Current through Rules and Regulations filed through March 20, 2024
(1) General.
(a) In accordance with O.C.G.A. §
33-10-13(b.1), the appointed
actuary shall prepare a memorandum to the company describing the analysis done
in support of his or her opinion regarding the reserves. The memorandum shall
be made available for examination by the Commissioner upon his or her request
but shall be returned to the company after such examination and shall not be
considered a record of the insurance department or subject to automatic filing
with the Commissioner.
(b) In
preparing the memorandum, the appointed actuary may rely on, and include as a
part of his or her own memorandum, memoranda prepared and signed by other
actuaries who are qualified within the meaning of
120-2-74-.05(2) of
this regulation, with respect to the areas covered in such memoranda, and so
state in their memoranda.
(c) 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 regulation, 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.
(d) 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 regulation. The reviewing
actuary shall not be an employee of a consulting firm involved with the
preparation of any prior memorandum or opinion for the insurer pursuant to this
regulation for any one of the current year or the preceding three (3)
years.
(e) In accordance with
O.C.G.A. §
33-10-13(b.1), the appointed
actuary shall prepare a regulatory asset adequacy issues summary, the contents
of which are specified in Subsection C. The regulatory asset adequacy issues
summary will be submitted no later than March 15 of the year following the year
for which a statement of actuarial opinion based on asset adequacy is required.
The regulatory asset adequacy issues summary is to be kept confidential to the
same extent and under the same conditions as the actuarial
memorandum.
(2) Details
of the Memorandum Section Documenting Asset Adequacy Analysis.
When an actuarial opinion is provided, the memorandum shall
demonstrate that the analysis has been done in accordance with the standards
for asset adequacy referred to in
120-2-74-.05(4) of
this regulation and any additional standards under this regulation. It shall
specify:
(a) 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:
(i) Lapse rates (both base and
excess);
(ii) Interest crediting
rate strategy;
(iii)
Mortality;
(iv) Policyholder
dividend strategy;
(v) Competitor
or market interest rate;
(vi)
Annuitization rates;
(vii)
Commissions and expenses; and
(viii) Morbidity.
(b) 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.
(c) 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:
(i) Default costs;
(ii) Bond call function;
(iii) Mortgage prepayment function;
(iv) Determining market value for assets sold
due to disinvestment strategy; and
(v) Determining yield on assets acquired
through the investment strategy.
6. 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.
(d) 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 rigorously 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;
(i) Summary of material changes in methods,
procedures, or assumptions from prior year's asset adequacy analysis;
(ii) Summary of results; and
(ii) Conclusions.
(3) Details of the
Regulatory Asset Adequacy Issues Summary
(a)
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 reserve 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 than 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's 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.
(b) 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.
(4) Conformity
to Standards of Practice. The memorandum shall include a 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."
(5)
Use of Assets Supporting the Interest Maintenance Reserve and the Asset
Valuation Reserve.
(a) 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.
(b) The amount of
the 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 shall be disclosed in the
memorandum.
(6)
Documentation. The appointed actuary shall retain on file, for at least seven
(7) 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.
O.C.G.A. Secs.
33-2-9,
33-10-13.