Actuarial AUG2015 THE NEWSMONTHLY OF THE AMERICAN ACADEMY OF ACTUARIES Academy Presents at NAIC Summer Meeting

CADEMY VOLUNTEERS gave multiple pre- chairperson of the Life Reinsurance Work Group, presented sentations at the NAIC’s Summer 2015 National on Treatment of Yearly Renewable Term Reinsurance in AMeeting in Chicago Aug. 14-17, interacting with Stochastic Exclusion Ratio Testing, while Bahna-Nolan state regulators on a variety of topics, including earth- provided an update on the development of the Guaranteed quake risk, long-term care terminations, life principle- Issue, Simplified Issue, and Preneed mortality tables from based reserving, investment risk-based capital (RBC), and the Academy/SOA Joint Project Oversight Group, and noted actuarial professionalism (see p. 6). that accelerated underwriting is an emerging trend. Mary Bahna-Nolan, vice president for life issues, and John MacBain, a member of the Nonforfeiture Modern- Richard Daillak, a member of the Life Practice Council, ization Work Group, provided an update on activities of the addressed the Life Actuarial (A) Task Force (LATF). Daillak, SEE NAIC, PAGE 11 Academy Releases Series of Papers Marking Medicare’s 50th Anniversary

EDICARE TURNED 50 AT THE END OF JULY, Advantage and supplemental policies. and the Academy—which also is marking its 50th The projected long-range financial condition of Medi- Manniversary this year—noted the milestone for care, according to the newly released 2015 Medicare Trust- the federal health care program by releasing several papers ees Report, has improved since last year, primarily due to

in the new Medicare@50 series. Enacted on July 30, 1965, a lower estimate for long-range health care cost growth UPDATE with President Lyndon Johnson’s signing of the Social Secu- for the Medicare Hospital Insurance (HI) Trust Fund and rity Amendments of 1965, Medicare became one of the most other parts of Medicare. As indicated in the Academy’s important social insurance programs in our nation’s history. July issue brief, Medicare’s Financial Condition: Beyond Actu- “Medicare has played a critical role in meeting the arial Balance, the HI trust fund will have sufficient funds health care needs of nearly all Americans age 65 and older to cover its obligations until 2030, the same year that was and millions of younger Americans with disabilities,” said projected last year, and 13 years later than was projected in Academy Senior Health Fellow Cori Uccello. “With 10,000 2009, the last report issued prior to passage of the Afford- Americans now enrolling in Medicare every day, it’s more able Care Act. In 2030, tax revenues would cover 86 per- important than ever to take stock of the program. The cent of program costs. Academy’s Medicare@50 series identifies some of the SEE MEDICARE@50, PAGE 15 most fundamental issues that policymakers and anyone concerned with the program’s future should be aware of, NEW SPECIAL DIRECTOR ELECTED such as ‘How serious are Medicare’s financial challenges?’ The Board of Directors this and ‘What benefits does Medicare provide, and to whom?’” month elected former Ohio Part of the Academy’s broader “Aging Securely” initia- Department of Insurance Direc- tive, which focuses on policy issues around longevity risk, tor (2007-11) Mary Jo Hudson health care needs, and financial security for an aging popu- to serve as a special director on lation, Medicare@50’s first three papers are: the Board for a term ending in ➥ Is It Sustainable for 50 More Years? This paper looks the fall of 2016. “I’ve had the at the financial challenges facing Medicare and high- pleasure of working with many actuaries as a regulator, and lights the need for policy options to ensure the pro- Hudson look forward to this new role gram’s long-term sustainability. supporting the important public Who Are the Beneficiaries? ➥ This paper examines the diverse policy and professionalism mission of the Academy,” said needs and characteristics of Medicare beneficiaries. Hudson, a member of the law firm of Bailey Cavalieri LLC ➥ Does It Meet the Needs of the Beneficiaries? This paper in Columbus, Ohio, a legal practice emphasizing multi- explores the benefits available under the traditional state insurance regulatory compliance issues. fee-for-service Medicare program, as well as Medicare 2 2 6 8 Senior Fellow Early-Bird Professionalism: Solvency Committee For P/C Named Annual-Meeting Academy Continues Webinar Looks at Discount Ends Aug. 31 Regulator Outreach Insurance Capital Standards CALENDAR

SEPTEMBER 2 Seminar: Vrrm, Vrrm, VM-20 – Start Your Engines, The Race to Academy NEWS Briefs the PBR Finish Line is On! 2 Webinar: Exploring Global Health Care Cost Drivers: Australia and Singapore Academy Names Jim MacGinnitie 9-11 Casualty Loss Reserve Seminar (CLRS) & Workshops, Atlanta Senior P/C Fellow

NOVEMBER HE ACADEMY ANNOUNCED Aug. 28 4 Webinar: Exploring Global Health it has named W. James (Jim) MacGinni- Care Cost Drivers: Canada and Chile Ttie, an actuary with more than 50 years of 9-12 Life and Health Qualifications consulting and executive experience in casualty Seminar, Arlington, Va. actuarial and financial issues, to be its first senior 12-13 Academy Annual Meeting and Public Policy Forum and 50th property/casualty fellow. Anniversary Gala, Washington, D.C. He will communicate the Academy’s work on casualty actuarial issues pertaining to cybersecu- DECEMBER rity, extreme weather and catastrophic event risks, 1-2 Seminar on P/C Effective Loss workers’ compensation, medical professional lia- Reserve Opinions, Philadelphia bility, reinsurance, auto insurance, and many more P/C issues to the public and to public policymakers. MacGinnitie MacGinnitie is a past president of the Acad- emy (1988-89), the Casualty Actuarial Society (1979), the Society of Actuaries (2002), and the Since retiring in 1999 after serving for two International Actuarial Association (2003). years as chief financial officer of CNA Finan- “The position of senior property and casualty cial—where he had worked for 12 years early fellow was created in recognition of the impor- in his career—MacGinnitie has served on the tance the Academy places on its role in shaping boards of directors of several insurers, and as sound public policy in the regulation of property an independent arbitrator and consultant. and casualty insurance,” said Academy President From 1994 to 1997, he was a partner and direc- Mary D. Miller. tor of actuarial services at Ernst & Young, founded “Jim brings to this position the ideal attri- the casualty actuarial practice of Tillinghast, serv- butes to make him an effective voice on casualty ing as its managing principal before its merger issues—wide practice experience and depth of with Towers Perrin, now Towers Watson. He also casualty actuarial knowledge, complemented by was Professor of Actuarial Science at the Univer- extensive leadership experience,” she said. sity of Michigan in the mid-1970s. Additional Session Information Released for Academy’s Annual Meeting

HE ACADEMY HAS RELEASED new ➥ Climate-change risk, cybersecurity threats, details for the educational sessions at its price optimization, the changing personal TAnnual Meeting and Public Policy Forum, to auto insurance market, and the public policy be held Nov. 12-13 in Washington. Sessions will implications surrounding those issues. offer public policy and professionalism con- ➥ Health care and the 2016 elections, updates on tent relevant to all actuarial areas of practice, Affordable Care Act implementation, payment and practice-specific content on topical casu- and delivery system reform, and long-term care. To continue receiving the alty, health, life, pension practice, and profes- ➥ The latest on life insurance regulation Update and other Academy publications on time, make sionalism issues. Discounted rates are available reforms, including a hypothetical look at “Day sure the Academy has your through Aug. 31—today—so register now. 1” of principle-based reserving (PBR) taking correct contact information. Uniquely positioned and knowledgeable effect, professionalism issues related to PBR, Academy members can subject matter experts leading the sessions will and new requirements for AXXX/XXX cap- update their member profile include congressional and federal agency repre- tive arrangements. at the member login page on the Academy website. sentatives, as well as leaders of the NAIC and of ➥ Implications of the Multiemployer Pension the U.S. actuarial profession. Reform Act, new reform efforts, and an exam- Session topics will include: SEE ANNUAL MEETING, PAGE 4

w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 2 REGISTER NOW FOR THE AMERICAN ACADEMY OF ACTUARIES 50TH ANNIVERSARY ANNUALANNUAL MEETINGMEETING AND PUBLIC POLICY FORUM NovemberNovember 12-13,12-13, 20152015

Washington Marriott Wardman Park Gain insights into the most • Earn CONTINUING 2660 Woodley Road, NW important PUBLIC POLICY EDUCATION credits. Washington, DC 20008 issues affecting your practice. Hear from distinguished speak- • HONOR your esteemed colleagues as the Academy Stay current in your practice with ers from within and outside the actuarial profession including presents awards honoring cross-practice and practice-specific Academy leaders, as well as Academy members’ sessions on professionalism and public invited administration, illustrious service. congressional, and state policy topics offering continuing • LEARN about the Academy’s insurance officials. education (CE) credits. Four practice- activities and plans for the specific tracks will be offered (health, future during the Nov. 12 ceremonial presidential life, pension, and property/casualty). transition.

• NETWORK with your Academy peers from within

Registration is open. Visit and outside your practice area. www.actuary.org 202-223-8196

Hosted in the spectacular Renaissance Revival-style halls of the National Museum of Women in the Arts, the Academy’s 50th Anniversary Gala Dinner will offer a feast in the company of your peers as the Academy commemorates public policy and professionalism milestones of significance to the U.S. actuarial profession—and the dedicated and visionary Academy members who made them possible.

50TH ANNIVERSARY CELEBRATION NATIONAL MUSEUM FOR WOMEN IN THE ARTS THURSDAY, NOVEMBER 12TH, 7:00 pm

The Gala Dinner is included in the two-day registration fee. Tickets may be purchased separately for guests and those who purchase a one-day registration. Annual Meeting, continued from page 2

ination of public plan funding and risk disclosure issues. ers who can provide deeper insights into sustainability issues. ➥ Lessons from the first year of Own Risk and Solvency Assess- The agenda will enable attendees to earn up to 10 organized ment (ORSA) report implementation, and developments and activity continuing education (CE) credits (depending on area trends in international solvency and capital standards. of practice), 1.5 hours of business CE credits, and 2.4 hours of ➥ A focus on cross-practice ethics issues, including discussion of professionalism CE credits. This will all take place amid a fes- new Academy research about perceptions of the ethical chal- tive and fascinating celebration of the Academy’s 50th anniver- lenges facing the profession. sary this year. Click here for a look at the expanded meeting ➥ A discussion led by the Public Interest Committee of the sus- agenda, and stay tuned for further announcements as speakers tainability of public programs/systems with agency stakehold- are added.

Issue Brief Details Cost Drivers Of 2016 Health Insurance Premium Changes

HE INDIVIDUAL AND SMALL GROUP MARKETS to plans in the individual health insurance market when they have COMMITTEE released an issue brief highlighting the major enrollees with especially high claims, thereby offsetting a portion Tdrivers of premium rate changes from 2015 to 2016 in indi- of the costs of higher-cost enrollees. This reduces the claim costs vidual and small-group markets. that insurers expect to pay, allowing them to offer premiums lower According to the issue brief, Drivers of 2016 Health Insurance than they otherwise would be. Premium Changes, growing health care costs, the phase-out of the Funding for the reinsurance program comes from contributions Affordable Care Act’s (ACA) transitional reinsurance program, and required by the ACA from all health plans—not only plans in the assumptions regarding the composition of the 2016 risk pool are individual market, but also those in the small and large group mar- among the major factors driving changes in health insurance pre- kets, as well as self-insured plans. These contributions are then used miums for next year. to make payments to ACA-compliant plans in the individual market. While primarily focusing on the individual market, other factors An increase in costs of medical services and prescription drugs is that will affect the small group market are highlighted as well. In based on not only the increase in per-unit costs of services, but also particular, the issue brief noted that: changes in health care utilization and changes in the mix of services. ➥ Premiums in the small group market could also change due to In recent years, health care spending growth has been lower relative its expansion to include groups sized 51-100. to historical levels. ➥ Average premium rate changes may not represent the rate But there is some uncertainty regarding the causes of these change experienced by a particular consumer. A number of fac- trends, and whether they will continue. Medical spending will con- tors can result in a consumer’s premium differing from the aver- tinue to grow and costs for prescription drugs, in particular, are age rate change, including changes in age, tobacco-usage status, expected to increase as more high-cost specialty drugs come to geography, benefit design, family status, and subsidy eligibility. market, such as new drugs to treat hepatitis C, high cholesterol, and The ACA transitional reinsurance program provides payments cancer, according to the issue brief. Academy Election Update

Voting Under Way for Regular Director Positions The Academy’s Nominating Committee presented a slate of four candidates for open regular director positions on the Academy Board of Directors. The nominees are: Elizabeth Brill, Alice Fontaine, Laurel Kastrup, and Allen Schmitz. Brill, Kastrup, and Schmitz are nominated to serve three-year terms expiring in 2018. Fontaine is nominated to serve the remain- ing one year of a three-year Board term expiring 2016 that is being vacated on Nov. 12. Academy President Mary D. Miller, in an Aug. 21 email to mem- bers announcing the slate of candidates for regular director posi- Online voting for the regular director positions opened on Aug. tions, highlighted the importance of participating in the Academy 31 at 9 a.m. EDT and will end on Sept. 21 at 11:59 p.m. EDT. For more elections, noting, “We encourage you to take part in selecting the information about the Nominating Committee Guidelines for how newest leaders of the Academy who will help us fulfill our mission candidates are selected and other election details, please visit the to serve the public and the U.S. actuarial profession.” Academy’s online Election Center. w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 4 Recently Released VOLUNTEER SURVEY DRAWS LARGE RESPONSE HE AUGUST ISSUE of HealthCheck covers the Academy’s More than 700 members participated in the Academy’s annual Medicare@50 series, the Medicare Subcommittee’s annual volunteer survey, which members use to indicate interest in Tissue brief, Medicare’s Financial Condition: Beyond Actuarial the Academy’s various working groups. All participants who Balance, which offers a long-term actuarial perspective on Medi- expressed an interest in volunteering will be contacted in the care’s long-term financial status, and the Centers for Medicare & coming months. Volunteers are essential to the Academy’s Medicaid Services’ Center for Consumer Information and Insur- work—many thanks to all who completed the survey. ance Oversight announcement of plans to delay publication of pre- liminary estimates of payments and charges for the risk-corridor tic Relations Actions; its adoption of a pending draft ASOP on prin- program under the Affordable Care Act. ciple-based reserves for life products; and notes the ASB’s July The August ASB Boxscore covers the ASB’s revision of ASOP No. public hearing on public pensions, which was also covered in the 34, Actuarial Practice Concerning Retirement Plan Benefits in Domes- July Actuarial Update. Academy Committees Submit Comments on PCAOB Auditor and Specialist Paper

HE FINANCIAL REPORTING COMMITTEE, Pension education and makes public whether those specialists have Accounting Committee, Casualty Committee on Property and completed that training. TLiability Financial Reporting, Health Financial Reporting and Sol- In recent years, actuarial practitioners—primarily those directly vency Committee, and Life Financial Reporting Committee sent com- employed or engaged by audit firms—have noted a significant ments to the Public Company Accounting Oversight Board (PCAOB) on increase in the depth and intensity of the review of their work its “The Auditor’s Use of the Work of Specialists” consultation paper. products by core audit teams. The letter states that the concerns In determining the degree of oversight that needs to be applied the PCAOB has regarding existing guidance may be more related to to the work of a specialist providing assistance on an audit, several a lack of compliance of some, but not all, specialists with the guid- key factors should be considered, the letter states. ance, and the committees said they “do not believe there are any Those include: specific problems with the guidance as it relates to actuarial services ➥ whether the specialist is an accredited member of a recognized or actuarial specialists, as defined by the PCAOB consultation draft.” professional body (and is publicly identified as such) and the Further, one-size-fits-all detailed requirements for specialists training necessary to receive credentials from that body; are unlikely to be effective or implementable, the letter states. ➥ the extent to which that body has a code of professional con- Even within the actuarial profession, the approaches taken by pen- duct, professional standards of both practice and qualification sion, life insurance, or casualty actuaries may vary and impact the to perform the specialist’s services, and an active disciplinary type of validation performed by auditors, it said, noting that audit- process; and ing procedures that are appropriate for one actuarial practice area ➥ the degree to which the body requires continuing professional may be inappropriate for another.

remembrance John Morris, Past Chairperson of COQ John Morris, who was chairperson of the Academy’s Com- member and excellent chair of the [COQ], among his many mittee on Qualifications (COQ) from 2011 to 2014, passed other contributions to the actuarial profession. away Aug. 18 at his home in Downington, Pa. He was 62. “His passion for our profession was irrepressible, and I Morris, who spent the last 26 years of his career with wish that I could communicate fully to future generations of PricewaterhouseCoopers, served as an Academy volunteer in actuaries the great positive impact John has had on the cred- a wide range of roles beyond the COQ, including, the Council ibility of the actuarial profession,” Passwater wrote. on Professionalism (2011-2014), the Consistency: Principles, “In addition to being a noble ambassador of our profes- Summary, Definitions & Report Format Work Group (2006- sion, John was also a very caring gentleman who encouraged 2011), the Life Valuation Committee (2005-2009), and the me personally on many occasions. I will miss John profession- Task Force on Independent Review of Principles Based Valu- ally and personally, but I know he would encourage us to look ations (2006-2013). forward to future opportunities,” he wrote. “I met John through volunteer service on the COQ and Morris is survived by his wife, Lee, and son, Joseph. In lieu always appreciated his balanced and thoughtful approach to of flowers, memorial contributions may be made to Neigh- the issues we faced,” current COQ Chairperson Keith Pass- borhood Hospice, 400 E. Marshall Street, West Chester, PA water wrote in a note to the committee. “John was a past 19380. To send online condolences, click here. w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 5 Academy Continues Its Professionalism Outreach With Regulators

edicated regulators woke early on a Saturday morning representatives also began presenting at sessions of CASTF, the to attend the Academy’s breakfast for regulators at the Life Actuarial Task Force, and the Health Actuarial Task Force. D NAIC’s Summer 2015 National Meeting this month. These discussions have covered a wide range of topics, including: As they have at each NAIC national meeting for several years, ➥ qualifications of actuaries and regulators who review a wide professionalism representatives from the Actuarial Standards variety of materials; Board (ASB), Actuarial Board for Counseling and Discipline ➥ how regulators can deal with unprofessional work that may (ABCD), and the Committee on Qualifications (COQ) updated not necessarily violate the Code of Professional Conduct; regulators on their respective areas of activities, answered ➥ ABCD procedures; questions, and listened to and engaged regulators in dialogue ➥ when regulators should contact the ABCD; on professionalism issues. ➥ requests for guidance; Academy President Mary D. Miller gave a preview of an ➥ whether specific qualification standards are needed for new attestation form—which now reflects comments collected last areas, such as principle-based reserves and the Affordable fall—that regulators have expressed a keen interest in having the Care Act; Academy develop. The “U.S. Qualification Standards Attestation,” ➥ refusal of filing actuaries to respond to regulator requests launching by the end of the year, will allow actuaries to demon- for proof of qualifications; strate how they meet the requirements set out in the U.S. Quali- ➥ the use of professional judgment as outlined in actuarial fication Standards (USQS) for signing NAIC annual life, health, standards of practice; and and property & casualty statutory statements of actuarial opinion. ➥ transparency in the ABCD process. At the breakfast, Tricia Mat- This ongoing dialogue has son, chairperson of the ASB, gave improved the Academy’s under- an update of the ASB’s work this standing of regulator concerns year and what standards are under The Academy is dedicated and regulators’ understanding development or revision. Nancy of, for instance, the USQS and Behrens, a member of the ABCD, to maintaining the high the role of the ABCD. It has also summarized recent requests for professional standards led to several concrete develop- guidance. And Tom Campbell, ments that address regulator a member of the Committee on of the U.S. actuarial concerns directly. For example, Qualifications, was available to the ABCD annual report has been discuss COQ activities. profession—and these expanded to include more detail The Academy’s profession- about cases and requests for alism outreach at NAIC began outreach dialogues with guidance, and when they were in March 2012, when Academy resolved. And as more regulators professionalism representatives high-ranking regulators have become aware that they can attended the NAIC Casualty go to the ABCD for confidential Actuarial and Statistical Task are an important part of guidance, the ABCD has received Force (CASTF) session to listen more requests for guidance from to regulator concerns on pro- that effort. that community. fessionalism issues. At the next The forthcoming U.S. Quali- NAIC meeting, in August 2012, fication Standards Attestation, the Academy held its first profes- which will allow actuaries to sionalism breakfast, where representatives from the ASB, ABCD, document their qualifications and continuing education in one and COQ outlined the roles they have as part of the Academy’s place, was undertaken to try to address serious regulator con- structural framework on U.S. actuarial professionalism and cerns about how to determine whether actuaries are qualified engaged regulators in discussion. in specific cases. Other outcomes from this professionalism Since then, the Academy has hosted professionalism break- dialogue include more descriptive discipline notices from the fasts at every national NAIC meeting, and each regulator-only Academy, and regulator-only webinars. breakfast has provided a forum for candid and open discussions The Academy is dedicated to maintaining the high profes- of professionalism issues that affect regulators, as well as time sional standards of the U.S. actuarial profession—and these out- for regulators to raise concerns about professionalism issues reach dialogues with high-ranking regulators are an important they see in actuarial work they review. In 2013, professionalism part of that effort. w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 6 Professionalism News

Academy Provides Professionalism Overview at Actuarial Conference

N AUG. 3, Committee on Qualifications member John ference in St. Simons Island, Ga. The presentation focused on the Gleba—a former vice president for professionalism qualification standards and the recently updated USQS FAQs on the Oissues—presented “A Look at Professionalism and the U.S. Academy website, and provided an overview of the Code of Profes- Qualification Standards” to an audience of approximately 65 life sional Conduct, actuarial standards of practice, and the role of the and P/C actuaries attending the 2015 Farm Bureau Actuarial Con- Actuarial Board for Counseling and Discipline. From the Actuarial Standards Board

HE ACTUARIAL STANDARDS BOARD (ASB) adopted brief description of the rationale for selection of assumptions and a final revision of actuarial standard of practice (ASOP) No. allocation methods. T34, Actuarial Practice Concerning Retirement Plan Benefits in The revised final ASOP, which will be effective for relevant Domestic Relations Actions. The revised ASOP applies to actuaries assignments for which the actuary is first engaged on or after Dec. performing actuarial services in connection with the measurement, 1, 2015, can be viewed here. allocation, or division of retirement plan benefits in domestic rela- tions actions. The ASOP is not applicable to actuarial services per- formed in connection with other post-employment benefits, such as ASB Public Hearing medical benefits, that may also be considered as part of the domestic Audio Posted relations action. Also this month, full audio from the ASB’s Key changes from the 1999 version of ASOP No. 34 include modi- July 9 public hearing on public pension fications to the guidance that each assumption selected by the actu- plans was posted on the Academy’s ary should be individually reasonable and consistent with the other website. Click here for the audio, or click here to download it. assumptions selected by the actuary, and to require inclusion of a

Call for Papers From The Actuarial Foundation N LIGHT OF THE ACADEMY’S ONGOING FOCUS on Read the August Newsletter policy issues affecting an aging population—longevity risk, Find out the latest news on The Actuarial Foundation in its August Iretirement security, long-term care, and public program sus- newsletter, which includes Chair Helen Galt’s overview of the tainability—the Academy supports a new call for papers from the foundation’s year-to-date activities and its “Project Math Minds” competition for high school students. Institute and Faculty of Actuaries (IFoA), the professional associa- tion for actuaries in the United Kingdom. Considering a Reverse Mortgage? The IFoA is soliciting research proposals related to a series of key Read The Actuarial Foundation’s latest issue of Financial Smarts policy questions focused on two actuarial themes: the aging of the popu- on reverse mortgages and learn how homeowners become eligible for a reverse mortgage, the different types of reverse mortgages, lation and the effect of the changing economic landscape on financial and some possible drawbacks. Consider sharing the newsletter health. Given the global nature of these two major themes, proposals are with your family, friends, and colleagues. being accepted from research-led organizations in the academic, not- Celebrating 20 Years—Foundation Releases 2014 for-profit, and public and private sectors within and outside of the U.K. Annual Report The Academy encourages members to consider this call for The Actuarial Foundation has been making a difference for over 20 papers to further the prominence of the profession’s independent years. Relive some of the accomplishments and 20th anniversary and objective perspective on these critical actuarial and policy ques- celebratory events in the Foundation’s 2014 Annual Report. tions. The submissions deadline is Oct. 5.

w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 7 Risk Management & Financial Reporting News Solvency Committee Webinar Looks at Insurance Capital Standards

ORE THAN 400 PEOPLE from 176 registered sites The panelists, all members of the Solvency Committee, were attended the Academy’s Aug. 4 webinar, “International Novian Junus, a principal and consulting actuary with the life insur- MInsurance Regulation 201: IAIS Development of Insurer ance consulting practice of the Seattle office of Milliman; Ned Tyr- Capital Standards.” Three panelists and moderator Elizabeth Brill, rell, international technical policy adviser for the NAIC; and Henry chairperson of the Solvency Committee, looked at the International Siegel, a semi-retired actuary. Association of Insurance Supervisors’ (IAIS) efforts to develop capital Junus said that current BCR estimates are based on a simple standards to prevent the insolvency of large multinational insurers. design that utilizes a market-adjusted valuation approach. Established in 1994, the IAIS is the standards-setting body Siegel talked about the IAIS’s recently released proposal for responsible for developing and assisting in the implementation of HLA, which would increase a G-SII’s required capital based on a principles, standards and other supporting material for the super- number of risk factors, including its non-traditional and non-insur- vision of the insurance sector internationally. Currently, the group ance products and activities. The primary purpose of the HLA is to is working on a number of capital standards proposals that could help reduce the probability of and impact on the financial system of have a significant impact on both international and U.S. insurers. the distress or failure of a G-SII. “We would hope the IAIS would “The IAIS is developing group solvency and capital standards for articulate a rationale for why those factors were chosen,” he said. large multinational insurer groups that could end up impacting many Tyrrell focused on ICS, and noted the IAIS Executive Commit- insurers and groups,” Brill said. “Depending on what these new stan- tee’s February 2015 agreement on the ultimate goal of a single ICS: dards look like—and the types of products and behaviors they incen- a common methodology by which one ICS achieves comparable tivize—it’s not hard to imagine that the standards could impact the outcomes across jurisdictions. types of products insurers are willing to offer in the marketplace and the prices at which they’re willing to offer those products.” Two Comment Letters on Solvency Issues Webinar participants discussed the IAIS’s development of insurer Also this month, the Solvency Committee submitted comments to group capital standards, which have been divided into three parts: the IAIS on the Higher Loss Absorbency Capacity for Global Systemi- a finalized basic capital requirement (BCR), a proposed higher loss cally Important Insurers (G-SIIs) public consultation document absorbency (HLA) capacity requirement for global systemically dated June 25, 2015, and submitted comments to the NAIC on the important insurers (G-SIIs), and a proposed insurance capital stan- Discussion Draft on Approaches to a Group Capital Calculation dated dard (ICS) for both G-SIIs and internationally active insurance groups. July 23, 2015.

Casualty News Task Force Submits Comment Letter to CASTF

HE PRICE OPTIMIZATION TASK FORCE submitted confusion, as demonstrated by the fact that the state bulletins issued a comment letter to the NAIC’s Casualty Actuarial and Statis- thus far describe the practice somewhat differently. Ttical (C) Task Force (CASTF) providing input on the recom- It outlined necessary elements for price optimization as: mendations section of its “Price Optimization White Paper.” 1. Model(s) or assumptions to estimate costs. The Casualty Practice Council formed the task force earlier 2. Model(s) or assumptions to estimate market conditions (this may this year to focus on the actuarial and public policy issues con- include separate models for new business conversion, policy- cerning price optimization. As the CASTF begins drafting the final holder retention, competition, etc.). section of the white paper, “Recommendations and Next Steps,” 3. Target business objectives and requirements. the Price Optimization Task Force recommended that current rate 4. Constraints (e.g., limiting answers to those that fall between the statutes and regulations provide state regulators with the abil- current price and the cost-based indication). ity to stop unfairly discriminatory pricing practices for personal 5. An algorithm that integrates items 1-2 in order to achieve item lines insurance products, regardless of whether final prices are 3 and fulfill item 4. selected considering price-optimized results, pure judgment, or Judgment plays a key role throughout the ratemaking process, some other technique. the letter stated, and even when price optimization is used, it is used And while the draft white paper provides an excellent overview as guidance in making the final rate-setting selections. The final of various definitions of price optimization, the letter stated, the selections should be the focus of the rate review; the ability to use absence of a common definition of “price optimization” could create judgment in arriving at final selections is important, it said.

w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 8 Subcommittee Submits Comments on Terrorism Risk Insurance

HE TERRORISM RISK INSURANCE SUBCOMMIT- those responses pertaining to those policies will distort the average. TEE submitted a comment letter to the NAIC’s Blanks Work- For example, workers’ compensation insurance covers terrorist Ting Group on its terrorism risk insurance supplement and attacks, but it is impossible to discern the exact percentage of such instructions draft. premiums allocated toward coverage of terrorism risk. As written, The letter suggested changing language in the draft to match the supplement appears to require reporting any policy that could with the direct terrorism premium reporting instructions. include as a cost a claim arising from a terrorist event (e.g., a per- Additionally, it said that if the intent of the instructions is to pro- sonal auto crushed by a building when it collapses after a car bomb), vide regulators with the average premium for terrorism coverage, the letter states. the instructions may not provide the desired information and may The subcommittee recommended the language be revised to have unintended consequences. Specifically, many policies have clarify exactly how companies should report policies in which “ter- terrorism coverage without a specific premium charged for it, and rorism is an included cost.”

Letters From Early Academy Leaders Still Resonate

N HONOR OF OUR 50TH ANNIVERSARY, throughout this year we are reprinting communications from early Academy presi- dents. This month’s letter is from the 1968 Yearbook and comes from Thomas E. Murrin, who details the then-nascent work on Iaccreditation and liaisons with the NAIC.

In reporting briefly on Academy affairs for the year 1967, I of Actuaries, which completed its work at the November, 1967, think it appropriate first formally to recognize and acknowl- meeting of the N.A.I.C. edge the significant leadership and contributions of Henry The Committee on Review and Evaluation, of which Walter Rood, who was my predecessor as first president of the Acad- Rugland is chairman, also contributed significantly to the activ- emy. He was one of the principal architects of the Academy’s ities of the Academy during the year. This committee’s work formation and contributed much time and effort to Academy was in two principal areas: (1) the further development and affairs. It was indeed an honor to have had an opportunity to clarification of the future examination policy of the Academy succeed Mr. Rood in serving the Academy as president in 1967. which culminated in a proposed revision of Article I, Section One of the principal areas of activity during the year was 2b, of the Bylaws, and (2) the development of a joint committee the extensive and time-consuming efforts of Chairman Wendell with the other five actuarial organizations in North America Milliman and the other members of the Admissions Committee. with respect to coordination of examination policy matters . As Approximately two hundred new members were admitted to a result, a joint Committee of Review and Evaluation has been the Academy during the year. In addition, arrangements were established to provide a continuing review of policy matters made to provide for the first interim examination in accordance relating to the education and examination of actuaries and to with the Bylaw provision governing admissions. In this connec- study these matters and, when appropriate, make recommen- tion Chairman Julius Vogel and the other members of the Com- dations on them to the governing bodies of the organizations mittee on Education and Examination spent many long hours in represented on the joint committee. developing the comprehensive and representative examination In summary, the officers, directors, and the various com- that was given in September. mittees of the Academy were most active during 1967 in their Another very active phase of Academy affairs during the service to the Academy. The dedication and diligence of these year was the work of the Accreditation Committee under the associates contributed very effectively to the progress that the chairmanship of Andrew Webster. A bill for accreditation of Academy enjoyed during my term as president, and I wish to actuaries was passed during the year in Indiana, to be effective express my thanks to them for their excellent work and sin- January 1, 1968. This bill embodies the concepts developed by cere dedication. At the Board of Directors meeting prior to the Committee and represents a significant precedent in the the Annual Meeting, Mr. L.H. Longley-Cook submitted his area of accreditation of actuaries. While legislation was not resignation as a Vice-President and Board Member because introduced in any other states, many studies and conferences he has established residence outside the United States. This regarding the desirability of additional legislation or admin- resignation was accepted with regret, and my report would be istrative orders were conducted by the Committee, which incomplete without an expression of the Board’s appreciation continues to be most active in this area. Likewise, it is closely as well as my personal appreciation for his pioneering work in following federal developments, including the bill introduced the original planning and establishment of the Academy and for by Senator Javits. The Committee has also maintained liaison his diligent service in the administrative work of the Academy. with the N.A.I.C. through its Committee To Study Accreditation Thomas E. Murrin w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 9 National Law Review also cited Academy’s Social Security 2016 cites the Academy issue the issue brief in its Health Committee, was quoted in the brief, Potential Implications Care Law Update, and the Ledger Gazette on the need of the Small Group Definition issue brief also was cited by for Congress to address the Expanding to Employers with Strategic Health Care, Navigant projected depletion of the Dis- 51-100 Employees. Health Care, Insurance & Finan- ability Insurance Trust Fund cial Advisor and AHIP Coverage. late next year. Leier noted that A link to the Academy’s issue how lawmakers respond to the brief, An Actuarial Perspec- Senior Health Fellow Cori urgency of the problem “will tive on the 2015 Social Security Uccello was quoted in a be a great test to show us how Trustees Report, was posted in IN THE NEWS McClatchyDC story, “Medicare Congress will go about solving BenefitsLink.com’s Retirement The Wall Street Journal men- and Medicaid Face Grow- the long-term issues facing the Plans Newsletter and in the tioned the Academy in a story ing Pains at Age 50.” The rest of Social Security.” Social Security Report. examining 2016 health care story appeared in more than insurance premium increases 25 newspapers nationwide, A Modern Healthcare story BenefitsLink.com’s Retirement in several states. The story including the Miami Herald and about the announcement by Plans Newsletter also posted cites analysis from the Acad- The Sacramento Bee. CMS that the release of data a link to the Academy’s issue emy’s issue brief, Drivers of on the ACA’s risk-corridor brief Alternatives for Pension 2016 Health Insurance Pre- Life and Health Advisor program will be delayed Cost Recognition: Issues and mium Changes, that the phas- reprinted “Medicare@50: Is It quoted Cathy Murphy-Barron, Implications, and a link to the ing out of certain Affordable Sustainable for 50 More Years?” Academy vice president for Academy’s comment letter Care Act (ACA) reinsurance one of three Medicare@50 health issues, who said, “CMS on proposed regulations on programs is one of several sig- papers released by the Acade- has never collected any of this suspensions of benefits under nificant 2016 cost drivers. my as part of its “Aging Secure- data before” and that “any the Multiemployer Pension ly” initiative to commemorate time you deal with data, it Reform Act of 2014. Inside Health Insurance the federal program’s 50th takes longer than you think.” Exchanges ran a subscriber- anniversary. The release of the The story was also picked up A link to the Academy’s issue only story citing the same Academy’s first three Medi- by Business Insurance. brief Medicare’s Financial Con- issue brief, which included an care@50 papers was reported dition: Beyond Actuarial Bal- interview with Individual and in The Katy News (Texas). A story by the Georgia Health ance was posted in Benefits- Small Group Markets Com- Care Association on health Link.com’s Health & Welfare mittee member David Shea. Tim Leier, chairperson of the policy changes expected in Plans Newsletter.

RISK MANAGEMENT AND FINANCIAL REPORTING BRIEFS

➥ Elizabeth Dietrich has joined the Solvency Committee.

HEALTH BRIEFS

➥ Adam Reese is now chairperson of the Active Benefits Subcommittee. ➥ Susan Pantely is now vice chairperson of the Health Care Delivery Committee. PENSION BRIEFS ➥ Joe Allen has joined the Health Practice International ➥ Michelle Quinlan has joined the Joint Academy/SOA Pen- Committee. sion Finance Task Force. ➥ John Bartel, Michael de Leon, and Randy Halper have joined the Retiree Benefits Subcommittee. ➥ John Schubert has joined the Active Benefits Subcommit- LIFE BRIEFS tee. ➥ Eric King has joined the Risk Sharing Subcommittee. ➥ Wayne Stuenkel is now chairperson of the Life Capital ➥ Timothy Fitzpatrick and Bob Mone have joined the Adequacy Committee. Medicaid Subcommittee. ➥ John Blocher, Katie Cantor, and Wayne Stuenkel have ➥ Janet Perrie has joined the Long-Term Care Principle- joined the Life Practice Council. Based Work Group. ➥ Monica Li has joined the PBR Review Procedures Work Group. w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 10 NAIC, continued from page 1

Life Products Committee’s Nonforfeiture Modernization Work Group cent Value at Risk (VaR) over a one-year time horizon for valuation to LATF. The work group has been working on examples of nonfor- purposes. The presentation went over what a 99.5 percent VaR is feiture calculations for various life and annuity products currently in in general terms, current VaR practices, the consistency and cred- the insurance marketplace and will present its findings to LATF in ibility of 99.5 percent VaR, and the significance of the one-year time November. The NAIC’s fall meeting is scheduled for Nov. 19-22 out- horizon. It noted that not all U.S. capital requirements are based on side of Washington, D.C. VaR measures, although some risks are calibrated using confidence An Academy Alert was issued following the meeting, and the intervals (percentiles), and that depending on management’s objec- Academy held a post-NAIC webinar on Aug. 27 at which Bahna- tives, companies may use multiple metrics. Nolan and others outlined meeting highlights. The Academy also During the CDAWG meeting, the Academy requested clarifi- hosted its professionalism breakfast on Aug. 15; see “Professional- cation regarding the absence of the cash flow approach based on ism Counts,” page 6. the Solvency Committee’s comments to the working group on the NAIC’s revised group capital assessment proposal. Health Actuarial (B) Task Force (HATF) CDAWG stated the cash flow approach has not been discarded Shari Westerfield, vice chairperson of the Health Practice Council and will be reconsidered in future capital assessment proposals. (HPC), provided the Health Actuarial (B) Task Force (HATF) with Currently, the working group is using existing business models and an overview of recent Academy health activities. She noted that in regulatory tools, like risk-based capital, for its group capital assess- addition to the Academy’s work with the NAIC on long-term care ment proposal. (LTC) issues, the Academy has groups working on papers related to LTC financing reform, its Medicare@50 series (see page 1), and health C1 Work Group Reports to Risk-Based Capital care delivery and payment reforms. Additionally, she noted that the Working Group recent restructuring of the HPC has been changed from a federal Nancy Bennett, senior life fellow, and Jerry Holman, co-chairperson and state structure to one that that is organized along product types. of the C1 Work Group, presented the work group’s report, “Model Brad Spenney, chairperson of the Cancer Claim Cost Table Construction and Development of RBC Factors for Fixed Income Work Group, updated HATF on work to perform updates to the Securities for the NAIC’s Life Risk-Based Capital Formula” to the current valuation standard of 1985 cancer-claim cost tables. Grad- NAIC’s Investment Risk-Based Capital Working Group on C-1 fac- uation methods have been discussed within the group, and they tors for corporate bonds, and recommended a set of base Risk-Based agreed to use a generalized linear model (GLM) graduation method Capital (RBC) and Asset Valuation Reserve (AVR) factors for the to graduate data—all data has been graduated except for length Life RBC formula. of stay. Still to be completed is the finalization of graduation of The recommended factors reflect loss given default experi- tables, determining loading methodology, and the drafting of the ence for corporate bonds from 1983 to 2012. The recommendation work group report. increases the number of RBC factors to 14 from six, to better align the capital requirements with credit risk experience. In addition, an Long-Term Care Actuarial (B) Working Group analysis of the changes from the current factors, including a numeri- Warren Jones, chairperson of the LTC Terminations Work Group, cal quantification of each assumption, was presented. presented to the Long-Term Care Actuarial (B) Working Group on The NAIC exposed the report for 45 days, and the next steps LTC intercompany experience data, the granularity of the group’s include responding to questions, developing adjustments to the fac- analysis, and the mortality selection. Results of the group’s voluntary tors for concentration risk and the number of issuers in an insurer’s lapse study by policy duration and attained age also were presented. portfolio, beginning a review of the capital requirements for struc- Al Schmitz, chairperson of the LTC Principle Based Reserve tured securities, and providing support to the NAIC to assist with Work Group, gave an update on the draft report that has been pro- implementation. duced and is currently going through final peer review. This report will include considerations of stochastic modeling and suggested Panel Addresses ‘All Things Earthquake’ next steps, and the model is intended to be illustrative and not At a special event hosted by the NAIC’s Center for Insurance Policy inclusive of all policy features that may be offered by an insurer, or and Research titled “All Things Earthquake,” Academy volunteer inclusive of detailed modeling considerations. Rob Walling participated in a stakeholder panel addressing the chal- Karl Volkmar, chairperson of the LTC Credibility Monograph lenges and intricacies associated with pricing for earthquake risks, Work Group, reviewed the group’s original objectives and outlined especially in less-familiar settings like the Cascadia Subduction the eight sections of the draft monograph that is currently under- Zone and situations involving man-made earthquakes. going Academy review and is expected to be complete in the next several weeks. NAIC Fall Meeting Solvency Committee Activities Nov. 19-22 Jeffrey Johnson, member of the Solvency Committee, gave a pre- National Harbor, Md. sentation to the ComFrame Development and Analysis (G) Working (Washington, D.C. area) Group (CDAWG) on the practical implications of using a 99.5 per- w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 11 NEW Academy Members

N THE FIRST SIX MONTHS OF THIS YEAR, 508 selves as government employees, new members joined the Academy. The new 2015 seven listed “miscellaneous,” and Imembers are a young group, with an average age of there was one nonprofit and one university member. 31, and 30 percent are women. At the half-year mark, Health was the most popular area of practice (192), the Academy had 18,891 members. followed by life (125), casualty (115), pension (48), and The majority (349) are employed by an insurance orga- risk management (nine), while 17 new members listed nization or organizations serving the insurance industry, their practice area as “other.” (Two did not identify while 143 are consulting actuaries. Five identified them- an area.)

Paul Abbott Andrew R. Bourg Leah David Joshua Gopin Emmanuel E. Acquaah Marie Keiko Breyan Charles John DeClara Rebecca L. Gorodetsky Shree H. Adhikari Tiana Britton-Davison Jeffrey M. Deems Han L. Grande Maxwell G. Adler Anthony J. Bucci Brian M. DeGeorge Bradley A. Granger Aaron G. Alexander Matthew Burrill Eric C. Deis Joseph H. Gravelle Alana Consuelo Andersen Hannah M. Butler-Purcell Giedre Delgado Amy Beth Green Robert Anderson Ian C. Cahill John DePippo Ryan J. Grusemeyer Joshua Andrews Ye Kai Cai Brian DeVinny Dustin Joseph Grzeskowiak Carter M. Angell Todd E. Callaway Magdalena Diedrich Haoyu Gu Emily D. Angyal Craig Campbell Daniel L. Dillon Stewart B. Guerard Viktor Antonius Stewart Norman Campbell Danielle Donnelly Nicholas Gullo Surekha Archer Alicia A. Carter Timothy S. Doyle Cory Guscano Gusland David A. Arlt Jedwin Gervasio Celestino Nathan A. Dunn Brian J. Hall Mary F. Arrowsmith Chelsea Cerini Jordan M. Edwards Xiaowei Han Robert A. Astleford Cloe Cerracchio David Andrew Ellis Yoohee Han Stephanie Aube Noah Champagne Howard D. Elson Mark R. Hanisch Kyle Babirad Ki-Hing Chan Richard Vincent Embser Gemma Harding Julie Grace Bacon Zhe-Hao Chan Matthew L. Emery David S. Harris Ronald K. Bailey Laura Chanan Anastasia V. Entin Michael A. Hartke Robert E. Balmer Yu-Jung Chang Jacob H. Epp Nicholas G. Hartmann Yair Bar-Chaim Giao N. Che Eric M. Erb Vincent E. Haupt Austin Barrington Cuiwei Chen Jun Fang Tyson C. Hawkins Nick A. Barron Joe Chen Timothy A. Fannon John B. Hebig James M. Beall Xi Chen Jayon Farrell Lisa M. Heintzelman David Bean Chia Yi Chin Dana M. Feldman Brandon C. Heipp Kristen C. Behling Anthony (AJ) Jordan Chinn Matthew D. Feryus Erica Helinek Robert T. Bell Tiffany M. Chiu William Edward Fiala Sarah S. Hellems Caleb Bennett Collin William Christovich Matthew J. Flanagan Shane T. Henshaw Samuel Joseph Bennett William Ciminelli Marc A. Fournier Jason B. Hermanson J. Daniel S. Benzshawel Victor M. Ciurte Ronald Joseph Fox Kathlyn F. Herrick Ben Berning John R. Clark IV Douglas E. Franklin Shimshon Herz Alexander N. Beruscha Daniel K. Clayman Robert Franquet Troy N. Heuer Priyanka Bhatlapenumarthi Christopher Contino Brandon L. Fuller Leigh G. Heymann Robert W. Bibb Brian Kevin Coppin Rachel L. Gallagher Jeana Rose Holewinski Amber S. Bird Lauren Corrigan Richard M. Gamret William Jackson Holmes Tyler A. Birlingmair Monique Coté Briana C. Garcia Nang Vilay Homphomsiltham Christopher Bitter Parker Crosby Jessica Marie Gardner Brian Hong Stacie N. Bleznick Sean M. Cullen Patrick Getts Brian Y. Hong Julia E. Blyumin Sarah E. Dallmann Kellen Gintner Jeremiah Scott Howell Daniel L. Boeder Xin Dang Jonathan E. Glass Benjamin C. Hsieh Brian Boger Suraj M. Datta Cameron K. Gleed Jiayue Hu Travis Books Andrew J. Davenport Matthew Goff Miao Hu Joshua Borish Mark A. Davenport Sara Goodman SEE NEW MEMBERS, PAGE 13 ➜ w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 12 NEW MEMBERS, CONTINUED FROM PAGE 12

Joseph Huang Michael Lam Cham Kee Daniel C. Mikos Fawn M. Racicot Monica C. Huang Lindsay E. Lange Jay Miller Skyler A. Rader Adam H. Hudes Thomas Lapinski Kellen C. Miller Richard P. Rakay Alexander S. Hutchison Cole Lauersdorf Melissa J. Miller Frank S. Rau Eric Hyland Tyler R. Laughlin Galin P. Mitchener Meghan M. Rausch Randy S. Jacks Jason P. Leask Brett Moberg Koushik Ray David M. Jackson James Lee Scott M. Moeller Jeremiah N. Reinkoester Nathaniel S. Jacoby Joseph Seung Lee Jeffrey S. Mond Lindsay S. Repp Peter Alfred James Kenneth Lee Brian Montgomery Timothy J. Reynolds Kiley S. Janousek Sarah A. Legatt Young Shin Lexi Moon Joshua C. Rhoads Brian R. Jermyn Mingwei Lei Anne Marie Moore Alex Ribar Bin Chris Jiang Chengchen Li Paul Moore Samuel T. Rickert Manrong Jiang Ting Li Jessica Morse Jamie C. Roderick Eric D. Johnson Yezi Li Kevin M. Mospan Maria L. Rodriguez Lars Johnson Marc Liebman Dennis M. Muchira John Henrik Rogers Mitchell Johnson Yun-Yun Liou Diane Mui Paige Roland Taylor Jolly Chihfan Flora Liu Justin D. Muir John R. Rose Rael N. Jones Christopher Liu Christine Muller Janet E. Rush Jacqueline E. Jurinko Jiejing Liu Javier A. Munoz Travis J. Russell Drew Kalnasy Yanqi Liu Catherine Murphy Philip D. Rutila David John Kandybowicz Scott B. Lombardo Richard Nam Dana Signe Ryan Guhan Yap Kannan Katarina N. Lorenz Steven A. Napoli Nicholas W. Saeger Olivia A. Keefer William R. Loth Philip B. Natoli Matthew V. Samuel Daniel Kelch Lisa Louk James H. Nelson Gene Paul San Valentin Karyn L. Kelly Kimberly M. Lovingood Zachary A. Nelson Neil Sandhoefner Cedean J. Kematick Tyler A. Lueck Louis H. Nichols Quinn B. Saner Philip Keown Vincent Chi-Yau Luk Igor Nikitin Alessandro Santoni Saurabh Khurana Grant E. Luloff James M. Norton Leah Sardiga Zain Khusro Sam Luo Carlos E. Nunez Nefissa Sator Thomas K. Kim Ryan James Lynch Daniel Kwane Nyatuame Shelley M. Schad Timothy M. Kim Jared T. Madden Melissa O’Brien Kyle Scherer Joseph Clark Kimosh Reza Manavi Brian J. O’Connor Beau D. Schmitz Emily King Alyssa Mansolf William F. O’Connor Matthew J. Schoonmaker James P. King Dong Mao Robert Mark O’Hara Jacob P. Schuller Alexander E. Kirimov Andrew L. Marcus Neill C. O’Reilly Troy A. Schulze Peter T. Kissinger Walter T. Matthews Ailen A. Okharedia Daniel James Schumacher Roman Kizner Matthew D. Maxwell Blake T. Orth Daniel W. Schwartz Michelle B. Klein John J. McAndrew Peter J. Ott Roni Y. Schwartz Patrick R. Knepler Clayton McCandless Elizabeth J. Pagano Selina M. Scott James Knight James McCaney Byoung Park Bryant Scott Seigler Kathleen M. Knudson Karen B. McCaulley Elizabeth M. Peasley Brock A. Seim Emily M. Knutson Amy E. McClendon Luke D. Pederson Kristin M. Shaffer Adam Koenig Kyle J. McClone Sarah R. Penikas Michael A. Shapiro Rebecca D. Kokes Jason McEwen Jack J. Pennito Zachary Shaw Qingzi J. Kong Justin B. McGetrick Richard E. Petsch Taylor Shear Shannon T. Koons Lilith Ciccarelli McGhee John Ryland Pigg Jr. Yiyun Shen Joseph Kordovi Timothy Shawn McGhee Christopher D. Pirkl Keisuke Shikimi Andy Korger Kevin C. McGoldrick Valerie Pirktl Alana Shiraishi Bryan Kozlak Brian McGuire Vincent Pompo Monica Marie Shokrai Isaac A. Kpodonou Courtney McIlvaine Louis-Philippe Pouliot Brian Shonk Nicholas Kraver Amanda R. Mellema Michael E. Prendes Sean Matthew Silva Max Kravitz Julie Elizabeth Melnick Kyle H. Proebsting Jeremiah J. Sim Michael J. Krentzman David J. Messinger Munyaradzi R. Punungwe Courtney Sims Amy Jean Kubli James Edward Meyer Jing Qian Ian M. Sims Rachel Kullman Josh Meyer David S. Quaid Joseph Sirc Katherine M. Kunik Robert Michalski Anthony S. Quarella SEE NEW MEMBERS, PAGE 14 ➜ w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 13 NEW MEMBERS, CONTINUED FROM PAGE 13

Alexander Smith Hsiao-Fan (Bonnie) Tang Samanvitha Vangala Zilu Peter Xia Benjamin Saul Smith Charles H. Taylor Corey Vaughan Tingting Xiao Jeannie Babcock Smith Todd E. Taylor Brenda R. Veik Ce Xiong Jessica F. Smith Jeffrey T. Tebeau Jacob A. Vervynckt Cory D. Yanew Ryan Smith Huizhe Teng Hung Vuong Soojin Yang Brian Smithers Wan Ying Teoh Lauren E. Wahl Jessica Yeh Paul Stanley Sogbodjor Laura M. Thomas Grant Wahlheim Yuan-Heng Yeh Maria Sokolova Darren C. Thompson Donald Edward Wakefield Ming Yi Aaron Solomon Michael G. Thompson Michael Wallace Kunshan Yin Justin D. Songster Patrick A. Thornton Hejia Wang Brett Yost Holly M. Sontag Andre A. Thouin Shian-Wei Wang Keith Young Amy Soon Julia L. Thurston Derek A. Wasilus Gordon Chun Yin Yu Joseph Sparacino Graham S. Tibbets Andrew Webster Karen Yu Jason R. Stading Dustin D. Tindall Alexander S. Weldon Susan Yuan Kendra K. Stanton Cong T. To Brandon Wen Yan Yuan Matthew Stedt Lydia J. Tolman Caleb M. Wetherell Huzefa M. Zariwala Christopher Steinker Laura F. Tornatore Kyle F. Whitehead Murray Zelnick James A. Stewart Lesley E. Tourville Thomas A. Whiting Aolin Zhang David C. Stoddard Huy Tran Lindsey Wicker Jing Zhang Jeffrey Wilson Stoiber Ming K. Tran Rebecca M. Wilczak Yulong Zhang Patrick Alan Stone Tarik Trent Matthew Willems Zhizhong (Michael) Zhang Edwin B. Storako III Timothy A. Trimborn Andrew T. Withrow Liang Zhou Ashley A. Story Thanh D. Trinh David M. Wolpov Mengting Zhou Derek C. Strutz Curtis A. Tronick Suthathip (Sarah) Wongmanee Jieqiug Zhu Jingyi Su Emily H. Turek Colin T. Woodworth Lin Zhu Marcus A. Such Lindsay Turner John N. Wright Xing Lian Sherry Zhu Holden J. Sweeden Samantha A. Ugol Xiang Wu Julia Zvenigorodsky Sean M. Swoboda David E. Uzquiano Zhixin Wu Elizabeth A. Sywyj Kyle Vandermay Joshua M. Wynveen Life & Health Qualifications Seminar Life & Health Qualifications Seminar

November 9-12, 2015 November 9-12, 2015 KEY BRIDGE MARRIOTT, ARLINGTON, VA KEY BRIDGE MARRIOTT, ARLINGTON, VA Limited seating—register today. Limited seating—registerwww.actuary.org today. www.actuary.org w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 14 Pension News Committees Release Issue Brief Actuarial Update on Alternatives for Pension Cost

COMMUNICATIONS REVIEW Recognition COMMITTEE John Moore, Chairperson HE PENSION COMMITTEE Shawna Ackerman and Pension benefits based on service to date—i.e., the projected Mary Bahna-Nolan Accounting Committee released an issue brief benefit obligation (PBO)—is typically calculated Eli Greenblum on alternative expense methodologies and based on the application of yield curve spot rates William Hines T Ken Kent their theoretical rationales and implications. to projected benefit cash flows. Mary D. Miller The issue brief, Alternatives for Pension Cost A single discount rate that produces that same Catherine Murphy-Barron Recognition—Issues and Implications, provides present value is then determined and disclosed. The Arthur Panighetti Thomas Terry a discussion of an area of emerging practice. Its most common approach has been to also use that Thomas Wildsmith objective is to inform actuaries and other interested same single rate in determining other cost compo- ASSISTANT DIRECTOR OF parties about alternative expense methodologies, nents such as service cost and interest cost. Alterna- COMMUNICATIONS |­ PUBLICATIONS and their theoretical rationales and implications. tive approaches have been proposed for the recogni- Eric Harding The issue brief states that: tion of various components of pension cost. These EDITOR Michael G. Malloy ➥ It is common to develop pension cost based on a involve more granular applications of interest rates DESIGN AND PRODUCTION single aggregated discount rate; i.e., that is used for developing service cost and interest cost. The mea- BonoTom Studio Inc. to develop projected benefit obligation. surement of PBO, as described above, does not change. DESIGNER ➥ Alternative approaches have been identified The issue brief also looks at some of the strengths Paul Philpott that represent more “granular” applications of and weaknesses of an aggregated approach. PUBLICATIONS AND MARKETING yield curve rates. In comparison to the current “aggregated” (sin- PRODUCTION MANAGER Laurie Young ➥ Use of such alternatives may reduce the amount gle rate) approach, alternative approaches might of recognized pension cost, but also have impli- result in a lower cost amount being recognized dur- American Academy cations for expected gains/losses to be recog- ing the measurement period. But because every of Actuaries nized at year-end. dollar of service cost and interest cost recognized PRESIDENT There are varying views about what yield is, by definition, reflected in the expected year-end Mary D. Miller ➥ PRESIDENT-ELECT curves represent that impact expectations for value of obligations, a change in recognized cost Tom Wildsmith year-end gains/losses and thus may act to jus- also changes the expectation for the year-end obli- SECRETARY tify different levels of cost recognition. gation and thus affects the gain or loss that results John Moore For U.S. pension accounting, the present value of when obligations are re-measured at year-end. TREASURER Art Panighetti VICE PRESIDENTS Shawna Ackerman Multiemployer Subcommittee Comments to Mary Bahna-Nolan Eli Greenblum William Hines IRS on Proposed Pension Regulations Ken Kent Catherine Murphy-Barron HE MULTIEMPLOYER SUBCOMMITTEE tions might not be necessary for determining whether EXECUTIVE DIRECTOR sent a comment letter to the Internal Revenue an application should be approved or denied. Mary Downs Service and Treasury Department on proposed It also offered suggestions on annual plan spon- DIRECTOR OF COMMUNICATIONS T David J. Nolan regulations on suspensions of benefits under the sor determinations, suspension not materially in EXECUTIVE OFFICE Multiemployer Pension Reform Act of 2014. excess of the level necessary to avoid insolvency, The American Academy of The subcommittee asked Treasury to consider reasonable actuarial assumptions, and on initial Actuaries whether some items required in the proposed regula- value of plan assets. 1850 M Street NW Suite 300 Washington, DC 20036 Medicare@50, continued from page 1 Phone 202-223-8196 Fax 202-872-1948 www.actuary.org Further, the projected Hospital Insurance deficit product (GDP) in 2014 to 3.4 percent in 2035, and Statements of fact and opinion in over the next 75 years is 0.68 percent of taxable pay- then more slowly to 3.8 percent of GDP by 2089. this publication, including editorials and letters to the editor, are made roll, which is down from 0.87 percent in 2014. The Additional papers in the Medicare@50 series on the responsibility of the authors Supplementary Medical Insurance (SMI) trust fund will be released in the future. Learn more about the alone and do not necessarily imply or represent the position of the American is expected to remain solvent because its financing Academy’s Medicare analysis by visiting the public Academy of Actuaries, the editors, or the members of the Academy. is reset each year to meet projected future costs. policy section of our website, and about sustainabil- ©2015 The American Academy of According to the 2015 trustees’ report, SMI spending ity in the June 2015 white paper, Sustainability in Actuaries. All rights reserved. is expected to grow from 2 percent of gross domestic American Financial Security Programs.

w w w . ac t ua r y . o r g Actuarial UPDATE AUGUST 2015 15