estimate assumptionPrudent Estimate Assumptions for all assumptions not stochastically modeled, and then applying a prescribed CTE level. A company may elect to exclude certain policies from the stochastic modeling requirement if certain conditions are met (as described in SubsSection 57H(5)). B.
Prudent Best Estimate AssumptionPrudent Estimate Assumptions. (1)
(2)(2)
The actuary shall determine prudent best estimate assumptionPrudent Estimate Assumptions for each risk factor that is not prescribed or is not stochastically modeled. The prudent best estimate assumptionPrudent Estimate Assumptions shall vary from scenarioScenario to scenarioScenario as appropriate. A prudent best estimate assumptionPrudent Estimate Assumption is developed by applying a marginMargin to the a best estimate assumptionAnticipated Experience Assumption for the risk factor. The prudent best estimate assumptionPrudent Estimate Assumption for each risk factor shall be: (a)
Consistent with the principles stated in SubsSection 24 of this regulationthese requirements;
(b)
Based on any relevant and credible experience that is available, including, but not limited to, the company’s own experience studies and industry experience studies;
(c)
Set to produce, together with other prudent best estimate assumptionPrudent Estimate Assumptions, an overall value for the reported reserveReported Reserve that is consistent with the objectives of statutory reserve reporting; and
(d)
Supported by a documented process to reassess the appropriateness of the assumption in future valuations.
Prescribed Deterministic ReserveDeterministic Reserve Valuation assumptions include: (a). (b). (c).
(3).
Interest Rate movements (i.e., Treasury interest rate curves); Net Spreads (net of default costs and investment expenses) over Treasuries for Reinvestment Assets; Equity performance (i.e., S&P 500 returns and other returns of other equity investments).
Stochastic ReserveStochastic Reserve Valuation Assumptions. (a)1.
Unless stated otherwise, Prudent Best Estimate Assumptions used in the Stochastic ReserveStochastic Reserve shall be the same as those used in the Deterministic ReserveDeterministic Reserve.
(b)2.
Prescribed assumptions include net spreads (net of default costs and investment expenses) over Treasuries for reinvestment Assets.
(c)3.
Risk Factors that are required by the Model Regulation to be modeled stochastically are: a. b.
(d)4.
(4).
Interest Rate movements (i.e., Treasury interest rate curves) Equity performance (i.e., S&P 500 returns and returns of other equity investments).
The actuary may elect to stochastically model other Risk Factors in addition to the Risk Factors listed in (c)3 above. If so elected, the requirements in the Guideline this Section for determining Prudent Best Estimates for the Risk Factor would not apply.
Granularity Considerations. (a).
In establishing valuation assumptions, the actuary shall choose between setting a separate assumption specific and appropriate to each individual policyPolicy being valued, a 12