Description: This presentation provided an analysis of investment guarantees in equity-linked products. There was an overview of the data and models in use. In addition an actuarial approach to left-tail analysis was presented as well as a dynamic hedging approach. From Actuarial Research Clearing House, 2012, Vol. 1.

Description: This session at the SOA 1998 Maui I Spring Meeting gives an overview of the equity indexed market and discusses the issues associated with managing these products after issue.

Description: Discussion of NAIC efforts to amend the annuity nonforfeiture laws to respond to falling interest rates.

Description: The NAIC has adopted revised VM-21 and AG43 for variable annuities, effective Jan. 1, 2020. The panel of presenters will provide background and an overview of the revisions, discuss detailed aspects of the new CTE Amount Standard Projection and prescribed assumptions, as well as discuss implementation considerations and the implications to hedging. In addition, the panelists will share progress on VM-23, principle-based reserves for non-variable annuities.

Description: This paper first derives the fair participation rate based on a fair value of the equity-indexed annuity EIA. Then using risk measures, a new participation rate is obtained, based on the tail loading of the hedging error distribution. Risk management strategies reducing risk related to the hedging error are also presented. A detailed numerical analysis is performed for a point-to-point EIA.

Description: This article summarizes some of the areas of concern in developing equity-indexed annuities for small companies.

Description: This article explores the effectiveness of hedging delta and rho of equity options. This provides insight into the frequency and severity of losses due to not hedging volatility risk or other higher order risks. 10yr-equity put option strategies were chosen to represent the risk of hedging guaranteed benefits attached to variable annuities, while 1-yr put and call strategies were modeled to investigate the risk of hedging equity index interest credited to fixed indexed annuities. In both cases, the value of the option was compared to the value of delta/rho hedges in the tail of both actual historical and simulated scenarios for equity returns and volatilities. The historical path of interest rates and equities was generally used to highlight the hedge impact for different implied volatility assumptions in each example.

Description: The speaker will share his insights into the hedging challenges faced by FIA and VA business in the current market environment.

Description: The proposed revisions to the variable annuity statutory framework and the FASB targeted improvement for long duration contract, motivate life insurance companies to re-evaluate their hedging strategy. Recently proposed revisions of AG 43/VM-21 and C3 Phase II, reward companies that have a clearly defined hedging strategy, if the companies can demonstrate that the valuation model and capital model can estimate real hedge performance accurately. The speakers of this session will discuss the hedging implication of the proposed AG 43/VM-21 and C3 Phase II framework. Additionally, methodology computational requirements, back-testing results under different economic scenarios and the resulting hedge credits of different hedging strategies will be compared, including explicit dynamic hedge and implicit dynamic hedge. The speakers will also touch on the impact of rebalance frequency on the performance of dynamic hedge. Case studies will be presented to provide guidance on practical implementation.

Description: The objective of this article is to help indexed annuity writers understand the pricing practices and ALM strategies used by their peers in the industry, especially in light of the prevailing low interest rate environment and a possible rise in interest rates.