Actuarial Standards Board News

The ASB recently adopted a revision of ASOP No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions. The ASOP provides guidance to actuaries when performing actuarial services with respect to measuring obligations under a defined benefit pension plan and determining periodic costs or actuarially determined contributions for such plans. While other actuarial standards of practice address assumptions, asset valuation methods, and assessment of risk, the revised ASOP addresses broader measurement issues, including cost allocation procedures and contribution allocation procedures. The standard provides guidance for coordinating and integrating all of the elements of an actuarial valuation of a pension plan. The standard is effective for any actuarial report issued on or after Feb. 15, 2023; and if the measurement date in the actuarial report is on or after Feb. 15, 2023.

The ASB also approved for exposure a revision of ASOP No. 29, now titled Expense Provisions for Future Cost Estimates for Prospective Property/Casualty Risk Transfer and Risk Retention. The ASOP applies to actuaries when developing or reviewing expense provisions for future cost estimates 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 any 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. The comment deadline is May 31, 2022. Information on how to submit comments can be found in the exposure draft.

The Actuarial Standards Board (ASB) of the American Academy of Actuaries recently adopted a revision of ASOP No. 2, now titled Nonguaranteed Elements for Life Insurance and Annuity Products. The ASOP applies to actuaries when performing actuarial services with respect to the determination and, if applicable, illustration of nonguaranteed elements (NGEs) for life insurance and annuity policies written on individual policy forms where NGEs may vary at the discretion of the insurer, except as noted in the ASOP.

The ASB also adopted a revision of ASOP No. 22, now titled Statements of Actuarial Opinion Based on Asset Adequacy Analysis for Life Insurance, Annuity, or Health Insurance Reserves and Other Liabilities. The ASOP applies to actuaries when performing actuarial services with respect to providing a statement of actuarial opinion based on asset adequacy analysis of life insurance, annuity, or health insurance reserves and other liabilities when the statement of actuarial opinion is prepared to comply with applicable law based on the model Standard Valuation Law and VM-30 of the NAIC Valuation Manual; or when the statement of actuarial opinion is prepared for an insurance company to comply with other applicable law.

Lastly, the ASB adopted a revision of ASOP No. 3, now titled Continuing Care Retirement Communities and At Home Programs. The ASOP applies to actuaries when performing actuarial services, including giving advice, in connection with continuing care retirement communities (including nonprofit and for-profit entities) or At Home Programs that are not regulated as insurance entities. These actuarial services may be performed for owners, operators, financing entities, or current or prospective contractual residents or members, as well as for other professionals or regulatory bodies.

The effective date for all three revised ASOPs, which can be viewed here, is June 1, 2022.

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The ASB recently adopted a final revision of ASOP No. 38, now titled Catastrophe Modeling (for All Practice Areas). The standard provides guidance to actuaries when performing actuarial services with respect to selecting, using, reviewing, or evaluating catastrophe models. The standard applies to actuaries in any practice area when performing actuarial services with respect to selecting, using, reviewing, or evaluating catastrophe models to assess risk, including but not limited to models of hurricanes, earthquakes, severe convective storms, terrorist acts, and pandemics. The standard also applies to the selection, use, review, or evaluation of catastrophe models, whether or not they are proprietary in nature. The ASOP was revised to be consistent with ASOP No. 56, Modeling, and other recent ASOPs. The standard is effective for work performed on or after Dec. 1, 2021.

The ASB recently approved a third exposure draft of a proposed revision of ASOP No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions. The standard provides guidance to actuaries when performing actuarial services with respect to measuring obligations under a defined benefit pension plan and determining periodic costs or actuarially determined contributions for such plans. The standard addresses broader measurement issues, including cost allocation procedures and contribution allocation procedures. The standard also provides guidance for coordinating and integrating all of the elements of an actuarial valuation of a pension plan. The comment deadline for the third exposure draft is Oct. 15, 2021. Information on how to submit comments can be found in the exposure draft.