Like hopeful NCAA college football teams, several matters affecting life and annuity products looked, in 2014, like they would make the playoffs and finally be resolved in early 2015.
- The review of Principle-Based Reserving (PBR) and interim adoption of Actuarial Guideline 48.
- The review of contingent deferred annuities by various NAIC groups to determine if existing laws and regulations provided sufficient solvency and consumer protection, and the CDA (A) Working Group’s (CDA WG) development of NAIC guidelines to serve as a reference to states.
- The Separate Account Risk (E) Working Group’s (SAR WG’s) review of separate accounts usage to fund insurance products guaranteed by the general account.
- Unclaimed life and annuity benefits requirements.
- Actuarial guidelines for index universal life insurance illustrations.
Actuarial Guideline 48, which sets uniform nationwide standards for XXX/AXXX captive reserve transactions, is headed to the playoffs. The PBR Implementation (EX) Task Force and Executive (EX) Committee adopted Actuarial Guideline 48, and Plenary is anticipated to adopt it by year-end. Meanwhile, PBR also seems to be a playoff contender. The PBR Review (EX) Working Group (PBR WG) expects to publish a January 2015 report that sheds light on companies’ readiness to play under new game rules. Additionally, the PBR WG is working with the Society of Actuaries to build a PBR training program. The PBR WG is also set to conduct a pilot study focusing on the PBR reserve implementation process; it hopes to select a consultant in Spring 2015, and start the one-year study in July.
The review of CDAs seems the second-most likely to be resolved in early 2015. On November 16, the CDA Working Group scored a field goal by adopting the revisions addressing CDAs to the Annuity Disclosure Model Regulation, Suitability in Annuity Transactions Model Regulation, Advertisements of Life Insurance and Annuities Model Regulation and Annuities Replacement Model Regulation and by receiving comments on its October 24 draft Guidance for the Financial Solvency and Market Regulation of Insurers Who Offer Contingent Deferred Annuities.
There was no touchdown, as regulators determined CDAs should offer some benefit to consumers when they are terminated. Regulators posited that some type of longevity or in-kind benefit should be offered rather than a cash value benefit, which would raise the cost of the product and possibly result in anti-selection. Regulators asked industry to provide some ideas. During the field goal, an inadvertent flag was thrown by a consumer group that believed the CDA WG should first resolve the type of benefits to include in CDAs in the event of termination, and it re-raised questions on guaranty fund coverage.
Two contenders’ playoff chances were dashed. While the SAR WG made good progress in early 2014, it fumbled a handoff as the chairman of SAR WG retired in July. With no volunteer to take over, the SAR WG’s efforts stalled in the redzone. Also, the Unclaimed Life Insurance Benefits (A) Working Group (Unclaimed Benefits WG) looked poised to score with a Hail Mary as it recommended the development of a new NAIC model law for unclaimed life insurance benefits. The pass was incomplete as the Unclaimed Benefits WG cancelled its November 16 meeting.
The Life Actuarial Task Force (LATF) discussed two teams’ actuarial guidelines for index universal life illustrations. LATF recognized that, while each team’s guidelines had merit, neither completely addressed its concerns. It appears that the regulators are revamping the playbook as LATF asked industry to submit plays for short yardage and long yardage options. LATF set a goal of having actuarial guidelines ready for approval at the 2015 Spring National Meeting. Maybe LATF’s playbook includes a jump-pass for a touchdown?