NU Online News Service, Dec. 10, 2003, 9:42 a.m. EST, Anaheim, Calif. – The National Association of Insurance Commissioners, Kansas City, Mo., fully adopted Actuarial Guideline 34 here at the NAIC’s winter meeting.[@@]

The guideline addresses reserves for the guaranteed minimum death benefits sold along with variable annuities.

The guideline requires that an insurer’s actuaries perform a stand-alone asset adequacy analysis for variable annuities with death benefit guarantees. An asset adequacy test helps determine whether a company has enough assets to back its obligations.

Guaranteed minimum death benefits and guaranteed minimum living benefits became an issue when the recent stock slump put many companies’ guarantees “in the money.” Regulators wanted to know that insurers had enough reserves to back the guarantees.

The NAIC adopted the GMDB guideline even as the American Academy of Actuaries, Washington, was fine-tuning a proposal for reserve guidelines for guaranteed living benefits. The authors are getting ready to expose the proposal for public comment, and supporters hope the proposal will be adopted by the end of 2004.

The AAA proposal is related to a risk-based capital proposal, called the C-3, Phase II project, which seeks to establish risk-based capital criteria for variable products with guarantees.

Regulators also addressed reserving for long term care insurance products. The recommendation of the AAA would increase reserving requirement by roughly 5% to 8%. However, a look at data from 11 companies found that LTC insurers were reserved at between 109% and 143% of what was required.