Tag Archives: life insurance

PRIIPs Level 3 Q&A update

By 1 January 2018 insurers, banks, asset managers and other investment firms offering packaged retail investment and insurance-based products (PRIIPs) must make a key information document (KID) available for all products offered to customers. On 18 August 2017 the European supervisory authorities (ESAs)—made up of the European Insurance and Occupational Pensions Authority (EIOPA), the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA)—published an updated questions and answers (Q&A) document on the PRIIPs KID. The first batch of Q&As was published in July.

The ESAs’ publication is aimed at clarifying aspects of the Regulatory Technical Standards (RTS) or ‘Level 2’ rules covering the specific form and content of KIDs. The latest questions addressed by the ESAs include queries on the following:

• Categorisation of a retail investor
• Market risk assessment
• Credit risk assessment
• Summary Risk Indicator (SRI)
• Presentation of costs

The combined set of Q&As, covering the first and second batch of queries, can be found here.

In addition to the latest Q&A document, the ESAs also published a useful flow diagram or decision tree showing how to perform the various calculations for the SRI and performance scenarios. This is a graphical view of the requirements set out in the RTS and a useful summary of the basic calculations. The flow diagram can be found here.

The ESAs stated they will continue to assess whether further guidance is needed based on additional questions received.

Please contact us if you have any questions or comments on PRIIPs. We would be happy to meet with you to discuss ways in which we can help you achieve a successful PRIIPs implementation including gap analysis, KID production, checking overall compliance with the PRIIPs requirements and review of KID elements, including narratives and numerical disclosure tables, etc.

Evolving FRM strategies still valuable to life insurers

In this A.M. Best interview, Milliman consultant Kamilla Svajgl offers perspective on financial risk management (FRM) strategies currently used by the life insurance sector. She also discusses how companies with sophisticated FRM strategies in place prior to the global financial crises withstood its effects.

Indonesia Life Insurance Newsletter, July 2017

The Life Insurance Association of Indonesia reported continued growth of the life Indonesia industry for 2016 and over the first quarter of 2017. In 2016, the industry recorded a total premium income of IDR 167.04 trillion, a 29.8% growth year-on-year compared with 2015. For the first three months of 2017, the total premium income for life insurance increased by 28.15% year-on-year to IDR 35.19 trillion as compared with the first three months of 2016. Milliman’s Richard Holloway, Halim Gunawan, and David Kong offer more perspective in the latest Indonesia Life Insurance Newsletter.

Annual Milliman survey reveals a staged approach in implementing recent regulatory changes for UL/IUL products

Results from participants in Milliman’s annual comprehensive study of universal life (UL) and indexed universal life (IUL) issues indicate a staggered approach in implementing recent regulatory changes. Principle-based reserves (PBR) may be implemented as early as January 1, 2017, and 27 survey participants reported they expect to implement PBR for all of their UL/IUL products spread over the three-year phase-in period allowed. Resource issues, time needed, financial impact/cost/benefits, clarification and finalization of PBR and Internal Revenue Service (IRS) regulations, and PBR implementation of other products first were cited as factors impacting the rationale for implementation plans.

Similarly, the earliest effective date for the use of the 2017 Commissioner’s Standard Ordinary (CSO) mortality table was January 1, 2017. The 2017 CSO is the new valuation mortality table to be used in the determination of the Commissioner’s Reserve Valuation Method (CRVM), net premium reserves, tax reserves, nonforfeiture values, etc. Twenty-two survey participants reported that they would implement this table for all of their UL/IUL products spread over the three-year phase-in period allowed. Ten participants reported implementation of the 2017 CSO would be product-dependent; implementation will be immediate for some products and over the three-year phase-in period for others.

“It’s not surprising that these regulatory changes are not being implemented immediately, given the complexity of the regulations, the potential impact on pricing and the bottom line, and the strain on resources, especially for smaller carriers,” says Sue Saip, consultant in Milliman’s Chicago office.

The 10th annual Milliman study, “Universal Life and Indexed Universal Life Issues,” focuses on current topics relative to universal life with secondary guarantees (ULSG), cash accumulation UL, current assumption UL, and the corresponding indexed UL (IUL) versions. Thirty-two carriers of universal life and indexed universal life products participated in this annual survey.

In addition to PBR and the 2017 CSO information, the survey also indicates that the use of new underwriting approaches is gradually gaining popularity. Scoring models are being used by 11 survey participants to underwrite their UL/IUL policies. Eight of the 11 use these models for fully underwritten policies, one uses them for simplified issue policies, and the final two use them for both fully underwritten and simplified issue business. Eight participants reported using scoring models with automated rules. The types of scoring models used include lab scoring models, credit scoring models, and scoring models relative to motor vehicle records. The survey also revealed that 10 of the 32 participants utilize fluid-less underwriting programs at face amounts where they previously would require fluids.

The study includes detailed information on product and actuarial issues, such as sales, profit measures, target surplus, reserves, risk management, underwriting, product design, compensation, pricing, and illustrations.

The “Universal Life and Indexed Universal Life Issues – Detailed Report” is available for purchase here or by calling Gina Ritchie at (312) 499-5605.

Proposed changes to U.S. GAAP: An impact analysis of proposed targeted improvements

The Financial Accounting Standards Board (FASB) has proposed significant changes to accounting standards for long duration insurance contracts to address several stakeholder concerns. In this report, Milliman consultants discuss the impact of the FASB’s proposed changes on earnings and equity for several illustrative product types. They also examine the industry’s preparedness to adopt the new guidance.

Central Bank of Ireland review of Solvency II life insurance pricing and reserving assumptions

In February 2017, the Central Bank of Ireland published letters on its website relating to its review of the consistency of Solvency II life insurance pricing and reserving assumptions. This briefing note by Milliman’s Aisling Barrett and Sinéad Clarke summarises the contents of these letters. The authors also reference the contents of the December 2016 industry letter on the standard formula Solvency Capital Requirement.