Transcription
Valuation ManualJan. 1, 2021 Edition
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VALUATION MANUALNAIC Adoptions through August 14, 2020The National Association of Insurance Commissioners (NAIC) initially adopted the Valuation Manual onDec. 2, 2012, with subsequent adoptions of amendments on June 18, 2015; Nov. 22, 2015; April 6, 2016;Aug. 29, 2016; Aug. 9, 2017; Aug. 7, 2018; Sept. 10, 2018; Aug. 6, 2019; and Aug. 14, 2020. 2020 National Association of Insurance Commissionersi
JPMorgan Chase Bank, N.A. (“J.P. Morgan”) is the source of certain data for thisValuation Manual. The data was obtained from sources believed to be reliable, but J.P.Morgan does not warrant its completeness or accuracy. The Valuation Manual is notsponsored, endorsed, sold or promoted by J.P. Morgan, and J.P. Morgan makes norepresentation regarding the advisability of trading in or use of such Valuation Manual.The data is used with permission and may not be copied, used or distributed without J.P.Morgan’s prior written approval. J.P. Morgan makes no express or implied warrantiesand hereby expressly disclaims all warranties of merchantability or fitness for a particularpurpose or use with respect to the data and the Valuation Manual. All warranties andrepresentations of any kind with regard to the data and/or the Valuation Manual aredisclaimed, including any implied warranties of merchantability, quality, accuracy, fitnessfor a particular purpose and/or against infringement and/or warranties as to any resultsto be obtained by and/or from the Valuation Manual without limiting any of the foregoing,in no event shall J.P. Morgan have any liability for any special, punitive, direct, indirect,or consequential damages, including loss of principal and/or lost profits, even if notifiedof the possibility of such damages.Copyright 2013. JPMorganChase & Co. All rights reserved. 2020 National Association of Insurance Commissionersii
Table of ContentsI. Introduction . 1Authority and Applicability . 1Background . 1Description of the Valuation Manual . 2Operative Date of the Valuation Manual . 2PBR Review and Updating Process . 2Process for Updating the Valuation Manual . 2Overview of Reserve Concepts . 5Corporate Governance Requirements for Principle-Based Reserves . 6II. Reserve Requirements . 7Life Insurance Products . 7Annuity Products . 8Deposit-Type Contracts . 9Health Insurance Products . 9Credit Life and Disability Products . 9Riders and Supplemental Benefits . 10Claim Reserves . 10III. Actuarial Opinion and Report Requirements. 11IV. Experience Reporting Requirements . 11V. Valuation Manual Minimum Standards. 11VM-01: Definitions for Terms in Requirements . 01-1VM-02: Minimum Nonforfeiture Mortality and Interest . 02-1VM-20: Requirements for Principle-Based Reserves for Life Products. 20-1VM-21: Requirements for Principle-Based Reserves for Variable Annuities . 21-1VM-22: Statutory Maximum Valuation Interest Rates for Income Annuities . 22-1VM-25: Health Insurance Reserves Minimum Reserve Requirements . 25-1VM-26: Credit Life and Disability Reserve Requirements. 26-1VM-30: Actuarial Opinion and Memorandum Requirements . 30-1VM-31: PBR Actuarial Report Requirements for Business Subject to a Principle-BasedValuation . 31-1VM-50: Experience Reporting Requirements . 50-1VM-51: Experience Reporting Formats . 51-1VM-A: Appendix A – Requirements . A-1VM-C: Appendix C – Actuarial Guidelines .C-1VM-G: Appendix G – Corporate Governance Guidance for Principle-Based Reserves . G-1VM-M: Appendix M – Mortality Tables. M-1 2020 National Association of Insurance Commissionersiii
IntroductionI.IntroductionAuthority and ApplicabilityThe Valuation Manual (VM) sets forth the minimum reserve and related requirements for jurisdictionswhere the Standard Valuation Law (#820), as amended by the National Association of InsuranceCommissioners (NAIC) in 2009, or legislation including substantially similar terms and provisions has beenenacted by jurisdictions, and this Valuation Manual is operative. The reserve requirements in the ValuationManual satisfy the minimum valuation requirements of Model #820.Requirements in the Valuation Manual are applicable to life insurance, accident and health (A&H)insurance, and deposit-type contracts as provided in the Valuation Manual. These contracts include thedefinition provided by Statement of Statutory Accounting Principles (SSAP) No. 50—Classifications ofInsurance or Managed Care Contracts as found in the NAIC Accounting Practices and Procedures Manual(AP&P Manual). Annuity contracts are, therefore, included within the terminology “life insurancecontracts” unless specifically indicated otherwise in this Valuation Manual.Minimum reserve requirements are provided in this Valuation Manual for contracts issued on or after theValuation Manual operative date of Jan. 1, 2017. Other requirements are applicable as provided pursuantto the Model #820 and this Valuation Manual.BackgroundAs insurance products have increased in their complexity, and as companies have developed new andinnovative product designs that change their risk profile, the need to develop new valuation methodologiesor revisions to existing requirements to address these changes has led to the development of the ValuationManual. In addition, the Valuation Manual addresses the need to develop a valuation standard that enhancesuniformity among the principle-based valuation requirements across states and insurance departments.Finally, the Valuation Manual defines a process to facilitate future changes in valuation requirements on amore uniform, timely and efficient basis.The goals of the NAIC in developing the Valuation Manual are:1.To consolidate into one document the minimum reserve requirements for life insurance,A&H insurance and deposit-type contracts pursuant to Model #820, including thoseproducts subject to principle-based valuation requirements and those not subject toprinciple-based valuation requirements.2.To promote uniformity among states’ valuation requirements.3.To provide for an efficient, consistent and timely process to update valuation requirementsas the need arises.4.To mandate and facilitate the specific reporting requirements of experience data.5.To enhance industry compliance with the 2009 Model #820 and subsequent revisions, asadopted in various states. 2020 National Association of Insurance Commissioners1
IntroductionDescription of the Valuation ManualThe Valuation Manual contains five sections that provide requirements covered in Authority andApplicability above, and that discuss principles and concepts underlying these requirements.1.Section I is an introductory section that includes the general concepts underlying thereserve requirements in the Valuation Manual.2.Section II summarizes the minimum reserve requirements that apply to a product or typeof product, including which products or categories of products are subject to principlebased valuation requirements and documentation. As minimum reserve requirements aredeveloped for various products or categories of products, those requirements will beincorporated into this section. The applicability of the minimum reserve requirements toparticular products will be clarified in the appropriate subsection. For example, theminimum reserve requirements that apply to a life insurance product will be identified inthe subsection addressing life insurance reserve requirements.3.Section III sets forth the requirements for the actuarial opinion and memorandum and theprinciple-based report.4.Section IV sets forth the experience reporting requirements.5.Section V contains Valuation Manual minimum standards. These standards contain thespecific requirements that are referenced in Sections II–IV.Operative Date of the Valuation ManualThe requirements in the Valuation Manual become operative pursuant to Section 11 of Model #820.PBR Review and Updating ProcessA well-conceived and designed principle-based reserve (PBR) review and updating process is needed toensure ongoing evaluation of the effectiveness of the PBR methodology, including prescribed assumptionsdefined in this Valuation Manual. This process will involve and provide ongoing feedback to state insuranceregulators and interested parties for the purpose of updating, improving, enhancing and modifying the PBRrequirements. These changes are necessary due to, for example, making adjustments as appropriate tomargins for conservatism, future improvements in cash-flow modeling techniques, future development ofnew poli
Market Regulation Regulatory and industry guidance on market-related issues, including antifraud, product fi ling requirements, producer licensing and market analysis. White Papers Relevant studies, guidance and NAIC policy positions on a variety of insurance topics. NAIC Activities NAIC member directories, in-depth reporting of state regulatory activities and official historical records of .
