ACLI – 2010s – Snippets

  • 2011 0422 – WSJ – AIG Tries to Sell Death-Bet Securities, By Leslie Scism – [link]
    • The new wrinkle of securitization arose in the market’s boom years before the financial crisis.
      • Just as Wall Street banks bundled mortgages to make mortgage bonds, financiers looked into bundling hundreds of life-insurance policies into bonds that they could then sell, with the bonds’ income coming from the death benefits.
    • The industry’s trade group, American Council of Life Insurers, has criticized the concept, saying the existence of a Wall Street pipeline that needs to be filled with policies could encourage fraud by commission-paid agents and others trying to get older people to purchase and sell policies.
  • We believe it is very important for the subcommittee, and other committees in Congress with jurisdiction over insurance, to have a sound understanding of how our industry operates…
    • … I would like to focus my remarks this morning on why the ACLI believes that the new Federal Insurance Office, FIO, is an extremely important new player in the insurance arena and why it is important for that office to be fully funded and staffed as quickly as possible.  (p26)

—  Statement of Gary E. Hughes, Executive Vice President & General Counsel, American Council of Life Insurers (ACLI)

2011 0728 and 1025 – GOV (House) – Insurance Oversight: Policy Implications for U.S. Consumers, Businesses and Jobs, Judy Biggert (R-IL) – [PDF-285p, VIDEO-?]

  • (p27) – Life insurers are distinct from banks in terms of their fundamental business model, their financial structure, and their regulatory oversight.
  • And a one-size-fits-all approach to rulemaking will not produce workable results.

—  Statement of Gary E. Hughes, Executive Vice President & General Counsel, American Council of Life Insurers (ACLI)

2011 0728 and 1025 – GOV (House) – Insurance Oversight: Policy Implications for U.S. Consumers, Businesses and Jobs – Part 1 (2011 0728), Part 2 ( 20111025) – [PDF-285p,

  • 7. Costs and Benefits of Federal Regulation
    • The ACLI has long argued that a uniform system of regulation, be it state or federal, should yield substantial cost savings, a portion of which will inure to the benefit of insurance consumers.
    • The most comprehensive effort to quantify these benefits and their implications for insurance consumers was conducted in 2004 by Sheila Bair, who at the time was the Dean’s Professor of Financial Regulatory Policy at the University of Massachusetts’ Isenberg School of Management.
    • — The full report – “Consumer Ramifications of an Optional Federal Charter for Life Insurers” – 273p – <Bad Link> 

2011 1213 – Letter – ACLI (Gary Hughes) to FIO (Federal Insurance Office) – 22p – https://www.regulations.gov/comment/TREAS-DO-2011-0010-0032

  • 2013 0917- ThinkAdvisor – ACLI calls Lawsky’s letter on reserves ‘irresponsible’, By Elizabeth D. Festa – [link]
    • In a letter to state insurance commissioners, the American Council of Life Insurers (ACLI) called the top New York insurance regulator’s remarks on life insurance reserving “irresponsible” and inaccurate, the former because they erode trust in the state regulatory system and the industry and the latter for actuarial reasons.
    •  Actuarial Guideline 38 (AG 38)
    • <WishList> – Lawsky Letter – Bad Link – https://www.dfs.ny.gov/about/press2013/pr1309111-link.pdf- ACLI 2013 0912 – Letter – ACLI – [link]
  • John Bruins (American Council of Life Insurers – ACLI) said there are a wide range of practices in the area of policy illustrations, particularly for indexed universal life (UL) policies.

2014 0114 –  NAIC – LATF Conference Call – RE: IULISG – Indexed Universal Life Illustrations Subgroup

  • (p33) – Brad Sherman (R-CA) – Who can comment on why we wouldn’t regulate credit default swaps as an insurance product?
  • Gary HUGHES, ACLI –  Personal opinion, it is a form of financial guaranty insurance. I think it probably should have been in a monoline company and not part of a multiline company.
  • Mr. SHERMAN. You are saying it should be part of a monoline company, but a regulated insurance company?
  • Mr. HUGHES. That would be my personal opinion, yes. 

2014 0520 – GOV (House) – Legislative Proposals to Reform Domestic Insurance Policy, Randy Neugebauer (R-TX)  —  [BonkNote]

  • Consistency across UL products
  • The maximum illustrated rate should be set at a level that is consistent with other products and allows IUL illustrations to illustrate these differences.
  • The 12% maximum illustrated rate was selected for VUL because it was unlikely that an average would exceed 12%.
  • The maximum for IUL illustrations should be set with a similar goal.

2014-1, NAIC Proceedings

    • Attachment Twenty-Six – Life Actuarial (A) Task Force – 11/14-15/14 – October 28, 2014
    • To: Mr. Mike Boerner, Chairman – NAIC Life Actuarial Task Force
    • From: ACLI
      • Re Actuarial Guideline on Illustrations of Indexed Universal Life Policies
  • (p34) – 1:58:00 – Richard Shelby (R-AL) – Would you discuss the likelihood of a so-called run on insurance products such as life insurance and what such a run would have to look like in order to cause systemic risk?
  • Gary Hughes, ACLI – I know one of the dissents to one of the designations pointed out, quite correctly, that insurance regulators have the absolute authority to prevent people from turning in their policies, if that is warranted.
    • But I think the experience of the recent economic crisis is very telling in this respect.
    • In fact, it was just the opposite of a run.
    • The products were so desirable in terms of the guarantees they made that, notwithstanding the crisis, people were holding onto those products no matter what.

2015 0325 – GOV (Senate) – FSOC Accountability Nonbank Designations, Richard Shelby (R-AL)  —  [BonkNote]

  • The special time burdens confronting regulated industries and large organizations in digesting regulatory proposals were explicitly recognized by the Administrative Conference of the United States in its publication entitled A Guide to Federal Agency Rulemaking1(“Guide’), which notes that:

    • [I]nterested persons often are large organizations, which may need time to coordinate an organizational response, or to authorize expenditure of funds to do the research needed to produce informed comments.2

2015 0430 – Letter – ACLI to DOL – re: Conflict of Interest Rule Proposed Rule, RIN 1210-AB32-2 – 5p 

  • 3. (LIAC) Appointed a New Working Group to Address Life Insurance Policy Illustration Issues
    • In response, she <Commissioner McPeak> said the Committee received comments from the American Academy of Actuaries (Academy), the American Council of Life Insurers (ACLI), the California Department of Insurance, the Massachusetts Mutual Life Insurance Company (MassMutual) and the NAIC consumer representatives.
    • Mr. Schwartzer said that absent specific suggested revisions, he would urge caution in opening Model #582 for revision. He suggested tabling the discussion for now until the Committee receives specific suggested revisions. Ms. Froment expressed support for Mr. Schwartzer’s comments.
    • Bruce Ferguson (ACLI) said more than 40 states have adopted Model #582. He noted that, in its comment letter, the ACLI suggests enhancing simplicity and transparency of the narrative summary in Model #582 to reflect the significant changes in the marketplace since Model #582 was adopted 20 years ago, including the demographics of consumers who buy life insurance, the product designs developed to meet the changing needs of consumers and the technology consumers use to obtain information about life insurance products.

2015-3, NAIC Proceedings

  • 2016 0403, NAIC Proceedings, LIIIWG, Life Insurance Illustrations Issues Working Group, Conference Call
    • [Michael] Lovendusky said the ACLI work group discussed whether the charge should include revising the Buyer’s Guide, which was a suggested addition to the charge from the American Academy of Actuaries (Academy).
    • While the ACLI work group did not oppose including the Buyer’s Guide, some on the work group thought that revisions to the Buyer’s Guide might work instead of revisions to the models.
      • However, Ms. [Brenda] Cude pointed out that the Buyer’s Guide has a different purpose from the policy summary and that revisions to one would not take care of the other because the Buyer’s Guide is designed to be educational, while the policy summary is informational and explains a particular policy.
    • [Michael] Lovendusky– ACLI) said consumers are mostly confused about options, guarantees and riders.
      • The ACLI work group was considering asking the Life Insurance and Annuities (A) Committee to narrow the charge to look at only products with options, guarantees and riders, but Ms. [Brenda] Cude said she thinks that it is important to consider how the disclosures for all products could be improved.
  • For life insurers, the risk of a bank-like “run” resulting from loss of consumer confidence is virtually non-existent.

2016 0831 – ACLI – Life Insurers Do Not Pose a Systemic Risk to the Nation’s Economy, By Dirk Kempthorne – (President and Chief Executive Officer of the ACLI – [Ilink]

  • Q101. Are there examples of other instances for which an extension of management actions to allow for the recognition of premium adjustments may be appropriate? Please explain. (Section 6.5.3.1)
    • ACLI believes that rate actions such as COI increases should be allowed.
      • We understand that rate actions might precipitate other policyholder actions such as increased lapses and possibly reputational risk.
    • Such policyholder behavior sensitivity could be captured by reasonable dynamic lapse assumptions.
  • 2016 – IAIS – ACLI Comments – FINAL_ACLI response to the IAIS Insurance Capital Standard consultation (Version 1.0) – 16p
  • He (ACLI – John Bruins) said the ACLI is concerned about the reaction that may be received from consumers when their policy illustration changes, even though no changes have been made to the product being illustrated.
    • He noted that several companies have indicated receiving negative reactions from policyowners when their policy illustration changed.

2016 04 – LATF, NAIC Conference Call

  • 2016 – IAIS – ACLI Comments – FINAL_ACLI response to the IAIS Insurance Capital Standard consultation (Version 1.0) – 16p
    • Q77. – Do existing financial instruments issued by mutual IAIGs (for example, but not limited to surplus notes, Kikin, and other forms of subordinated financial instruments) absorb losses on a going concern basis? Please identify which instrument and explain.
    • A-ACLI – Surplus notes that are issued by mutual IAIGs in the United States can absorb losses on a going concern basis.
      • If the issuing insurance company is in good financial condition, the insurer would make applicable interest and principal payments when due and as permitted by the applicable financial regulator.
      • However, as discussed above, in times where the issuing insurance company is under financial stress, the financial regulator will disallow payments of interest and principal on the surplus notes.
      • When payments are disallowed, the surplus notes and other obligations of the company will not go into default, there is no requirement for a receivership proceeding, and the company can continue to operate in a normal fashion, i.e., the issuing insurance company can still be solvent when the financial regulator determines that no distributions should be allowed.
      • If the insurance company’s financial condition improves, the financial regulator may permit distributions to be made, but while distributions are not permitted, the insurance company can continue to operate as a going concern.
      • There are examples of this type of scenario in the marketplace today.
  • 2017-2, NAIC Proceedings – 2017 0519 – LIAC, Life Insurance (A) Committee
    • Michael Lovendusky (American Council of Life Insurers-ACLI) agreed with exploring having the NAIC as the destination for information on more sophisticated products
  • Brian Bayerle (American Council of Life Insurers-ACLI) said pledging collateral to the FHLB could actually increase a company’s liquidity, as the company can draw on liquid assets in the event of needing additional liquidity.
    • He said this is especially true if the more illiquid assets are pledged.
  • Mr. Ostlund said he is not convinced it is a good idea for an insurance company to be doing anything in that regard, as it might be desperation.
  • Michael Lovendusky (ACLI) said that could have been the situation in 2008.
  • Paul Graham (ACLI) said the asset the company gets as a result of the transaction is cash and what that does is take care of situations where a market may make it difficult to sell existing assets at book or better.
    • He said it allows companies to hold assets through a market cycle without taking a capital loss in the event that cash is needed to pay benefits.

2017 0928 – NAIC – Market Conduct Annual Statement Blanks (D) Working Group – Conference Call

  • Unlike a term policy, which can end after a specified number of years, permanent life insurance will continue to the policy’s maturity age so long as premiums are paid.
    • (Note that this isn’t exactly accurate for UL, where policies can continue as long as the cash value is sufficient to pay the policy charges. We may want to make that distinction. )  —  [Bonk: ACLI Wording and Strikethrough]
  • [Bonk: Without Strikethrough]
    • (Note that this isn’t exactly accurate for UL, where policies can continue as long as the cash value is sufficient to pay the policy charges. We may want to make that distinction. )

2017 1115 – Letter – ACLI to NAIC (LIBGWG-Life Insurance Buyer’s Guide), Redlined Draft – 12p

  • Further, ACLI would also like to object to the recommendations set forth by the American Academy of Actuaries letter, dated October 19th, in which the Academy recommends discussion of non-guaranteed elements (NGEs) to be included in the Buyer’s Guide,

2017 1115 – Letter – ACLI to NAIC (LIBGWG-Life Insurance Buyer’s Guide), Redlined Draft – 12p

  • In the U.S., many states have laws that permit insurers to offset a portion of their future premium, income and/or franchise tax liabilities by the amount of the guaranty association assessments they have paid (e.g., 20% over 5 years).
    • This, in turn, reduces the tax bases of those states.  (p4)

2018 0223 – Letter –  ACLI to FSB (Financial Stability Board) – re: Key Attributes Assessment Methodology for the Insurance Sector – 5p

  • ACLI – “Including life insurance in the model regulation is unnecessary because life insurance sales practices are already subject to comprehensive state laws and regulations which assure that life insurance products are sold consistent with the best interest of consumers,” J. Bruce Ferguson, senior vice president for state regulation at the American Council of Life Insurers, wrote in a May 29 comment letter. – <WishList>

2018 0718 – InvestmentNews.com – State insurance commissioners don’t include life products in their annuity suitability reform, by Mark Schoeff Jr. – [link]

  • But one industry egghead is egging plaintiffs’ lawyers on:
    • Joseph Belth, author Life Insurance: A Consumer’s Handbook, writes on his Insurance Forum blog:
      • “I think the only way to force the industry and other interested parties to address the age 100 problem is to mount a class action.”
    • Problems w/ class case:
      •  As Belth acknowledges, named plaintiff(s) would be unlikely to live long enough to see case to conclusion
      • Numerosity issue – individual carrier may not have many policyholders in this category
      • High dollar policyholders may prefer to pursue individual claims
      • Potential issues of ripeness (if policyholder hasn’t reached maturity date, damages are speculative) and mootness (such policyholders could die before that date and receive death benefit) (p14)

2018 – ACLI – Hot Topics in Litigation, American Council of Life Insurers – 32p

  • Neither model was intended to generate Buying Guides or to relieve consumers of their own individual responsibilities to understand the product that they are spending their hard-earned money to buy after all. 

—  Michael Lovendusky, ACLI, American Council of Life Insurers

2018 1009 – NAIC Conference Call – LIIIWG, Life Insurance Illustrations Working Group – [Bonk: Not in NAIC Proceedings]

  • 2018 1218 – Insurance Compact –  Insurance Compact Product Standards Committee, Member Call Summary – 4p
    • Th PSC reviewed the ACLI comments under Benefit Provisions in §3A (1) and agreed it would add clarity to include requirements for adjustable life and whole life separately:
  • …completely Dynamic services and policy opportunities for their customers to purchase and to elect a variety of options. 

—  Michael Lovendusky, ACLI

2019 1109 – NAIC – LIIIWG (Life Insurance Illustrations Working Group), Conference Call – [Bonk: Not in Proceedings]

  • It might surprise you to know that about 15 percent of retirement savings in America are in cash-value life insurance-that is something that is not often shown in reports. (p31)

—  John W. Mangan, Vice President, State Relations, American Council of Life Insurers (ACLI) 

2019 0405 – Nevada – Minutes of the Meeting of the Assembly Committee on Government Affairs – Eightieth Session – 51p