(a)
It may not be necessary to perform stochastic modeling for groups of policies where it can be demonstrated that the Standalone Sstochastic Rreserve for those policies will not be greater than the Modified Ddeterministic Rreserve. Such demonstration shall take into account the effect of any Provision for Model Understatement for the group of policies. Thus, the actuary may elect to exclude certain groups of policies from the stochastic modeling requirement upon demonstration that the Modified recalculated Ddeterministic Rreserve for those policies (which includes any additional reserve amount that the actuary may decide to add for the purpose of the stochastic modeling exclusion) will adequately provide for all material risks underlying such policies.
(b)
The Standalone Stochastic Reserve equals the amount resulting from the Stochastic Reserve calculation described in Subsection 5H(2), but ignoring the step described in Subsection 5H(6)(c), and only including the group of policies subject to the stochastic modeling exclusion.
(ca)
To exclude a group of polices from the stochastic modeling requirement, the actuary shall, for the group of policies to be excluded: (i)
(ii)
(iii)
Determine the Mrecalculatedodified Ddeterministic Rreserve for these policies, which equals the sum of the amounts in (I) and (II) below: (I)
The greater of the aggregate deterministic scenario reserveScenario Reserve (as described in see SubsSection 57H(5)(b) below) and the sum of the per policy reservePer Policy Reserves for these policies.
(II)
An additional reserve amount that the actuary may decide to include for the purpose of the stochastic modeling exclusion.
Provide a demonstration that the Mrecalculatedodified Ddeterministic Rreserve adequately provides for all material risks underlying such policies. An acceptable demonstration shall (I)
Provide a reasonable assurance that if the Standalone Sstochastic Rreserve was calculated for only those polices subject to the stochastic modeling exclusion, it would not be greater than the Mrecalculatedodified deterministic reserveDeterministic Reserve for such policies after reflecting the effect of any Provision for Model Understatement for such policies;
(II)
Provide sufficient supporting information that an experienced independent actuarial reviewer can assess the reasonableness of the conclusion to exclude the group of policies; and
(III)
Provide an effective evaluation of the residual risk exposure resulting from risk mitigation techniques such as Derivative Programs hedge instruments and reinsurance.
A complete demonstration supporting the exclusion must be provided in the actuarial reportActuarial Report in the initial exclusion year and at least once every three (3) calendar years subsequent to the initial exclusion. Any demonstration shall take into account whether changing conditions over the current and two (2) subsequent calendar years would be likely to change the conclusion to exclude the group of policies from the stochastic modeling requirement. If, as of the end of any calendar year, the actuary determines the Standalone Sstochastic reserve will exceed the Mrecalculatedodified deterministic reserveDeterministic Reserve for the group of policies, the exclusion shall be discontinued and the policies shall be included in the stochastic modeling calculations. 29