Shane Chalke
Shane Chalke
I’ll begin my presentation with the Universal Life Model Regulation, as it’s by far the more controversial of the two…”
” This all sounds very complicated, this projection and discounting procedure, but don’t worry, it gets worse.
In addition to everything I just went through, there is this troublesomelittle “r” factor. The regulation says that, if the actual account value
is less than the GMP use the GMP instead and then multiply the result by “r”, the ratio of the account value to the GMF.
So if your actual account value is half of your GMF, you calculate the reserve pretending that it is the GMF, and then take half of it when you’re all done.
I’m really surprised that the “r” factor didn’t get more publicity, because it really seems as if it came right out of left field.
The purpose of the “r” factor, however, is really quite simple. If theactual account value is less than the GMF, then future guaranteed policy
benefits will run out before the maturity date.
This is true because the GMF is that amount which is exactly on target to mature the policy.
Therefore, anything less than the GMF will be insufficient to mature the policy on a guaranteed basis. It was felt that,in order to reserveadequately for all policy guarantees, it would be desirable to make sure
that any projection of benefits extends until the maturity date of the
policy.
1984, NAIC UPDATE, Society of Actuaries
LARRY SILKES:
Life insurance, because it is a nontangible product, is extremely susceptible
to being perceived as whatever people think it to be.
1983 – UNIVERSAL LIFE VALUATION AND NONFORFEITURE: A GENERALIZED MODEL, by SHANE A. CHALKE AND MICHAEL F. DAVLIN,
1983 – Universal Life Valuation and NonForfeiture – Snippets 14p
Macro Pricing: A Comprehensive Product Development Process
1984, NAIC UPDATE, Society of Actuaries
1989-4 NAIC Proc. 593The opinion that nonforfeiture benefits should be mandated was not completely unanimous among the Task Force. Following is a presentation by Shane Chalke to a group of economists at The Institute For Humane Studies at George Mason University on June 29, which presents the opposing view.