The Individual Life Experience Committee has completed their latest report on intercompany mortality experience by amount of insurance under standard individually underwritten issues. This study includes policy years 2005-07. Read the report and associated documents.

Statistics show an encouraging pattern of increased life expectancy that will trigger increased consumption patterns in the population for medical services and pharmaceuticals, says this Milliman Pharmaco-Actuarial Advisor article.

The LLMA has been established as a not-for-profit venture in order to promote a liquid traded market in longevity and mortality-related risk.

The LLMA’s founder members are: AXA, Deutsche Bank,
J.P. Morgan, Legal & General, Pension Corporation,
Prudential, RBS and Swiss Re.

Transamerica Reinsurance President Paul Rutledge recently spoke with Fred Sievert, former president of New York Life and current chairman of the Actuarial Foundation, about the demanding issues facing life insurers since the onset of the financial crisis. Fred shares his view that a number of life insurers, in search of continued growth, became too comfortable with optimistic investment gains subsidizing increasingly risky business. When the financial markets began failing, the weaknesses of this dependency were exposed.

The Marketing and Distribution and Product Development Sections along with the Committee on Life Insurance Research, are pleased to make the following report available. Authored by a Mike Batty and Alice Kroll of Deloitte Consulting, the report summarizes the results of a company survey on the utilization of life insurance automated underwriting systems.

The 10 leading causes of death were the same in 2006 and 2007. The rankings also remained the same, with one exception. In 2007, Alzheimer's disease was the sixth leading cause of death, and diabetes the seventh; the ranks were reversed in 2006. Age-adjusted death rates for six of the 10 leading causes of death declined from 2006 to 2007 (from a decline of 1.8% for malignant neoplasms to a decline of 8.4% for influenza and pneumonia). Only the rate for chronic lower respiratory diseases increased (up by 1.7%). No changes were observed in the rates for Alzheimer's disease; nephritis, nephrotic syndrome, and nephrosis; and septicemia.

Milliman research report designed to identify why some companies have not yet registered with or filed through the IIPRC and to gauge the experience of those companies which have filed Interstate Compact submissions. The survey asked companies 17 questions regarding the IIPRC and overall, revealed a high level of satisfaction for companies currently filing IIPRC submissions. Responses to the survey were submitted by 61 companies.

Insurers know well that using a consistent approach to managing and measuring diverse risk portfolios is an ERM essential that can help them make informed decisions about pricing, product strategy, capital budgeting and linking pay to performance. And yet most insurers use any number of measurements to gauge financial results across varied businesses.As part of Towers Perrin's ongoing series on embedding ERM in insurance, this new article sheds light on a consistent analytical framework that can be applied to an insurer's internal measurement and management system to align value assessment, risk and capital management.

A discussion among regulators of how a new guideline for reserving for variable annuities should be crafted included talk about how reliable stochastic scenarios are in assessing reserving needs of companies.

Article in the October/November issues of The Actuary magazine.

In The Black Swan: The Impact of the Highly Improbable, Nassim Taleb explains the realm of the black swan. The former Wall Street “quant” turned philosopher describes two worlds: “Mediocristan,” where events far from the ordinary rarely happen, and “Extremistan,” where unexpected and unpredictable events – black swans – can occur.

Insurers that try to illustrate annuity performance graphically should provide at least 2 standard illustrations, veteran actuary Steven Ostlund of the Alabama DOI has recommended in a comment letter submitted to the NAIC's Annuity Disclosures Working Group.

The September 2009 issue looks at:

• Life Reinsurance Data from The Munich American Survey By David M. Bruggeman
• What Reinsurers and Cedants Can Learn from Uncle Rex and the Bulls By Rick Flaspöhler
• Reinsurance Modernization – A New World ViewBy Daniel W. Krane and Elizabeth A. Diffley
• Life Reinsurance: Capacity and Concentration of Risk Survey Analysis By William J. Briggs, Gaetano Geretto and Robert B. Lau
• Enhancing the Benefit: How quality successful limited-benefit health plans answered the demand for a more robust product By Curt A. Wieden
• American Academy of Actuaries Stop Loss Risk-Based Capital Work Group is Reviewing the Potential Need for Changes in the RBC FactorsBy Michael L. Frank

The Committee on Life Insurance Research, Product Development Section, and Reinsurance Section are pleased to make this report available. Performed by the Ernst & Young team of Thomas Crawford, Richard de Haan and Chad Runchey, this research reviewed literature on longevity risk. The paper summarizes results and addresses topics including the emergence and quantification of longevity risk; current and future risk management techniques; and products currently in the market that are exposed to longevity risk. The appendices include a summary of each paper reviewed for the study.

This report presents the results of the most recent study of individual life insurance lapse experience in the United States conducted jointly by LIMRA International and the Society of Actuaries (SOA). The observation period for the study is calendar years 2004–05. The study is based on data provided by 34 individual life insurance writers and it presents lapse experience for whole life, term life, universal life and variable universal life plans issued between 1901 and 2005. This report includes results for most key policy and product factors.

From the CDC's MMWR.

In case you haven’t heard, there’s a big change in accounting standards getting ready to take place. Around about 2014, there will be “a single set of high-quality, understandable and International Financial Reporting Standards (IFRS) for general purpose financial statements.”

This is the second part of a series on the uses and misuses of mortality metrics. Life table construction is beyond the scope of this article, but the reader will need some familiarity with life tables in order to understand the issues. See this related document which illustrates life table construction and the calculation of life expectancy.

A wise actuary told me that we spend much more time on risks that we understand than on risks we’re not comfortable with. For example, actuaries spend hours calculating mortality and lapse rates, but we typically treat interest rates as a “standard assumption.” After all, interest rates are environmental factors outside of our control and difficult to predict.

With the H1N1 flu spreading globally, the World Health Organization (WHO) has declared it a pandemic. This marks the first global flu epidemic in 41 years with reports of the flu coming from Mexico, U.S., Australia and many more locations. In response to this development, members from the Society of Actuaries (SOA) are advising businesses to revisit and/or create business continuity and preparedness plans.

The current economic crisis is challenging life insurers to look closely at all of the products in their portfolio and make adjustments as necessary. While much of the focus is on variable annuities and universal life with secondary guarantees, the performance of term life is also affected by market upheaval.

In this issue of The Forecaster, Jim McArdle, Senior Vice President of Sales and Marketing at Transamerica Rinsurance, discusses the impact of current market conditions on term life insurance with Keith Dall, Principal at Milliman, Inc. Keith sees companies responding in a variety of ways – looking for new financing solutions, tightening underwriting guidelines, monitoring products and rates more closely and more.

Paper presented to the Institute of Actuaries of Australia
2009 Biennial Convention.

Paper prepared for the Institute of Actuaries of Australia’s (Institute) 4th Financial Services Forum 2008.

Like so many aspects of the life insurance business, manufacturing return of premium (ROP) term just became more complicated. Actuarial Guideline CCC (AG CCC) is already effective for new policy forms and starting in 2010 affects all contracts. The guideline treats ROP by rider the same as ROP as an integrated benefit and provides guidance for the calculation of cash values (CVs). These changes, among others, will impact the design, pricing, ROP pattern and administration of ROP products going forward.

As part of the recently released 2008 VBT mortality tables, the Society of Actuaries introduced a theoretical model of the mortality continuum for the insurable population. The model’s spectrum extends from the very best super-preferred risks to those who barely qualify for a residual-standard class. Also included in the theory are underlying distributions for each distinct level of mortality. So how does the SOA model hold up to real world empirical data? Transamerica Reinsurance’s mortality experience database provides an ideal vehicle for putting the theory to the test.

This monograph contains papers submitted and presented at the 2008 Enterprise Risk Management Symposium held April 14-16, 2008 in Chicago. It also includes additional research papers that were submitted and accepted for the 2008 ERM Symposium Call for Papers, but not presented. This was the third year in which a call for papers was issued in conjunction with the Symposium. The call for papers continues to showcase the latest in ERM thinking as well as present advances made in this arena.

The SOA's Preneed Experience Team is pleased to make available the following report by the Deloitte–UConn Actuarial Center examining preneed life insurance mortality experience. The report has been revised since its initial release to correct an error discovered in the Preneed Insurance Male Mortality Table per 1000. An Excel Spreadsheet of the Mortality Table shown in the report is also provided.

Despite the financial crisis, the ILS market has more than held its own and appears poised for further growth. This Towers-Perrin article appears in the 2009/1 issue of Emphasis.

Presentation by Transamerica Reinsurance's David Wylde at the 2009 MUD Group meeting.

Presentation by Rick Bergstrom and Anna Hart at the 2009 MUD Group meeting.

The insurance industry is in the business of controlling threats to life. It has invented new mortality gadgets, and now it needs to control them properly despite today’s tough times.

PricewaterhouseCoopers shares research conducted by the Centre for the Study of Financial Innovation (CSFI). It questions insurers on three areas: current risks, future trends, and their preparedness to respond to the risk environment. With 403 insurers and industry observers responding from 39 countries at a difficult time for financial services, they see significant change in how risks are perceived and prioritised.

Elaine Tumicki writes in Product Matters, the newsletter of the Society of Actuaries' Product Development section: With new life insurance products and features coming out at a break-neck pace over the last several years, life insurers may have felt like they were on a treadmill, with the speed slowly but steadily increasing. The growing reliance on independent distribution requires companies to stay ahead of —or at least keep up with—their competitors if they want to stay on the shelf. Improving speed-to-market has become a key component of life company strategy. What have companies been doing to address this ever-increasing challenge?

Universal life and indexed universal life continue to be key areas of interest in the life insurance market today. Milliman, Inc. conducted its second annual comprehensive survey aimed at addressing UL/IUL issues. Survey topics were determined based on input from Milliman consultants, as well as participants in the 2007 UL/IUL survey.

Milliman white paper.

Assessment tools that assign risk scores to insureds—or potential insureds—based on their prescription histories are increasingly used by actuaries and others within health insurance organizations to assess future health risk.

The downturn affecting the financial markets is having a significant impact on the life insurance industry. Glenn Cunningham, Executive Vice President of Life Reinsurance, discussed the ramifications with Robert Klein, Associate Professor of Risk Management and Insurance and Director of the Center for Risk Management and Insurance Research at Georgia State University. Dr. Klein believes that unprecedented events have exposed regulatory and reporting weaknesses. However, he stresses that prudent regulation should not interfere with how companies respond to customer needs, and that greater transparency should be the goal of any reform.

A review of life insurance sales statistics and selected U.S. Census data offer interesting information on the relationship between macroeconomic changes and demand for term life insurance. LIMRA’s annual U.S. Individual Life Insurance Sales Trends and demographic trends from the U.S. Bureau of the Census suggest that term sales recover relatively quickly following an economic downturn.

Changes to estimates could be more than 20% in some cases: As if facing a worldwide economic crisis weren’t enough, life settlement investors have found out in recent months that insureds are going to live longer than was previously thought.

Milliman experts reveal the status of newly developed valuation bases applicable to IFRS 4 phase II, MCEV principles, and Solvency II, and help insurers maintain consistency among these various methods of risk reporting.

A group in the United States working for state insurance regulators has green-lighted several proposals submitted by the life-insurance industry in recent weeks aimed at lowering insurers' capital and reserve requirements, the Wall Street Journal reports.

Review of Robert N. Butler, M.D.'s book by Heather Jerbi in Contingencies.

Explores the difficulties in analysing and handling Child CI claims and look at how providers generally manage their risks via benefit design.

The life insurance industry continues to face pressures to deliver cheaper products and more services. These pressures come from several sources, including heightened competition from overcapacity in the marketplace, the demands of independent distribution channels and, not the least, expectations on Wall Street for ever growing revenues, says Transamerica Reinsurance President Paul Rutledge.

This paper presents a model for analyzing the impact of underwriting cycles on an insurer’s surplus. The model allows the insurer to vary its security loading in response to the cycles, with a strategy parameter that indicates the extent to which the insurer follows the loading which prevails in the market. The insurer’s claim rate is also allowed to vary to reflect exposure changes that result from the insurer’s strategy.

Presentation at the SOA Annual Meeting & Exhibit, October 2008.

Presentation from SOA Annual Meeting in Orlando, October 2008.

Presentation at the SOA Annual Meeting & Exhibit, October 2008.

Presentation from SOA Annual Meeting in Orlando, October 2008.

Presentation from SOA Annual Meeting in Orlando, October 2008.

A follow-up to the article originally published in the May 2006 edition of Product Matters!, the newsletter of the SOA Product Development Section.

• Life Reinsurance Data From The Munich American Survey
• Longevity: Mortality Improvement
• Solvency II—What It Means For Reinsurers
• Limited Medical Benefit Plans—What Insurance Companies, Employers And Reinsurers Need To Know
• Update In The Employer Stop Loss Medical Insurance Market
• Reinsurance Execs Predict Capital Channels Will Blur
• STOLI Poses Danger To Industry, Reinsurers Warned

...and more.

Chris Hause, FSA attempts to put the whole Principles-Based Reserve project into perspective for non-actuaries and actuaries who have been ignoring the whole thing, hoping it will all go away.

Changes in longevity, biological perspectives, mortality trends and more.

The 20th century saw unprecedented advances in longevity, but alarms are sounding with regard to health care costs.

Ronora Stryker writing in "The Actuary" Magazine.

PartnerRe on Longevity Risk, The Longevity Bond.

http://www.partnerre.com/App_Assets/Public/ec5c4fb2-97ac-465e-9dac-85fa0...

The competition for baby boomers' investment dollars is just one of the major issues facing life insurers. Other pressing concerns include Solvency II, fair-value reporting, and more effective risk management.

The move toward a principles-based approach (PBA) for determining reserves and regulatory minimum capital for life and variable annuity business continues in the U.S. The PBA framework being developed by the National Association of Insurance Commissioners (NAIC) will replace the existing formula-based approach with a stochastic model-based methodology (see Emphasis 2006/3, 'A Principles-Based Reserve and Capital Standard').

http://www.towersperrin.com/tp/showdctmdoc.jsp?url=master_brand_2/global...

The latest issue of Contingencies presents a look at the healthcare proposals of Barack Obama and John McCain. This piece focuses on a few aspects of the candidates' plans.

Think back – do you remember at least one quarter where your company’s financial results were well below plan as a result of far more than expected new LTD claims? Do you also remember when, a couple of quarters later, the financial results were excellent, as many of these new claims terminated when they had proved to be not very severe?

Overall lapse rates for whole life plans were down in 2003 and 2004, according to a joint study sponsored by LIMRA International, Windsor, Conn., and the Society of Actuaries, Schaumburg, Ill. (link updated)

Handouts from various sessions at the SOA Life 2008 Spring Meeting and joint day with the CIA, CAS, and IAA Life Section, held in June 2008 in Quebec, Canada.

Non-traditional reinsurance, financial reinsurance (or whatever you want to call it

Actuaries are among the few people in this confusing world who actually relish confusion. They want to make sense of trends, reversals, discontinuities, and the like. But will the mother of all discontinuities, looming in a recess just over the horizon, cause past trends to be irrelevant, the reversals to be minor blips, and the discontinuities to become the new norm?

This Contingencies article says that from an actuarial point of view, it might be interesting to know whether it’s possible to predict the likelihood of a person living to 100 and beyond based on general personal data taken at some point in young adulthood.

http://www.ey.com/Publication/vwLUAssets/Actuarial_Transformation_Roundable_Report/$FILE/Actuarial_Transformation_Roundtable_Report.pdf

A Milliman actuary, along with two colleagues, developed a predictive model using 2007 medical costs and independent variables in addition to age and gender. Drawing on their experience, this paper discusses some new approaches to addressing the issues that researchers face when trying to model medical costs using regression analysis.

With ROP term gaining popularity, the Interstate Insurance Product Regulation Commission (Interstate Compact) began to set up filing guidelines to assist in expediting approval of this type of product.

The thirty-one states participating in the Interstate Compact (as of July 1, 2008) agree on the required guidelines for approving any product filing. The group setting up the ROP guidelines has been meeting throughout 2008, and has come to their initial recommendation.