United States

NAIC adopts revisions to Actuarial Guideline 38


Revisions provide guidance on certain secondary guarantees

On Sept. 12, 2012, the NAIC's Executive Committee and Plenary adopted revisions to Actuarial Guideline 38 (AG38), which sets forth reserve requirements for all universal life products that employ secondary guarantees.

This adoption of AG38 ends many questions that had arisen since the original adoption of the application of the valuation of life insurance policies model regulation (Model 830) in 1999 and its application to new product designs.

Many of the questions that had arisen relate to the application of the guidance to various products that contain guarantees. These newly adopted changes provide guidance on how to reserve for certain secondary guarantees in accordance with Model 830.

While Model 830 is a complex regulation, its intent is clear—reserves need to be established for the guarantees provided by a policy. Policy designs that are created to simply disguise those guarantees or exploit a perceived loophole must be reserved in a manner similar to more typical designs with similar guarantees.

The changes to the model law provide explicit guidance on how certain contracts should be treated based on when they were entered and what provisions were included. Read the revised language.

For more information, contact RSM Insurance Industry Partner Jay Golonka at jay.golonka@rsmus.com or 919.645.6809.


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