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Work could be delayed for at least six months on mortality tables that are used to determine necessary reserves for life insurance products and that determine how such products are priced.

The last Commissioners Standard Ordinary Tables were developed in 1980. Since that time, agreement among regulators and insurers suggests that mortality rates have improved and that new tables would reflect that improvement.

Consequently, regulators directed the Society of Actuaries in Schaumburg, Ill. and the American Academy of Actuaries in Washington to work on Valuation Basic Tables (VBT) and subsequent new CSO Tables. VBTs are the building blocks from which CSO Tables are developed.

Life actuaries have been working for over a year to complete a VBT and earlier this month told regulators they believed their work was complete. They asked regulators to sign off on the VBT so they would have direction and an assurance that they should be proceeding with completion of the CSO Tables.

Initially, a tight timetable of approving the VBT, completing work on the CSO Tables, exposing them and putting them on a fast track through the adoption process of the National Association of Insurance Commissioners was planned. But regulators still have questions about how the VBT was put together.

Larry Gorski, chief actuary with the Illinois insurance department, says he needs more information on two issues: the development of the smoker/nonsmoker VBT and exclusion of mortality data from Bragg and Associates in Atlanta. The exclusion of the Bragg non-overlapping smoker/nonsmoker data from SOA experience is an issue, according to Gorski. Two sets of data have been used in creating the VBT: SOA and Bragg data.

Gorski says the VBT is constructed so that there is a combined table and from that table, mortality tables were created for smokers and non-smokers. There are different levels of reserving for smokers and non-smokers, Gorski says. To date, the data has been examined for reserving adequacy but the fairness of the margins to the smoker and non-smoker populations also needs to be looked at if products are going to be priced fairly based on these tables, he explains.

Additionally, according to Gorski, it is necessary to make sure that the portion of the Bragg mortality data that does not overlap with Society data matches the experience of the SOA work.

During a recent discussion on the issue, insurers warned regulators that failure to get a go-ahead could delay tables for at least six months. Actuaries will have to turn their attention to preparing company financial statements during the coming weeks.

Mike Batte, chair of the Life and Health Actuarial Task Force has asked actuaries working on the CSO tables to continue their work as if the VBT was going to be approved. For now, says Academy spokesman Steve English, the Academy is continuing its work.


Reproduced from National Underwriter Life & Health/Financial Services Edition, October 29, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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