MMMM Good, Regulators Say, As VA Benefit Guideline Simmers
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Four years and numerous drafts later, an actuarial guideline that regulates reserves for guaranteed living benefits in variable annuities looks like it finally has legs, according to those working on the project.
The draft, formally known as actuarial guideline MMMM or quad M, is being put on a fast track by regulators at the National Association of Insurance Commissioners, Kansas City, Mo., with a conference call scheduled in the next few weeks. The tentative plan is to move the model through both the Life & Health Actuarial Task Force and the Life "A" Committee during the call and then fully adopt the guideline during the winter NAIC meeting in December.
The draft seeks to establish reserving guidelines for variable deferred and immediate annuities. However, it does not apply to group annuity contracts that are not subject to the Commissioners Annuities Reserve Valuation Method.
Guarantees that are covered under the guideline include guaranteed minimum accumulation benefits, guaranteed minimum income benefits, guaranteed minimum withdrawal benefits and guaranteed payout annuity floors benefits.
The interpretation of the NAICs Model Standard Valuation Law is intended to be temporary until a permanent solution is implemented. If all goes as intended, the guideline would become effective on Dec. 31, 2002 and be in effect until Jan. 1, 2006 at the latest.
Interviews suggest that a key part of the guideline is an asset adequacy analysis requirement in the draft. In addition to a general asset adequacy test, there is also a stand-alone asset adequacy analysis of the VAGLB reserve.
