2024 SOA ImpACT Conference Virtual - Session 5E: Practitioner Assessment of the New NAIC Economic Scenarios 11.14.24 Recording

The National Association of Insurance Commissioners (NAIC) project for the transition to a new real-world economic scenario generator (ESG) prescribed for principle-based reserve and capital calculations selected a vendor in the fall of 2020. The American Academy of Actuaries and other interested parties have been assisting the NAIC in this transition. Over the past four years, extensive analysis, model validation, and comparison work has been done. There have been many updates on the project but few opportunities to obtain an in-depth understanding of the new features of the new ESG and its impact on reserves and capital. Practitioners are very interested in the questions: - How different are the scenarios from the Academy/Society of Actuaries ESG and the new NAIC ESG? - How different are the models and techniques used to create the scenarios in both generators? - Is there a significant difference in capital and reserve requirements for model office tests between the two ESGs? - Are there concerns with the new NAIC ESG? The session addresses each of these questions in detail. At the conclusion of the session attendees will appreciate the key differences between the model structure and scenario performance of the two ESGs and will understand the differences in capital and reserve requirements for model office tests across the two ESGs. Attendees will also learn how the initial yield curve fitting differs between the models, about fund mapping considerations, and the interpretability of parameters in the new NAIC model.