A team of actuaries wants to give state insurance regulators a new way to see what long-lived annuity holders and pension plan participants are doing to a life insurer’s financial strength.
The Longevity Risk Task Force, an arm of the American Academy of Actuaries, is looking at how to build longevity risk adjustments into life insurers risk-based capital (RBC) ratios.
Members of the Longevity Risk Subgroup, a panel at the National Association of Insurance Commissioners, heard an update about the task force project earlier this month, during a conference call meeting.
Paul Navratil, the chairperson of the actuarial academy’s Longevity Risk Task Force, and others on the task force, say in a written presentation prepared for the NAIC that they see a life insurer’s RBC ratio, or LRBC ratio, as a tool regulators can use to identify weakly capitalized companies.
“We took a practical approach in developing an initial longevity risk factor for LRBC which is not intended to precisely reflect all drivers nor to align to an internal view of economic capital for all companies,” according to the task force presentation.
The task force said it tried to come up a longevity risk factor that was easy to calculate and consistent with the existing LRBC framework.
The task force is starting by looking only at annuity products that are already paying income, and at the group annuities used to fund pension risk transfers. The task force is not yet looking at the longevity risk embedded in products such as variable annuities and long-term care insurance.