Actuarial Standards Board News

Read the latest news from the ASB Boxscore.

The Actuarial Standards Board (ASB) of the American Academy of Actuaries approved an exposure draft of a proposed 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 ASOP provides guidance to actuaries when performing actuarial services with respect to adjusting deficiency reserve mortality rates using X factors pursuant to applicable law (statutes, regulations, and other legally binding authority), including applicable law based on the National Association of Insurance Commissioners (NAIC) Valuation of Life Insurance Policies Model Regulation (Model). 

Notable changes made in the exposure draft 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 the descriptions of Model requirements; adding guidance related to the creation of X factor classes based on risk characteristics; and adding guidance for assessing mortality expectations compared to actual experience.

The comment deadline is Sept. 15, 2023. Information on how to submit comments can be found in the exposure draft.

The Actuarial Standards Board (ASB) of the American Academy of Actuaries approved an exposure draft of a new ASOP on enterprise risk management to replace ASOP Nos. 46 and 47, Risk Evaluation in Enterprise Risk Management and Risk Treatment in Enterprise Risk Management, respectively. The proposed ASOP, titled Enterprise Risk Management, provides guidance to actuaries when performing actuarial services with respect to developing, maintaining, or reviewing all or part of an enterprise risk management (ERM) framework.

ASOP Nos. 46 and 47 were the first ASOPs applying specifically to actuaries performing actuarial services for the purposes of ERM. Both ASOPs were adopted by the ASB in 2012. In the years since ASOP Nos. 46 and 47 were adopted, actuarial practice in the field of ERM has evolved considerably, with many actuaries now working as risk practitioners and a number working in senior risk roles, including chief risk officer. Moreover, ERM nomenclature has also evolved. Additionally, ASOP No. 55, Capital Adequacy Assessment, covering topics with strong connections to ERM, was adopted by the ASB in 2019. Therefore, the ASB decided to revise ASOP Nos. 46 and 47 to reflect the developments of the past decade, to better reflect today’s ERM practices and terminology, and to align with ASOP No. 55. The comment deadline is Sept. 15, 2023. Information on how to submit comments can be found in the exposure draft. 

The ASB adopted new ASOP No. 57, Statements of Actuarial Opinion Not Based on an Asset Adequacy Analysis for Life Insurance, Annuity, or Health Insurance Reserves and Related Actuarial Items. A conversion of Actuarial Compliance Guideline (ACG) No. 4, Statutory Statements of Opinion Not Including an Asset Adequacy Analysis by Appointed Actuaries for Life or Health Insurers, the new standard applies to actuaries when performing actuarial services with respect to providing a statement of actuarial opinion for life insurance, annuity, or health insurance reserves and related actuarial items that are within the scope of the Statement of Actuarial Opinion, NAIC Life and Accident & Health/Fraternal Annual Statement (Blue Book), when the statement is prepared to comply with applicable law and is not based on an asset adequacy analysis because of an exemption.

As ACG No. 4 was the last remaining actuarial compliance guideline and remained relevant for actuaries working for companies that receive an exemption from asset adequacy analysis, the ASB decided to convert ACG No. 4 into the standard format of an ASOP. The standard is effective for all statements of actuarial opinion covered by the scope of the ASOP issued on or after June 15, 2023.

The ASB also approved an exposure draft of a proposed revision of ASOP No. 27, now titled Selection of Assumptions for Measuring Pension Obligations. The standard applies to actuaries when performing actuarial services that include selecting assumptions used in the actuary’s measurement of defined benefit pension plan obligations, other than obligations of social insurance programs that are within the scope of ASOP No. 32, Social Insurance, unless ASOP No. 32 explicitly calls for application of the standard.

In June 2020, ASOPs Nos. 27 and 35 were both revised to expand their scope, to provide additional guidance on the combined effect of assumptions, to 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 has adopted identical language in ASOPs Nos. 27 and 35 where practical and improved the similarity of layout and structure to simplify the overall guidance. The final step in this simplification is to combine the two current pension assumption standards into one. When the proposed revision to ASOP No. 27 is adopted as the single assumption standard for pensions, ASOP No. 35 will be repealed.

The comment deadline is June 15, 2023. Information on how to submit comments can be found in the exposure draft.