Actuarial Standards Board News

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 When the revised ASOP No. 27 is effective as the single assumption standard for pensions, ASOP No. 35 will be repealed, and technical corrections will be made to ASOPs referencing ASOP No. 35.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.

The Actuarial Standards Board of the American Academy of Actuaries approved a third exposure draft of a proposed revision of Actuarial Standard of Practice (ASOP) No. 24, now titled NAIC Life Insurance Illustrations Model Regulation. The ASOP applies to actuaries when performing actuarial services in support of a certification or representation that life insurance illustrated scales are in conformity with the National Association of Insurance Commissioners (NAIC) Life Insurance Illustrations Model Regulation (Model) or applicable actuarial guidelines. Such a certification or representation may be made in an illustration actuary’s certification pursuant to applicable law (statutes, regulations, and other legally binding authority) based on the Model or may be made in the absence of an applicable law based on the Model.

The second exposure draft of the proposed revision was released in July 2023, and six comment letters were received and considered in making changes that are reflected in the third exposure draft. Notable changes reflected in the third exposure draft include revising guidance on “timeframe” and “adjustments to actual experience,” and adding guidance on “hedge costs” and “consistency of experience factors” as well as a disclosure for actions or events reflected in the experience factors for which experience has not yet emerged.

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

The Actuarial Standards Board (ASB) released its 2023 Annual Report, which highlights the board’s accomplishments throughout the year. In 2023, the ASB adopted three revised actuarial standards of practice (ASOPs), approved four exposure drafts for comment, and introduced its 57th ASOP. In addition, the ASB continued development on 10 other new or revised ASOPs.

The Actuarial Standards Board (ASB) of the American Academy of Actuaries adopted a revision of Actuarial Standard of Practice (ASOP) No. 29, now titled Expense Provisions for Prospective Property/Casualty Risk Transfer and Risk Retention. The standard applies to actuaries when performing actuarial services with respect to developing or reviewing expense provisions for prospective property/casualty risk transfer or risk retention. This includes expense provisions developed or reviewed for insurance, reinsurance, self-insurance, loss portfolio transfers, or other mechanisms for prospective property/casualty risk transfer or risk retention. If the actuary’s actuarial services involve reviewing expense provisions developed by another party, the actuary should use the guidance in the ASOP to the extent practicable within the scope of the actuary’s assignment. 

The revision, which was exposed for comment twice, received 13 comment letters. Notable changes made to the standard include:

• The expansion of scope and new guidance on loss adjustment expense categories, intended measure, the timing of residual market expenses, the timing of statutory assessments, and documentation;

• Definitions for “coverage,” “expense provision,” “risk retention,” and “risk transfer” were added; and

• The list of required disclosures was expanded.

This standard is effective for work performed on or after July 1, 2024.