VACARVM Processing

VACARVM's Adoption is now Behind Us.

No matter the amount of preparation, year-end 2009 was likely a challenge. Did you run into unanticipated problems? Did some aspects go surprisingly smoothly? How did the standard scenario amount compare to CTE (70)? Were you able to set up a production-like process and generate repeatable, auditable results?

We have been addressing all of these questions over the last few months. Companies say there is still much to learn and much to do better from improving the process—models, run times, setting assumptions, methods, positions, and documentation—to understanding the fundamentals, drivers, nuances and implications of implementation issues such as including or excluding hedging, discount rate options and risk margins. Many companies simply ran out of time and/or took short-cuts.

2010 is a chance to examine and reconsider all the issues again. VACARVM will need to be incorporated into business decisions, business forecasts and planning, product development and risk mitigation. A number of companies have considered changing their hedging from an economic basis to one incorporating VACARVM.

If you have not been to an industry meeting this year and want learn what others have been doing, the following reference (which was presented at the March 2010 Chicago Actuarial Association by Joe Rafson of KPMG, Chicago) provides a good summary: VA CARVM – Implementation Issues.

PolySystems supports the mechanical aspects of the process. Our annuity suite— AnnuityMaster, AnnuityDelphi and Asset Delphi—supports both the standard and stochastic scenarios on a grid-enabled platform.   

We also offer consulting services to help you beyond the mechanical process as you strive to gain insights. We are ready to talk about the:

• Basics of the Standard Scenario Amount calculation;
• Basics of the CTE (70) calculation;
• Methodology and assumptions prescribed by AG 43 and those that are at the actuary’s discretion. How much leeway is there in this reserve, and how are other companies interpreting the guideline?
• Sensitivity Analysis: Not all companies have interpreted AG 43 the same way, and at times there is no guidance regarding what is “correct.” We will examine where company practice has diverged and demonstrate the impact of these different interpretations.    

PolySystems can also help you with tasks such as experience studies, sensitivity analysis and “what if’s,” balancing your risk-reward criteria, being a sounding board or reviewing your work. Please email Bob Keating or call 312.332.5670.