(1)
Purpose and effective
date. The purpose of this rule is to prescribe:
a. Requirements for statements of actuarial
opinion that are to be submitted in accordance with Iowa Code section 508.36
and for memoranda in support thereof;
b. Rules applicable to the appointment of an
appointed actuary; and
c. Guidance
as to the meaning of "adequacy of reserves."
(2)
Authority. This rule is
issued pursuant to the authority vested in the commissioner under Iowa Code
section
508.36. This
rule will take effect for annual statements for the year 2004.
(3)
Scope. This rule shall
apply to all life insurance companies and fraternal benefit societies doing
business in this state and to all life insurance companies and fraternal
benefit societies which are authorized to reinsure life insurance, annuities or
accident and health insurance business in this state.
This rule shall be applied in a manner that allows the
appointed actuary to utilize the actuary's professional judgment in performing
the asset analysis and developing the actuarial opinion and supporting
memoranda, consistent with relevant actuarial standards of practice. However,
the commissioner shall have the authority to specify specific methods of
actuarial analysis and actuarial assumptions when, in the commissioner's
judgment, these specifications are necessary for an acceptable opinion to be
rendered relative to the adequacy of reserves and related items.
This rule shall be applicable to all annual statements filed
with the office of the commissioner after January 1, 2004. A statement of
opinion on the adequacy of the reserves and related actuarial items based on an
asset adequacy analysis in accordance with subrule 5.34(6), and a memorandum in
support thereof in accordance with subrule 5.34(7), shall be required each
year.
(4)
Definitions. As used in this rule:
"Actuarial opinion " means the opinion of an
appointed actuary regarding the adequacy of the reserves and related actuarial
items based on an asset adequacy analysis in accordance with subrule 5.34(6)
and with applicable actuarial standards.
"Actuarial Standards Board" means the board
established by the American Academy of Actuaries to develop and promulgate
standards of actuarial practice.
"Annual statement" means that statement
required by Iowa Code section
508.11 to be
filed annually by the company with the office of the commissioner.
"Appointed actuary" means any individual who
is appointed or retained in accordance with the requirements set forth in
5.34(5)"c" to provide the actuarial opinion and supporting
memorandum as required by Iowa Code section
508.36.
"Asset adequacy analysis" means an analysis
that meets the standards and other requirements referred to in
5.34(5)"d. "
"Commissioner " means the insurance
commissioner of this state.
"Company" means a life insurance company,
fraternal benefit society or reinsurer subject to the provisions of this
rule.
"Qualifiedactuary" means any individual who
meets the requirements set forth in 5.34(5)"b. "
(5)
General
requirements.
a.
Submission
of statement of actuarial opinion.
(1) There is to be included on or attached to
page 1 of the annual statement for each year beginning with the statement filed
as of December 31, 2004, the statement of an appointed actuary, entitled
"Statement of Actuarial Opinion," setting forth an opinion relating to reserves
and related actuarial items held in support of policies and contracts, in
accordance with 5.34(6).
(2) Upon
written request by the company, the commissioner may grant an extension of the
date for submission of the statement of actuarial opinion.
b.
Qualified actuary. A
"qualified actuary" is an individual who:
(1)
Is a member in good standing of the American Academy of Actuaries;
(2) Is qualified to sign statements of
actuarial opinion for life and health insurance company annual statements in
accordance with the American Academy of Actuaries qualification standards for
actuaries signing such statements;
(3) Is familiar with the valuation
requirements applicable to life and health insurance companies;
(4) Has not been found by the commissioner
(or if so found has subsequently been reinstated as a qualified actuary),
following appropriate notice and hearing, to have:
1. Violated any provision of, or any
obligation imposed by, the insurance code or other law in the course of dealing
as a qualified actuary;
2. Been
found guilty of fraudulent or dishonest practices;
3. Demonstrated incompetency, lack of
cooperation, untrustworthiness to act as a qualified actuary;
4. Submitted to the commissioner during the
past five years, pursuant to this rule, an actuarial opinion or memorandum that
the commissioner rejected because it did not meet the provisions of this rule
including standards set by the Actuarial Standards Board; or
5. Resigned or been removed as an actuary
within the past five years as a result of acts or omissions indicated in any
adverse report on examination or as a result of failure to adhere to generally
acceptable actuarial standards; and
(5) Has not failed to notify the commissioner
of any action taken by any commissioner of any other state similar to that
under 5.34(5)"b "(4).
c.
Appointed actuary. An
"appointed actuary" is a qualified actuary who is appointed or retained to
prepare the statement of actuarial opinion required by this rule, either
directly by or by the authority of the board of directors through an executive
officer of the company other than the qualified actuary. The company shall give
the commissioner timely written notice of the name, title (and, in the case of
a consulting actuary, the name of the firm) and manner of appointment or
retention of each person appointed or retained by the company as an appointed
actuary and shall state in the notice that the person meets the requirements
set forth in 5.34(5)"b." Once notice is furnished, no further
notice is required with respect to this person, provided that the company shall
give the commissioner timely written notice in the event the actuary ceases to
be appointed or retained as an appointed actuary or to meet the requirements
set forth in 5.34(5)"b." If any person appointed or retained
as an appointed actuary replaces a previously appointed actuary, the notice
shall so state and give the reasons for replacement.
d.
Standards for asset adequacy
analysis. The asset adequacy analysis required by this rule shall:
(1) Conform to the standards of practice as
promulgated from time to time by the Actuarial Standards Board and any
additional standards under this rule, which standards are to form the basis of
the statement of actuarial opinion in accordance with 5.34(6);
(2) Be based on methods of analysis as are
deemed appropriate for such purposes by the Actuarial Standards
Board.
e.
Liabilities to be covered.
(1) Under the authority of Iowa Code section
508.36, the statement of actuarial opinion shall apply to all in-force business
on the statement date, whether directly issued or assumed, regardless of when
or where issued, e.g., reserves of Exhibits 8, 9, and 10, and claim liabilities
in Exhibit 11, part 1, and equivalent items in the separate account statement
or statements.
(2) If the appointed
actuary determines as the result of asset adequacy analysis that a reserve
should be held in addition to the aggregate reserve held by the company and
calculated in accordance with methods set forth in Iowa Code section
508.36, the
company shall establish the additional reserve.
(3) Additional reserves established under
5.34(5)"e"(2) and deemed not necessary in subsequent years may
be released. Any amounts released shall be disclosed in the actuarial opinion
for the applicable year. The release of such reserves would not be deemed an
adoption of a lower standard of valuation.
(6)
Statement of actuarial opinion
based on an asset adequacy analysis,
a.
General description. The
statement of actuarial opinion submitted in accordance with this subrule shall
consist of:
(1) A paragraph identifying the
appointed actuary and the actuary's qualifications (see
5.34(6)"b"(1));
(2) A scope paragraph identifying the
subjects on which an opinion is to be expressed and describing the scope of the
appointed actuary's work, including a tabulation delineating the reserves and
related actuarial items that have been analyzed for asset adequacy and the
method of analysis (see 5.34(6) "b "(2)), and identifying the
reserves and related actuarial items covered by the opinion that have not been
so analyzed;
(3) A reliance
paragraph describing those areas, if any, where the appointed actuary has
deferred to other experts in developing data, procedures or assumptions (e.g.,
anticipated cash flows from currently owned assets, including variation in cash
flows according to economic scenarios (see 5.34(6)"b "(3))),
supported by a statement of each such expert in the form prescribed by
5.34(6)"e "; and
(4) An opinion paragraph expressing the
appointed actuary's opinion with respect to the adequacy of the supporting
assets to mature the liabilities (see 5.34(6)"b "(6)).
(5) One or more additional
paragraphs will be needed in individual company cases as follows:
1. If the appointed actuary considers it
necessary to state a qualification of opinion;
2. If the appointed actuary must disclose an
inconsistency in the method of analysis or basis of asset allocation used at
the prior opinion date with that used for this opinion;
3. If the appointed actuary must disclose
whether additional reserves of the prior opinion date are released as of this
opinion date, and the extent of the release;
4. If the appointed actuary chooses to add a
paragraph briefly describing the assumptions that form the basis for the
actuarial opinion.
b.
Recommended language. The
following paragraphs shall be included in the statement of actuarial opinion in
accordance with this subrule. Language is that which in typical circumstances
should be included in a statement of actuarial opinion. The language may be
modified as needed to meet the circumstances of a particular case, but the
appointed actuary should use language that clearly expresses the actuary's
professional judgment. However, in any event, the opinion shall retain all
pertinent aspects of the language provided in this subrule.
(1) The opening paragraph should generally
indicate the appointed actuary's relationship to the company and qualifications
to sign the opinion. For a company actuary, the opening paragraph of the
actuarial opinion should include a statement such as:
"I, [name], am [title] of [insurance company name] and a
member of the American Academy of Actuaries. I was appointed by, or by the
authority of, the board of directors of said insurer to render this opinion as
stated in the letter to the commissioner dated [insert date]. I meet the
Academy qualification standards for rendering the opinion and am familiar with
the valuation requirements applicable to life and health insurance
companies."
For a consulting actuary, the opening paragraph should
include a statement such as: "I, [name], a member of the American Academy of
Actuaries, am associated with the firm of [name of consulting firm]. I have
been appointed by, or by the authority of, the board of directors of [name of
company] to render this opinion as stated in the letter to the commissioner
dated [insert date]. I meet the Academy qualification standards for rendering
the opinion and am familiar with the valuation requirements applicable to life
and health insurance companies."
(2) The scope paragraph should include a
statement such as:
"I have examined the actuarial assumptions and actuarial
methods used in determining reserves and related actuarial items listed below,
as shown in the annual statement of the company, as prepared for
filing with state regulatory officials, as of December
31,20____. Tabulated below are those reserves and related actuarial items which
have been subjected to asset adequacy analysis."
| Asset Adequacy Tested Amounts - Reserves and
Liabilities |
|
Statement Item
|
Formula Reserves (1)
|
Additional Actuarial Reserves (a) (2)
|
Analysis Method (b)
|
Other Amount (3)
|
Total Amount (1)+(2)+(3) (4)
|
|
Exhibit 5
A Life Insurance
|
|
|
|
|
|
|
B Annuities
|
|
|
|
|
|
|
C Supplementary Contracts Involving Life
Contingencies
|
|
|
|
|
|
|
D Accidental Death Benefit
|
|
|
|
|
|
|
E Disability-Active
|
|
|
|
|
|
|
F Disability-Disabled
|
|
|
|
|
|
|
G Miscellaneous
|
|
|
|
|
|
|
Total (Exhibit 5 Item 1, Page 3)
|
|
|
|
|
|
|
Exhibit 6 A Active Life Reserve
|
|
|
|
|
|
|
B Claim Reserve
|
|
|
|
|
|
|
Total (Exhibit 6 Item 2, Page 3)
|
|
|
|
|
|
|
Exhibit 7 Premiums and Other Deposit Funds (Column
5, Line 14)
|
|
|
|
|
|
|
Guaranteed Interest Contracts (Column 2, Line 14)
|
|
|
|
|
|
|
Other (Column 6, Line 14)
|
|
|
|
|
|
|
Supplemental Contracts and Annuities (Column 3, Line
14)
|
|
|
|
|
|
|
Dividend Accumulations or Refunds (Column 4, Line
14)
|
|
|
|
|
|
|
Total Exhibit 7 (Column 1, Line 14)
|
|
|
|
|
|
|
Exhibit 8, Part 1
1 Life (Page 3, Line 4.1)
|
|
|
|
|
|
|
2 Health (Page 3, Line 4.2)
|
|
|
|
|
|
|
Total Exhibit 8, Part 1
|
|
|
|
|
|
|
Separate Accounts (Page 3 of the Annual Statement of
the Separate Accounts, Lines 1, 2, 3.1, 3.2, 3.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
IMR (General Account, Page _____ Line
_______)
|
|
(Separate Accounts, Page ____ Line
__________)
|
|
AVR (Page _____ Line _______)
|
|
Net Deferred and Uncollected Premium
|
(a) The
additional actuarial reserves are the reserves established under subparagraph
(2) of 5.34(5)"e."
(b) The appointed actuary should indicate the
method of analysis, determined in accordance with the standards for asset
adequacy analysis referred to in paragraph 5.34(5) "J, " by means of symbols
that should be defined in footnotes to the table.
(c) Allocated amount of asset valuation
reserve (AVR).
(3) If
the appointed actuary has relied on other experts to develop certain portions
of the analysis, the reliance paragraph should include a statement such as:
"I have relied on [name], [title] for [e.g., 'anticipated
cash flows from currently owned assets, including variations in cash flows
according to economic scenarios' or 'certain critical aspects of the analysis
performed in conjunction with forming my opinion'], as certified in the
attached statement. I have reviewed the information relied upon for
reasonableness."
Such a statement of reliance on other experts should be
accompanied by a statement by each of such experts in the form prescribed by
5.34(6)"e."
(4) If the appointed actuary has examined the
underlying asset and liability records, the reliance paragraph should include a
statement such as:
"My examination included such review of the actuarial
assumptions and actuarial methods and of the underlying basic asset and
liability records and such tests of the actuarial calculations as I considered
necessary. I also reconciled the underlying basic asset and liability records
to [exhibits and schedules listed as applicable] of the company's current
annual statement."
(5) If
the appointed actuary has not examined the underlying records, but has relied
upon data (e.g., listings and summaries of policies in force or asset records)
prepared by the company, the reliance paragraph should include a statement such
as:
"In forming my opinion on [specify types of reserves], I
relied upon data prepared by [name and title of company officer certifying
in-force records or other data] as certified in the attached statements. I
evaluated that data for reasonableness and consistency. I also reconciled that
data to [exhibits and schedules to be listed as applicable] of the company's
current annual statement. In other respects, my examination included review of
the actuarial assumptions and actuarial methods used and tests of the
calculations I considered necessary."
The section shall be accompanied by a statement by each
person relied upon in the form prescribed by 5.34(6)"e."
(6) The opinion paragraph
shall include a statement such as:
"In my opinion the reserves and related actuarial values
concerning the statement items identified above:
"
1. Are computed in accordance with presently accepted
actuarial standards consistently applied and are fairly stated, in accordance
with sound actuarial principles;
"
2. Are based on actuarial assumptions that produce
reserves at least as great as those called for in any contract provision as to
reserve basis and method, and are in accordance with all other contract
provisions;
" 3. Meet the
requirements of the insurance law and rules of the state of [state of
domicile]; and are at least as great as the minimum aggregate amounts required
by the state in which this statement is filed;
"
4. Are computed on the basis of assumptions consistent
with those used in computing the corresponding items in the annual statement of
the preceding year-end (with any exceptions noted below); and
"
5. Include provision for all actuarial
reserves and related statement items which ought to be established.
"The reserves and related items, when considered in light of
the assets held by the company with respect to such reserves and related
actuarial items including, but not limited to, the investment earnings on such
assets, and the considerations anticipated to be received and retained under
such policies and contracts, make adequate provision, according to presently
accepted actuarial standards of practice, for the anticipated cash flows
required by the contractual obligations and related expenses of the company.
(At the discretion of the commissioner, this language may be omitted for an
opinion filed on behalf of a company doing business only in this state and in
no other state.)
"The actuarial methods, considerations and analyses used in
forming my opinion conform to the appropriate Standards of Practice as
promulgated by the Actuarial Standards Board, which standards form the basis of
this statement of opinion.
"The following material change(s) which occurred between the
date of the statement for which this opinion is applicable and the date of this
opinion should be considered in reviewing this opinion: (Describe the change or
changes.)
"The impact of unanticipated events subsequent to the date of
this opinion is beyond the scope of this opinion. The analysis of asset
adequacy portion of this opinion should be viewed recognizing that the
company's future experience may not follow all the assumptions used in the
analysis.
_____________
Signature of Appointed Actuary
_____________
Address of Appointed Actuary
_____________
Telephone Number of Appointed Actuary
_____________
Date"
c.
Assumptions for new
issues. The adoption for new issues or new claims or other new
liabilities of an actuarial assumption that differs from a corresponding
assumption used for prior new issues or new claims or other new liabilities is
not a change in actuarial assumptions within the meaning of this
subrule.
d.
Adverse
opinion. If the appointed actuary is unable to form an opinion, then
the actuary shall refuse to issue a statement of actuarial opinion. If the
appointed actuary's opinion is adverse or qualified, then the actuary shall
issue an adverse or qualified actuarial opinion explicitly stating the
reason(s) for the opinion. This statement should follow the scope paragraph and
precede the opinion paragraph.
e.
Reliance on information furnished by other persons. If the
appointed actuary relies on the certification of others on matters concerning
the accuracy or completeness of any data underlying the actuarial opinion, or
the appropriateness of any other information used by the appointed actuary in
forming the actuarial opinion, the actuarial opinion should so indicate the
persons upon whom the actuary is relying and a precise identification of the
items subject to reliance. In addition, the persons on whom the appointed
actuary relies shall provide a certification that precisely identifies the
items on which the person is providing information and a statement as to the
accuracy, completeness or reasonableness, as applicable, of the items. This
certification shall include the signature, title, company, address and
telephone number of the person rendering the certification, as well as the date
on which it is signed.
f.
Alternate option.
(1) Iowa
Code section
508.36 gives
the commissioner broad authority to accept the valuation of a foreign insurer
when that valuation meets the requirements applicable to a company domiciled in
this state in the aggregate. As an alternative to the requirements of
subparagraph 5.34(6)
"b "(6), item "3," the commissioner may
make one or more of the following additional approaches available to the
opining actuary:
1. A statement that the
reserves "meet the requirements of the insurance laws and regulations of the
State of [state of domicile] and the formal written standards and conditions of
this state for filing an opinion based on the law of the state of domicile." If
the commissioner chooses to allow this alternative, a formal written list of
standards and conditions shall be made available. If a company chooses to use
this alternative, the standards and conditions in effect on July 1 of a
calendar year shall apply to statements for that calendar year, and they shall
remain in effect until they are revised or revoked. If no list is available,
this alternative is not available.
2. A statement that the reserves "meet the
requirements of the insurance laws and regulations of the State of [state of
domicile] and I have verified that the company's request to file an opinion
based on the law of the state of domicile has been approved and that any
conditions required by the commissioner for approval of that request have been
met." If the commissioner chooses to allow this alternative, a formal written
statement of such allowance shall be issued no later than March 31 of the year
it is first effective. The statement shall remain valid until rescinded or
modified by the commissioner. A rescission or modification of the statement
shall be issued no later than March 31 of the year it is first effective. After
that statement is issued, if a company chooses to use this alternative, the
company shall file a request to do so, along with justification for its use, no
later than April 30 of the year the opinion is to be filed. The request shall
be deemed approved on October 1 of that year if the commissioner has not denied
the request by that date.
3. A
statement that the reserves "meet the requirements of the insurance laws and
regulations of the State of [state of domicile] and I have submitted the
required comparison as specified by this state."
* If the commissioner chooses to allow this alternative, a
formal written list of products (to be added to the table in 5.34(6) '/"(1)"3,"
second bulleted paragraph) for which the required comparison shall be provided
will be published. If a company chooses to use this alternative, the list in
effect on July 1 of a calendar year shall apply to statements for that calendar
year, and it shall remain in effect until it is revised or revoked. If no list
is available, this alternative is not available.
* If a company desires to use this alternative, the appointed
actuary shall provide a comparison of the gross nationwide reserves held to the
gross nationwide reserves that would be held under National Association of
Insurance Commissioners codification standards adopted in rule
191-5.15 (508,512B,514,514B,515,520). Gross nationwide reserves are the total reserves
calculated for the total company in-force business directly sold and assumed,
indifferent to the state in which the risk resides, without reduction for
reinsurance ceded. The information provided shall include at least the
following:
|
(1)
Product Type
|
(2)
Death Benefit or Account Value
|
(3)
Reserves Held
|
(4)
Codification Reserves
|
(5)
Codification Standard
|
|
|
|
|
|
|
|
|
|
|
* The information listed shall include all products
identified by either the state of filing or any other states subscribing to
this alternative.
* If there is no codification standard for the type of
product or risk in force or if the codification standard does not directly
address the type of product or risk in force, the appointed actuary shall
provide detailed disclosure of the specific method and assumptions used in
determining the reserves held.
* The comparison provided by the company is to be kept
confidential to the same extent and under the same conditions as the actuarial
memorandum.
(2)
Notwithstanding 5.34(6)"f'(1) the commissioner may reject an
opinion based on the laws and regulations of the state of domicile and require
an opinion based on the laws of this state. If a company is unable to provide
the opinion within 60 days of the request or such other period of time
determined by the commissioner after consultation with the company, the
commissioner may contract an independent actuary at the company's expense to
prepare and file an opinion.
(7)
Description of actuarial
memorandum including an asset adequacy analysis and regulatory asset adequacy
issues summary.
a.
General.
(1) In accordance
with Iowa Code section
508.36, the
appointed actuary shall prepare a memorandum to the company describing the
analysis done in support of the opinion regarding the reserves. The memorandum
shall be made available for examination by the commissioner upon request but
shall be returned to the company after such examination and shall not be
considered a record of the division or subject to automatic filing with the
commissioner.
(2) In preparing the
memorandum, the appointed actuary may rely on, and include as a part of the
actuary's own memorandum, memoranda, prepared and signed by other actuaries who
are qualified within the meaning of 5.34(5)"b" with respect to
the areas covered in such memoranda, and so state in their memoranda.
(3) If the commissioner requests a memorandum
and no such memorandum exists or if the commissioner finds that the analysis
described in the memorandum fails to meet the standards of the Actuarial
Standards Board or the standards and requirements of this rule, the
commissioner may designate a qualified actuary to review the opinion and
prepare such supporting memorandum as is required for review. The reasonable
and necessary expense of the independent review shall be paid by the company
but shall be directed and controlled by the commissioner.
(4) The reviewing actuary shall have the same
status as an examiner for purposes of obtaining data from the company, and the
work papers and documentation of the reviewing actuary shall be retained by the
commissioner; provided, however, that any information provided by the company
to the reviewing actuary and included in the work papers shall be considered as
material provided by the company to the commissioner and shall be kept
confidential to the same extent as is prescribed by law with respect to other
material provided by the company to the commissioner pursuant to the statute
governing this rule. The reviewing actuary shall not be an employee or a
consulting firm involved with the preparation of any prior memorandum or
opinion for the insurer pursuant to this rule for the current year or the
preceding three years.
(5) In
accordance with Iowa Code section
508.36, the
appointed actuary shall prepare a regulatory asset adequacy issues summary, the
contents of which are specified in 5.34(7)"c." Companies
submitting the regulatory asset adequacy issues summary shall submit the
summary no later than March 15 of the year following the year for which a
statement of actuarial opinion based on asset adequacy is required. Iowa
foreign companies are not required to submit the regulatory asset adequacy
issues summary annually; however, the summary shall be made available for
examination by the commissioner upon request. The regulatory asset adequacy
issues summary is to be kept confidential to the same extent and under the same
conditions as the actuarial memorandum.
b.
Details of the memorandum section
documenting asset adequacy analysis (5.34(6)). When an actuarial
opinion under 5.34(6) is provided, the memorandum shall demonstrate that the
analysis has been done in accordance with the standards for asset adequacy
referred to in 5.34(5) "J" and any additional standards under this rule. It
shall specify:
(1) For reserves:
1. Product descriptions including market
description, underwriting and other aspects of a risk profile and the specific
risks the appointed actuary deems significant;
2. Source of liability in force;
3. Reserve method and basis;
4. Investment reserves;
5. Reinsurance arrangements;
6. Identification of any explicit or implied
guarantees made by the general account in support of benefits provided through
a separate account or under a separate account policy or contract and the
methods used by the appointed actuary to provide for the guarantees in the
asset adequacy analysis;
7.
Documentation of assumptions to test reserves for the following:
* Lapse rates (both base and excess);
* Interest crediting rate strategy;
* Mortality;
* Policyholder dividend strategy;
* Competitor or market interest rate;
* Annuitization rates;
* Commissions and expenses; and
* Morbidity.
The documentation of the assumptions shall be such that an
actuary reviewing the actuarial memorandum could form a conclusion as to the
reasonableness of the assumptions.
(2) For assets:
1. Portfolio descriptions, including a risk
profile disclosing the quality, distribution and types of assets;
2. Investment and disinvestment
assumptions;
3. Source of asset
data;
4. Asset valuation bases;
and
5. Documentation of assumptions
made for:
* Default costs;
* Bond call function;
* Mortgage prepayment function;
* Determining market value for assets sold due to
disinvestment strategy; and
* Determining yield on assets acquired through the investment
strategy.
The documentation of assumptions shall be such that an
actuary reviewing the actuarial memorandum could form a conclusion as to the
reasonableness of the assumptions.
(3) For the analysis basis:
1. Methodology;
2. Rationale for inclusion or exclusion of
different blocks of business and how pertinent risks were analyzed;
3. Rationale for degree of rigor in analyzing
different blocks of business (include in the rationale the level of
"materiality" that was used in determining how vigorously to analyze different
blocks of business);
4. Criteria
for determining asset adequacy (include in the criteria the precise basis for
determining if assets are adequate to cover reserves under "moderately adverse
conditions" or other conditions as specified in relevant actuarial standards of
practice); and
5. Whether the
impact of federal income taxes was considered and the method of treating
reinsurance in the asset adequacy analysis.
(4) Summary of material changes in methods,
procedures, or assumptions from prior year's asset adequacy analysis.
(5) Conclusion(s).
c.
Details of the regulatory asset
adequacy issues summary.
(1) The
regulatory asset adequacy issues summary shall include:
1. Descriptions of the scenarios tested
(including whether those scenarios are stochastic or deterministic) and the
sensitivity testing done relative to those scenarios. If negative ending
surplus results under certain tests in the aggregate, the actuary should
describe those tests and the amount of additional reserves as of the valuation
date which, if held, would eliminate the negative aggregate surplus values.
Ending surplus values shall be determined by either extending the projection
period until the in-force and associated assets and liabilities at the end of
the projection period are immaterial or by adjusting the surplus amount at the
end of the projection period by an amount that appropriately estimates the
value that can reasonably be expected to arise from the assets and liabilities
remaining in force;
2. The extent
to which the appointed actuary uses assumptions in the asset adequacy analysis
that are materially different from the assumptions used in the previous asset
adequacy analysis;
3. The amount of
reserves and the identity of the product lines that had been subjected to asset
adequacy analysis in the prior opinion but were not subject to analysis for the
current opinion;
4. Comments on any
interim results that may be of significant concern to the appointed actuary,
for example, the impact of the insufficiency of assets to support the payment
of benefits and expenses and the establishment of statutory reserves during one
or more interim periods;
5. The
methods used by the actuary to recognize the impact of reinsurance on the
company cash flows, including both assets and liabilities, under each of the
scenarios tested; and
6. Whether
the actuary has been satisfied that all options, whether explicit or embedded,
in any asset or liability (including but not limited to those affecting cash
flows embedded in fixed income securities) and equity like features in any
investments have been appropriately considered in the asset adequacy
analysis.
(2) The
regulatory asset adequacy issues summary shall contain the name of the company
for which the regulatory asset adequacy issues summary is being supplied and
shall be signed and dated by the appointed actuary rendering the actuarial
opinion.
d.
Conformity to standards of practice. The memorandum shall
include the following statement: "Actuarial methods, considerations and
analyses used in the preparation of this memorandum conform to the appropriate
standards of practice as promulgated by the Actuarial Standards Board, which
standards form the basis for this memorandum."
e.
Use of assets supporting the
interest maintenance reserve and the asset valuation reserve. An
appropriate allocation of assets in the amount of the interest maintenance
reserve (IMR), whether positive or negative, shall be used in any asset
adequacy analysis. Analysis of risks regarding asset default may include an
appropriate allocation of assets supporting the asset valuation reserve (AVR);
these AVR assets may not be applied for any other risks with respect to reserve
adequacy. Analysis of these and other risks may include assets supporting other
mandatory or voluntary reserves available to the extent not used for risk
analysis and reserve support.
The amount of assets used for the AVR shall be disclosed in
the Table of Reserves and Liabilities of the opinion and in the memorandum. The
method used for selecting particular assets or allocated portions of assets
must be disclosed in the memorandum.
f.
Documentation. The
appointed actuary shall retain on file, for at least seven years, sufficient
documentation so that it will be possible to determine the procedures followed,
the analyses performed, the bases for assumptions and the results obtained.
This rule is intended to implement Iowa Code section
508.36.
