Genworth, one of the companies issuing the policies, has previously told regulators that rules-based reserve approaches like the AG 38 guidance do not work well for products like
ULSGs.
A client with a traditional
ULSG product may have zero value at age 90, while for less than 10% more in annual premium, a VUL may have hundreds of thousands of cash value.
For
ULSG products, a significant gap exists between heretofore perceived economic reserves and theAG48 results, with theAG48 results being much closer to the statutory
ULSG reserves.
Indeed, this is why the regulatory concern in some states over adequate life insurer reserve levels pursuant to Actuarial Guideline 38 applying to universal life with secondary guarantees (
ULSG) is not just a small-screen issue.
The work involved reviewing and realigning reserving methodologies for certain universal life products with secondary guarantees (
ULSG) and creating a unified approach.
life products with secondary guarantees are an issue of interest at the NAIC quarterly meeting, where New York's Benjamin Lawsky cites deep worry over insurers having adequate reserves to cover
ULSG, and signals his intent to tightly police any reserving implications from the sale of
ULSG.
During the NAIC 2011 Fall National Meeting, the Executive Committee, due to the interpretive differences on this issue, forwarded the statement to the newly established Joint Working Group of the Life Insurance and Annuities Committee and Financial Condition Committee to examine the adequacy of the reserve requirements for
ULSG and term universal life (UL) products.
In fact, he says just the opposite is occurring, with level term (LT) and universal life with secondary guarantee (
ULSG) rates going up moderately in response to market conditions and policy reserve regulations.
Milliman Inc., Chicago, published this finding in a new study, "Universal Life and Indexed Universal Life Issues." The report explores issues relative to universal life with secondary guarantees (
ULSG), cash accumulation UL, current assumption UL and indexed UL (IUL) products.
Subdued rates will pressure fixed accumulation and UL secondary guarantee (
ULSG) products, but have less impact on indexed UL.
As for term and universal life with secondary guarantees (
ULSG), he says the demand will be "as much as in 2009."
This makes it very challenging to develop competitive premiums, as compared to recent
ULSG levels.
