FASB published LTDI requirements in 2018. The effective date for insurers who are SEC filers to publish US GAAP financials under LDTI is January 1, 2023. The effective date for non-public insurers is January 1, 2025. LDTI requires insurers to identify a new category of benefits called market risk benefits (MRBs) in insurance products. Broadly, variable annuity (VA) and fixed indexed annuity (FIA) guaranteed minimum death, accumulation, withdrawal, and income benefits fall under MRBs. Valuing MRBs requires calculating the liability on a fair value basis. Valuing FIA MRBs on a fair value basis can be complicated as several aspects of FIAs such as option budgets and policyholder behavior are driven by company management decisions and the competitive landscape.
Discuss various aspects of FIA MRB valuation. Illustrate the current industry status on the following aspects of FIA MRB valuation by polling the session audience attendees on:
- Earnings volatility
- Roll forwards and disclosures
- Use of appropriate economic scenario generators (ESG)
- Actuarial modeling of FIA MRBs and efficient modeling techniques
- Pricing and reinsurance