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Life Health > Life Insurance

NAIC Panel Releases Draft Of Preferred Table Guidance

By Jim Connolly

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Members of the Life & Health Actuarial Task Force voted earlier this week to expose a draft of preferred life actuarial guidance to public review.

All members of the LHATF except for New York supported the move to expose the draft of Actuarial Guideline TAB, which deals with the application of the model regulation permitting the recognition of preferred mortality tables for use in determining minimum reserve liabilities.

The guideline is supposed to help the actuaries who advise insurers decide which mortality rates to use when insurers switch to the 2001 Commissioners Standard Ordinary Preferred Class Structure Mortality Table.

Mike Batte, a life actuary with the New Mexico Department of Insurance, called for quick action on AG TAB before the guideline vote, during an LHATF conference call.

The NAIC, Kansas City, Mo., already has approved new preferred mortality tables, and lawmakers are starting to introduce preferred mortality table bills in state legislatures, Batte said.

Because states are adopting the tables, NAIC members “need to get the guideline done,” Batte said. “We cannot wait all year.”

The version of the guideline exposed includes 2 amendments proposed by the American Council of Life Insurers, Washington.

- For mortality classes of less than 10 years, only a test based on the present value over the life of the contract would have to be passed.

- The certification exemption for business valued on the residual standard smoker table as well as the residual standard nonsmoker table currently specified in the draft would be expanded.

Paul Graham, an ACLI vice president, explained the ACLI’s request for the residual standard certification exemption in a letter submitted to the LHATF in November 2006.

“We are aware that some regulators believe that the definition of anticipated mortality should include the effect of anti-selective lapses,” Graham writes in the letter. “However, such a definition would create a mismatch between the anticipated mortality being tested and the valuation basic table (which does not include the effect of anti-selective lapses).

“Such a mismatch would result in the inability to use the select mortality tables for most level premium term products, the very products for which the mortality tables were developed. Therefore, the definition of anticipated mortality must not include the effect of anti-selective lapses.”

During the conference call LHATF regulators expressed concern over a part of the draft guideline that talks about what actuaries should do when there is no experience.

If relevant company experience for a particular class and other relevant experience are “insufficient to form an assumption,” then the current proposal states that the appointed actuary should use professional judgment to assess anticipated mortality.”

Fred Anderson, a life actuary with New York department, said there needs to be “some science behind the determination of the appropriate mortality table to use.”

The states supporting New York’s call for more actuarial science were California, Florida, Kansas and Utah.

“How do you use judgment if you don’t have something with which to make an assumption from?” asked Tomasz Serbinowski, a Utah regulator.

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