Practice Note for the Application of C-3 Phase II and Actuarial Guideline XLIII
Q3.15 Suppose the Standard Scenario reserve on a company's variable annuity business is larger than the reserve calculated from model projections and application of the CTE measure required by AG 43. Is it appropriate to use the excess to offset reserve shortfalls on other blocks of business that are outside the scope of AG 43? A: There is nothing in AG 43 or the Standard Valuation Law that expressly permits the Standard Scenario reserve, the reserve calculated using modeling, or the AM reserve to meet formulaic minimums on other blocks of business. Like other formulaic reserves, the amount of reserves held based on the Standard Scenario provide starting asset levels for asset adequacy analysis and not target liability requirements. It is not required to aggregate asset adequacy analysis results; however, reserve redundancies under asset adequacy analysis for a given product may be used to offset reserve redundancies under asset adequacy analysis in another product.
American Academy of Actuaries
21
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