Upload
jimmy-chandra
View
217
Download
0
Embed Size (px)
Citation preview
7/25/2019 07 Premium Deficiency Reserves - Hunt
1/19
7/25/2019 07 Premium Deficiency Reserves - Hunt
2/19
Milliman USA
Deficiency ReservesDeficiency Reserves
The IdeaThe Idea
Present Value of Net PremiumsPresent Value of Net Premiums
minusminus
Present Value of Gross PremiumsPresent Value of Gross Premiums
7/25/2019 07 Premium Deficiency Reserves - Hunt
3/19
Milliman USA
Deficiency ReservesDeficiency Reserves
The Current RealityThe Current RealityMinimum Reserve =Minimum Reserve =
Present Value of BenefitsPresent Value of Benefits
minusminusPresent Value of Lesser of GrossPresent Value of Lesser of Gross
Premium or Net PremiumPremium or Net Premium
7/25/2019 07 Premium Deficiency Reserves - Hunt
4/19
Milliman USA
( )
= +++++
M
txMM
txtxtx
M
txMDef
x aaat
......
PAPAGPV
Deficiency Reserves ExpressedDeficiency Reserves ExpressedAlgebraically . . .Algebraically . . .
7/25/2019 07 Premium Deficiency Reserves - Hunt
5/19
Milliman USA
Comparison of DeficiencyComparison of DeficiencyReserve and Basic ReserveReserve and Basic Reserve
PatternPattern
20 Year Level Term Policy20 Year Level Term Policy
0
5
10
15
20
0 2 4 6 8 10 12 14 16 18 20
Basic Reserves Deficiency Reserves
7/25/2019 07 Premium Deficiency Reserves - Hunt
6/19
Milliman USA
Comparison of DeficiencyComparison of DeficiencyReserve and Basic ReserveReserve and Basic Reserve
PatternPattern
Whole Life PolicyWhole Life Policy
0
200
400600
800
1000
0 10 20 30 40 50 60
Basic Reserves Deficiency Reserves
7/25/2019 07 Premium Deficiency Reserves - Hunt
7/19
Milliman USA
Comparison of DeficiencyComparison of DeficiencyReserve and Basic ReserveReserve and Basic Reserve
PatternPattern
Whole Life PolicyWhole Life Policy (first 10 years)(first 10 years)
0
50
100
150
0 2 4 6 8 10
Basic Reserves Deficiency Reserves
7/25/2019 07 Premium Deficiency Reserves - Hunt
8/19
Milliman USA
Term InsuranceTerm Insurance -- XXXXXX
Deficiency Reserves =Deficiency Reserves =
Quantity AQuantity AMinusMinus
Basic ReserveBasic Reserve
7/25/2019 07 Premium Deficiency Reserves - Hunt
9/19
Milliman USA
Deficiency Reserve Mortality
Can be modified by:
80 CSO 10-Year select factors
XXX select factors
X% of the XXX select factors Any other table of select
factors adopted by the NAIC
7/25/2019 07 Premium Deficiency Reserves - Hunt
10/19
Milliman USA
X Factor RestrictionsX Factor Restrictions
Can vary by any factor thatCan vary by any factor thataffects mortalityaffects mortality
Cannot be less than 20%Cannot be less than 20%
Cannot decrease by policy yearCannot decrease by policy year
7/25/2019 07 Premium Deficiency Reserves - Hunt
11/19
Milliman USA
More X Factor RestrictionsMore X Factor Restrictions PV death benefits using XPV death benefits using X
factors PV death benefitsfactors PV death benefitsusing anticipated mortalityusing anticipated mortality
Mortality rates with X factorsMortality rates with X factorsanticipated mortality rates inanticipated mortality rates in
each of the next 5 yearseach of the next 5 years Must meet requirements atMust meet requirements at
each valuation dateeach valuation date
7/25/2019 07 Premium Deficiency Reserves - Hunt
12/19
Milliman USA
More X Factor RestrictionsMore X Factor Restrictions
May be decreased at futureMay be decreased at futurevaluation dates if expectedvaluation dates if expected
mortality decreasesmortality decreases Must provide Actuarial OpinionMust provide Actuarial Opinion
and Memorandum if < 100%and Memorandum if < 100%
7/25/2019 07 Premium Deficiency Reserves - Hunt
13/19
Milliman USA
Impact of Select Factors onImpact of Select Factors on
Deficiency ReservesDeficiency Reserves20 Year Level Term Policy20 Year Level Term Policy
0
510
15
20
0 2 4 6 8 10 12 14 16 18 20
Basic Reserves Deficiency Reserves
10 Yr Select XXX Select
7/25/2019 07 Premium Deficiency Reserves - Hunt
14/19
Milliman USA
More Guidance. . .More Guidance. . .
Academy Practice Note for XXXAcademy Practice Note for XXX
Actuarial Standard of PracticeActuarial Standard of Practice#40#40
Academy Practice Note forAcademy Practice Note forASOP#40ASOP#40
7/25/2019 07 Premium Deficiency Reserves - Hunt
15/19
Milliman USA
XXX ExemptionsXXX Exemptions
XXX defines exemptions to itsXXX defines exemptions to itssegmentation methodology for YRTsegmentation methodology for YRTreinsurance, and Attainedreinsurance, and Attained--ageage--basedbased
YRT policies.YRT policies.
In these exemptions, deficiencyIn these exemptions, deficiencyreserves are required using thereserves are required using theclassic definition.classic definition.
7/25/2019 07 Premium Deficiency Reserves - Hunt
16/19
Milliman USA
Universal LifeUniversal Life
Alternative Minimum ReservesAlternative Minimum ReservesIf GMP < Valuation Net PremiumIf GMP < Valuation Net Premium
Then the Minimum Reserve isThen the Minimum Reserve is
calculated using by replacing thecalculated using by replacing thevaluation net premium with the GMPvaluation net premium with the GMP
7/25/2019 07 Premium Deficiency Reserves - Hunt
17/19
Milliman USA
Product FeaturesProduct Features
Common with AMRsCommon with AMRs
NoNo--load products, if theload products, if theguaranteed cost bases areguaranteed cost bases are
similar to the valuation basissimilar to the valuation basis GuaranteedGuaranteed COIsCOIs < Valuation< Valuation qsqs
Guaranteed Interest > ValuationGuaranteed Interest > Valuation Any feature that tends toAny feature that tends to
lower the GMPlower the GMP
7/25/2019 07 Premium Deficiency Reserves - Hunt
18/19
Milliman USA
2001 CSO Table2001 CSO Table Can use select rates in 1Can use select rates in 1stst
segmentsegment
Can multiply select rates by XCan multiply select rates by Xfactors in 1factors in 1stst segmentsegment
X factors have sameX factors have same
restrictions as beforerestrictions as before
Different mortality can be usedDifferent mortality can be used
for basic and deficiencyfor basic and deficiencyreservesreserves
7/25/2019 07 Premium Deficiency Reserves - Hunt
19/19