A.1 Fixed Deferred Annuities Flashcards
deferred annuity product designs
- contract that gts to pay a series of payments
- accumulation period = period before payment begins
- payout period = period where payments are made to PH
- Consideration ~ premiums
examples of deferred annuity:
- SPDA
- FPDA
- Fixed deferred annuity
- variable deferred annuity
- modified gtd annuity
- indexed annuity
insurance and other features that can be attached to deferred annuities
Living benefits:
- GMAB
- GMIB
- GMWB
- GLWB
Death benefits:
- ROP
- Resets
- roll up and ratchets
Misc:
- nursing home waiver
- bailout provision
- MVA
- free partial wd
- annuity purchase enhancements
- interest index
- equity index
Standard NF Law for annuities
Min NF = (Prior Min NF + 87.5% Consideration - 50 - Prem Tax) * (1+i) - Partial Wd - Loans
- interest = 5 year CMT - 1.25%
- i between [1%, 3%]
- can subtract an additional 1% for indexed annuities, floor still applies
settlement options for deferred annuities
- Annuity Certain
- Straight Life annuity (life contingent)
- Life annuity with a period certain
- refund annuity = a life annuity that makes additional payments on death
- Joint and survivorship annuity
- if annuitant dies during the accumulation period; contract must provide a DB >= min NF at time of death
- waive SC and pay full FV on death
understand CARVM and general steps
CARVM = greatest of the respective excess PV (future gtd benefits) at the end of each policy year over the PV any required future payable prior to the end of the respective policy year CARVM = Greatest (PVFB - PVFP) for any future policy year
CARVM
- Benefit Streams
- Elective vs non elective benefits
- integrated benefits streams
- incidence rates
benefit stream
- to calculate CARVM, need to determine every possible future DB, NF, and annuity payment at the end of each contract year
Elective vs non-elective
- non-elective benefits = benefits payable after the occurrence of a contingent event, independent of owners election of an option.
Example: Death, disability, nursing home benefits
- Elective benefits = benefits elected by the PH
example: partial wds, annuitizations
Integrated benefit streams
- a series of possible combination of benefit payments
- can contain the possibility of elective and non elective benefits
- integrated benefit streams are classed into 3 types:
1. CV benefit stream = series of partial wds that terminate with full wd
2. annuitization benefit stream = series of partial wds that end in full annuitization
3. other elective benefit stream = series of possible other gtd elective benefits ending via those other elective benefits
Incidence rates
- probability that an elective or non elective benefit will occur in a particular contract year
Determination of Valuation IRs
IR items determined at the contract level:
- method of valuation
- whether or not the contract permits cash settlement options
- whether interest is gtd on premiums received 12 months following the issue date
IR items determined at the benefit level:
- interest gtd period
- plan type
Applying CARVM to common product features
- nursing home waivers
- considered non-elective benefit
- apply full nursing home benefits paid upon incidence - Bailout provisions
- CARVM = set SC = 0 in any year where the bailout can be triggered
- NY law: reserve = max(AV, CARVM with no SC) - MV adjustment
- if annuity is in the GA, exclude MVA from the reserve calculation - annuity purchase rates
- if purchase rates are more favorable than gtds: reserve >= 93% of the amount used to purchase annuitization benefits at time of valuation
- Two tiered IR credit = calc separate projections for CSV and annuitizations and reflect appropriate fund values for each benefit… reserve = largest of the two
CARVM for fixed and flexible premium contracts
Fixed Premium deferred annuities:
- subtract the PV of appropriate future premiums from the PV of each future benefit
Flexible premium deferred annuity
- only CARVM future premiums required by contract can be subtracted
- flexible premium contracts have no required premium, so cannot assume any future premiums paid = higher reserves
