AG 51 Gives State Regulators a Window Into LTCI Issuer Finances

A new long-term care insurance (LTCI) issuer financial reporting rule, Actuarial Guideline 51, is giving a team of state insurance regulators new ideas about how U.S. LTCI issuers are really doing.

Fred Andersen, a Minnesota insurance regulators, talked about the new AG 51 data stream today in Chicago, at a session at the Intercompany Long Term Care Insurance Conference.

(Related: Regulators Post LTCI Reserve-Testing Draft)

Members of the National Association of Insurance Commissioners (NAIC), a group for state insurance regulators, have adopted AG 51 and set it to begin applying to LTCI issuers' 2017 operations.

The new actuarial guideline applies only to issuers with large amounts of stand-alone LTCI, not to small blocks of LTCI business, and not to products that combine long-term care benefits with life insurance or annuities.

Insurers submitted about 50 filings for 2017 to the NAIC's Valuation Analysis Review Group, Andersen said.

The NAIC has promised to keep the filings confidential, and it's just starting to think about the release of industrywide data, Andersen said.

But Andersen did say that he now believes that LTCI issuers as a whole have about $140 billion in total reserves, after double counting for reinsurance arrangements is filtered out.

ILTCI Conference speakers have said that reinsurers would like LTCI issuers to provide payments equal to about 50% of the value of their LTCI reserves, in addition to the reserves, when transferring responsibility for blocks of LTCI business to the reinsurers.

Some have interpreted those payment preferences to mean that reinsurers believe LTCI issuers have an average of about 33% less in reserves than they ought to have.

"I'm not getting anything close to that, even in a worst-case scenario," Andersen said.

Andersen said he believes the ceding commission totals reinsurers want the direct writers to pay include adjustments for LTCI being in disfavor and other adjustments in addition to adjustments for possible under-reserving.