After A Decade, Variable Annuity Reserving Guideline Advances

After nearly a decade of work and many incarnations, a reserving guideline for variable annuities with guarantees took a major step toward full adoption by the National Association of Insurance Commissioners, Kansas City, Mo.

In an Aug. 20 conference call, the Life & Health Actuarial Task Force unanimously decided to adopt draft Actuarial Guideline VA-CARVM and to sunset AG 34 and AG 39, considered temporary measures, when VA-CARVM becomes effective on Dec. 31, 2009. The 2 existing guidelines would pass out of use on Dec. 30, 2009.

VA-CARVM must still be adopted by the NAIC's Life & Annuities "A" Committee as well as the NAIC's Executive Committee and Plenary.

The issue of properly reserving for VAs with guarantees came to light nearly a decade ago with the growing popularity of these products, but consensus on a guideline could not be reached prior to the vote on the current draft, exposed by LHATF on July 10. The issue has been before at least 4 LHATF chairs.

Leslie Jones, a life actuary with the South Carolina insurance department who spearheaded the issue for LHATF, said after the vote that "this was a long, arduous project, but I think it is an excellent result."

Prior to the vote, CIGNA raised an issue regarding tax reserves, and while there was general agreement that for some companies there may be some impact, most companies were all right with the proposal as it stood.

John Bruins, a life actuary with the American Council of Life Insurers, Washington, said that while the proposal was not perfect and companies were aware of that fact, it was a proposal that would offer enough consensus to gain momentum and be put in place by states.

Armand dePalo, executive vice president and corporate actuary with Guardian Life, New York, said he was co-chair of a tax committee that reviewed the issue and that of 12 major carriers on that committee, none had raised concerns about tax reserves.

The CIGNA request was not advanced by regulators.

John Purple, a life actuary with the Connecticut insurance department, asked for the development of a practice note to ensure auditability of company models.

In response, Tom Campbell, a life actuary with Hartford Life, Simsbury, Conn., and the point person on the project for the American Academy of Actuaries, Washington, said the Academy would be glad to work on such a practice note. However, he said that if the Academy worked on it as an Academy project, then the Academy would decide how the note ultimately turned out. LHATF could then accept or reject that outcome. If, however, LHATF formed a subgroup, then the Academy would offer input and LHATF would make the final decision.

A decision was made that LHATF form a subgroup.

After A Decade, Variable Annuity Reserving Guideline Advances

Resource Center

Trending Stories

After A Decade, Variable Annuity Reserving Guideline Advances

Related Stories

Resource Center

Trending Stories