The Valuation Actuary and Cash Flow Testing for Life Insurance Companies

In 1992, the NAIC adopted the concept of the appointed actuary with respect to loss reserve opinions. Now this concept is evolving into that of the valuation actuary with the potential for broad responsibilities for opining on assets and surplus as well as insurer liabilities. This session explores the appointed actuary concept and the implications of the expanding role of actuaries in reporting on the general financial position of an insurer. Life actuaries have considerable experience in valuation topics. State valuation requirements for life insurers have changed. Cash flow testing is now required for interest sensitive life insurance products. This has changed the nature and scope of the work required of valuation actuaries as well as changed the investment strategy of life insurance companies. We will hear from life actuaries as to their experiences in cash flow testing, the various scenarios tested, and show the applicability to property casualty insurers.