored by governmental entities for retiree group benefits. (ASOP No. 6)

Deferred Policy Acquisition Cost (DPAC)

An asset representing the unamortized portion of policy acquisition expenses. (ASOP No. 10)

Deferred Sales Inducements (DSI)

An asset representing the unamortized portion of sales inducements to policyholders. (ASOP No. 10)

Deficiency Reserves

The excess, if greater than zero, of minimum reserves calculated in accordance with section 8 of the model NAIC Standard Valuation Law over basic reserves. (ASOP No. 40)

Demand Surge

A sudden and usually temporary increase in the cost of materials, services, and labor due to the increased demand for them following a catastrophe.

Demographic Assumptions

Demographic and all other noneconomic assumptions (i.e., those assumptions not covered in ASOP No. 27), unless explicitly stated otherwise.

Demutualization

The conversion of a mutual company to a stock company. (ASOP No. 37)

Dependents

Individuals who are covered or may become covered under a retiree group benefits program by virtue of their relationship to an active or retired participant. (ASOP No. 6)

Derivative Contracts

Any security that derives its value from an underlying financial instrument. Examples include interest rate swaps, futures, and options. (ASOP No. 7)

Determination Policy

The insurer’s principles or objectives for determining NGEs. For example, the determination policy could include the insurer’s governing principles and requirements, profitability objectives, capital requirements, guidelines for drafting product provisions, and requirements for and frequency of reviews of NGEs on in-force products.

Deterministic

A reserve calculated under a defined scenario and a single set of assumptions in accordance with section 4 of VM-20.

Deterministic Reserves

A reserve calculated under a defined scenario and a single set of assumptions. (Principle-Based Reserves for Life Products)

Development (or Lag) Method

An estimation technique under which historical claim data, such as the number and amount of claims for the subject block of business, are grouped into the time periods in which claims were incurred and the time periods in which they were processed. The processing date is typically the date the claim is received, adjudicated, or paid by the claim payer. The development method uses these groupings to create a claims processing or development pattern, which is used to help estimate the unprocessed portion of incurred claims. (ASOP No. 5 Revision – Incurred Health and Disability Claims)

Development Method

A method under which historical claim data, such as the number and amount of claims for the subject block of business, are grouped into the time periods in which claims were incurred and the time periods in which they were processed. The processing date is typically the date the claim is received, adjudicated, or paid by the claim payer. The method uses these groupings to create a claims processing or development pattern, which is used to help estimate the unprocessed portion of incurred claims. (ASOP No. 5)

Deviation

The act of departing from the guidance of an ASOP. (ASOP No. 1)

Diagnostic Services

Services (for example, lab or radiology) provided to determine whether a medical condition exists. Having these services performed does not by itself indicate a condition exists, although the result of the test may indicate it does. (ASOP No. 45)

Direct Users

A present or prospective client who has the opportunity to select the actuary and is able to communicate directly with the actuary about the actuary’s qualifications, work, or recommendations. (ASOP No. 34)

Disciplined Current Scale

A scale of nonguaranteed elements, certified annually by the illustration actuary, constituting a limit on illustrations currently being illustrated by an insurer that is reasonably based on actual recent historical experience and that satisfies the requirements set forth in the Model.

Discount Rates

The rate used to discount projected cash flow to determine their present value. (ASOP No. 8)

Discounted Cash Flow

The actuary’s estimate of the present value of a cash flow.

Discounted Claim Estimate

The actuary’s estimate of the present value of the claim estimate.

Discounted Unpaid Claim Estimates

The actuary’s estimate of the present value of the unpaid claim estimate. (ASOP No. 20)

Disproportinate Share Hospital (DSH) Payments

Hospitals that serve a large number of Medicaid or uninsured patients may be considered disproportionate share hospitals and may be eligible to receive additional payments under Medicaid. These payments may be subject to a hospital-specific limit. An annual allotment to each state limits Federal financial participation. Section 1923(i) of the Social Security Act requires direct payment of DSH payments and prohibits DSH payments made by MCOs. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Distributable Earnings

Amounts that an insurance business can distribute while retaining the level of capital required to support its ongoing operations. Distributable earnings consist of earnings of an insurance business computed using the applicable regulatory accounting basis, adjusted to allow for the injection or release of regulatory capital and surplus, in recognition of appropriate capital and surplus levels needed to support the ongoing operations. A regulatory accounting basis is the basis required by the insurance supervisory authority in a particular jurisdiction to be used for financial statement filings by insurance companies and similar entities in that jurisdiction. (ASOP No. 19)

Dividend Determination

Given the dividend framework, the process by which the divisible surplus is allocated to policies including the determination of dividend factors. (ASOP No. 15)

Dividend Factor Classes

A group of policies for which dividends are determined by using the same value or set of values for a particular dividend factor. (ASOP No. 15)

Dividend Factors

A value or set of values, other than the policy factors, used in the determination of the dividend on a particular policy. A dividend factor reflects the experience of the dividend factor class of policies to which the particular policy belongs. Examples of dividend factors include those related to mortality, morbidity, expense, investment income, policy termination, tax, and experience premiums. (ASOP No. 15)

Dividend Framework

The structure by which the insurer allocates divisible surplus among participating policies. This includes the assignment of policies to dividend factor classes, the method of allocating income and costs, and the structure of the formulas or other methods of using dividend factors. (ASOP No. 15)

Divisible Surplus

The aggregate amount available to be distributed to policyholders as dividends. (ASOP No. 15)

Domestic Relations Actions

Prenuptial, postnuptial, separation, divorce, and support agreements, and other domestic relations proceedings. (ASOP No. 34)

Domestic Relations Law

Federal, state, and local statutes, regulations, case law, and other binding authority that may govern the domestic relations action, the retirement plan or plans, or any other aspect of the actuary’s engagement. (ASOP No. 34 Revision)

Domestic Relations Order (DRO)

A court order dividing retirement plan benefits between the covered party and spouse. (ASOP No. 34)

DPAC

An asset representing the unamortized portion of policy acquisition expenses. (ASOP No. 10)

DSH Payments

Hospitals that serve a large number of Medicaid or uninsured patients may be considered disproportionate share hospitals and may be eligible to receive additional payments under Medicaid. These payments may be subject to a hospital-specific limit. An annual allotment to each state limits Federal financial participation. Section 1923(i) of the Social Security Act requires direct payment of DSH payments and prohibits DSH payments made by MCOs. (Medicaid Managed-Care Capitation – Rate Development and Certification)

DSI

An asset representing the unamortized portion of sales inducements to policyholders. (ASOP No. 10)

Duration

The length of time, measured in years, since a life expectancy estimate was issued. (ASOP No. 48)

Dynamic Modeling

The use of assumptions that are non-stochastic, but vary in response to scenario variations in stochastic assumptions. An example is the use of lapse rates that are a function of relative competitive position that can vary according to the interest rate scenario. (Standards for Life-Insurance Required Capital Levels)

Economic Capital

The amount of capital an organization requires to survive or to meet a business objective for a specified period of time and risk metric, given its risk profile. (ASOP No. 46)

EHBS

The ACA requires health plans offered in the individual and small group markets to provide coverage for specific items and services known as essential health benefits. EHBs must include items and services within the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. HHS allows each state to choose from a set of plans to serve as the benchmark plan in their state. All state-required benefits enacted prior to December 2011 are considered to be included in EHBs. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

Eligibility Date

Date (or dates) as of which a policy must be deemed in force, according to the plan of conversion, for the policyholder to be eligible to receive consideration. (ASOP No. 37)

Eligible Policyholders

The owner of one or more policies eligible to receive consideration under the plan of conversion. (ASOP No. 37)

Emerging Risks

New or evolving risks that may be difficult to manage since their likelihood, impact, timing or interdependency with other risks are highly uncertain. (ASOP No. 46)

Encounter Data

Information about an interaction between a provider of health care services and a member that is documented through the submission of a claim to an MCO, and shared between the MCO and the state Medicaid agency. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Enhanced or Additional Benefits

Benefits offered by MCOs to their Medicaid members that are above and beyond the benefits offered by the state Medicaid plan. Common examples are adult dental services, non-emergency transportation, and adult vision services. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Enterprise Risk Management

The discipline by which an organization in any industry assesses, controls, exploits, finances and monitors risks from all sources for the purpose of increasing the organization’s short- and long-term value to its stakeholders. (ASOP No. 46)

Enterprise Risk Management (ERM) Framework

The collection of processes by which the organization identifies, classifies, sets risk appetite for, mitigates, measures, and finances (with capital) its risk exposures.

Enterprise Risk Management Control Cycle

The continuing process by which risks are identified, risks are evaluated, risk appetites are chosen, risk limits are set, risks are accepted or avoided, risk mitigation activities are performed, and actions are taken when risk limits are breached. (ASOP No. 46)

Entity

An institution, company, corporation, partnership, government agency, university, employee benefit plan, or other organization that may be subject to a financial audit, financial review, or financial examination, as well as the individuals who are authorized to act on behalf of the organization.

Entry Age Normal Actuarial Cost Method

A method under which the actuarial present value of the projected benefits of each individual included in an actuarial valuation is allocated on a level basis over the earnings or service of the individual between entry age and assumed exit age(s). The portion of this actuarial present value allocated to a valuation year is called the normal cost. The portion of this actuarial present value not provided for at a valuation date by the actuarial present value of future normal costs is called the Actuarial accrued liability. (ASOP No. 4)

ERM

The discipline by which an organization in any industry assesses, controls, exploits, finances and monitors risks from all sources for the purpose of increasing the organization’s short- and long-term value to its stakeholders. (ASOP No. 46)

ERM Control Cycle

The continuing process by which risks are identified, risks are evaluated, risk appetites are chosen, risk limits are set, risks are accepted or avoided, risk mitigation activities are performed, and actions are taken when risk limits are breached. (ASOP No. 46)

ERM Frameworks

The collection of processes by which the organization identifies, classifies, sets risk appetite for, mitigates, measures, and finances (with capital) its risk exposures.

Essential Health Benefits

The ACA requires health plans offered in the individual and small group markets to provide coverage for specific items and services known as essential health benefits. EHBs must include items and services within the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. HHS allows each state to choose from a set of plans to serve as the benchmark plan in their state. All state-required benefits enacted prior to December 2011 are considered to be included in EHBs. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

Estimated Gross Margin

As defined in the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) No. 95-1, Accounting for Certain Insurance Activities of Mutual Life Insurance Enterprises, & 22. (ASOP No. 10)

Estimated Gross Profit

As defined in SFAS No. 97, & 23. (ASOP No. 10)

Estimation Period

The period for which differences in morbidity are being quantified by the risk adjustment methodology. (ASOP No. 45)

Evaluation

Events

The incident or activity that triggers potential for claim or claim adjustment expense payment. (Draft Proposed Revision of ASOP No. 36)

Examiner

An employee of or contractor to state or federal regulators performing a financial examination on behalf of a governmental agency responsible for oversight of the financial condition of the entity.

Existing Business

Policies in force on the appraisal date, including any remaining obligations and risks that relate to coverage provided previously (e.g., the runoff of claim liabilities). (ASOP No. 19)

Expected Deaths

The number of deaths statistically expected in a given time interval. (ASOP No. 48)

Expected Value Estimate

An estimate of the mean value of an unknown quantity where the mean value represents a probability-weighted average of the quantity over the range of all possible values. (ASOP No. 36)

Expense Limitations

Legislative or regulatory rules that disallow or limit certain categories of expenses in determining rates. (ASOP No. 29)

Expense Provisions

Future cost estimates for expenses related to prospective property/casualty risk transfer or risk retention other than the following: losses, the provision for profit and contingencies, the cost of capital, investment expenses, and federal and foreign income taxes.

Expenses

Administrative or investment expenses borne or expected to be borne by the benefit plan or retiree group benefits program.

Experience Factor Classes

A group of policies for which nonguaranteed elements are determined by using common numerical values of a particular experience factor.

Experience Factors

A value or set of values that represents the actual experience of a policy form. Examples of experience factors include rates of mortality, expense, investment income, termination, and taxes.

Experience Gain (Loss)

A measure of the difference between actual experience and that expected based upon a set of actuarial assumptions, during the period between two actuarial valuation dates, as determined in accordance with a particular actuarial cost method. (ASOP No. 4)

Experience Losses

A measure of the difference between actual experience and that expected based upon a set of actuarial assumptions, during the period between two actuarial valuation dates, as determined in accordance with a particular actuarial cost method. (ASOP No. 4)

Experience Period

The period of time to which historical data used for actuarial analysis pertain.

Experience Rating

A rate modification technique that involves evaluating the policyholder’s actual experience relative to the average experience of similarly classified policyholders to derive a rate unique to that policyholder’s risk. (Property/Casualty Ratemaking)

Expert

One who is qualified by knowledge, skill, experience, training, or education to render an opinion or otherwise testify concerning the matter at hand.

Expertise

The specialized skills or knowledge possessed by an individual. (ASOP No. 38 Revision)

Explicit Risk Margin

An explicit provision for uncertainty in a reserve or unpaid claim estimate. (ASOP No. 36)

Exposure

The extent of risk presented by one or more entities that have been provided coverage under a plan or contract.

Exposure Base

The basic unit that measures a policy’s exposure to loss.

Exposure Units

A unit by which the cost for a health benefit plan is measured. For example, an exposure unit may be a contract, an individual covered, $100 of weekly salary, or $100 of monthly benefit.

Extreme Events

A low-frequency event with high-severity or widespread potential effects that causes unusually large aggregate losses and that could distort the historical experience. An extreme event may exhibit contagion, which is a lack of independence between the occurrence of losses among different entities.

Federally Qualified Health Centers (FQHC)

A federally qualified health center is (1) an organization that receives grants under Section 330 of the Public Health Service Act; (2) an organization that does not receive a grant under the Section 330 of the Public Health Service Act, but otherwise meets all requirements to receive such a grant; or (3) an outpatient health clinic associated with tribal or Urban Indian Health Organizations (UIHO); and has applied for recognition and been approved as a federally qualified health center for Medicare and Medicaid, as described in Sections 1861(aa)(3) and 1905(l)(2) of the Social Security Act. Payments to these organizations are subject to requirements set forth in Section 190 2(bb) of the Social Security Act. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Fee Structure

A combination of fees that generally includes advance fees, periodic fees, and additional fees.

Filing Actuaries

An actuary who prepares, supervises the preparation of, or peer reviews a health filing on behalf of a health plan entity. This includes actuaries employed by the health plan entity and consulting actuaries. This does not include a “reviewing actuary,” as defined in section 2.9. (ASOP No. 8)

Filing Actuary

An actuary who prepares, supervises the preparation of, or peer reviews a health filing on behalf of a health plan entity. This includes actuaries employed by the health plan entity and consulting actuaries. This does not include a “reviewing actuary,” as defined in section 2.9. (ASOP No. 8)

Financial Adequacy

A condition in which program costs are projected not to exceed program income and assets over a specified period of time.

Financial Audit

An evaluation of financial statements or internal controls over financial reporting by an auditor, conducted under generally accepted auditing standards, with a view to expressing an opinion on whether the financial statements are presented fairly in all material respects within the applicable financial reporting framework or on the effectiveness of the entity’s internal controls over financial reporting.

Financial Examination

An evaluation of an entity’s financial condition by an examiner. It will generally include a review of the financial statement and will often include a review of financial strength, corporate governance, or management oversight.

Financial or Personal Security Systems

A private or governmental entity or program that is intended to mitigate the impact of unfavorable outcomes of contingent events. Examples of financial or personal security systems include auto insurance, homeowners insurance, life insurance, and pension plans, where the mitigation primarily takes the form of financial payments; prepaid health plans and continuing care retirement communities, where the mitigation primarily takes the form of direct service to the individual; and other systems, where the mitigation may be a combination of financial payments and direct services. (ASOP No. 12)

Financial Projections

A projection of covered lives, premiums, claims, expenses, capital and surplus, or other financial quantities that may be required by applicable law. (ASOP No. 8)

Financial Reports

A report that conveys the performance or experience of a life or health risk-bearing entity at a specific point in time or over an accounting or measurement period that is provided to an internal or external party and on which the principal is expected to rely. The financial report may be based on any financial reporting regime appropriate to the assignment. Examples of financial reports include, but are not limited to, statutory financial statements, own risk and solvency assessment (ORSA) reports, enterprise risk management (ERM) reports, GAAP financial statements, asset adequacy analysis reports, and experience study reports.

Financial Review

An evaluation, by performing limited procedures, of financial statements or internal controls over financial reporting by an auditor, conducted under generally accepted auditing standards. The evaluation supports an auditor’s opinion on whether any material modifications should be made to the financial statements or to the entity’s internal controls over financial reporting. A financial review is often performed on interim financial statements. For this standard, a financial review does not include a review conducted for any other purpose, such as in support of a potential M&A or IPO transaction.

Financial Statements

Reports on the financial position and the financial activities of an entity, prepared in accordance with accounting requirements prescribed or permitted by insurance regulators or accounting standards.

Forecast Actuarial Cost Method

A method under which the excess of the actuarial present value of the sum of projected benefit payments for a specified period plus a funding objective as of the end of the period over the actuarial value of assets is allocated on a level basis over the earnings or service of the group during the specified period, including earnings or service for any future entrants assumed. The allocation is performed for the group as a whole, not as a sum of individual allocations. The portion of this actuarial present value allocated to a valuation year is called the annual cost allocation. (ASOP No. 4)

Forecast Period

The future time period to which the historical data are projected. (ASOP No. 13)

Formula Reserves

Amounts required under section B.6(e) of Section 7. However, formula reserves required by Section 7 do not include any additional reserves established as a result of an asset adequacy analysis. (ACG No. 4)

FQHC

A federally qualified health center is (1) an organization that receives grants under Section 330 of the Public Health Service Act; (2) an organization that does not receive a grant under the Section 330 of the Public Health Service Act, but otherwise meets all requirements to receive such a grant; or (3) an outpatient health clinic associated with tribal or Urban Indian Health Organizations (UIHO); and has applied for recognition and been approved as a federally qualified health center for Medicare and Medicaid, as described in Sections 1861(aa)(3) and 1905(l)(2) of the Social Security Act. Payments to these organizations are subject to requirements set forth in Section 190 2(bb) of the Social Security Act. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Frozen Attained Age Actuarial Cost Method

A method under which the excess of the actuarial present value of projected benefits of the group included in an actuarial valuation, over the sum of the actuarial value of assets plus the unfunded frozen actuarial accrued liability, is allocated on a level basis over the earnings or service of the group between the valuation date and assumed exit. This allocation is performed for the group as a whole, not as a sum of individual allocations. The unfunded frozen actuarial accrued liability is determined using the unit credit actuarial cost method. The portion of this actuarial present value allocated to a valuation year is called the normal cost. (ASOP No. 4)

Frozen Entry Age Actuarial Cost Method

A method under which the excess of the actuarial present value of projected benefits of the group included in an actuarial valuation, over the sum of the actuarial value of assets plus the unfunded frozen actuarial accrued liability, is allocated on a level basis over the earnings or service of the group between the valuation date and assumed exit. This allocation is performed for the group as a whole, not as a sum of individual allocations. The frozen actuarial accrued liability is determined using the entry age actuarial cost method. The portion of this actuarial present value allocated to a valuation year is called the normal cost. (ASOP No. 4)

Full Credibility

The level at which the subject experience is assigned full predictive value, often based on a selected confidence interval. (ASOP No. 25)

Full-Value Reserve

An un-discounted provision for the payment of outstanding losses and/or loss adjustment expenses in the anticipated future settlement amounts. (ASOP No. 20)

Fully Funded

A phrase that indicates that a particular measure of plan assets equals or exceeds a particular measure of plan liabilities. Any other phrase that conveys a similar message must meet the requirements in this standard for the use of the phrase fully funded. Disclosure requirements for actuarial work products that include this phrase or any phrase that conveys a similar message are in section 4.1(p). (ASOP No. 4 Revision)

Functional Impairment

The inability to perform one or more ADLs. (ASOP No. 18)

Funded Status

Any comparison of a particular measure of plan assets to a particular measure of plan obligations.

Funding Method

A procedure for allocating the actuarial present value of projected benefits (and expenses, if applicable) to time periods usually in the form of a normal cost and an actuarial accrued liability. For purposes of this standard, a pay-as-you-go method is not considered to be an actuarial cost method.

Funding Valuation

A periodic measurement of pension obligations performed by the actuary that the plan sponsor may use to determine plan contributions or the benefit levels supportable by specified contribution levels. A funding valuation includes the determination of the minimum required contribution, as defined by the Employee Retirement Income Security Act of 1974 (ERISA).

GAAP Net Premiums

The portion of gross premium that provides for costs. (ASOP No. 1)

Gain and Loss Analysis

An analysis of the effect on the plan’s funded status between two measurement dates resulting from the difference between expected experience based upon a set of actuarial assumptions and actual experience.

General Administrative Expenses

Operational and administrative expenses (other than investment expenses) not specifically defined elsewhere in this section. (ASOP No. 29)

General Economic Inflation

Price changes over the whole of the economy. The most widely used indices are the Consumer Price Index and the Gross National Product price deflator. (ASOP No. 6)

Generally Accepted Auditing Standards

Sets of standards promulgated by various standards-setting bodies by which audits or reviews are performed and against which the quality of audits or reviews may be judged.

Going-Concern Assumption

The assumption that a CCRC is and will remain able to attract new residents to replace existing residents as the latter vacate units. (ASOP No. 3)

Governance

Structures of an organization’s personnel, committees, and boards associated with management of the business that defines where authorities are held and the associated processes for decision-making and escalation.

Governance and Controls

The application of a set of procedures and an organizational structure designed so that intended users can place their confidence in the output of the model.

Graduation

The process of making adjustments to experience results in order to have a smooth progression in the mortality rates over the whole age range. (ASOP No. 48)

Granularity

The extent to which a model contains separate components such as cells, or assumptions that vary by cell or time intervals. Models with a higher degree of granularity (more cells or assumption variations) may provide more model precision or flexibility, but may also require greater effort and expense to design, maintain, assemble and run. (Modeling)

Gross Premium Reserve

The actuarial present value of benefits, expenses, and related amounts less the actuarial present value of premiums and related amounts.

Gross Premium Reserve Test

The comparison of the gross premium reserve computed under one or more scenarios to the financial statement reserve.

Gross Premiums

Amounts contractually required to be paid or anticipated to be contributed by the policyholder. (ASOP No. 10)

Groups

Affiliated group of individual organizations, of which at least one is an insurer.

Guaranteed Elements

A premium, value, charge, or benefit that limits an NGE. Guaranteed elements are specified in the policy. Examples of guaranteed elements include maximum premium charges, maximum expense charges, minimum credited interest rates, maximum cost of insurance charges, maximum gross premiums, minimum index parameters, maximum mortality and expense (M&E) risk charges, and maximum policy loan interest rates.

Guaranteed Policy Factors

A premium, value, charge, or benefit that limits an NGE. Guaranteed policy factors are specified in the policy. Examples of guaranteed policy factors include minimum cash values, minimum credited interest rates, maximum cost of insurance charges, maximum gross premiums, minimum index parameters, maximum mortality and expense charges, and maximum policy loan interest rates.

Guaranteed Renewable Contract

A contract which provides that the insured has the right to continue the insurance in force for a specified period by the timely payment of premiums, and that the insurer may not unilaterally change the contract during that specified period, except that premium rates may be revised by the insurer on a class basis. (ASOP No. 18)

Health Benefit Plans

A contract, such as an insurance policy, or other financial arrangement providing medical, prescription drug, dental, vision, disability income, long-term care, or other health-related benefits, whether on a reimbursement, indemnity, or service benefit basis, regardless of the form of the risk-bearing entity.

Health Care Guarantees

A clause in a residency agreement guaranteeing access to health care and defining the type of health care services to be provided to the resident. These health care services may be offered with or without additional charges to the periodic fees.

Health Centers

A facility associated with a CCRC where health care is provided to residents in accordance with a residency agreement. The health center typically includes some combination of assisted living, special care, and nursing care units. Non-residents may also live in the health center.

Health Filing

A required regulatory filing for health benefits, accident and health insurance, and entities providing health benefits, which requires projection of future contingent events, for rates or benefits, or financial projections. Rate or benefit filings include, but are not limited to, the following: a. filings of manual rates, rating factors, or underwriting manuals; b.filings of rating methodology, such as experience rating formulas and factors; c.statements of actuarial soundness or rate adequacy, as may be defined by the regulatory body, for future rating periods; d. certification of benefit values, such as actuarial value or actuarial equivalence, for example, as required by the Affordable Care Act; and e.other filings of a similar nature as may be required by a regulatory body. (ASOP No. 8)

Health Insurance

Coverage associated with contract provisions for medical, dental, vision care, disability income, accidental death and dismemberment, long-term care, and similar benefits, on either a reimbursement or service-benefit basis, sold by insurance companies, health maintenance organizations, hospital and medical service organizations, and other entities subject to insurance regulatory authorities. (ASOP No. 11)

Health Insurance Assets

An asset that is estimated using actuarial considerations or any other asset included in the health benefit plan statement of actuarial opinion. Examples include risk adjustment transfer payment receivables, pharmacy rebate receivables, provider settlement receivables, and Medicare Part D settlement receivables.

Health Insurance Liability

An amount recorded in financial statements or accounting systems in order to reflect health benefit plan obligations. Common examples include health claims in course of settlement, health claims that are incurred but not yet reported, liabilities for settlements of provider contracts, contract reserves, experience refund liabilities, premium deficiency reserves, premium stabilization reserves, and liabilities for reinsurance payable.

Health Insurance Plans

A contract or other financial arrangement providing hospital, medical, prescription drug, dental, or vision benefits. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

Health Plan Entity

An insurance company, health maintenance organization, hospital or medical service organization, self-insured health benefit plan sponsor, governmental health benefit plan sponsor, or any other health benefit plan sponsor from which health filings are required. (ASOP No. 8)

Health Status Based

Using healthcare claims, pharmacy claims, lab test results, health risk appraisal or other data based on underlying conditions or treatment as well as demographic information such as age and gender. (ASOP No. 45)

Historical A/E Analysis

A/E analysis using the mortality tables, underwriting multipliers, improvement factors, medical records and other pertinent information actually used when the life expectancy was issued. (Exposure Draft, Proposed ASOP Life Settlements Mortality)

Historical A/E Mortality Basis

Mortality assumptions developed from a base  mortality table using information such as underwriting multipliers, improvement factors, medical records and other pertinent information relevant to the individual life expectancies as of their associated underwriting dates. (ASOP No. 48)

Historical Contributions

The contribution a particular policy or class of similar eligible policies has made to the company’s statutory surplus and asset valuation reserve in a given year. (ASOP No. 37)

Hold‐out Data

A subset of data that is withheld intentionally when developing a predictive model so that the model may be validated later with data that were not used to develop the model.

Home Care

Care received at the patient’s home, such as part-time skilled nursing care, custodial care, speech therapy, physical or occupational therapy, part-time services of home health aides, or help from homemakers or chore workers.

Homogeneity

The degree to which the expected outcomes within a risk class have comparable value. (ASOP No. 12)

Hospice Care

A program that provides health care to a terminally ill person and counseling for that person and his or her family. Hospice care can be offered in a hospice setting established for this single purpose, a nursing home, or in the person’s home, where nurses and social workers can visit the patient regularly. (ASOP No. 18)

IBNR

Adjustment to observed deaths in a given time period to account for deaths that have occurred but have not been reported due to the time lag in reporting systems or errors and incomplete information available from reporting sources regarding deaths. (ASOP No. 48)

IGT

A transfer of public funds between governmental entities (for example, county government to state government or state university hospital to state Medicaid agency). (Medicaid Managed-Care Capitation – Rate Development and Certification)

Illustrated Scales

A scale of nonguaranteed elements currently being illustrated that is not more favorable to the policyholder than the lesser of the disciplined current scale or the currently payable scale.

Illustration Actuary

An actuary who is appointed in accordance with the requirements set forth in the Model.

Immediate Gain Actuarial Cost Methods

An actuarial cost method under which actuarial gains and losses are included as part of the unfunded actuarial accrued liability of the pension plan, rather than as part of the normal cost of the plan.

Impaired Mortality

A mortality assumption that has been adjusted for impairments. (ASOP No. 48)

Impairment

A health factor or condition that tends to increase an insured’s probability of death. (ASOP No. 48)

Implementation

An executable form of the model. Examples of implementation may include, but not be limited to, a computer program, database, spreadsheet or any combination thereof. (Modeling)

Incentive Payments

A bonus payment to a provider, typically used to motivate efficiency or quality in patient care management, or to encourage retention of providers in a network. (ASOP No. 42)

Incurral Date

The date a claim is determined to be a liability of the organization in accordance with the terms of the health benefit plan. For health benefit plans where the claim must exceed a minimum threshold, for example where there is a deductible or elimination period, the incurral date may be the date claims begin to accumulate toward the threshold. (ASOP No. 5)

Incurred but not Reported (IBNR) Deaths

Adjustment to observed deaths in a given time period to account for deaths that have occurred but have not been reported due to the time lag in reporting systems or errors and incomplete information available from reporting sources regarding deaths. (ASOP No. 48)

Incurred Claims

A death that has taken place, whether known or not known. (Exposure Draft, Proposed ASOP Life Settlements Mortality)

Incurred Deaths

A death occurring during a period of exposure being analyzed, whether reported during that period or not. (ASOP No. 48)

Independent Living Units

Living quarters designed for residents capable of living independently. A resident could receive home health care in the independent living unit, but a resident who needs full-time health care on either a temporary or permanent basis is normally transferred to the health center.

Indeterminate Premium Policies

Life and health insurance policies under which the insurer is obligated to provide coverage for an extended period of time, and under which premiums may vary at the discretion of the insurer. (ASOP No. 10)

Individual

In this standard, the word refers both to individual life insurance and annuity contracts and to individual-type contracts issued under a “group” umbrella of any trust which does not have discretion to select the insurer(s) on behalf of all individual policyholders. (ASOP No. 1)

Individual Aggregate Actuarial Cost Method

A method under which the actuarial present value of each increment of an individual’s projected benefits is allocated on a level basis over the future earnings or service of the individual between the age at which such increment is first recognized and the exit age(s). The portion of this actuarial present value allocated to a valuation year is called the normal cost. The actuarial value of assets is deemed to be assigned to individuals on a reasonable and consistent basis; for example, each individual’s share may be the accumulation of his or her prior normal costs and any prior actuarial gains (losses) allocated to the individual. Actuarial gains (losses) are allocated to individuals in proportion to the assigned actuarial value of assets, or on any other reasonable and consistent basis. The actuarial accrued liability for an individual equals the assigned portion of the actuarial value of assets. (ASOP No. 4)

Individual Level Actuarial Cost Method

A method under which the actuarial present value of each increment of an individual’s projected benefits is allocated on a level basis over the future earnings or service of the individual between the age at which such increment is first recognized and the exit age(s). The portion of this actuarial present value allocated to a valuation year is called the normal cost. Each individual’s portion of the actuarial accrued liability should be determined on a consistent basis, usually as the retrospective accumulation of the individual’s prior actuarial accrued liability and prior normal cost, using the valuation actuarial assumptions. (ASOP No. 4)

Individual Policies

Any policy (or contract) that is defined as an individual policy under state insurance law or by the terms of the policy. Any certificate issued under any other policy that is sold to a passive trust but is marketed to individuals is also defined as an individual policy for purposes of this standard. (ASOP No. 33)

Individual Spread Gain Actuarial Cost Method

A method under which the actuarial present value of each increment of an individual’s projected benefits is allocated on a level basis over the future earnings or service of the individual between the age at which such increment is first recognized and the exit age(s). The portion of this actuarial present value allocated to a valuation year is called the normal cost. The actuarial value of assets is deemed to be assigned to individuals on a reasonable and consistent basis; for example, each individual’s share may be the accumulation of his or her prior normal costs and any prior actuarial gains (losses) allocated to the individual. Actuarial gains (losses) are allocated to individuals in proportion to the assigned actuarial value of assets, or on any other reasonable and consistent basis. The actuarial accrued liability for an individual equals the assigned portion of the actuarial value of assets. (ASOP No. 4)

Inflation

General economic inflation, defined as price changes over the whole of the economy.

Information Date

The date through which data and other information have been considered in setting assumptions.

Initial Assets

The assets allocated to a closed block at its inception. The assets of the closed block may be either of the following: (a) a distinct segment of assets (which may contain either 100% or a specified fraction of each designated asset) associated exclusively with the closed block; or (b) a defined share of a larger segment of assets. Such larger segment may also contain assets associated with participating business sold after the date of conversion. Such defined share will vary from time to time according to the methodology specified in the operating rules. (ASOP No. 33)

Initial Liabilities

The obligations ascribed to the closed block at its inception by the operating rules. (ASOP No. 33)

Input

Assumptions, data, or parameters used in a model.

Instrumental Activities of Daily Living (IADLs)

Functions, more complex than ADLs, that are used as measurement standards of functioning capacity; examples include preparing meals, managing medications, housekeeping, telephoning, shopping, and managing finances. (ASOP No. 18)

Insurance Business

An enterprise involved in assuming insurance risk, such as one or any combination of the following:  an insurance company or health maintenance organization; a collection of policies or contracts in-force that cover insurance risk; and a distribution system that sells such policies or contracts. (ASOP No. 19)

Insurance Cash Flow

Funds from premiums and miscellaneous (non-investment) income from insurance operations, and payments for losses, expenses, and policyholder dividends. Associated income taxes are recognized when the analysis is on a post-tax basis. (ASOP No. 30)

Insurance Risk

The extent to which the level or timing of actual insurance cash flows is likely to differ from expected insurance cash flows. (ASOP No. 30)

Insured

An individual whose life is covered by a life insurance policy. (ASOP No. 48)

Insurer

An entity that accepts the risk of financial losses or, for a specified time period, guarantees stated benefits upon the occurrence of specific contingent events, in exchange for a monetary consideration.

Intended Applications

The designer’s planned uses for the model. (Modeling)

Intended Audience

The persons to whom an appraisal report is directed and with whom the actuary, after discussion with the principal, intends to communicate. Unless otherwise specifically agreed, the principal is always a member of the intended audience. In addition, other persons or organizations, such as investors or regulators, may be designated by the principal, with consent of the actuary, as members of the intended audience. (ASOP No. 19)

Intended Purpose

The intended application or the project’s objective or both, depending on the actuary’s role. The intended application applies if the actuary’s role includes designing, building, or developing the model. The project’s objective applies if the actuary’s role includes selecting or using the model in an actual project.

Intended Users

Any person who the actuary identifies as able to rely on the actuarial findings. (ASOP No. 41)

Intergovermental Transfers (IGTs)

A transfer of public funds between governmental entities (for example, county government to state government or state university hospital to state Medicaid agency). (Medicaid Managed-Care Capitation – Rate Development and Certification)

Intermediate Nursing Care

Care needed for persons with stable conditions that require daily, but not 24- hour, nursing supervision. Intermediate nursing care is less specialized than skilled nursing care and often involves more custodial care. (ASOP No. 18)

Internal Capital Assessment

A methodology used to calculate the additional assets necessary in excess of liabilities to withstand shocks based on an internal quantification of financial risk exposures using stochastic methods or deterministic proxies. An internal capital assessment may indicate capital levels that are higher or lower than levels specified by regulators or rating agencies.

Investment Cash Flows

All cash flows related to investment operations, including investment purchases, sales, income, and expenses.

Investment Contracts

As each is defined in SFAS No. 97, & 6–14. (ASOP No. 10)

Investment Income

Proceeds (other than the return of principal) derived from the investment of assets, minus investment expenses. Associated income taxes are recognized when the analysis is on a post-tax basis. (ASOP No. 30)

Investment Income from Insurance Operations

The income associated with the investment of insurance cash flows. (This is sometimes referred to as investment income on policyholder-supplied funds.) (ASOP No. 30)

Investment Risk

Uncertainty surrounding the realization of a specified investment income stream. (ASOP No. 20)

Investment Yield Risk

The risk that investment yields will differ from expectations or assumptions, causing a change in the amount or timing of cash flows.

Investment-Rate-of-Return Risk

The risk that investment rates of return will differ from expectations or assumptions, causing a change in the amount or timing of asset, policy, or other liability cash flows. This has been commonly referred to in actuarial literature as the C-3 risk or asset/liability mismatch risk. (ASOP No. 7)

Judge

The judicial officer presiding over a domestic relations action, or an arbitrator, mediator, or special master acting in a similar adjudicatory capacity. (ASOP No. 34)

Known

ASOPs frequently refer to circumstances, factors, practices of the principal, or other items that are known to the actuary. In many cases, the actuary must rely upon the principal and others acting on the principal’s behalf to supply relevant information. Unless an ASOP clearly indicates otherwise, “known” means that the actuary had actual knowledge of the item in question at the time the actuary rendered actuarial services. (ASOP No. 1)

Lag Method

A method under which historical claim data, such as the number and amount of claims for the subject block of business, are grouped into the time periods in which claims were incurred and the time periods in which they were processed. The processing date is typically the date the claim is received, adjudicated, or paid by the claim payer. The method uses these groupings to create a claims processing or development pattern, which is used to help estimate the unprocessed portion of incurred claims. (ASOP No. 5)

LE

The expected future lifetime of an insured. There are two primary types of life expectancies, mean and median, are reported by LE providers in the life settlement market. (Exposure Draft, Proposed ASOP Life Settlements Mortality)

LE Provider

An entity that applies medical underwriting analysis to determine a mortality assumption or life expectancy. (ASOP No. 48)

Legal Expert

A third party that the actuary relies on to interpret the law and regulations related to the regulatory filing. For regulatory actuaries, this could be the legal authority designated or authorized to provide such advice for the government organization to which the actuary is responsible. (Revision of ASOP No. 8, Regulatory Filings for Health Plan Entities, to Include Specific Issues Related to the Accountable Care Act and Additional Guidance on Rating)

Level of Care

Varying degrees of care based on a resident’s or member’s health status. Typical levels of care include independent living, assisted living, nursing care, and memory care. The levels of care may be dictated by state licensure.

Leverage

A measure of the relative amount of risk to which capital is exposed, typically expressed as the ratio of an exposure measure (such as premium or liabilities) to the capital amount. (ASOP No. 30)

Liability

Any commitment by, or requirement of, an insurer that can reduce revenue or generate disbursement cash flows.

Liability for future policy benefits

An accrued obligation to policyholders that relates to insured events, such as death or disability, measured as the present value of future policy benefits minus the present value of future GAAP net premiums.

Life Care Community (LCC)

A CCRC in which nursing care is provided for life without increasing the periodic fee on account of a change in health. (ASOP No. 3)

Life Expectancy (LE)

The expected future lifetime of an insured. There are two primary types of life expectancies, mean and median, are reported by LE providers in the life settlements market. (ASOP No. 48)

Life Expectancy Provider (LE Provider)

An entity that applies medical underwriting analysis to determine a mortality assumption or life expectancy. (ASOP No. 48)

Life Settlement

The life insurance policy or policies sold to an investor.  The term “life settlement” includes viatical and other life settlements.  Generally, a viatical life settlement is any life settlement where the insured has a life expectancy of less than two to three years depending on state regulation. (ASOP No. 48)

Limited-Payment Contracts

As each is defined in SFAS No. 97, & 6–14. (ASOP No. 10)

Liquidation Rights

The rights (if any) that a member of a mutual company has upon liquidation of the company. (ASOP No. 37)

Liquidity Risk

The risk stemming from limited marketability of an investment. (Draft Proposed Revision of ASOP No. 20)

Living Units

The various living quarters of a CCRC, including independent living units and health center units.

Lock-in

A requirement to continue using original basis assumptions (as set at issue, acquisition, or prior redetermination due to a premium deficiency). (ASOP No. 10)

Long-Duration Health Benefit Plans

An insurance policy or other financial arrangement that establishes health-related obligations for an extended period of time. Benefits may begin several years after plan inception and may extend for several years. Benefits may be on a reimbursement, indemnity, or service benefit basis. Examples of long-duration health benefit plans include long-term disability income, long-term care, critical illness, and accidental death and dismemberment insurance.

Long-Range Period

A period long enough to discern the general pattern and level of future costs.

Long-Term (Custodial) Care

A wide array of health and other support services for people who suffer a loss of functional capacity that results in the need for continual one-to-one assistance of another person in the activities of daily living, such as walking, dressing, eating, toileting, or mobility. (ASOP No. 6)

Long-Term Care (LTC)

A wide range of health and social services, which may include adult day care, custodial care, home care, hospice care, intermediate nursing care, respite care, and skilled nursing care, but generally not care in a hospital. Long-term care is sometimes referred to as long-term services and supports or LTSS.

Long-Term Care Benefit Plan

A policy, contract, or arrangement providing LTC benefits, either on a stand-alone basis or as part of a plan that provides other benefits as well (except where the LTC benefits are an immaterial feature). The plan may describe requirements for benefit eligibility, covered services, benefit amount, benefit payment duration (including short-term and long-term), maximum benefit amount, and other coverage features.

Long-Term Care Insurance Plans

A policy, contract, or arrangement providing LTC benefits, either on a stand-alone basis or as part of a plan that provides other benefits as well (except where the LTC benefits are an immaterial feature). The plan will usually describe requirements for benefit eligibility, covered services, benefit amount, benefit payment duration, maximum benefit amount, and other coverage features. (ASOP No. 18)

Long-Term Products

A health benefit plan that provides medical or disability benefits for an extended period of time. Some examples are cancer, long-term care, and long-term disability policies. The plan’s benefits may not begin for several years after policy purchase and claims usually extend beyond the valuation date.

Loss

The cost that is associated with an event that has taken place and that is subject to coverage. It is also known as “claim amount.” The term “loss” may include loss adjustment expenses as appropriate.

Loss Adjustment Expenses (LAE)

The cost of administering, determining coverage for, settling, or defending claims even if it is ultimately determined that the claim is invalid. It is also known as “claims adjustment expense.” (ASOP No. 28)

LTC

A wide range of health and social services, which may include adult day care, custodial care, home care, hospice care, intermediate nursing care, respite care, and skilled nursing care, but generally not care in a hospital. Long-term care is sometimes referred to as long-term services and supports or LTSS.

LTC Benefit Plans

A policy, contract, or arrangement providing LTC benefits, either on a stand-alone basis or as part of a plan that provides other benefits as well (except where the LTC benefits are an immaterial feature). The plan may describe requirements for benefit eligibility, covered services, benefit amount, benefit payment duration (including short-term and long-term), maximum benefit amount, and other coverage features.

LTC Insurance Plans

A policy, contract, or arrangement providing LTC benefits, either on a stand-alone basis or as part of a plan that provides other benefits as well (except where the LTC benefits are an immaterial feature). The plan will usually describe requirements for benefit eligibility, covered services, benefit amount, benefit payment duration, maximum benefit amount, and other coverage features. (ASOP No. 18)

Managed-Care Organization (MCO)

The entity contracting with the state Medicaid agency to provide health care services for selected subsets of the Medicaid population. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Margins

An adjustment for uncertainty, such as that caused by a lack of full credibility of the data. (Modeling)

Marital Property

Assets of the marital estate as determined under the laws and regulations of the applicable jurisdiction. (ASOP No. 34)

Market Interest Rates

Interest rates that are available on funds invested at a particular date. (ASOP No. 20)

Market Risk

Uncertainty regarding the future market value of an asset. (ASOP No. 20)

Market Risk Benefits

A contract or contract feature in a long-duration contract issued by an insurance entity that both protects the contract holder from other-than-nominal capital market risk and exposes the insurance entity to other-than-nominal capital market risk by providing a benefit in excess of account value.

Market Value

The price that would be received to sell an asset in an orderly transaction between market participants at the measurement date (sometimes referred to as fair value). (ASOP No. 44)

Market-Consistent Actuarial Present Value of Accrued Benefits

The market-consistent actuarial present value of accrued benefits that are expected to be paid in the future. For the purpose of this present value measurement, accrued benefits include vested and nonvested benefits, and take into account the following items (if applicable to the plan benefits) as of the measurement date:

a. accrued service;

b. compensation;

c. substantive plan provisions, i.e., the plan as it is commonly understood by the plan sponsor and participants, reflecting current benefit administration practice;

d. ancillary benefits, such as disability benefits or death benefits; and

e. automatic cost-of-living adjustments.

Ancillary benefits and early retirement subsidies are deemed to accrue on a pro rata basis over total service. Any benefit that is not based on service is deemed to accrue on a pro rata basis over total service. Benefits that are disproportionately backloaded relative to service are deemed to accrue on a pro rata basis over total service. (Measuring Pension Obligations and Determining Pension Plan Costs or Contributions)

Market-Consistent Present Value

An actuarial present value that is consistent with the price at which benefits that are expected to be paid in the future would trade in an open market between a knowledgeable seller and a knowledgeable buyer. The existence of a deep and liquid market for pension cash flows or for entire pension plans is not a prerequisite for this present value measurement.

Market-Estimate Assumptions

An assumption that represents what a typical market participant would use in assessing the amount the participant would pay to acquire a given asset, or the amount the participant would require to assume a given liability (a so-called “exit market” price). (ASOP No. 10)

Material

Resulting in an impact, significant to the interested parties, on the affected actuarial incurred claim estimate. (ASOP No. 5)

Materiality

“Materiality” is a consideration in many aspects of the actuary’s work. An item or a combination of related items is material if its omission or misstatement could influence a decision of an intended user. When evaluating materiality, the actuary should consider the purposes of the actuary’s work and how the actuary anticipates it will be used by intended users. The actuary should evaluate materiality of the various aspects of the task using professional judgment and any applicable law (statutes, regulations, and other legally binding authority), standard, or guideline. In some circumstances, materiality will be determined by an external user, such as an auditor, based on information not known to the actuary. The guidance in ASOPs need not be applied to immaterial items. (ASOP No. 1)

Materiality Standard

The amount that the actuary judges to be material in determining if there is a significant risk of material adverse deviation with respect to the loss and loss adjustment expense reserves.

May

“May” as used in the ASOPs means that the course of action described is one that would be considered reasonable and appropriate in many circumstances. “May” in ASOPs is often used when providing examples (for example, factors the actuary may consider; methods that may be appropriate). It is not intended to indicate that a course of action is reasonable and appropriate in all circumstances, nor to imply that alternative courses of action are impermissible. (ASOP No. 1)

MCO

The entity contracting with the state Medicaid agency to provide health care services for selected subsets of the Medicaid population. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Mean Life Expectancy

The average life expectancy based on the assumed survival curve. (ASOP No. 48)

Measurement Dates

The date as of which the values of the retiree group benefits obligation and, if applicable, the assets are determined (sometimes referred to as the “valuation date”).

Measurement Period

The period subsequent to the measurement date during which the chosen assumptions or other model components will apply. The period often ends at the time the last participant is expected to receive the final benefit.

Median Life Expectancy

The point in time at which, based on the assumed survival curve, there is a 50% probability that the person will still be alive. (ASOP No. 48)

Medical Education Payments

Payments for graduate medical education as part of the rate structure for inpatient hospital payments or as supplemental payments under 42 CFR 447.272. These payments may include direct (GME) or indirect (IME) costs for medical education. These payments may be included as part of Medicaid managed-care capitation rates or may be made directly to providers for managed-care enrollees. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Medicare Integration

The approach to determining the portion of a Medicare-eligible claim that is paid by the benefit plan after adjustment for Medicare reimbursements for the same claim. Types of Medicare integration include the following:

a. Full Coordination of Benefits (Full COB)—The health plan pays the difference between total eligible charges and the Medicare reimbursement amount, or the amount it would have paid in the absence of Medicare, if less.

b. Exclusion—The health plan applies its normal reimbursement formula to the amount remaining after Medicare reimbursements have been deducted from total eligible charges.

c. Carve-Out—The health plan applies its normal reimbursement formula to the total eligible charges, and then subtracts the amount of Medicare reimbursement. (ASOP No. 6)

Medicare-Eligible Participants

A participating individual who is entitled to Medicare benefits. (ASOP No. 6)

Members

A person who has signed a membership agreement with an At Home Program.

Membership Agreement

A contract between one or more members and an At Home Program that describes the services to be provided and the obligations of the parties. The contract is usually of long duration and may be for the life of each member. The contract describes the health care guarantee and any refund guarantee.

Membership Rights

Any rights a member of a mutual company has by virtue of ownership of an insurance policy, other than the contractual insurance rights under the policy. Typical membership rights include voting rights and the rights, if any, the member has upon liquidation of the company. (ASOP No. 37)

Merit Adjustments

The rates of change  in an individual’s compensation attributable to personal performance, promotion, seniority, or other individual factors.

Merit Scale

The rates of change in an individual’s compensation attributable to personal performance, promotion, seniority, or other individual factors. (Proposed Revision of ASOP No. 27)

Methods

A systematic procedure for developing, reviewing, or changing rates.

Minimum Medical Loss Ratio

A provision that requires the MCO to use no less than a stated portion of its earned premium for defined medical or care management expenditures. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Minimum Net Premium Reserve

The formula reserve calculated in accordance with the procedures set forth in section 3 of VM-20.

Minimum Reserve

The minimum reserve standard for all life policies subject to the requirements of the Valuation Manual. (Principle-Based Reserves for Life Products)

Minimum Value

The minimum required actuarial value for employer-sponsored group plans, as applied under the ACA. In the large group market, the MV is a component of the determination of whether an employer is subject to a penalty. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

Minimum Value (MV) Calculator

A spreadsheet released by Health and Human Services (HHS), used to determine the MV. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

Minimum Value Requirements

The minimum required actuarial value for certain employer-sponsored health insurance plans, as defined by regulations issued pursuant to the ACA. (Determining Minimum Value and Actuarial Value under the Affordable Care Act)

Model

A mathematical or empirical representation of a specified phenomenon.

Model Framework

The configuration of a model and how the model operates. (Pricing of Life Insurance and Annuity Products)

Model Output

Data or information produced by the model. (ASOP NO. 38 Proposed Revision)

Model Points

A record used in a model to represent a cohort of policies with similar characteristics. (Pricing of Life Insurance and Annuity Products)

Model Risk

The risk that the methods are not appropriate to the circumstances or the models are not representative of the specified phenomenon. (ASOP No. 43)

Model Run

The output of a model derived from a given set of input. (Modeling, Second Exposure Draft)

Model Segment

A group of policies and associated assets that are modeled together to determine the path of net asset earned rates. (Principle-Based Reserves for Life Products)

Model Select Mortality Factors

The select mortality factors in the appendix of the Model. (ASOP NO. 40)

Modeling

Selecting, designing, building, modifying, developing, using, reviewing, or evaluating models.

Modeling Cells

Policies that are treated in a cash flow model as being completely alike with regard to demographic characteristics, policyholder behavior assumptions, and policy provisions.

Moderately Adverse Conditions

Conditions that include one or more unfavorable, but not extreme, events that have a reasonable probability of occurring during the testing period.

Moderately Adverse Deviation

A change made to one or more assumptions in order to perform asset adequacy analysis under moderately adverse conditions.

Modification Factors

A factor that is used to adjust standard mortality to reflect rating classification. This may include items such as flat extras, mortality multiples, and age ratings. (ASOP No. 48)

Modified A/E Analysis

Any A/E analysis, other than a historical A/E analysis, in which mortality assumptions differ from those originally used by the LE provider. This may result in life expectancy estimates that differ from those originally provided. (Exposure Draft, Proposed ASOP Life Settlements Mortality)

Modified A/E Mortality Basis

Mortality assumptions other than the historical A/E mortality basis. Use of this basis may result in life expectancy estimates that differ from those originally provided. (ASOP No. 48)

Morbidity

The incidence of or resource use associated with a medical condition or group of conditions.

Morbidity Rate

The probability of incurring an illness or disability requiring the transfer to a different level of care. The permanent transfer rates and the temporary transfer rates together comprise the morbidity rates. (ASOP No. 3)

Mortality Assumptions

The annual probability of death at each age and duration. This may reflect an assumption of future mortality improvement or deterioration or modification factors. This term may apply to either a single insured or group of insureds. (Exposure Draft, Proposed ASOP Life Settlements Mortality)

Mortality Multiple

A modification factor typically determined from a debit/credit underwriting methodology. (ASOP No. 48)

Must

The words “must” and “should” are used to provide guidance in the ASOPs. “Must” as used in the ASOPs means that the ASB does not anticipate that the actuary will have any reasonable alternative but to follow a particular course of action. In contrast, the word “should” indicates what is normally the appropriate practice for an actuary to follow when rendering actuarial services. Situations may arise where the actuary applies professional judgment and concludes that complying with this practice would be inappropriate, given the nature and purpose of the assignment and the principal’s needs, or that under the circumstances it would not be reasonable or practical to follow the practice. Failure to follow a course of action denoted by either the term “must” or “should” constitutes a deviation from the guidance of the ASOP. In either event, the actuary is directed to ASOP No. 41, Actuarial Communications. The terms “must” and “should” are generally followed by a verb or phrase denoting action(s), such as “disclose,” “document,” “consider,” or “take into account.” For example, the phrase “should consider” is often used to suggest potential courses of action. If, after consideration, in the actuary’s professional judgment an action is not appropriate, the action is not required and failure to take this action is not a deviation from the guidance in the standard. (ASOP No. 1)

Mutual Company

A mutual life insurance company, or a mutual holding company formed in conjunction with the demutualization of a mutual life insurance company. (ASOP No. 37)

MV

The minimum required actuarial value for employer-sponsored group plans, as applied under the ACA. In the large group market, the MV is a component of the determination of whether an employer is subject to a penalty. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

MV Calculator

A spreadsheet released by Health and Human Services (HHS), used to determine the MV. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

MV Requirements

The minimum required actuarial value for certain employer-sponsored health insurance plans, as defined by regulations issued pursuant to the ACA. (Determining Minimum Value and Actuarial Value under the Affordable Care Act)

MVC

Data and methodology released by HHS that is used to determine whether the MV requirement is met.

MVC-AV

The actuarial value calculated using the MV Calculator, including any adjustments for non-standard plan designs. (Determining Minimum Value and Actuarial Value under the Affordable Care Act)

Net GAAP Liability

The GAAP policy benefit liability less any associated DPAC, VOBA, and DSI. (ASOP No. 10)

Net Liabilities

Reserves (net of reinsurance reserve credits), plus any other liabilities (such as amounts due the assuming entities), less any other assets arising from a reinsurance program (such as amounts receivable from assuming entities or deferred acquisition costs), for the reinsured block of business.

Net Premium Reserves

The formula reserve calculated in accordance with the procedures set forth in the Valuation Manual.

Net Retained Business

The portion of the business written or assumed by the ceding entity that is not subject to the reinsurance program.

Net Statement Liabilities

Reserves (net of reinsurance reserve credits), plus any other liabilities (such as amounts due reinsurers), less any other assets arising from reinsurance transactions (such as amounts receivable from reinsurers or deferred acquisition costs) for the reinsured block of business. (ASOP No. 11)

Neutral

A description of model inputs or methodologies that are intended to anticipate expected future experience without any adjustment for uncertainty or for asymmetric alternative outcomes. (Modeling)

NGE

Any premium, charge, or benefit within an insurance policy that affects policy costs or values, is not guaranteed in the policy, and can be changed at the discretion of the insurer. An NGE may provide a more favorable value to the policyholder than an element that is guaranteed in the policy. Examples of nonguaranteed charges or benefits include credited interest in excess of the minimum guaranteed rate, cost of insurance (COI) charges, bonuses, indeterminate premiums, index parameters, and expense charges.

NGE Framework

The combination of the determination policy, how policy classes are established, and the practices used to determine NGE scales.

NGE Scale

A series of one or more premiums, charges, or benefits, which are not guaranteed and can be changed over time. For example, an NGE scale for COI charges could be set based on issue age, underwriting class, and duration.

Non-Contractual Resident

A person living in the CCRC without a health care guarantee and without a refund guarantee. Non-contractual residents normally pay for all health care services received on a fee for service basis. Examples of non-contractual residents are rental or lease residents, and direct admissions to the health center.

Non-Resident

A person living in the CCRC who has signed an agreement without a health care guarantee and without a refund guarantee. Non-residents normally pay for all health care services received on a fee for service basis.

Non-Standard Plan Design

In various situations, the actuary will need to consider adjusting the results of the AV or MV Calculators because of limitations associated with the calculators or features of unique or innovative plan designs that are expected to have a material effect on the plan’s AV. These situations are referred to as non-standard or unique plan designs. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

Nonforfeiture Benefits

Benefits that are available if premiums are discontinued.

Nonguaranteed Charges or Benefits

Any element within a policy (as defined in section 2.5), other than policy dividends, which affects policyholder costs or value, and which may be changed at the discretion of the insurer after issue.  Examples of nonguaranteed charges or benefits include excess interest, mortality charges or expense charges lower than those guaranteed in the policy indeterminate premiums, and participation rates for equity-indexed products. (ASOP No. 2)

Nonguaranteed Element Framework

The structure by which the insurer determines nonguaranteed elements. This includes the assignment of policies to experience factor classes, the method of allocating income and costs, and the structure of the formulas or other methods of using experience factors. For participating policies, this would include the dividend framework defined in ASOP No. 15. For life policies within the scope of ASOP No. 2, the nonguaranteed element framework would include the concepts of policy class, determination policy, and anticipated experience factors.

Nonguaranteed Elements

Any element within an insurance policy that affects policy costs or values that is not guaranteed or not determined at issue. A nonguaranteed element may provide a more favorable value to the policyholder than that guaranteed at the time of issue of the policy. Examples of nonguaranteed elements include policy dividends, excess interest credits, mortality charges, expense charges, indeterminate premiums, and participation rates and maximum rates of return for indexed life insurance products.

Nonguaranteed Reinsurance Element Framework

The practices, methods, and criteria used by the assuming entity to determine nonguaranteed reinsurance elements.

Nonguaranteed Reinsurance Elements

Any premium, charge, or benefit within a reinsurance program that affects reinsurance costs or values, is not guaranteed in the reinsurance program, and can be changed at the discretion of the assuming entity or service provider. A nonguaranteed reinsurance element may provide a more favorable value to the ceding entity than an element that is guaranteed in the policy. Examples of nonguaranteed reinsurance elements are the premiums in a yearly renewable term reinsurance agreement that are defined as nonguaranteed and service provider fees that can be contractually changed.

Nonproportional Features

A feature of a reinsurance agreement in which the reinsuring entity agrees to reimburse the ceding entity for losses above a predetermined aggregate level and up to an aggregate reimbursement limit. Examples of such nonproportional features include aggregate claim limits, deductibles, limited coverage periods, stop-loss coverage, layers of claims covered (such as claims starting and ending at defined levels), and separate but related reinsurance agreements (i.e., where the results of one reinsurance agreement affect the operation of the other).

Normal Costs

The portion of the actuarial present value of projected benefits (and expenses, if applicable) that is allocated to a period, typically twelve months, under the actuarial cost method. Under certain actuarial cost methods, the normal cost is dependent upon the actuarial value of assets.

Normative Database

Data compiled from sources that are expected to be typical of the retiree group benefits program, rather than from plan-specific experience. Examples of normative databases include published mortality and disability tables, proprietary premium manuals, and experience on similar retiree group benefits programs. (ASOP No. 6)

Notional Asset Portfolio

A portfolio of assets, not owned by the insurer, which changes the risk characteristics of either the assets or the liabilities of the insurer. (ASOP No. 7)

Nursing Home

A residential facility which provides long-term nursing care to those who are unable to handle their own daily living needs. They are typically staffed by nurses with a physician on call, and care may range from custodial to skilled.

Occupancy Rates

The number of occupied units at each level of care by contractual and non-contractual residents, relative to available units.

One-Year Term Cost

The actuarial present value, as of a valuation date, of all benefits expected to become payable in the future as a result of an event or events expected to occur during a valuation year. (ASOP No. 4)

Open Group/Closed Group

Terms used to distinguish between two classes of actuarial cost methods. Under an open group actuarial cost method, actuarial present values associated with expected future entrants are considered; under a closed group actuarial cost method, actuarial present values associated with future entrants are not considered. (ASOP No. 4)

Operating Profit

The sum of underwriting profit, miscellaneous (non-investment) income from insurance operations, and investment income from insurance operations. Associated income taxes are recognized when the analysis is on a post-tax basis. (ASOP No. 30)

Operating Rules

All portions of the plan of conversion that specify the methods and procedures for setting up, maintaining, and monitoring the operations of a closed block. (ASOP No. 33)

Oral Communication

An actuarial communication made orally that has not, to the knowledge of the actuary, been recorded or transcribed verbatim. Such an oral communication is an actuarial communication, but is not an actuarial document. (ASOP No. 41)

Organization

The entity for which ERM is being performed. Examples include public or private companies, government entities, and associations, whether for profit or not for profit. (ASOP No. 46)

ORSA

An internal assessment of the adequacy of an organization’s risk management and current, and likely future, solvency position, including action plans produced from the assessment. ORSA is a widely recognized key component of the ERM frameworks of many insurance organizations. ORSA is a requirement in most insurance regulatory regimes globally, although in some regimes it is not mandated for certain organizations. Nevertheless, some organizations elect to perform non-mandated ORSAs.

ORSA Report

A report produced with the following objectives: a) to communicate the main outcomes, rationale, calculations, conclusions, and action plans of the ORSA to senior management and board level; b) to explain to insurance regulators how the ERM framework operates; and c) to outline to insurance regulators the results of the solvency assessment.

Other Acquisition Expenses

Costs, other than commission and brokerage fees, associated with the acquisition of business. (ASOP No. 29)

Other Cash Flows

All cash flows not related to underwriting or investment operations. Examples include shareholder dividends, capital contributions, and non-risk bearing fee income.

Other Liability Cash Flow

Cash flows not specifically associated with asset or policy cash flows. Examples are corporate expenses, payables, surplus notes, shareholder dividends, or balance sheet items that result from litigation. (ASOP No. 7)

Other Users

Any recipient of an actuarial communication who is not an intended user. (ASOP No. 41)

Output

The results of a model including point estimates, likely or possible ranges, parameters (as input for other models), or qualitative criteria on which decisions could be made.

Output Smoothing Methods

A method used by the actuary to adjust the results of a contribution allocation procedure to reduce volatility.

Overfitting

A situation where a model fits sample data so closely that prediction accuracy decreases when the model is applied to different (for example, out-of-sample) data.

Overview

Pension obligation values incorporate assumptions about pension payment commencement, duration, and amount. Pension obligation values also require discount rates to convert future expected payments into present values. In order to measure a pension obligation, the actuary will typically need to select or assess assumptions underlying the obligation.

Own Risk And Solvency Assessment

An internal assessment of the adequacy of an organization’s risk management and current, and likely future, solvency position, including action plans produced from the assessment. ORSA is a widely recognized key component of the ERM frameworks of many insurance organizations. ORSA is a requirement in most insurance regulatory regimes globally, although in some regimes it is not mandated for certain organizations. Nevertheless, some organizations elect to perform non-mandated ORSAs.

Parameter Risk

The risk that the parameters used in the methods or models are not representative of future outcomes. (ASOP No. 43)

Parameters

Mathematical, financial, economic, or statistical input to models that, when  varied, results in different realizations. Examples include expected values, and the coefficients of variables in mathematical distributions or regression formulae. As input to a model, parameters are sometimes considered assumptions and are sometimes considered data, but are named separately in this standard.

Participant

An individual who (a) is currently receiving benefit coverage under a retiree group benefits program, (b) is reasonably expected to receive benefit coverage under a retiree group benefits program upon satisfying its eligibility and participation requirements, or (c) is a dependent of an individual described in (a) or (b).

Participant Contributions

Payments made by a participant to support a retiree group benefits program. (2nd Draft Proposed Revision of ASOP No. 6)

Participating Policy

An insurance or annuity policy under which the policyholder is entitled to participate in the distributable surplus of the company. (ASOP No. 10)

Pay-as-You-Go

A method of financing a pension plan under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments and expenses becoming due. (ASOP No. 4)

PBA Review Actuaries

An independent and qualified actuary who is retained by the board of directors of the company or its designee to render a PBA review opinion. (Independent Review of Principles-Based Valuations)

PBR Actuarial Reports

The document or set of documents containing supporting information prepared by the company under the direction of a qualified actuary as required by Chapter VM-31: PBR Report Requirements for Business Subject to a Principle-Based Reserve Valuation of the Valuation Manual (VM-31). (Principle-Based Reserves for Life Products (Second Exposure Draft))

Performance Incentives

A payment mechanism under which an MCO may receive funds in addition to the capitation rates for meeting targets specified in the contract between the state and the MCO. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Performance Withholds

An amount included in the capitation rates that is paid if the MCO meets certain state requirements, which may be related to quality or operational metrics. The amount may be withheld or paid up front with the monthly capitation rate. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Periodic Costs

The amount assigned to a period using a cost allocation procedure for purposes other than funding.  This may be a function of plan obligations, normal cost, expenses, and assets.  In many situations, periodic cost is determined for accounting purposes.

Periodic Fees

Amounts payable by a resident periodically (usually monthly) during the existence of a residency agreement. The periodic fees are typically adjusted from time to time to reflect changes in operating costs.

Permanent Transfer

A move from one level of care to another level of care without expectation of returning to the former level of care.

Physical Property

Physical assets, such as land, building, furniture, fixtures, or equipment, which belong to the CCRC. These assets, excluding land, are assumed to depreciate over their respective lifetimes. These assets are also referred to as the fixed assets of the CCRC.

Plan of Conversion

The plan under which a mutual company converts to a stock company. (ASOP No. 37)

Plan Provisions

The relevant terms of the plan document and any relevant administrative practices known to the actuary.

Plan Sponsors

An organization that establishes or maintains a retiree group benefits program. Examples of plan sponsors include employers and Taft-Hartley Boards of Trustees. (2nd Draft Proposed Revision of ASOP No. 6)

Policy

Unless otherwise specified, the term policy (and its plural form, policies) in this standard includes both insurance policy and annuity contract. In some demutualizations it may also include supplementary contracts.

Policy Benefit Liabilities

An accrued obligation to policyholders that relates to the payment of future costs and amounts accrued for unearned revenue. The amount accrued for unearned revenue may or may not be shown separately in the company’s financial statements, but is, in any case, included in the policy benefit liability for purposes of this standard. (ASOP No. 10)

Policy Cash Flow

All premiums and other amounts paid by policyholders or contract holders to the insurer and all benefits, expenses, and other amounts paid to policyholders or others as required by policy or law. (ASOP No. 7)

Policy Cash Flow Risk

The risk that the amount or timing of cash flows under a policy or contract will differ from expectations or assumptions for reasons other than a change in investment rates of return or a change in asset cash flows. This has been commonly referred to in actuarial literature as the C-2 risk. (ASOP No. 7)

Policy Class

Policies that are grouped together for the purposes of determining an NGE.

Policy Factors

A premium, value, charge, or benefit that limits a nonguaranteed charge or benefit. Policy factors are based on the guarantees defined in the policy. Examples of policy factors include minimum cash values, minimum mortality charges, maximum gross premiums, and maximum policy loan interest rates.

Policyholder

Policyholder Dividends

Nonguaranteed returns of premium or distributions of surplus. (ASOP No. 29)

Pooled Health Plans

A health benefit plan in which the claim cost portion of its premium rates is based at least in part on the claims experience of groups other than the group being valued. The use of projection assumptions that are not based solely on the claims experience of the group being valued (for example, the health care cost trend rate assumption) would not by itself create a pooled health plan. (2nd Draft Proposed Revision of ASOP No. 6)

Population Projections

An estimate of the number of residents expected to live in the CCRC at various future times.

Portfolio Interest Rate

Interest rate on an investment portfolio, calculated relative to current book values or on other asset valuation bases. (ASOP No. 20)

Practical

ASOPs frequently call upon actuaries to undertake certain inquiries, perform certain analytical tests, or make disclosures if it is “practical” or “practicable” to do so. These terms are intended to suggest that all possible steps need not always be taken to complete an assignment. A professional assignment frequently requires the actuary to adopt a course of action that is likely to yield an appropriate result without being unnecessarily time-consuming, elaborate, or costly relative to the principal’s needs. Thus, it is appropriate for the actuary, exercising professional judgment, to decide that the circumstances surrounding a particular assignment are such that it would not be necessary to undertake a particular task. (Note: ASOPs commonly use “practical” and “practicable” interchangeably.) (ASOP No. 1)

Prefunding Contributions

A potential payment to prefund the retiree group benefits program , other than by the participant, determined by the actuary. It may or may not be the amount actually paid by the plan sponsor or other contributing entity. (2nd Draft Proposed Revision of ASOP No. 6)

Premium Deficiency

A condition that exists when the net GAAP liability plus the present value of future gross premiums is less than the present value of future benefits and expenses using current best estimate assumptions. (ASOP No. 10)

Premium Deficiency Reserves

A liability established when, for a period of time, the value of future premiums, current reserves, and unpaid claims liability are less than the value of future claim payments and expenses plus the anticipated liabilities at the end of the period.

Premium-Related Expenses

Those expenses that vary in direct proportion to premium, e.g., premium taxes. These expenses are sometimes referred to as variable expenses. (ASOP No. 29)

Premiums

The final price charged for the transfer of risk.

Prescribed Asset Valuation Method

A specific asset valuation method that is mandated by law, regulation, or other binding authority. For purposes of this standard, the plan sponsor would be considered a binding authority to the extent that law, regulation, or accounting standards give the plan sponsor responsibility for selecting such an asset valuation method. (ASOP No. 44)

Prescribed Assumption or Method

A specific assumption or method that is mandated or that is selected from a specified range that is deemed to be acceptable by law, regulation, or other binding authority. For purposes of this standard, the plan sponsor would be considered a binding authority to the extent that law, regulation, or accounting standards give the plan sponsor responsibility for selecting such an assumption or method.

Prescribed Assumption or Method Set by Another Party

A specific assumption or method that is selected by another party, to the extent that law, regulation, or accounting standards give the other party responsibility for selecting such an assumption or method. For this purpose, an assumption or method selected by a governmental entity for a plan that such governmental entity or a political subdivision of that entity directly or indirectly sponsors is a prescribed assumption or method set by another party.

Prescribed Assumption or Method Set by Law

A specific assumption or method that is mandated or that is selected from a specified range or set of assumptions or methods that is deemed to be acceptable by applicable law (statutes, regulations, and other legally binding authority). For this purpose, an assumption or method selected by a governmental entity for a plan that such governmental entity or a political subdivision of that entity directly or indirectly sponsors is not a prescribed assumption or method set by law.

Prescribed Assumptions

A specific assumption that is mandated or that is selected from a specified range that is deemed to be acceptable, by law, regulation, or other binding authority. (ASOP No. 21)

Prescribed Assumptions or Methods Set by Another Party

A specific assumption or method that is selected by another party, to the extent that law, regulation, or accounting standards give the other party responsibility for selecting such an assumption or method. For this purpose, an assumption or method selected by a governmental entity for a plan that such governmental entity or a political subdivision of that entity directly or indirectly sponsors is a prescribed assumption or method set by another party.

Prescribed Assumptions or Methods Set by Law

A specific assumption or method that is mandated or that is selected from a specified range or set of assumptions or methods that is deemed to be acceptable by applicable law (statutes, regulations, and other legally binding authority). For this purpose, an assumption or method selected by a governmental entity for a plan that such governmental entity or a political subdivision of that entity directly or indirectly sponsors is not a prescribed assumption or method set by law.

Present Value

The value at a point in time of cash flows at other points in time, calculated at selected interest rates.  It is also known as “discounted present value” or “discounted value.” (ASOP No. 36)

Pricing

The process of setting charges for, and benefits provided by, an insurance policy or annuity contract at issue. Examples of charges include premiums, cost of insurance charges, separate account charges, surrender charges, and policy fees. Examples of benefits include death benefits, surrender benefits, and income benefits.

Pricing Valuation

A measurement of pension obligations performed by the actuary to estimate the impact on the periodic cost or the actuarially determined contribution of proposed changes to plan benefit provisions.

Principal

A client or employer of the actuary.

Principle-Based Reserve (PBR)

The reserve resulting from a principle-based valuation prepared in accordance with the Valuation Manual. (Principle-Based Reserves for Life Products)

Principle-Based Reserve (PBR) Actuarial Reports

The document or set of documents containing supporting information prepared by the company under the direction of a qualified actuary as required by Chapter VM-31: PBR Report Requirements for Business Subject to a Principle-Based Reserve Valuation of the Valuation Manual (VM-31). (Principle-Based Reserves for Life Products (Second Exposure Draft))

Principle-Based Valuation

A valuation that uses a cash flow model to project liability and asset cash flows to estimate the values and analyze the risks of policy benefits and guarantees, and of the assets backing the policies. It uses assumptions for some risk factors that are based on the insurer’s own experience to the extent relevant and credible. (Principle-Based Reserves for Life Products)

Process Risk

The risk associated with the projection of future contingencies, that are inherently variable, even when the parameters are known with certainty. (ASOP No. 43)

Productivity Growth

The rates of change in a group’s compensation attributable to the change in the real value of goods or services per unit of work.

Professional Judgment

Actuaries bring to their assignments not only highly specialized training, but also the broader knowledge and understanding that come from experience. For example, the ASOPs frequently call upon actuaries to apply both training and experience to their professional assignments, recognizing that reasonable differences may arise when actuaries project the effect of uncertain events. (Introduction – Introductory Actuarial Standard of Practice)

Profit Margin

The difference between all expected cash inflows and all expected cash outflows in the future cost estimate of the risk transfer or risk retention. The profit margin is also equal to the underwriting profit margin, plus the provision for investment income, less expected income taxes, plus any risk margins in the future cost estimate. Profit margin is also known as total return.

Profitability Analysis

An evaluation of a product’s expected financial return using a set of pricing assumptions and a specified model framework.

Profitability Metrics

A measurement used to assess a product’s expected level of financial return.

Program

Health benefit programs including but not limited to commercial and employer sponsored health insurance, self-funded employer health insurance, and government sponsored health insurance, such as Medicaid and Medicare.

Program Assets

The investments held by the trust fund, including any cash balance, available to meet program costs.

Program Costs

The program’s expenditures for benefits and administrative or general expenses. The expenditures for benefits are sometimes referred to as claim costs. The amount required to attain and maintain a target trust fund level may also be included.

Program Income

The program’s tax income, investment income, premiums, and any other receipts and income, other than loan proceeds.

Project Objective

The specific goal or question the actuary is addressing when selecting or using a catastrophe model to meet the needs of the principal. (ASOP No. 38 Revision)

Projected Benefits

Those pension plan benefit amounts which are expected to be paid at various future times under a particular set of actuarial assumptions, taking into account such items as the effect of advancement in age and past and anticipated future compensation and service credits. That portion of an individual’s projected benefit allocated to service to date, determined in accordance with the terms of a pension plan and based on future compensation as projected to retirement, is called the credited projected benefit. (ASOP No. 4)

Projection Actuarial Cost Method

A method under which the excess of the actuarial present value of the sum of projected benefit payments for a specified period plus a funding objective as of the end of the period over the actuarial value of assets is allocated on a level basis over the earnings or service of the group during the specified period, including earnings or service for any future entrants assumed. The allocation is performed for the group as a whole, not as a sum of individual allocations. The portion of this actuarial present value allocated to a valuation year is called the annual cost allocation. (ASOP No. 4)

Projection Method

The application of an adjusted historical claim metric to an appropriate exposure base, in order to estimate incurred claims. (ASOP No. 5 Revision – Incurred Health and Disability Claims)

Provider-Related Assets or Liabilities

An amount established for expected future incentive payments or receipts or for non-claim related payments or receipts.

Provider-Related Liabilities

A liability established to cover expected future incentive or non-claim payments or to cover the possibility of a change in the relationship between the risk-assuming entity and a provider. (ASOP No. 42)

Providers

Individuals, groups, or organizations providing health care services, including doctors, hospitals, physical therapists, medical equipment suppliers, etc.

Provision for Adverse Deviation

An explicit amount to make some provision for uncertainty in a liability. This sometimes is called a Provision for Uncertainty or a Margin for Uncertainty.

Prudent Estimate Assumptions

A risk factor assumption developed by applying margins to the anticipated experience assumption for that risk factor. (Principle-Based Reserves for Life Products)

Qualified Actuary

An actuary who meets the qualification requirements set forth by applicable law. (ASOP No. 22)

Qualified Domestic Relations Order (QDRO)

A domestic relations order that satisfies the qualification requirements of Internal Revenue Code (IRC) section 414(p) and section 206(d) of the Employee Retirement Income Security Act of 1974 (ERISA). (ASOP No. 34)

Qualified Opinion

A PBA review opinion that contains a statement that the PBA review actuary disagrees with a material aspect of the actuarial judgments of the certifying actuary. (Qualified Opinion)

RADV

The process of verifying the accuracy of information submitted for use in the risk-adjustment model.

Rate of Investment Return

Investment income earned on funds held over time, expressed as a percentage of those funds. (ASOP No. 8)

Ratemaking

The process of estimating future costs associated with the transfer of risk in insurance or other risk-transfer mechanisms. (Property-Casualty Ratemaking)

Rates

An estimate of the expected value of future costs.

Rating Period

Time period for which managed-care Medicaid capitation rates are being developed. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Real Return

The sum of the risk premium and the real risk-free return. It can also be expressed as the nominal return less inflation. (Proposed Revision of ASOP No. 27)

Real Risk-Free Returns

The return on an investment that is completely secure as to principal and yield in an environment with no inflation. (Proposed Revision of ASOP No. 27)

Realization

Model results that are derived from a given set of inputs. This concept is also sometimes referred to as a “scenario” or a “run.” (Modeling)

Reasonable

In many instances, the ASOPs call for the actuary to take “reasonable” steps, make “reasonable” inquiries, select “reasonable” assumptions or methods, or otherwise exercise professional judgment to produce a “reasonable” result when rendering actuarial services. The intent is to call upon the actuary to exercise the level of care and diligence that, in the actuary’s professional judgment, is necessary to complete the assignment in an appropriate manner. Because actuarial practice commonly involves the estimation of uncertain events, there will often be a range of reasonable methods and assumptions, and two actuaries could follow a particular ASOP, both using reasonable methods and assumptions, and reach different but reasonable results. (ASOP No. 1)

Reasonable Dividend Expectations

The expectations that the current dividend scale will be maintained if the experience underlying the current scale continues, and that the dividend scale will be adjusted appropriately if the experience changes. (ASOP No. 33)

Recalibration

The process of modifying the risk adjustment model, usually the risk weights. Recalibration is often used to make the risk adjustment model more specific to the population, data, and other characteristics of the project for which it is being used. (ASOP No. 45)

Recoverable

An amount (for example, deductibles, ceded reinsurance, salvage, or subrogation) that may be collected from a counterparty.

Redetermination

Where appropriate, the term includes initial determination. (ASOP No. 1)

Refund Guarantees

A clause in a residency agreement or membership agreement that provides for a refund of any portion of the advance fee upon termination of the agreement.

Refundable Advance Fee

The portion of an advance fee, designated in the residency agreement, that is to be returned to the resident or the resident’s estate either upon termination of the agreement or upon resale of the unit. (ASOP No. 3)

Regulatory Benchmarks

A measurement that may be used by the regulatory authority in evaluating a health filing. Possible benchmarks may include loss ratios, capital ratios, or actuarial values. (ASOP No. 8)

Reinsurance Agreement

The contract between one or more individuals and the CCRC that describes the services to be provided and the obligations of the parties. The contracts are usually of long duration and may be for the life of the individual or the life of the survivor of joint individuals. The residency agreement describes the health care guarantee, if any, and any portion of the advance fee that would be refundable upon termination of the residency agreement. (Proposed Revision of ASOP No. 3)

Reinsurance Assumed

Reinsurance as it affects the entity accepting the risk under a reinsurance agreement. This applies equally to an assuming entity and to an assuming entity that is a retrocessionaire.

Reinsurance Ceded

Reinsurance as it affects the entity transferring the risk under a reinsurance agreement. This applies equally to a ceding entity and to a ceding entity that is an assuming entity (for example, assuming entity ceding to a retrocessionaire).

Reinsurance Contract

A contractual agreement whereby some element of risk contained in the coverage provided by one or more plans or contracts is transferred from the ceding entity (the reinsured) to the assuming entity (the reinsurer). (ASOP No. 36)

Reinsurance Programs

The combination of the reinsurance agreement(s), its associated service contracts, and their implementation. Activities under a reinsurance program include but are not limited to sales, underwriting, claims adjudication, and administration, which might be affected by volume-based or performance-based fees or commissions.

Reinsurance Transactions

A transaction made pursuant to a reinsurance agreement. (ASOP No. 11)

Reinvestment Rate

The assumed yield rate on assets to be purchased with the closed block’s cash flows. (ASOP No. 33)

Reinvestment Risk

Uncertainty regarding the yields that will be available on reinvestment of proceeds from current investments that are subject to reinvestment in the future. (ASOP No. 20)

Relevant Experience

Experience in situations that are sufficiently similar to the liabilities, assets, and environments being projected to make the experience appropriate, in the actuary’s professional judgment, as a basis for determining the assumptions for anticipated experience.

Reliance

Actuaries frequently rely upon others for information and professional judgments that are pertinent to an assignment. Similarly, actuaries often rely upon others to perform some component of an actuarial analysis. Accordingly, some ASOPs permit the actuary to rely in good faith upon such individuals, subject to appropriate disclosure of such reliance, if required by applicable ASOPs (for example, ASOP Nos. 23, Data Quality, and 41). (ASOP No. 1)

Reported Amount

The reported amount is the minimum amount that is required to be reported by the company with respect to the C3 component of risk-based capital as of the valuation date for all policies required to use a principle-based approach. The reported amount equals the excess on the valuation date of the total asset requirement over the statutory liabilities reported with respect to the policies. (Standards for Life-Insurance Required Capital Levels)

Reproducible

A property of a model that implies that each time the model is run with the same inputs, the realization will be identical. (Modeling)

Required Actuarial Document

An actuarial communication of which the formal content is prescribed by law or regulation. (ASOP No. 32)

Required Capital

The minimum level of excess of assets over liabilities required by regulators, rating agencies, or internal assessments.

Reserve

An amount recorded in financial statements or accounting systems in order to reflect obligations. (2nd Exposure Draft Proposed Revision of ASOP No. 36)

Reserve Analysis

The process of evaluating the reasonableness of a reserve. (Draft Proposed Revision of ASOP No. 36)

Reserve Evaluation

The process of evaluating the reasonableness of a reserve. (ASOP No. 36)

Reserves

A provision to satisfy obligations as of a specified date. (Draft Proposed Revision of ASOP No. 36)

Residency Agreement

The contract between one or more individuals and the CCRC that describes the services to be provided and the obligations of the parties. The contracts are usually of long duration and may be for the life of the individual or the life of the survivor of two or more individuals. The residency agreement describes the health care guarantee, if any, and any portion of the advance fee that would be refundable upon termination of the residency agreement.

Residents

A person living in the CCRC who has signed a residency agreement with a health guarantee or a refund guarantee.

Residual Market Expenses

Assessments for the entity’s share of residual market profits or losses.

Residual Market Provision

A provision for the entity’s costs that represents its share of residual market profits or losses. (ASOP No. 29)

Respite Care

Temporary care for frail or impaired persons that allows volunteers to have a rest from care giving. (ASOP No. 18)

Responding Actuary

An actuary who is authorized by the entity to respond to the auditor or examiner on behalf of the entity being audited, reviewed, or examined with respect to specified elements of the entity’s financial audit, financial review, or financial examination that are based on actuarial considerations. Any given financial audit, financial review, or financial examination may involve one or more responding actuaries.

Retiree Group Benefit Program

The program specifying retiree group benefits: including eligibility requirements, participant contributions, and the design of the benefits being provided. (2nd Draft Proposed Revision of ASOP No. 6)

Retiree Group Benefits

Medical, prescription drug, dental, vision, legal, death, long- term care, or other benefits (excluding retirement income benefits) that are provided during retirement to a group of individuals, on account of an employment relationship. (ASOP No. 6)

Retiree Group Benefits Plans

The plan specifying retiree group benefits: including eligibility requirements, contributions, and the design of the benefits being provided. (Proposed Revision of ASOP No. 6)

Retiree Group Benefits Program

The program specifying retiree group benefits: including eligibility requirements, participant contributions, and the design of the benefits being provided. (2nd Draft Proposed Revision of ASOP No. 6)

Retirement Plan

An employment-related arrangement for determining the amount and timing of retirement benefit payments, eligibility for payments, etc. A retirement plan may be a defined benefit pension plan, a defined contribution plan, or a hybrid plan with both defined benefit and defined contribution elements. It may be a plan qualified under the IRC, a nonqualified plan of deferred compensation, or a governmental plan sponsored by the United States or its agencies or a state or local government. (ASOP No. 34)

Retrospective Rating

A rating technique that adjusts the insured’s premium for a policy period based on the insured’s loss experience during that same period (Property/Casualty Ratemaking).

Review

An examination of the obvious characteristics of data to determine if such data appear reasonable and consistent for purposes of the assignment. A review is not as detailed as an audit of data.

Review Date

The date (subsequent to the valuation date) through which material information known to the actuary is included in forming the reserve opinion. (ASOP No. 36)

Reviewing Actuary

An actuary who is responsible for reviewing a health filing on behalf of a government agency or consumers. This includes actuaries employed by the government agency and consulting actuaries engaged to review a health filing on behalf of the government agency or consumers. (ASOP No. 8)

RHC

Clinics that meet certain requirements for providing primary care services in specific areas, as outlined in the Public Health Service Act and defined in Section 1905(l)(1) of the Social Security Act. Medicaid payment rates to RHCs may be specified in legislation or statute. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Risk

The potential of future deviation of actual results from expectations derived from actuarial assumptions.

Risk Adjustments

The process by which relative risk factors are assigned to individuals or groups based on expected resource use and by which those factors are taken into consideration and applied. (ASOP No. 45)

Risk Appetite

The level of aggregate risk that an organization chooses to take in pursuit of its objectives.

Risk Appetite Framework

A methodology used to identify, measure, and place limits on risks an organization is willing to take. The risk appetite framework may contain risk appetite statements, measurement of risks, setting and monitoring of risk appetite limits, and the governance associated with risk appetite.

Risk Appetite Limits

The level that a risk measure should not exceed for the organization to remain within the intended level of risk-taking. Risk appetite limits may be applied at an aggregate level or specifically to a risk type. They may also operate at the company level within a group.

Risk Appetite Statements

A statement by the management of an organization (or a part of an organization) of how much risk, of different risk types and also overall, that the organization is willing to take. There may be several risk appetite statements pertaining to individual risks or a single statement across an organization.

Risk Capital

Amounts to absorb potential unexpected losses resulting from severe events.

Risk Capital Base

A minimal acceptable amount of capital. (Capital Adequacy Assessment for Insurers)

Risk Capital Target

The preferred amount of capital. This could be a range.

Risk Capital Threshold

The minimum level of capital necessary for an organization to operate effectively as selected by management and expressed as a function of a measure of risk. An insurer may establish multiple risk capital thresholds based on different risk metrics at any one time.

Risk Characteristics

Measurable or observable factors or characteristics that are used to assign each risk to one of the risk classes of a risk classification system. (ASOP No. 12)

Risk Class

A set of risks grouped together under a risk classification system. (ASOP No. 12)

Risk Classification

The process of establishing a system for evaluating, prioritizing, and cataloging risks, normally involving the creation of a risk inventory and an associated risk taxonomy.

Risk Classification Framework

The system, process, or schema used to assign risk subjects to risk classes, based on the risk characteristics of each risk subject.

Risk Classification System

A system used to assign risks to groups based upon the expected cost or benefit of the coverage or services provided. (ASOP No. 12)

Risk Evaluation Systems

A combination of practices, tools, and methodologies within a risk management system used to measure the potential impacts of risk events on the performance metrics of an organization. (ASOP No. 46)

Risk Factor

An aspect of future experience that is uncertain as of the valuation date and that can affect the future financial results arising from the provisions of a policy. Examples include mortality, expense, policyholder behavior, and asset return. (Principle-Based Reserves for Life Products)

Risk Funding

A mechanism for the assessment, management, and financing of exposure to loss.

Risk Inventory

A regularly updated register of the risks to which an organization is exposed. Also commonly referred to as a risk register.

Risk Limits

A threshold used to monitor the actual risk exposure of a specific unit or units of the organization to ensure that the level of aggregate risk remains within the risk tolerance. (ASOP No. 46)

Risk Management System

A combination of practices, tools and methodologies that an organization uses to identify, assess, measure, mitigate and manage the risks it faces during the course of conducting its business. (ASOP No. 46)

Risk Margins

A provision for uncertainty in an unpaid claim estimate (ASOP No. 20)

Risk Measures

A measurement of the outcomes of a contingent event mitigated by the financial or personal security system. Examples of risk measures include mortality rates, healthcare costs, and claim frequency and severity.

Risk Metrics

A measure of risk. Examples include value at risk, expected policyholders deficit, and conditional tail expectation. (ASOP No. 46)

Risk Mitigation

Action that reduces the frequency or severity of a risk. (ASOP No. 46)

Risk of Adverse Deviation

The risk that actual experience may differ from best-estimate assumptions in a manner that produces costs higher than assumed or revenues less than assumed.

Risk Premium

The portion of real return that reflects uncertainties of future payments and appreciation. (Proposed Revision of ASOP No. 27)

Risk Profile

The risks to which an organization is exposed over a specified period of time.

Risk Retention

A risk-management and risk-control strategy for the assessment, management, or financing of retained risk associated with the specific coverage. Examples of risk retention include self-insurance and certain types of single parent captives.

Risk Subject

An individual or entity that is or may be covered by a financial or personal security system.

Risk Taxonomy

A tiered structure with broad risk classifications at the top and more narrowly defined classifications further down. Risk inventories typically use taxonomy to index their risks.

Risk Tolerance

The aggregate risk-taking capacity of an organization.

Risk Transfer

A risk-management and risk-control strategy, involving legally binding agreements, that shifts responsibility from one party to another or indemnifies one party by another party for the financial obligations associated with the coverage. Examples of risk transfer include insurance, reinsurance, and loss portfolio transfers.

Risk Treatment

The process of selecting actions and making decisions to transfer, retain, limit, and avoid risk. This can include determining risk tolerance, choosing risk appetites, setting risk limits, performing risk mitigation activities, and optimizing organizational objectives relative to risk. (ASOP No. 47)

Risk Weight

The value assigned to each condition category that indicates the expected contribution of that condition category to an individual’s estimated resource use. (ASOP No. 45)

Risk-Adjusted Rate of Return

An expected or target annual return to the investor that includes a risk-free return that compensates the investor for the use of the funds (recognizing anticipated inflation so as to maintain the real value of those funds), plus a risk premium above the risk-free rate that compensates the investor for the risk that actual returns will deviate from expected. The size of the risk premium varies with the degree of risk associated with the returns. (ASOP No. 19)

Risk-Assuming Entity

The entity with respect to which the actuary is determining liabilities associated with health benefit plans or risk-sharing arrangements. (ASOP No. 42)

Risk-Bearing Entity

The entity with respect to which the actuary is determining liabilities associated with health benefit plans or risk-sharing arrangements.

Risk-Free Interest Rates

The theoretical rate of return of an investment with zero risk with respect to payment timing and amount. (ASOP No. 20)

Risk-Sharing

An arrangement involving two or more entities, calling for payments contingent upon certain financial, operational, or other metrics. Examples include, but are not limited to, provider risk-sharing arrangements such as provider incentives, bonuses, and withholds or governmental risk-sharing arrangements such as risk corridor and risk-adjustment programs.

Risk-Sharing Arrangement

An arrangement involving a provider, calling for payments to or from the provider where the payment is not related to a specific service performed by that provider, and the payment is contingent upon certain financial or operational goals being achieved. Examples of risk-sharing arrangements include provider incentives, bonuses, and withholds.

Rural Health Clinics (RHC)

Clinics that meet certain requirements for providing primary care services in specific areas, as outlined in the Public Health Service Act and defined in Section 1905(l)(1) of the Social Security Act. Medicaid payment rates to RHCs may be specified in legislation or statute. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Scale

A series of premiums, charges, or benefits. For example, a COI scale would be determined across all ages and durations.

Scenario Analysis

A process for assessing the impact of one possible event or several simultaneously or sequentially occurring possible events. Scenario analysis may include a narrative description (non-financial) or numerical or financial calculations.  

Scenario Tests

A process for assessing the impact of one possible event or several simultaneously or sequentially occurring possible events on an organization’s financial position.

Scenarios

A set of economic and other assumptions used in performing cash flow analysis. (ASOP No. 22)

Schedule Rating

A rate modification technique that considers the individual risk characteristics that are expected to affect the policyholder’s future loss and allocated loss adjustment expense experience but are not yet reflected in the experience rating process. (Property/Casualty Ratemaking)

Sensitivity Analysis

Analysis performed by changing an assumption or set of assumptions and comparing the results to those resulting from the original assumption(s).

Sensitivity Test

A calculation of the effect of varying an assumption.

Service Provider

An entity other than the assuming entity and ceding entity providing contractual services related to a reinsurance agreement, such as reinsurance intermediaries, managing general underwriters, captive manager, third-party administrators (TPAs), claims managers, investment advisors, investment managers, information technology providers (such as cloud data services and credit reporting agencies), and trustees.

Service-Dependent Benefits

Benefits for which the amount or timing of benefit payments depends on the covered party’s age or length of service. (ASOP No. 34)

Short-Range Period

A period long enough to encompass a complete economic cycle or planning cycle, whichever is appropriate.

Should Consider

The phrase “should consider” is less prescriptive than either “must” or “should.” This phrase is used to describe an action that the actuary may choose to follow after consideration. If, in the actuary’s professional judgment, the action is not appropriate, the action is not required and failure to take this action is not a deviation from the guidance in the standard. “Should consider” may also indicate that the actuary look beyond that which is measurable and certain. For example, ASOP No. 41, section 3.2 provides that the actuary “should consider” the needs of the intended user. However, actuaries cannot foresee all possibilities. Actuaries may choose to document their thoughts and concerns about these issues as part of their communication of results.  (Introduction – Introductory Actuarial Standard of Practice)

Significant

Significance can have different meanings. A result may be deemed to be statistically significant if it is determined that the probability that the result was produced by random chance is small. An event may be described as significant if the likelihood of its occurrence is more than remote. In addition, a result may be significant because it is of consequence. Other uses may be encountered in actuarial practice. The actuary should exercise care in interpreting or using these words. (ASOP No. 1)

Skilled Nursing Care

Care provided by skilled medical personnel, such as registered nurses or professional therapists, but generally not care in a hospital. (ASOP No. 18)

Small Employer

Any person, firm, corporation, partnership, or organization that employs a number of eligible employees within a statutorily specified range that has an upper bound and that satisfies any other statutorily defined criteria. (ASOP No. 26)

Social Influences

The impact on insurance costs of societal changes such as changes in claim consciousness, court practices, and legal precedents, a well as in other noneconomic factors. (ASOP No. 13)

Social Insurance Programs

A program for which this standard applies as described in section 1.2; used interchangeably with Program.

Specification

A description of a model that identifies the inputs and their interactions with each other, the formulas and algorithms to be used, and the outputs to be produced. (Modeling)

Spouse

A husband, wife, or domestic partner eligible for retiree group benefits. (ASOP No. 6)

Spread Gain Actuarial Cost Methods

An actuarial cost method under which actuarial gains and losses are included as part of the current and future normal costs of the plan.

Standard

Starting Assets

An estimate as of the valuation date of the value of the assets that will be used to fund projected policy cash flows arising from the policies funded by those assets. (Principle-Based Reserves for Life Products)

State Plan Services

The benefits provided to Medicaid beneficiaries who are eligible under a qualifying category of Medicaid assistance in a state. (Medicaid Managed-Care Capitation – Rate Development and Certification)

Statement of Actuarial Opinion

An opinion expressed by an actuary in the course of performing actuarial services and intended by that actuary to be relied upon by the person or organization to which the opinion is addressed. (ASOP No. 28)

Statement of Actuarial Review

A formally communicated appraisal of actuarial work done by another person. (ASOP No. 9)

Statutory Assessment Expenses

Any mandated assessments that are permitted by applicable law to be included in the expense provisions.

Statutory Assessment Provision

A provision for the entity’s costs stemming from any mandated assessment. (ASOP No. 29)

Stochastic

Describes an assumption or scenario that is generated by a random process.

Stochastic Analysis

Analysis performed using a model that estimates distributions of potential outcomes by allowing random variation in one or more inputs to the model.

Stochastic Modeling

A process for estimating distributions of potential outcomes by allowing for random variations in one or more inputs over time.

Stochastic Reserves

A reserve amount calculated with stochastically generated scenarios in accordance with the Valuation Manual. (Principle-Based Reserves for Life Products)

Stop-Loss Coverage

Insurance protection providing reimbursement of all or a portion of claims in excess of a stated amount. Stop-loss coverage may be either individual or aggregate (sometimes referred to as excess loss coverage). (ASOP No. 6)

Stress Testing

A scenario analysis that measures the impact of adverse changes affecting an organization’s financial position.

Subject Experience

A specific set of data drawn from the experience under consideration for the purpose of predicting the parameter understudy. (ASOP No. 25)

Subsequent Events

Subsequent events are events (1) that have occurred since the end of the certification period and before the date of the certification, (2) that could materially affect current or future certifications rendered, and (3) about which the actuary has knowledge.

Sufficient

Containing enough data elements or records for the analysis.

Supplemental Payments

Payments in addition to the Medicaid fees made by states directly or through the MCOs to providers of Medicaid services. These payments are usually made to hospitals, but other provider types may also qualify for such payments. These payments are sometimes reciprocation for the provider paying a special tax or assessment fee. (Medicaid Managed Care Capitation – Rate Development and Certification)

Survival Curve

The probability data set representing the assumed probability of survival to the end of every period in the future for an insured. (ASOP No. 48)

Surviving Dependents

A dependent who qualifies as a participant under the retiree group benefits program following the death of the associated participant.  (ASOP No. 6)

Survivor

A spouse or dependent who continues as a participant under the retiree group benefit plan following the death of a participating employee or retiree. (ASOP No. 6)

Sustainability

The capacity of a Social Insurance Program to continuously support the benefits provided by laws applicable to the Program, when considering the applicable financing mechanism and the potential future demographic and economic environment in which it will operate.

Tabular Method

The application of a factor to a volume measure (for example, number of individual claims) based on prior experience, in order to estimate unpaid claims liabilities for reported claims (commonly used for long-term claims). (ASOP No. 5)

Taxes, Licenses, and Fees

Taxes and miscellaneous fees except federal and foreign income taxes. (ASOP No. 29)

Temporary Transfer

A move from one level of care to another level of care with the expectation of returning to the former level of care.

Ten-Year Select Factors

The select factors adopted with the 1980 amendments to the model NAIC Standard Valuation Law. (ASOP No. 40)

Terminal Funding

A method of funding a pension plan under which the entire actuarial present value of benefits for each individual is contributed to the plan’s fund at the time of withdrawal, retirement, or benefit commencement. (ASOP No. 4)

Testimony

Communication presented in the capacity of an expert witness at trial, in hearing or arbitration, in deposition, or by declaration or affidavit. Such testimony may be oral or written, direct or responsive, formal or informal.

Three Lines of Defense

A common model for governance of an organization’s ERM framework. The “first line” refers to business and process owners within the organization. The “second line” identifies where there is separate oversight of risk-taking activities, with some independence from the first line. The “third line” is the role undertaken by auditors, which includes reviewing the effectiveness of the second line and the ERM framework.  

Time Value of Money

The principle that an amount of money available at an earlier point in time has different usefulness and value than the same amount of money has at a later point in time.

Tontine

An outcome of a closed block in which relatively few last surviving policyholders receive dividends substantially disproportionate to those previously received by other policyholders in the same closed block, particularly policyholders who had persisted for a considerable period. (ASOP No. 33)

Total Asset Requirements

The book value of a set of assets that are just sufficient to meet a specific solvency test. (Standards for Life-Insurance Required Capital Levels)

Total Return

The sum of operating profit and investment income on capital, usually after income taxes, often expressed in percentage terms. (ASOP No. 30)

Trend

Measures of rates of change, over time, of the elements, such as cost, incidence, and severity, affecting the estimation of incurred claims.

Trending Period

The time over which trend is applied in projecting from the experience period to the forecast period. (ASOP No. 13)

Trending Procedures

A process by which the actuary evaluates how changes over time affect items such as claim costs, claim frequencies, expenses, exposures, premiums, retention rates, marketing/solicitation response rates, and economic indices. Trending procedures estimate future values by analyzing changes between exposure periods (for example, accident years or underwriting years). A trending procedure does not encompass the process commonly referred to as “development,” which estimates changes over time in losses (or other items) within a given exposure period. (ASOP No. 13)

Trends

Measure of rates of change, over time, that affects revenues, costs, or actuarial assumptions.

Trust Fund

An account to which income is credited and from which benefits and often administrative expenses are deducted for a specified program.

UL-type contracts

As each is defined in SFAS No. 97, & 6–14. (ASOP No. 10)

Underlying Product

The source of the risk ceded in a reinsurance transaction. Examples of underlying products include life insurance, annuities, long-duration health benefit plans, pensions, and any associated riders.

Underwriting Cash Flows

All cash flows related to underwriting operations, including premiums, claims, claims expenses, and underwriting expenses.

Underwriting Expenses

All expenses except losses, loss adjustment expenses, investment expenses, policyholder dividends, and income taxes. (ASOP No. 30)

Underwriting Profit

The provision for underwriting profit in the actuarially developed rate, typically expressed as a percentage of the rate. (ASOP No. 30)

Underwriting Profit Margin

An explicit provision for profit in the future cost estimate. An underwriting profit margin may be referred to as an underwriting profit provision in certain contexts.

Unearned Premium Reserves

An amount established to reflect premiums that have been collected prior to the valuation date for coverage after the valuation date.

Unfunded Accrued Liability

The excess of the actuarial accrued liability over the actuarial value of assets. (ASOP No. 4)

Unfunded Actuarial Accrued Liability

The excess of the actuarial accrued liability over the actuarial value of assets. (ASOP No. 4)

Unfunded Actuarial Liability

The excess of the actuarial accrued liability over the actuarial value of assets. (ASOP No. 4)

Unfunded Actuarial Reserve

The excess of the actuarial accrued liability over the actuarial value of assets. (ASOP No. 4)

Unfunded Frozen Actuarial Accrued Liability

An unfunded actuarial accrued liability which is not adjusted (“frozen”) from one actuarial valuation to the next to reflect actuarial gains (losses) under certain actuarial cost methods. Generally, this amount is adjusted by any increments or decrements in actuarial accrued liability due to changes in pension plan benefits or actuarial assumptions subsequent to the date it is frozen. Adjustments are made from one actuarial valuation to the next to reflect the addition of interest and deduction of amortization payments. (ASOP No. 4)

Unfunded Frozen Actuarial Liability

An unfunded actuarial accrued liability which is not adjusted (“frozen”) from one actuarial valuation to the next to reflect actuarial gains (losses) under certain actuarial cost methods. Generally, this amount is adjusted by any increments or decrements in actuarial accrued liability due to changes in pension plan benefits or actuarial assumptions subsequent to the date it is frozen. Adjustments are made from one actuarial valuation to the next to reflect the addition of interest and deduction of amortization payments. (ASOP No. 4)

Unintended Bias

Impacts or outcomes on specific risk subjects resulting from the use of a risk classification framework that is not intentionally designed to result in such impacts or outcomes.

Unit Credit Actuarial Cost Method

A method under which the benefits (projected or unprojected) of each individual included in an actuarial valuation are allocated by a consistent formula to valuation years. The actuarial present value of benefits allocated to a valuation year is called the normal cost. The actuarial present value of benefits allocated to all periods prior to a valuation year is called the actuarial accrued liability. (ASOP No. 4)

Universal Life-Type (UL-Type) Contracts

As each is defined in SFAS No. 97, & 6–14. (ASOP No. 10)

Unpaid Claim Estimate Analysis

The process of developing an unpaid claim estimate. (ASOP No. 36)

Unpaid Claim Estimates

The actuary’s estimate of the obligation for future payment resulting from claims due to past events. For clarity and unless otherwise indicated, this estimate is on an undiscounted basis and the terms “unpaid claim estimate” and “undiscounted unpaid claim estimate” are used interchangeably throughout this standard. (Draft Proposed Revision of ASOP No. 20)

Unpaid Claims Liabilities

The entity with respect to which the actuary is determining liabilities associated with health benefit plans or risk-sharing arrangements. (ASOP No. 5 Revision – Incurred Health and Disability Claims)

Valuation Basis

An accounting or economic framework for the recognition and measurement of assets and liabilities.

Valuation Date

The date for which the actuarial opinion is provided.

Valuation Mortality Table

A table prescribed for determining mortality rates within section 1 of VM-M of the Valuation Manual.

Valuation Period

A defined period for which incurred claims are recorded. (ASOP No. 5)

Value of Business Acquired (VOBA)

The intangible asset that arises in the application of GAAP purchase accounting as the difference between the reported value and the fair value of insurance contract liabilities, or comparable amounts determined in purchased insurance business combinations. (ASOP No. 10)

Voting Rights

The right to elect members of the board of directors of the mutual company and the right to vote on any proposed reorganization (including demutualization). (ASOP No. 37)

Withdrawal

The termination of a residency agreement or membership agreement  by the resident or member for reasons other than death.

Withdrawal Rate

The probability that a residency agreement will be terminated by the resident’s leaving the CCRC for reasons other than death. (ASOP No. 3)

X Factor Class

A group of policies under one or more plans of insurance to which a single set of X factors applies.

X Factors

The percentages that may be applied to the Model select mortality rates for the purpose of calculating deficiency reserves in the first segment only, for segments determined under the contract segmentation method defined in the Model.