NAIC Committee Advances Revised GMDB Guideline

A revised Guideline 34 would apply to variable annuities with GMDBs that potentially could exceed account value. There is concern that in policies such as dollar-for-dollar contracts, a small account value could be retained by the contract holder, locking in the higher GMDB obligation.

The draft revision would apply to contracts that include return-of-premium provisions, roll-ups, ratchets and resets. It would apply only to group VA contracts subject to the Commissioners Annuity Reserving Valuation Method.

The guideline warns that actuarial judgment is needed and that use of the guideline should be carefully considered in certain situations, such as when a market slump reduces the value of the underlying VA funds, causing a change in the net amount of risk.