Regulatory Resource for Actuaries: Life & Annuity

Last reviewed: 1/08/18

Recent Updates

General Information Sources

Actuarial Standards Board – Actuarial Standards of Practice (ASOPs)

The Actuarial Standards Board (ASB) establishes and improves standards of actuarial practice. These Actuarial Standards of Practice (ASOPs) identify what the actuary should consider, document, and disclose when performing an actuarial assignment. The ASB’s goal is to set standards for appropriate practice for the United States.

ASOP Discussion Drafts 
This link is to ASOP Discussion drafts. Discussion Drafts are released as an initial step in seeking comments on changes to existing or creation of new standards of practice.

ASOP Exposure Drafts  
ASOP exposure drafts. Exposure drafts are released by AAA for feedback from the actuarial community after obtaining Actuarial Standards Board (ASB) and legal reviews. 

Current ASOPs
The link is to the current ASOPs which may be found on the Actuarial Standards Board website. The list can be filtered to display Life ASOPs and General ASOPs.

American Academy of Actuaries (AAA)

The American Academy of Actuaries is a professional association whose mission is to serve the public and the U.S. actuarial profession. The Academy assists public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries credentialed by one or more of the five U.S.-based actuarial organizations in the United States.

American Academy of Actuaries Life Practice Council Committees
The Life Practice Council oversees the Academy's public policy work on life insurance issues. This link provides an overview of the various committees and groups which support the Life Practice Council's mission. The following are examples of interest to the Life & Annuity community:

  • Life Capital Adequacy Committee 
    Addresses issues related to life and annuity risk-based capital (RBC) requirements.
  • Life Experience Committee 
    Interfaces with work groups of the Society of Actuaries (SOA) regarding experience studies.
  • Life Financial Reporting Committee   
    Responsible for topics related to life insurance financial reporting matters, focusing primarily on Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
  • Life Products Committee 
    Focuses on emerging issues in product development including pricing, underwriting, and disclosures.
  • Life Valuation Committee 
    Addresses topics related to the valuation of life insurance and annuity products, focusing primarily on statutory valuation techniques.
  • Lifetime Income Risk Joint Task Force   
    Reviews and evaluates the risks and related issues of inadequate guaranteed lifetime income among retirees
  • Stress Testing Work Group
    Evaluates the use of stress testing in the calculation of reserves and capital.
  • Tax Work Group   
    Provides insights on tax issues related to life and annuity products

American Academy of Actuaries - Life Practice Notes  
Practice notes provide guidance to actuaries on various issues such as product development, market conduct, valuation, capital management, and risk management.

U.S. Qualification Standards  

This document describes the standards U.S. actuaries are required to meet (by virtue of the Code of Professional Conduct) to issue Statements of Actuarial Opinion when rendering Actuarial Services.

Federal Regulations & Legislation

Federal Insurance Office
The FIO was established by the Dodd-Frank Act which granted the FIO certain financial stability, monitoring, and international responsibilities. It advises the Secretary of the Treasury (Secretary) on major domestic and prudential international insurance policy issues and serving as a non-voting member on the Financial Stability Oversight Council (FSOC).

Department of Labor Fiduciary Rule - Final  
Regulation defining who is a fiduciary of an employee benefit plan under ERISA as a result of giving investment advice to a plan, its participants or beneficiaries. This new rule also defines applicability for IRAs. The rule treats persons who provide investment advice for a fee as a fiduciary in a wider array of advice relationships.

Department of Labor Fiduciary Rule – Fifth Circuit Court of Appeals Ruling  
The Fifth Circuit Court of Appeals denied requests made by California, New York, and Oregon, as well as the American Association of Retired Persons (AARP), to intervene in the litigation challenging the Department of Labor’s (DOL) Fiduciary Rule.  As a result, the Fifth Circuit Court’s ruling on March 15, 2018 that the DOL exceeded its statutory authority stands and the fiduciary rule will become invalid.  The DOL had until June 13, 2018 to appeal the Circuit Court’s decision to the United States Supreme Court.  The full text of the decision can be found at this page. 

Securities and Exchange Commission - Regulation Best Interest Proposed Rule 
The SEC is proposing a new rule under the Securities Exchange Act of 1934 establishing a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer.   The comment period for this new rule is open until August 7, 2018.  The proposed rule can be found at this page.  

International Standards

European Financial Reporting Advisory Group (EFRAG)
EFRAG  is a private association established in 2001 with the encouragement of the European Commission to serve the public interest.  Its Member Organizations are European stakeholders and National Organisations having knowledge and interest in the development of IFRS and how they contribute to the efficiency of capital markets.  

International Financial Reporting Standards
IFRS Standards are set by the International Accounting Standards Board and are used primarily by publically accountable companies—those listed on a stock exchange and by financial institutions, such as banks.  A full listing of Standards can be found at this page, along with links to the unaccompanied Standards.  


Latest Life Insurance Prudential Standards
The Australian Prudential Regulation Authority (APRA) oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies and most members of the superannuation industry. The APRA web page contains news and regulatory requirements.


Life Insurance Capital Adequacy Test

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada. OSFI has issue the final version of the Life Insurance Capital Adequacy Test (LICAT) guideline.

OSFI’s Latest guidelines on IFRS9 (Accounting)

OSFI’s latest guidelines on IFRS9 (Accounting) provide application guidance to Federally Regulated Entities (FREs) applying International Financial Reporting Standard 9 Financial Instruments (IFRS 9), and is effective when IFRS 9 is applicable to FREs.  

New Zealand

Professional Standards
The New Zealand Society of Actuaries web site includes professional standards.

Interstate Insurance Product Regulatory Commission

Adopted Uniform Product Standards  
Individual and Group Life and Individual Annuity product standards for the purpose of approval of policy forms, riders, and applications in 40+ states. Also contains IIPRC operating procedure information.

Docket Developing Standards 
IIPRC Pending standards under development or existing standard in the process of being reviewed.

Filing CSO Mortality Table Updates with the IIPRC  
Information on how to file 2017 CSO Mortality table changes to previously approved life insurance plans with the IIPRC. Contains additional links to product standard, checklists, and best practices.

Interstate Insurance Product Regulatory Commission 
The IIPRC adopts product standards for Annuity and Life Insurance products. Product standards for Annuity and Life Insurance products 

National Association of Insurance Commissioners (NAIC)

The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.

NAIC Committees, Task Forces, & Working Groups  
This link provides a summary and links to the individual web pages of the committees, task forces, and working groups which makeup the NAIC and carry out its functions. Each individual web page contains information such as meeting materials, exposure drafts, and related documents. The following are examples of interest to the Life & Annuity community:

  • Life Insurance and Annuities (A) Committee
  • Life Actuarial Task Force (LATF)
  • Financial Condition (E) Committee
  • Financial Regulation Standards and Accreditation (F) Committee

  • NAIC Model Laws  
    The NAIC creates Model Laws in an effort to promote uniformity across the industry. States individually enact insurance laws, which are generally the NAIC's Models Laws in their entirety or with changes. 

    State Regulations & Legislation

    American Academy of Actuaries –State Scan   
    Legislative bill summaries and status on key topics for all 50 states.

    California 2018 Actuarial Memorandum and Executive Summary  
    Provides filing instructions and requirements associated with California's Actuarial Memorandum and Regulatory Asset Adequacy Issues Summary documents.

    Illinois Department of Insurance   
    Illinois DOI Company Bulletin 2018-11 with comments concerning Health Insurance Reporting, Rate Filings and Valuation Manual. 

    New York State Department of Financial Services Financial Reporting and Reserve Valuation Requirements for Life Companies, Including the Annual Special Considerations Letter   
    Forms and instructions provided to life insurance companies and fraternal benefit organizations doing business in New York and all insurers holding a certificate from the Superintendent as being accredited for the reinsurance of life insurance, annuities, or accident and health insurance for required filings. (November 2018)

    New York Adopts PBR Legislation  

    The bills adopted are identical Assembly Bill No. A.11116A and Senate Bill No. S.8978A. PBR allows insurance companies to hold reserves based on credible experience that is tailored to the companies’ particular products, within the strict guidelines that will be set by DFS for New York. (December 2018)

    New York Adopts PBR Emergency Regulation  
    The emergency regulation to begin the implementation of principle-based reserving (PBR) will become effective on January 1, 2020.  The emergency regulation affirms the Superintendent’s statutory authority to deviate from the (NAIC Valuation Manual to adjust reserves, if necessary, in order to protect New York policyholders and the State’s life insurance industry. (December 2018) 

    New York State Department of Financial Services – Insurance Regulation 210
    NYDFS Rule establishing standards for the determination and any readjustment for non-guaranteed elements that may vary at the insurer’s discretion for life insurance policies and annuity contracts.

    New York DFS - Suitability and Best Interests in Life Insurance and Annuity Transactions
    The new Regulation 187 requires insurers to establish standards and procedures to supervise recommendations by agents and brokers to consumers with respect to life insurance policies and annuity contracts issued in New York State so any transaction is in the best interest of the consumer and appropriately addresses the insurance needs and financial objectives of the consumer at the time of the transaction.

    The National Conference of Insurance Legislators (NCOIL)   
    NCOIL helps legislators make informed decisions on insurance issues that affect policyholders and monitor federal / state authority under the McCarran-Ferguson Act.

    U.S. Federal Taxation

    Tax Code, Regulations, and Official Guidance
    US federal taxation is addressed within the Internal Revenue Code (IRC). As not all tax issues can be definitively addressed by the IRC, tax regulation is also shaped by other sources such as Treasury regulations, revenue rulings, and court cases. This webpage provides general links to the IRC (Title 26 of the U.S. Code), Treasury regulations, and other official tax guidance maintained by the Internal Revenue Service (IRS).

    Federal Income Taxation of Life Insurance Companies
    Life insurance companies (see IRC §816 for definition of life insurance company) receive favorable federal income tax treatment. This link provides relevant sections of the IRC to determine the Life Insurance Company Taxable Income (LICTI) for federal income tax purposes. Of particular note to actuaries is IRC §807, defining tax reserves. A life insurance company would also be subject to the general provisions of the IRC for insurance companies (e.g., "DAC Tax" under IRC §848).

    IRC §72: Taxation of Annuities & Certain Proceeds of Endowment and Life Insurance Contracts

    This section of the IRC describes the portions of annuity, endowment, and life insurance contracts includible in gross income for federal income tax purposes.

    IRC §7702: Definition of Life Insurance
    To receive favorable tax treatment, a life insurance policy must meet the definition of Life Insurance as specified in IRC §7702. Policyholders generally make the reasonable assumption that life insurance contracts purchased from an insurer will be treated as life insurance for tax purposes—insurers (and their actuaries) should be diligent in designing their products to comply with federal income taxation definitions of life insurance.

    IRC §7702A: Definition Modified Endowment Contract
    A life insurance policy meeting the definition of life insurance under IRC §7702 (see above) is considered a Modified Endowment Contract if it satisfies the definition in IRC §7702A. While Modified Endowment Contracts still receive favorable tax treatment, certain limitation and penalties may apply (see IRC §72).

    IRC §7702B: Treatment of Qualified Long-Term Care Insurance
    A Qualified Long-Term Care Insurance Contract does not pay or reimburse expenses incurred for services or items reimbursable under the SSA or reimbursable but for the deductible or coinsurance amount, is guaranteed renewable, does not provide cash surrender value or other money that can be paid, assigned, or pledged as collateral for a loan, or borrowed and meets other requirements.

    Tax Cuts and Jobs Act
    This law amends the Internal Revenue Code (IRC) to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. 

    U.S. Generally Accepted Accounting Principles (US GAAP)

    The Securities Exchange Act of 1934 granted the Securities and Exchange Commission (SEC) authority to promulgate financial accounting standards for non-governmental entities. The Financial Accounting Standards Board (FASB) was eventually created and designated by the SEC as the organization responsible for establishing and maintaining these accounting standards (US GAAP). In addition to FASB pronouncements, rules and interpretative releases of the SEC are also sources of authoritative GAAP for SEC registrants.

    Accounting Standards Codification (ASC) Topic 944: Insurance
    The Accounting Standards Codification (ASC) is the source of authoritative Generally Accepted Accounting Principles (GAAP) recognized by the Financial Accounting Standards Board (FASB). Topic 944 covers insurance and replaces the Statements of Financial Accounting Standards (e.g., SFAS 60, SFAS 97, SFAS 120, etc.) previously promulgated by FASB (pre-codification). The ASC can be viewed at this link for free by registering for the Basic View.

    FASB Projects
    This page provides information on the current projects being undertaken by the Financial Accounting Standards Board (FASB), including an agenda of current projects, active exposure drafts, discussion papers, and other project documents.


    Selected Topics

    Capital Standards

    Capital Adequacy Assessment for Insurers - Seeking Comments 
    Third Exposure Draft document of proposed ASOP regarding Capital Adequacy Assessment for Insurers. (November 2018)

    Group Capital Calculations Working Group
    The charge of the Working Group is to construct a U.S. group capital calculation using an RBC aggregation methodology; liaise as necessary with the ComFrame Development and Analysis (G) Working Group on international capital developments and consider group capital developments by the Federal Reserve Board, both of which may help inform the construction of a U.S. group capital calculation.

    Standards for Life Insurance Required Capital Levels - Seeking Comments 
    Discussion Draft document which contains a proposal for an ASOP associated with current regulatory work on capital levels for life insurance products.

    Tax Reform Changes to Life RBC Proposal
    The life and fraternal RBC formulas are tax-affected and are currently based on the tax code prior to the reform adopted in December 2017. This proposal adjusts factors and instructions that were based upon the previous tax environment to reflect the current environment.

    IFRS 17 International Accounting for Insurance Contracts  

    EFRAG – IFRS 17 Project Page   

    Project page for the IFRS 17 activity taken on by the European Financial Reporting Advisory Group (EFRAG) in support of the European Commission endorsement process.  This page includes information on the status of the project, recent announcements, and documents released throughout the project.  

    IAA IFRS 17 Resource Page
    The International Actuarial Association (IAA) is preparing materials to support IAA member associations and actuaries worldwide with the application and implementation of IFRS 17.   

    IASB Issues IFRS 17    
    The International Accounting Standards Board (IASB) has issued IFRS 17, global guidelines that require insurance companies to report specific information about the insurance contracts issued and the reinsurance contracts held. IFRS 17 will significantly impact insurer operations, including more transparency on returns and risk. The effective date of IFRS 17 has been deferred to January 1, 2022. The following links are to documents and a webinar on the subject.  

    IFRS17 Insurance Contracts Accounting - Project Page  
    The page includes information on recent exposure drafts, Board deliberations, discussion papers, and Educational materials. The IASB is expecting to publish a new IFRS Standard for insurance contracts in early 2017(IFRS 17 Insurance Contracts) to replace IFRS 4 Insurance Contracts on January 1, 2021 and establish a comprehensive Standard for insurance contracts.

    Transition Resource Group for Insurance Contracts
    The Transition Resource Group (TRG) for IFRS 17 Insurance Contracts is one of the ways the Board is supporting implementation of the new Standard.  The members of the TRG include financial-statement preparers and auditors with both practice and direct knowledge of implementing IFRS 17.  This site includes information about the TRG, materials from meetings held, and other resources for IFRS 17.   

    Interest Rates

    Current and historical federal and other interest rates

    Composite Corporate Bond Rates 
    Composite Corporate Bond Rate Table published by the IRS

    Federal Reserve System Historical Interest Rates 
    The H.15 release contains daily interest rates for selected U.S. Treasury and private money market and capital market instruments. It is published weekly.

    Federal Reserve System Data Download 
    This link is to capability to download historical interest rate data maintained by the Federal Reserve System.

    Historical Valuation, Tax, and Nonforfeiture Interest Rates 
    Current and historical valuation and non-forfeiture interest rates based on the dynamically determined formula from valuation law.

    IRS Monthly Interest Rate Updates 
    Interest rate tables managed by the IRS.

    VM-20 Spreads & Defaults

    VM-20 Default Costs

    VM-22 Daily Corporate Rates

    Principle-Based Reserving

    Actuarial Standards of Practice (ASOP) 52- Principle-Based Reserves for Life Products under the NAIC Valuation Manual
    This standard applies to actuaries when performing actuarial services on behalf of life insurance companies, including fraternal benefit societies, in connection with the calculation or review of reserves for life insurance policies subject to “VM-20: Requirements for Principle-Based Reserves for Life Products” in the Valuation Manual (VM-20).

    Independent Review of Principle-Based Valuations - Seeking Comments 
    Discussion Draft document which contains a proposal for an ASOP associated with current regulatory work on principle-based reserves review opinions. 

    PBR in Practice AAA Resource Page

    The Academy has assembled materials to assist actuaries and regulators as the U.S. moves into the implementation phase of PBR for life insurance.

    PBR Checklist Subgroup of the Life Practice Council of the American Academy of Actuaries (Academy)

    Full Alert under Alert No. 2016-L-3 available.

    PBR Model Governance Checklist
    The PBR Checklist Subgroup of the Life Practice Council of the American Academy of Actuaries (Academy) has developed a model governance.

    AAA Practice Note on Life Principle-Based Reserves Under VM-20
    This practice note covers principle-based life insurance reserve valuation practices for individual life insurance and represents the views of actuaries that have been involved in the development of the proposed life reserving standards. The purpose is to assist actuaries with implementation of the principle-based life reserve valuation approach adopted by the NAIC.

    Life Principle-Based Reserves Under VM-20 .

    PBR Questions for LATF Consideration
    The NAIC LATF has been working on PBR Questions for LATF Consideration (Revised 02/2017).

    Valuation Manual (VM)

    The Valuation Manual (VM) together with the Standard Valuation Law (SVL) form the framework for PBR. Development of the VM is ongoing and the reader should be aware that the version presented in this link may not represent the most current version available.

    2017 Edition of the Valuation Manual effective for year end 2017

    2018 Edition of the Valuation Manual effective 1/1/2018

    2019 Red-Lined Edition of Valuation Manual

    Accounting Standards Update 2018-12: Targeted Improvements for Long-Duration Contracts
    On 8/15/2018 FASB issued an Accounting Standards Update (ASU) for the financial reporting of long-duration contracts such as life insurance, disability income, long-term care and annuities.

    U.S. GAAP Targeted Improvements for Long-Duration Contracts

    Accounting Standards Update 2018-12: Targeted Improvements for Long-Duration Contracts
    On 8/15/2018 FASB issued an Accounting Standards Update (ASU) for the financial reporting of long-duration contracts such as life insurance, disability income, long-term care and annuities.

    Exposure Draft: Proposed Accounting Standards Update to ASC Topic 944
    A summary is also provided by FASB In Focus.