Description: This article notes that life insurance companies have long used sophisticated techniques for appraising capital investment, and explores the question of whether these techniques can be applied to other industries.

Description: This material, Appendix II of the 1987 Valuation Actuary Handbook, is an appendix to Chapter II of the Handbook, ‘Methods of Analyzing cash Flows to Test for Reserve Adequacy.’ In this appendix, the authors provide more detail on what they call cash-flow based surplus, and how this concept can be used. It is defined as the amount of cash that could be removed and leave assets sufficient to mature all benefits on a true economic basis, i.e. ignoring statutory accounting requirements, under an assumed interest rate and experience scenario.

Description: The author suggests that the optimal use of capital requires one to find a way to strike a balance between the conflicting desires for maximizing long term profit and minimizing short term loss.

Description: This dialogue discusses the history and purpose of section 811(a) and its historic role in the computation of life insurance company taxable income and, in particular, reserves.

Description: This article describes how there are many kinds of plans and arrangements under which qualified annuities are issued, and the rules governing them differ considerably.

Description: A discussion of the possible effort required and impacts resulting from the implementation of C3 Phase II for establishing risk-based capital for variable annuities. This article will describe practical considerations gleaned from actual valuation calculations recently performed by a consulting firm.

Description: This article summarizes the recent changes to the C3 Phase III proposal, initial industry comment letters to the proposal and outstanding issues identified by the regulators.

Description: Businesses across the board have been drastically impacted by the effects of COVID-19 over the course of 2020, and insurance was not immune. Perhaps most relevant to this industry’s current capital and liquidity concern is the prevailing low interest rate environment. This has been a global trend in the last decade, and treasury rates in much of the developed world are at or near zero. Reduced investment returns limit an insurer’s ability to achieve their desired return on equity, eliminating previously profitable strategies that depended on the leverage of life and annuity balance sheets. Focus and activity have instead shifted to other methods to counteract the low interest rate markets and accompanying capital strain. Examples include increased mergers and acquisitions (M&A) activity within the insurance industry and an increasing focus by private equity firms in the insurance market for asset-intensive products, both of which reflect the goal of increasing yield rates on capital.

Description: Editorial discussing risk management in today’s economic world.

Description: This article focuses on the motivation and trends, rather than mechanics, in Life Insurance Securitization.