Session 29, PBR is Coming Soon! Moderator: Kerry A. Krantz, FSA, MAAA

Transcription

1 Session 29, PBR is Coming Soon! Moderator: Kerry A. Krantz, FSA, MAAA Presenter: Mark William Birdsall, FSA, MAAA, FCA Timothy C. Cardinal, FSA, MAAA, CERA Craig C. Chupp, FSA, MAAA Donna R. Claire, FSA, MAAA, CERA Kerry A. Krantz, FSA, MAAA

2 Valuation Actuary Symposium Session 29 1

3 2016 Valuation Actuary Symposium Kerry Krantz PBR is Coming Soon! August 29, 2016

4 Facilitators Mark Birdsall Tim Cardinal Craig Chupp Donna Claire Kerry Krantz 3

5 Procedures Four tables, each with a facilitator Two groups of topics Two discussion sessions For each session, the table appoints a note-taker and prioritizes the topics to discuss in that session At half-time, rotate to a table with the second group of questions At the end of the second session, note-takers will report on their discussions by topic 4

6 Group 1 Topics assumption setting PBR vs. Actuarial Memorandum documentation How to set margins - rigor required Margins are not required if the factors don't materially impact the modeled reserve How does one decide what is material for purposes of deciding whether or not to include a margin for a particular risk factor? Covariance adjustments Non-guaranteed elements - use of dynamic formulas Share holder dividends included or not Credibility methods, Buhlmann vs. Limited Fluctuation Which Products - Illustrations VM and mortality table changes Alternate methods for calculating the deterministic reserve 5

7 Group 2 Topics company planning Scope Applicability Implementation Date Small Company Exemption Pros/Cons Use of 2017 CSO for non PBR Modeling efficiency techniques, model segments and aggregation issues For which products is the Net Premium Reserve different from the current CRVM Using the cash flow testing model for the Stochastic Exclusion Test 6

8 Supplemental Impact of VM-20 on product strategy (new product, re-pricing existing products). In the pricing discussion: "how" to incorporate expected VM-20 reserves in the pricing models (NPR only? Scalar of NPR? Nested DR?, etc). New approach in section 2 to do the NPR, DR and SR comparison at the product level. Aggregation Quarterly reporting Tax reserve issues (e.g. what is the tax reserve if the 3-three phase-in is elected) Modeling reinsurance cash flows Modeling riders Mortality assumption to use for SI and GI Valuation system conversion Attribution Analysis of 2017 CSO impact separate from moving to PBR reserves; use of 2017 CSO mortality tables and if it was dependent on performing "PBR" reserves vs "CRVM" reserves/phase in or exemption decisions. Do you have to run cash flow testing if you report PBR reserves Mandatory application of exclusion tests Simplified Underwriting vs. guaranteed issue implications of 2017 CSO When actuarial judgment is employed, any determination of materiality should be supported by quantitative measures unless you believe a qualitative assessment is sufficient. 7

9 Research Helps VM-20 Practice Note Model Governance Practice Note PBR Guide? Other.. 8

10 Scope and Applicability VM only applies in jurisdictions that have enacted new SVL (VM Intro) VM applicable to life insurance, A&H and deposittype contracts issued after 1/1/2017 (VM Intro) Minimum reserve requirements of VM-20 and VM- 21 are considered PBR requirements unless only the NPR, VM-A or VM-C applies (VM-II) PBR Report requirements of VM-31 only apply to business subject to PBR requirements (VM-III) 9

11 Implementation Date Company may elect to establish reserves pursuant to VM-A or VM-C for business otherwise subject to VM- 20 for 2017, 2018 and 2019 (VM-II) Once a company elects to apply VM-20 to a block of business, it must continue to apply VM-20 for future issues of that business. (VM-II) 10

12 Use of 2017 CSO Company may elect to use 2017 CSO for life products valued under VM-A or VM-C for 2017, 2018 and 2019, subject to conditions of VM-20 Section 3 (VM-II) 11

13 Small Company Exemption (Source: Section 6 of VM-20) Requirements (all 3 must be met): Company has < $300 million and group has < $600 million of ordinary life premium Company TAC 450% of ACL and unqualified opinion ULSG policies meet definition of a non-material SG Company wishing to apply exemption must file a statement of exemption with their domestic regulator prior to July 1 certifying that all of the required conditions are met. Domestic regulator has authority to reject prior to September 1 12