Whole Life and Term

Question 1

LFBP

Answer 1

944-40-25-11 The LIABILITY FOR FUTURE POLICY BENEFITS represents the present value of future benefits to be paid to or on behalf of policyholders and certain related expenses less the present value of future net premiums receivable under the insurance contracts. In no event shall net premiums exceed gross premiums.

Question 2

PBL

Answer 2

“Policy Benefit Liability” Synonymous with LFBP for Whole Life and Term Products. Terminology that AXIS uses.

Question 3

NPR

Answer 3

Net Premium Ratio.

“For traditional and limited-payment long-duration insurance contracts, the net premium is that portion of the gross premium required to provide for all benefits and expenses, excluding acquisition costs or any costs that are required to be
charged to expense as incurred.”

Could also be called K-Factor.
Not to be confused with VM20 Stat Net Premium Reserve.

Question 4

DPL

Answer 4

Deferred Profit Liability-
Any gross premium deferred in accordance with paragraph 944-605-25-4A (that is, the deferred profit liability) shall be recognized in income in a constant relationship with insurance in force (if accounting for life insurance contracts) or with the amount of expected future benefit payments (if accounting for annuity contracts).

Could be called “URR” Unearned Revenue Reserve by clients familiar with FAS97

Question 5

Amortization Base

Answer 5

Important for several types of balances in GAAP ASU 2018-12. Including DAC, CoR, DPL. Different drivers for different purposes.

Question 6

PVP

Answer 6

Present Value of Premiums

Usually refers to NET Premiums ( PV Gross Premium x K Factor).
Part of PBL & Disclosures, at current or locked discount rates.

Question 7

PVB

Answer 7

Present Value of Benefits:

Part of PBL, K-factor Calcs & Disclosures, at current or locked discount rates.
Includes some Expenses

Question 8

DAC

Answer 8

Deferred Acquisition Costs Capitalized at issue and amortized over life of policy.

Question 9

Locked In Rate

Answer 9

Discount Rate at issue for K-factor calculation and disclosures tied to market rate

The liability for future policy benefits shall be discounted using an upper-medium grade (low credit-risk) fixed-income instrument yield. An insurance entity shall consider reliable information in estimating the upper-medium grade (low-credit-risk) fixed income instrument yield that reflects the duration characteristics of the liability for future policy benefits (see paragraph 944-40-55-13E).

May be singular or based on yield curve.

Can “float” for open cohorts.

Question 10

Current Rate

Answer 10

Updated Discount Rate as of Current Reporting period, used for discounting Benefits and Net Premiums, not in calculating Net Premium Ratio.

Question 11

Transition

Answer 11

Point in time when reserves change from old GAAP to New GAAP. Can use “Fully Retrospective” Approach, which includes all historic cash flows for policies or “Modified Retorspective” Approach which allows for “Carry Over Balances” to be used at Transition Date.

Question 12

LDTI

Answer 12

Long Duration Targeted Improvements - Alternate name for GAAP ASU 2018-12. Also sometimes called “New GAAP”.

Question 13

Cohort

Answer 13

Grouping level for calculations and disclosures. At least GAAP product type (Whole Life and Term, Limited Pay, etc.) and issue year. Can be “Closed” or “Open”

Question 14

Subcohort

Answer 14

Company specific grouping, not required by ASU 2018

Question 15

Disclosure

Answer 15

A numerical or explanatory statement. EX: Roll-forwards, Assumptions/ Judgements, and Impacts from Changes.

For DAC and PBL.

Question 16

OCI

Answer 16

Other Comprehensive Income –

Primarily the line item to quantify Difference in PBL at Locked vs. Current Rate for Whole Life and Term Products