At Miller & Newberg, we perform the annual cash flow testing (also known as asset adequacy analysis) for over 20 insurance companies and fraternal benefit societies. Our client companies are quite familiar with the process, but this year, the process will be changing. And, as is typical with new regulatory requirements, it means that additional steps must be performed.
Over the past year, the NAIC adopted Actuarial Guideline 53, entitled “Application of the Valuation Manual for Testing the Adequacy of Life Insurer Reserves.” For purposes of annual cash flow testing, it requires additional documentation and analysis related to certain types of higher yielding assets, assets that many insurers now own as investing in them has become necessary due to competitive pressures.
The new actuarial guideline mandates a set of sensitivity tests, reflecting limitations on the assumed yields for certain types of assets. For some insurers, this may increase the likelihood that they will be required to set up an asset adequacy reserve. But for all insurers, this is designed to supply management teams, boards, and regulators with more detailed information regarding the risks that are being undertaken by investing in certain high yielding assets.
Watch this replay of a recent live webinar, held in conjunction with Slope Software, to gain insight into this new actuarial guideline and the expanded process we will be following as we perform our client companies’ annual cash flow testing.
As always, we at Miller & Newberg are available to help you to understand any new regulations and how they should affect the way you manage your business. Just give us a call at 913-393-2522.