Section 760 IAC 1-57-10 - Additional considerations for analysisAuthority: IC 27-1-12.8-21
Affected: IC 27-1-12.8-21
Sec. 10.
(a) The appointed actuary shall analyze only those assets held in support of the reserves that are the subject for specific analysis, hereafter called "specified reserves". A particular asset or portion thereof supporting a group of specified reserves cannot support any other group of specified reserves. An asset may be allocated over several groups of specified reserves. The annual statement value of the assets held in support of the reserves shall not exceed the annual statement value of the specified reserves, except as provided in subsection (b). If the method of asset allocation is not consistent from year to year, the extent of its inconsistency should be described in the supporting memorandum.(b) An appropriate allocation of assets in the amount of the Interest Maintenance Reserve (IMR), whether positive or negative, must be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the Asset Valuation Reserve (AVR); these AVR assets may not be applied for any other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for in risk analysis and reserve support.(c) The amount of the assets used for the AVR must be disclosed in the Table of Reserves and Liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets must be disclosed in the memorandum.(d) Interest rate scenarios used in performing the asset adequacy analysis shall be as follows: (1) For the purpose of performing the asset adequacy analysis required by this rule, the qualified actuary is expected to follow standards adopted by the Actuarial Standards Board; however, the appointed actuary must consider in the analysis the effect of at least the following interest rate scenarios:(A) Level with no deviation.(B) Uniformly increasing over ten (10) years at one-half percent (0.5%) per year and then level.(C) Uniformly increasing at one percent (1%) per year over five (5) years and then uniformly decreasing at one percent (1%) per year to the original level at the end of ten (10) years and then level.(D) An immediate increase of three percent (3%) and then level.(E) Uniformly decreasing over ten (10) years at one-half percent (0.5%) per year and then level.(F) Uniformly decreasing at one percent (1%) per year over five (5) years and then uniformly increasing at one percent (1%) per year to the original level at the end of ten (10) years and then level.(G) An immediate decrease of three percent (3%) and then level. For these and other scenarios that may be used, projected interest rates for a five (5) year Treasury Note need not be reduced beyond the point where the five (5) year Treasury Note yield would be at fifty percent (50%) of its initial level.
(2) The beginning interest rates may be based on:(A) interest rates for new investments as of the valuation date similar to recent investments allocated to support the product being tested; or(B) an outside index, such as Treasury yields, of assets of the appropriate length on a date close to the valuation date. Whatever method is used to determine the beginning yield curve and associated interest rates should be specifically defined. The beginning yield curve and associated interest rates should be consistent for all interest rate scenarios.(e) The appointed actuary shall retain on file, for at least seven (7) years:(1) sufficient documentation so that it will be possible to determine the procedures followed;(2) the analysis performed;(3) the bases for assumptions; and(4) the results obtained.Department of Insurance; 760 IAC 1-57-10; filed May 16, 1997, 9:30 a.m.: 20 IR 2787; filed Oct 6, 2003, 5:15 p.m.: 27 IR 514, eff Dec 31, 2003; errata filed Dec 16, 2003, 1:30 p.m.: 27 IR 1575; readopted filed Nov 24, 2009, 9:35 a.m.: 20091223-IR-760090791RFAReadopted filed 11/20/2015, 9:25 a.m.: 20151216-IR-760150341RFAReadopted filed 11/15/2021, 8:32 a.m.: 20211215-IR-760210419RFA