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Life Health > Annuities > Variable Annuities

Regulators Need a Fictional Variable Annuity Issuer

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What You Need to Know

  • The NAIC will compare the performance of a model office with forecasts provided by real insurers to determine whether the real insurers’ performance forecasts seem reasonable.

Imagine a model office providing many different types of products, with many different types of assets.

That office would produce a wide range of reserve and capital results.

State insurance regulators plan to hire consultants to create such a simulation of a variable annuity issuer. The results could help the National Association of Insurance Commissioners analyze what real insurers are saying about how they might perform in different economic scenarios.

The NAIC wants to see how the simulation, or “variable annuity model office,” does in the different economic conditions bubbling out of the NAIC’s new Economic Scenario Generator tool.

The NAIC will compare the performance of the model office with the performance forecasts provided by real insurers to determine whether the real insurers’ performance forecasts seem reasonable.

What It Means

Regulators are trying to come up with a better way to determine how well-equipped life insurers are to make good on the promises they’ve made to clients.

The Details

The federal government leaves regulation of the business of insurance to the states.

The NAIC is a Kansas City, Missouri-based group for state insurance regulators. The NAIC’s executive committee, and the committee’s internal administration subcommittee, agreed last week to let the subcommittee hire a model office designer.

The model office will provide a wide range of in-force variable annuity and registered index-linked annuity products, with a variety of supporting assets and hedging strategies.

(Image: Shutterstock)