Weekly Tip: Actuarial Requirements for GLB & GMDB Submissions

 

Weekly Tips

Actuarial Requirements for GLB & GMDB Submissions

4/21/2016

The IIPRC has distinct Uniform Standards applicable to guaranteed living benefits (GLB) and guaranteed minimum death benefits (GMDB) for both the Variable and Non-Variable Annuity product lines. These annuity benefit features have actuarial requirements that are frequently overlooked. In this week’s Tip we will highlight those requirements in order to help you have a more efficient filing experience when submitting these types of features.

On the Record, you will find the distinct Uniform Standard for each of the annuity features, along with the corresponding checklist. To make your filing process smoother, please make sure that you are using the correct Uniform Standard for your design. Make sure to expand the correct product line – Variable or Non-Variable Annuity – to find the Uniform Standards applicable to the benefit feature you are filing. Company actuaries are strongly encouraged to refer to the Uniform Standards in whole as well as the checklists, as the actuarial memos are prepared for these annuity feature submissions.

The Uniform Standards for these annuity features may be found using the links below:

We identified some helpful hints regarding the numerical examples that are required to be included in the actuarial memo. The IIPRC actuaries frequently write objections about missing examples or scenarios that are not included in the actuarial memorandum as required by the Uniform Standard. Examples that show the derivation of GLB and GMDB amounts over the potential life of the contract, not just a point in time, are required for both the Variable or Non-Variable Annuity product feature. In addition, the variable numerical examples must show the derivation of GLB and GMDB amounts for both positive and negative economic scenarios.

GLB examples must:

  • Reflect changes that may occur in the benefit base before the GLB feature is exercised and illustrate all elements that may increase or decrease the benefit base (ex. step ups, ratchets, additional premium payments, withdrawals);
  • For a Guaranteed Minimum Withdrawal Benefit (GMWB) feature, show the guaranteed period withdrawal amount and/or the guaranteed lifetime withdrawal amount and how these values may change over time;
  • For a GMWB feature, show the change in the remaining benefit amount from the time the feature is exercised to the termination of the contract; illustrating the impact of excess withdrawals and any element that may impact the remaining benefit amount and showing the impact on all values when the account value is reduced to zero because of GMWB withdrawals;
  • Show the change in the account value and the base contract guaranteed minimum value, if any, related to each example; and
  • Show the impact of the rider charge on the account value and guaranteed minimum value, if any.

GMDB examples must:

  • Reflect changes that may occur in the benefit base on and before the date of death and illustrate all elements that may increase or decrease the benefit base (ex. step ups, ratchets, additional premium payments, withdrawals);
  • Show the change in the account value and the base contract guaranteed minimum value, if any, related to each example;
  • Show the impact of the rider charge on the account value and guaranteed minimum value, if any;
  • For a GMDB included in or attached to an indexed annuity, the examples must reflect various economic scenarios; and
  • For a non-variable GMDB benefit feature the actuarial memorandum must also include a demonstration showing that the design of the GMDB feature meets the definition of an Incidental GMDB as defined at the beginning of the non-variable GMDB Standard.

The IIPRC Office also would like to take this opportunity to remind you that we are currently accepting applications for the 2016 Focus Group. More information may be found under News and Announcements on the IIPRC website. We hope that you would take this opportunity to help us make the Compact filing experience more productive and efficient for you and your colleagues.

If you have any questions about these requirements or the Weekly Tip, please contact the IIPRC Office.