The ASB released its 2019 Annual Report. In 2019, the ASB had another banner year in standards-setting, adopting two new ASOPs, approving eight exposure drafts for comment, approving a proposal to revise one existing ASOP, and issuing one Request for Input on an ASOP on rate filings. In addition, the ASB presented a professionalism series webinar on reliance in ASOPs and provided content for several Actuarial Update “Professionalism Counts” articles.
The ASOP provides guidance to actuaries when performing actuarial services with respect to measuring obligations under a defined benefit pension plan also referred to as “plan” or “pension plan” throughout this standard and determining periodic costs or actuarially determined contributions for such plans. Notable changes since the first exposure draft include expanding the ASOP’s scope to clarify the guidance when an assumption or method is not selected by the actuary; renaming the Investment Risk Defeasement Measure section to Low-Default-Risk Obligation Measure and substantially modifying its guidance for calculating such a measure; and modifying the Output Smoothing Method section to clarify how to determine whether a reasonable relationship exists with the actuarially determined contribution without regard to the output smoothing method.
The comment deadline for the second exposure draft, which can be viewed here, is April 30, 2020.
The ASB adopted ASOP No. 56, Modeling. The ASOP provides guidance to actuaries when performing actuarial services with respect to designing, developing, selecting, modifying, using, reviewing, or evaluating models. Notable changes made to the fourth exposure draft include deleting the section on margins because it did not provide sufficiently clear guidance. In addition, “hold-out data” in predictive modeling was defined and added to the list of items that may be included in the model output validation. The ASOP, which underwent four exposure periods and received over 100 combined comment letters, was developed in response to the increases in the number and importance of modeling applications in actuarial science, with the results of actuarial models sometimes being reflected in financial statements. ASOP No. 56 is effective for work commenced on or after Oct. 1, 2020, and can be viewed here.
ASOP No. 11, which was first adopted in 1989, superseded Recommendation No. 4 and Interpretation No. 4-A of the Financial Reporting Recommendations and Interpretations of the American Academy of Actuaries that covered certain aspects of generally accepted accounting principles financial reporting on reinsurance ceded by life and health insurance companies. The ASOP was revised in 2005 to reflect changes in reinsurance practice and related accounting guidance. Since 2005, significant new guidelines and requirements for life insurance policies and annuity contracts had emerged. The proposed revision of ASOP No. 11 would apply to actuaries when performing actuarial services in connection with preparing, determining, analyzing, or reviewing financial reports for internal or external use that reflect reinsurance programs on life insurance, annuities, or health benefit plans. The comment deadline for the ASOP No. 11 exposure draft is March 31, 2020.
The first exposure draft of ASOP No. 32 was issued in October 2018. Seven comment letters were received and considered in making changes that are reflected in the second exposure draft. Notable changes to the second exposure draft include clarifying the scope to cover situations when a program was not specifically included or excluded from the scope, and expanding the scope to apply to actuaries when performing actuarial services in connection with an actuarial analysis of a Social Insurance Program when the actuary’s principal is not a government agency with responsibility for the valuation of a Social Insurance Program. The comment deadline for the ASOP No. 32 exposure draft is Feb. 14, 2020.
Both drafts can be viewed under the “Drafts” tab in “Exposure Drafts Open for Comment.” Information on how to submit comments can be found in the drafts.
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About The ASB
The Actuarial Standards Board (ASB) sets standards for appropriate actuarial practice in the United States through the development and promulgation of Actuarial Standards of Practice (ASOPs). These ASOPs describe the procedures an actuary should follow when performing actuarial services and identify what the actuary should disclose when communicating the results of those services.