Sides Split On Direction Of Preferred Mortality Table

–the feasibility of exposing as yet undeveloped actuarial guidance so the preferred mortality table regulation would be ready for advancement at the NAIC fall meeting.

New York regulator and life actuary Bill Carmello said he is "uncomfortable ceding what is our responsibility [to actuaries]. They can't make the rules. If there are rules in a regulation, we need to make them." The answer, he continued, is not to reference an actuarial standard of practice but actually to develop a guideline simultaneously with the draft regulation. "I would not be comfortable at the thought of a guideline that would still have to be developed."

Katie Campbell, a life actuary and regulator from Alaska, noted that "the great big elephant in the room" is nothing less than the adoption in a three-week time frame of a guideline that has not yet been started.

Allen Elstein, a Connecticut regulator, said it is important that those who have concerns with the existing draft of the regulation be heard and that a new effort to develop an actuarial guideline not result in those concerns being left unheard.

In a memorandum dated June 16, Sheldon Summers, a California regulator, expressed reservations over the ACLI proposal. Among his concerns were the use of lapse assumptions in the calculation of universal life reserves and the use of the 2001 CSO Table in a way that has aspects of a principles-based approach.

Summers writes that "whereas, the choice of using a smoker and a nonsmoker table is based on objective criteria, and that is whether someone smokes or not, the choice of using a preferred version of the split smoker or nonsmoker tables is based on the actuary's judgment…."

The memo continues: "The ACLI proposal consists of allowing mortality assumptions to be principles-based without being subject to the various requirements that are being proposed for a principles-based approach."

During the discussion, Birny Birnbaum, an NAIC funded consumer advocate and executive director of the Center for Economic Justice, Austin, Texas, called the idea of adopting a regulation without an understanding of the implications of references within it to a guideline, "bizarre."

A written comment submitted by Birnbaum on July 3 calls the proposed regulation "…a bald attempt by industry to eliminate reasonable regulatory oversight" and urges LHATF not to adopt it. The comment continues, "It appears to us that LHATF is putting forth the American Council of Life Insurers (ACLI) proposal with little regulatory input, guidance or comment."

He expressed concern over the lack of objective standards regarding the use of preferred mortality tables in the proposed regulation. "The only condition on the use of super preferred nonsmoker, preferred nonsmoker and preferred smoker mortality tables is that a company actuary certifies that the present value of anticipated mortality experience is less than the present value of death benefits using the relevant mortality table," Birnbaum writes.

"We do not understand how a company reasonably can determine how to use a specific preferred mortality table when there are no objective characteristics associated with the determination of the mortality experience of that table."