• Where were the people that wanted to do that when we were going through the process. 
  • Folks, we've been talking about this for a year.
    • We have taken input from anyone and everyone.
  • If we had any sense that we could have had ten-year projections only, if we had any sense that we could have graded interest rates and that it would have gotten any support, believe me, we would have done it.
  • Where were you people when we were developing the model?

--  MR. FOLEY <Regulator>

1995 - SALES ILLUSTRATIONS, Society of Actuaries

2. Standardized Assumptions

  • Tony Higgins (N.C.) asked the working group to consider projections into the future for only a few years of the non-guaranteed elements, and then projections further into the future of standardized assumptions or guarantees.
  • Mr. Wright said this allows a company to show how its policy works without the problem of projections of non-guaranteed elements far into the future.
  • Lester Dunlap (La.) also expressed interest in the idea of standardized assumptions to show how the policy works. He said projections far into the future can border on misrepresentation.

1994-3 NAIC Proc. 

She <Daphne Bartlett - Actuary>:

  • suggested grading in the interest rate over a period of time to standardized assumptions.
  • said that this would be an appropriate substitute for the sensitivity index. 
  • saw several advantages. It eliminated the portfolio versus new money problem because one could grade down, and the other might need to grade up.
  • said the numbers generated by the illustration would be more realistic...
  • said this would minimize the need for in-force illustrations.

1995-1, NAIC Proceedings

Non-guaranteed Premium

  • On the other hand, at Transamerica Life Insurance and Annuity Company, our pension affiliate, the current premiums are priced using a level interest assumption, rather than the more normal assumptions that interest rates will decline.
  • For most of the products on the market, the current premiums are guaranteed not to be raised for a period of any where from one to six years from issue.
  • During this period when the current premiums are guaranteed, deficiency reserves would have to be set up based on the current premiums. 

-- DENISE F. ROEDER <Occidental>


All these methods are based one way or another on the ancient truth that the present value of benefits, expenses, and margins must equal the present value of premiums.


  • When one considers the interest assumption, it must be remembered that rates are presently very high but may be showing signs of leveling off.
  • It seems inconceivable in view of the past that interest rates will stay at their present levels for a long period of time.

If the interest assumption in the early policy years is taken as the rate on new investments, the actuary should allow for the possibility of a reduction after the first few policy years and provide for a more conservative rate at the later policy durations.