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G.

5.

Determine the cash flows for all other general account assets following the same methodology as described in Subsection 7.F.4 of the Section F for Alternative 2.

6.

Determine the cash flows for separate account fixed income, equity and other assets following the same methodology as described in subsection 7.F.5 of the Section F for Alternative 2.

Economic Scenarios 1.

Deterministic Economic Scenarios a.

b.

For purposes of calculating the deterministic reserve under Section 4, the company shall use: i.

U.S. Treasury interest rate curves following Scenario 12 from the set of prescribed scenarios used in the stochastic exclusion ratio test defined in Section 6.B; and

ii.

Total investment return paths for general account equity assets and separate account fund performance consistent with the total investment returns for corresponding investment categories contained in Scenario 12 from the set of prescribed scenarios used in the stochastic exclusion ratio test defined in Section 6.B.

The company shall map each of the proxy funds defined in Sections 7J and 7K to the prescribed fund returns defined in Section 7.G.1.a following the mapping process described in Section 7.G.2.b.

Guidance Note: The Scenario 12 interest rate yield curves and total investment returns are based on approximately a one standard deviation shock to the Economic conditions as of the projection start date, where the shock is spread uniformly over the first 20 years of the projection. It is anticipated that Scenario 12 will be updated quarterly and posted on the NAIC website, reflecting the current yield curve at the end of each quarter. The values in Scenario 12 are based on the same generator that is anticipated to be used for the stochastic scenarios, but that generator has not yet been adopted 2.

Stochastic Economic Scenarios a.

For purposes of calculating the stochastic reserve under Section 4, the company shall use i.

U.S. Treasury interest rate curves following a prescribed economic scenario generator with prescribed parameters; and

ii.

Total investment return paths for general account equity assets and separate account fund performance generated from a prescribed economic scenario generator with prescribed parameters.

Guidance Note: It is expected that the prescribed generator will produce prescribed returns for several different investment categories (similar to the 19 categories provided by the American Academy of Actuaries for C3P2: Treasuries at different tenors, money market/short term investments, U.S. Intermediate Term Government Bonds, U.S. Long Term Corporate Bonds, Diversified Fixed Income, Diversified Balanced Allocation, Diversified Large Capitalized U.S. Equity, Diversified International Equity, Intermediate Risk Equity, and Aggressive or Specialized Equity). b.

The company shall map each of the proxy funds defined in Sections 7J and 7K to the prescribed fund returns defined in Section 7.G.2.a. This mapping process may involve blending the accumulation factors from two or more of the prescribed fixed income and/or equity returns to create the projected returns for each proxy fund. If a proxy fund cannot be appropriately mapped to some combination of the prescribed returns, the company shall determine an appropriate return and disclose the rationale for determining such return.

Š 2010 National Association of Insurance Commissioners

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VM-20_APF_form_5-18-11  

3. Show what changes are needed by providing a red-line version of the original verbiage with deletions and identify the verbiage to be dele...