Cost of Implementing a Principle-Based Framework for Determining Reserves and Capital
- Background
In collaboration, the National Association of Insurance Commissioners (NAIC), the Life Reserves Work Group (LRWG) and the Life Capital Work Group (LCWG) of the American Academy of Actuaries are working to develop a principle-based approach for determining reserves and capital for life insurance products. Given the current formulaic methodology, companies of all sizes have likely begun investigating the operational changes and resources needed in order to implement the proposed statutory requirements.
The purpose of this project is to identify company considerations in implementing the new principle-based methodology as well as estimating the cost of implementation for a company. The research results will assist actuaries, regulators and others by educating them about implementing a principle-based approach and how it might impact a company's operations and resources.
- Research Objective
The objective for this project is to perform a survey of life insurance companies on the cost of implementing the new principle-based framework. Among the questions to be addressed at a minimum include:
What are companies planning to do in implementing the new methodology?
- Impact on operations and reporting framework
- Impact on current employees
- Impact on systems (both current and new)
- Need for new or additional resources
What are the initial implementation costs?
- Number of man hours needed to implement
- Cost of system/software modifications/enhancements or new system
- Cost of training
- Cost of implementing new processes
What are the ongoing costs?
- Cost of maintaining existing systems for existing business
- Cost of additional reporting for new vs. existing business
Follow-up telephone and/or in-person interviews with some of the survey respondents may be required to gather additional information.
The Researcher(s) will summarize the results of the survey in a report made available to the membership.
It is expected that the Researcher(s) will work closely with a Project Oversight Group (POG) in finalizing the information to be collected, the survey questionnaire and/or interview questions, and the final report of survey results. The Researcher(s) will also provide the POG with periodic progress reports. Members of this group will be available to provide feedback and guidance to the Researcher(s) as needed.
To keep costs at a minimum, the intent is for the SOA to administer the survey utilizing SOA online survey software and other resources.
Due to the time sensitive nature of the information and its usefulness for the intended audience, a relatively short term project is envisioned with a targeted completion date by December 31, 2009.
- Propsal
To facilitate the evaluation of proposals, the following information should also be submitted:
- Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education, and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
- An outline of the approach to be used, emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, and possible limitations of the analysis, specifically what the Researcher(s) will do with inconclusive or otherwise incomplete survey results.
- Cost estimates for the research. We expect to reach agreement on a fixed cost for this project with the Researcher(s).
While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
- A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions.
- Ideas regarding the form and distribution of the final report, both for immediate release and for permanent reference (e.g., submission to the Actuarial Practice Forum or other SOA publication).
- Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.
- Selection Process
The SOA's sponsoring committees are responsible for the selection of the proposal to be funded. Input from other knowledgeable individuals also may be sought, but the sponsoring committees will make the final decision. The SOA's Research Actuary will provide staff actuarial support.
- Questions
Any questions regarding this RFP should be directed by fax, or e-mail to: Ronora Stryker, SOA Research Actuary (Fax: 847.273.8514; e-mail: rstryker@soa.org).
- Submission of Proposal
Please e-mail a copy of the proposal to:
Proposals must be received no later than October 16, 2009. It is anticipated that all researchers who have submitted proposals will be informed of the status of their proposal no later than October 30, 2009.
Note: Proposals are considered confidential and proprietary.
- Conditions
The Society of Actuaries reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available to proceed. The Society of Actuaries also reserves the right to redirect the project as is deemed advisable.
The Society of Actuaries intends to copyright and publish the results of this research. The research will be considered work-for-hire and all rights thereto belong to the Society of Actuaries. However, appropriate credit will be given to the Researcher(s).