A Survey of Actuarial Modeling Controls in the Context of a Model-Based Valuation Framework

As the life insurance and annuity industries move toward model-based approaches to reserve and capital valuation (MBV), actuarial models are increasing in complexity and sophistication while the imperative to avoid modeling errors is also increasing. In the new environment, the high reliance that companies and regulatory agencies will place on model results will require a well developed and maintained control system to assure the quality of all models and supporting processes. The Financial Reporting Section, Committee on Life Insurance Research and Committee on Finance Research are pleased to make available a new report on actuarial modeling control practices. Authored by Sara Kaufman, Jeff Lortie and Jason Morton of Deloitte, the report summarizes the results of an online survey and follow-up discussions with survey respondents on the control systems US and Canadian life insurance and annuity companies have currently implemented. The report then evaluates the current state against the controls expected to be in place upon adoption of MBV approaches and increased external scrutiny, and proposes considerations for enhancing the current state to get to the necessary controls within a more highly controlled model framework.

The Sponsors would like to thank the following individuals that served on the Project Oversight Group:

Ronora Stryker, SOA Research Actuary, Chair
Mark Billingsley
Tim Bischof
JoAnn Davis-Valz
Doug Drabek
Denis Harkin
Sam Keller
Stephen Marco
Michael McDermid
Jim Merwald
Nathan Worrell
David Wylde
Jan Schuh, Sr. Research Administrator