A.1 Standard Valuation Law

Question 1

describe what the original SVL intended

Answer 1

• establish a reserving method = CRVM

- reserving assumptions: CSO table, 3.5% IR

Question 2

the 4 amendments to the SVL

Answer 2

1976 Actuarial Opinion and CARVM

• requires insurers to file a statement of AO on sufficiency of reserves and related items
• introduced CARVM for annuities

1980 Dynamic IR and the 1980 CSO table

• the CSO table became the min standard for mortality
• dynamic IR formula allowed the rate to adjust more quickly in changing IR environments

1991 Actuarial opinion and Memorandum regulation

• requires life insurers to appoint an “appointed Actuary”
• AA is responsible for preparing the AO
• ASOP 22: additional requirements for asset adequacy analysis

2009 Valuation Manual
- introduces PBR

Question 3

Actuarial Guidelines

Answer 3

• issued by the NAIC to provide additional guidance for unusual product designs not anticipated by the SVL

Question 4

SVL Sections

Answer 4

Section 4 - mortality and IR assumptions

• mortality is based on the prevailing CSO of that time
• max valuation IR - based on a dynamic valuation IR formula

Section 5

• Life insurance and endowments = CRVM
• Annuities and pure endowments = CARVM

Section 6 - additional min reserve requirements

• aggregated reserves cannot be less than the reserves determined by the AA
• aggregate reserve must be greater than calc’d in section 5, 8, or 9

section 7 - optional reserve calculation
- any reserve standard can be used as long as it exceeds the minimum in section 6

section 8
- require additional deficiency reserves when the NP > GP

section 9 - addresses indeterminate premium plans

section 11 - min standard for policies issued on or after the operative date - points the VM

Section 12 - requirements for PBR

• unfavorable events have a reasonable probability of occurring
• assumptions, methods, models consistent with company’s overall risk assessment process
• margins for uncertainty
• assumptions are either prescribed or based on company best estimates if credible
• additional oversight and regulatory requirements for contracts subject to PB valuation

section 13: experience report submission