Regulators continued taking steps to make sure products are financially sound.
During the winter meeting of the National Association of Insurance Commissioners here, regulators fully adopted Actuarial Guideline 34, which addresses variable annuity guaranteed minimum death benefit reserves. The guideline requires a stand-alone asset adequacy analysis be performed for VAs with GMDBs. Asset adequacy tests determine whether a companys assets are sufficient to back the obligations it has assumed.
Guaranteed minimum death and living benefits recently became an issue when the stock market fell and these guarantees became burdensome for many companies. Regulators were concerned that there be proper reserving for these guarantees.
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The NAIC adopted the GMDB guideline even as the American Academy of Actuaries was fine-tuning a proposal for guaranteed living benefits. The proposal, which would establish reserving guidelines, will be exposed for comment in anticipation it can be fully adopted by year-end 2004.