Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Life
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

Browse Open Actuarial Jobs

Life  Health  Casualty  Pension  Entry Level  All Jobs  Salaries


Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 09-09-2019, 05:39 PM
pete5383's Avatar
pete5383 pete5383 is online now
Member
SOA
 
Join Date: Feb 2011
Posts: 22,512
Default FAS60 - Changing Assumptions but not Unlocking

I've got a puzzler question for my GAAP friends.

Let's think of this example for 30 Year Term Life (FAS60, locked-in assumptions). I'm not really a Term Valuation guy naturally, so apologies if I say anything silly. Let's say you should a block that had face values from $100K-$500K, and nothing lower or higher. Your locked-in assumptions are based on the $100K bands ($100K-$200K, $200K-$300K, etc.).

Five years after this block has stopped issuing new policies, it is decided (with approval from the states) that policies can reduce their benefits and their premiums by equal percentages. So, 25% reduction in benefits = 25% reduction in premium.

My questions...

1) If a policy takes the reduction and goes from $250K face to $125K, does he get the assumptions of the new lower band that he is now in?

2) If yes, would we retroactively apply them, as though we were unlocking?

3) If yes, what about a policy that went from $150K to $75K, for which we don't have assumptions. Do we get to create them, and if so, would they be best-estimate?

Hopefully that all makes sense!
__________________
When the only American citizen President Trump singles out for China’s investigation is his political opponent in the midst of the Democratic nomination process, it strains credulity to suggest that it is anything other than politically motivated
Reply With Quote
  #2  
Old 09-09-2019, 07:04 PM
Ranger's Avatar
Ranger Ranger is offline
Member
SOA AAA
 
Join Date: Sep 2001
Favorite beer: An icy cold one in a glass bottle
Posts: 1,323
Default

My first thought is "no, you don't get to make any changes".

I'm not sure I even see an argument for a change in the mortality assumption. While the current face amount may now be smaller (and might have had a different mortality assumption at application because of different underwriting requirements), the underwriting that did happened hasn't changed. The $250k face policy (now at $125k) was underwritten for a $250k face policy. The current face amount is immaterial. I have a hard time seeing a case for a change in mortality assumption.

Will there be a change in persistency expectation? I have hard time seeing a justification for this change as well.

Obviously you'll want to check your DAC recoverability under your new scenario with lower premium revenues. All the expenses are behind you and those didn't change but now you have less future revenue.

These are just the initial thoughts of one random guy from the internet. Do not construe them to be an actuarial opinion or advice. consume with copious quantities of caution.
Reply With Quote
  #3  
Old 09-09-2019, 10:54 PM
pete5383's Avatar
pete5383 pete5383 is online now
Member
SOA
 
Join Date: Feb 2011
Posts: 22,512
Default

Thank you very much! I don't know much about FAS60 tbh (FAS97 4 Life), so I appreciate the thoughts, and what you said makes a lot of sense.
__________________
When the only American citizen President Trump singles out for China’s investigation is his political opponent in the midst of the Democratic nomination process, it strains credulity to suggest that it is anything other than politically motivated
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 09:31 PM.


Powered by vBulletin®
Copyright ©2000 - 2019, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.27703 seconds with 9 queries