Actuarial Standards Board News

The Actuarial Standards Board of the American Academy of Actuaries approved an exposure draft of a proposed revision of Actuarial Standard of Practice (ASOP) No. 30, now titled Profit Margins and Contingency Provisions in Property/Casualty Risk Transfer and Risk Retention. The ASOP applies to actuaries when performing actuarial services with respect to developing or reviewing profit margins and contingency provisions that are included in future cost estimates for all forms of prospective property/casualty risk transfer and risk retention. 

Notable changes from the existing standard include broadening the scope in section 1.2 from estimating the cost of capital and evaluating the underwriting profit and contingency provisions to developing overall profit margins and contingency provisions; adding definitions of profit margin, risk margin, risk retention, and risk transfer; clarifying the difference between a profit margin and a contingency provision; and clarifying guidance regarding taking the cost of capital into account when developing the profit margin. 

The comment deadline is November 1, 2024. Information on how to submit comments can be found in the draft.

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The Actuarial Standards Board of the American Academy of Actuaries adopted a revision of Actuarial Standard of Practice (ASOP) No. 36, now titled Statements of Actuarial Opinion Regarding Property/Casualty Loss, Loss Adjustment Expense, or Other Reserves. The ASOP provides guidance to actuaries when performing actuarial services with respect to a written statement of actuarial opinion regarding property/casualty loss, loss adjustment expense, or other reserves. The ASOP underwent two exposure periods and received 13 comment letters. Notable changes from the existing ASOP No. 36 include expanding the purpose and scope beyond “issuing” and “providing” to “performing actuarial services with respect to a written statement of actuarial opinion regarding property/casualty loss, loss adjustment expense, or other reserves”; adding definitions for “counterparty” and “recoverable”; and revising guidance on the stated basis of the reserve to include characteristics of other reserves being opined upon.

Successively, the scope of the 2022 adopted revision of ASOP No. 28, Statements of Actuarial Opinion Regarding Health Insurance Assets and Liabilities, was further revised to clarify that ASOP No. 36 may apply to the standard in addition to ASOP No. 28 and ASOP No. 22, Statements of Actuarial Opinion Based on Asset Adequacy Analysis for Life Insurance, Annuity, or Health Insurance Reserves and Other Liabilities.

The effective date for ASOP Nos. 28 and 36 is Oct. 1, 2024.

The Actuarial Standards Board (ASB) of the American Academy of Actuaries adopted a revision of Actuarial Standard of Practice (ASOP) No. 27, now titled Selection of Assumptions for Measuring Pension Obligations. The standard provides guidance to actuaries when performing actuarial services that involve selecting assumptions, including giving advice on selecting assumptions, for measuring defined benefit pension plan obligations. 

In June 2020, ASOP Nos. 27 and 35, Selection of Demographic and Other Noneconomic Assumptions for Measuring Pension Obligations, were both revised to expand the scope, provide additional guidance on the combined effect of assumptions, provide guidance on assessing assumptions not selected by the actuary, and to modify the required disclosure of rationale for assumptions selected. 

Throughout the past few revisions, the ASB adopted identical language in ASOP Nos. 27 and 35 where practical and improved the similarity of layout and structure to simplify the overall guidance. The final step in the simplification was to combine the two current pension assumption ASOP Nos. 27 and 35 into one. When the revised ASOP No. 27 is effective as the single assumption standard for pensions, ASOP No. 35 will be repealed, and technical corrections will be made to ASOPs referencing ASOP No. 35. The ASB generally attempted to avoid changing the current guidance in both ASOPs except when the two standards took different approaches to the assumption selection framework. 

During the exposure period, six comment letters were received and considered in making changes that are reflected in the revised ASOP No. 27, including clarifying that the standard applies when the actuary selects assumptions for the measurement of retiree group benefits obligations, as specified in ASOP No. 6, Measuring Retiree Group Benefits Obligations and Determining Retiree Group Benefits Program Periodic Costs or Actuarially Determined Contributions. 

ASOP No. 27 is effective for any actuarial report that meets the following criteria: (a) the actuarial report is issued on or after January 1, 2025; and (b) the measurement date in the actuarial report is on or after January 1, 2025.

The Actuarial Standards Board (ASB) of the American Academy of Actuaries adopted a revision of Actuarial Standard of Practice (ASOP) No. 40, now titled Compliance with the NAIC Valuation of Life Insurance Policies Model Regulation with Respect to X Factors. The standard applies to actuaries when performing actuarial services with respect to adjusting deficiency reserve mortality rates using X factors pursuant to applicable law, including applicable law based on the National Association of Insurance Commissioners (NAIC) Valuation of Life Insurance Policies Model Regulation (Model). The standard provides specific guidance for actuaries complying with requirements consistent with the Model, and actuaries complying with requirements that differ materially from the Model should apply the guidance in the standard to the extent appropriate. 

Notable changes to the revision, which underwent one exposure period and received four comment letters, include making the ASOP applicable to all actuaries performing actuarial services related to compliance with the Model, rather than only to the appointed actuary; eliminating or updating definitions for clarity; and eliminating descriptions of Model requirements throughout section 3. The standard will be effective for all statements of actuarial opinion provided for reserves with a valuation date on or after September 15, 2024.