Professionalism Counts is a column in Actuarial Update, the Academy's monthly newsletter.
KEEPING UP WITH THE ASOPs: FIVE REVISED STANDARDS TAKE EFFECT THIS YEAR
Keeping actuarial standards of practice (ASOPs) up to date with current practice, law and regulation, and other developments in the business and economic environments in which actuaries operate is a vital part of the work of the Actuarial Standards Board (ASB). The ASB—and its committees and task forces—has been extremely busy in the last year or so revising ASOPs. Now, some of that work is coming to fruition: Five revised ASOPs will take effect this year. Let’s take a quick look at some of the changes.
Three revised ASOPs will take effect June 1, 2022.
ASOP No. 2, Nonguaranteed Elements [NGEs] for Life Insurance and Annuity Products. Changes made to ASOP No. 2 clarify the scope, introduce the NGE framework, and expand guidance for advising on the actuarial aspects of the determination policy, establishing or making changes to policy classes, and determining NGE scales. New guidance on reliance, as well as documentation and disclosure requirements, were added.
ASOP No. 3, Continuing Care Retirement Communities and At Home Programs. The revision addresses actuarial practice for at-home programs that are not regulated as insurance entities and includes new disclosure requirements intended to enhance the quality of actuarial communications regarding continuing care retirement communities and at-home programs.
ASOP No. 22, Statements of Actuarial Opinion Based on Asset Adequacy Analysis for Life Insurance, Annuity, or Health Insurance Reserves and Other Liabilities. ASOP No. 22 now applies to actuaries when providing a statement of actuarial opinion relating to asset adequacy analysis of life insurance, annuity, or health insurance reserves and other liabilities. New sections were added to provide guidance on trends in assumptions, assumption margins, discount rates, sensitivity testing, reinsurance ceded, the use of cash flows from other financial calculations, separate account assets, and changes in methods, models, or assumptions. In addition, documentation requirements were strengthened, and disclosure items were modified to align with changes made to the guidance.
A fourth revised ASOP will take effect July 1, 2022...
ASOP No. 28, Statements of Actuarial Opinion Regarding Health Insurance Assets and Liabilities. The scope of this ASOP was clarified to apply to actuaries issuing or reviewing statements of actuarial opinion and any associated actuarial memorandum with respect to health insurance assets and liabilities of insurance companies, reinsurance companies, or other health insurance financing systems that provide similar coverages. These opinions and memorandums include opinions prepared in accordance with the NAIC’s annual statement requirements. In addition, guidance was expanded regarding the basis of assets and liabilities, asset and liability evaluation, collectability of actuarial assets and offsets to liabilities, and statement of actuarial opinion. Guidance regarding disclosures and reliance on others was also added. (Note: The ASB will discuss a revision to the scope of ASOP No. 28 at its March meeting.)
…and a fifth on Dec. 1, 2022.
ASOP No. 11, Treatment of Reinsurance or Similar Risk Transfer Programs Involving Life Insurance, Annuities, or Health Benefit Plans in Financial Reports. The scope was expanded to include risk transfer programs similar to reinsurance and to apply to internal and external financial reports, rather than only financial statements. Guidance on health benefit plans was expanded, and guidance was added regarding the financial reporting aspect of nonguaranteed reinsurance elements, the impact of risks retained, modeling, counterparty risk, and the impact of nonguaranteed elements of the policies being reinsured. The disclosures were aligned with the revisions made to the guidance.
Keeping up to date with the ASOPs is important. You are encouraged to make sure you understand the changes to ASOPs that apply to your practice by reading them in full. One of the best ways to do this is by accessing them online. If you would like to access ASOPs through your mobile device, you are encouraged to add an ASB icon to your home screen for a direct link to the ASB website. If you prefer to keep copies of the ASOPs on your computer, you are encouraged to download the standards library at least once a year to ensure that you have the latest version of each ASOP. And if you’d like to be informed when new or revised ASOPs and exposure drafts are released, subscribe to Boxscore, the ASB’s newsletter.