IAIS - Universal Life Insurance

  • The mismatch between the cash flows from assets and liabilities for traditional products like universal life or fixed annuities is due mostly to interest rate risk. (p18)

2018 - IAIS - [GIMAR] Global Insurance Market Report - 72p

  • iaisweb.org/icp-online-tool/13526-icp-15-investments/ - 15.3.4
    • Nevertheless, close matching of assets and liabilities is often possible and should be considered as a potential requirement in the case of unit-linked or universal life policies where there is a direct link between policyholder benefits and investment funds or indices.
    • It may not be possible for the mismatching risk to be covered effectively by capital.
    • Where the supervisor requires assets to be closely matched to such liabilities, other restrictions on investments may be appropriate to contain the investment fund risk being borne directly by policyholders.
  • iaisweb.org/icp-online-tool/13525-icp-14-valuation/  - 14.8.4
    • The first boundary constraint excludes new business arising from the “rolling-over” of the existing contract, except where such “roll-over” is due to the exercising of an explicit option available to the policyholder under the current contract.
    • Contractual cash flows arising from policyholders’ unilateral in-the-money options to extend the contractual termination date should be included.
    • The current estimate should allow for the expected rate of exercising such options.
    • This boundary constraint also excludes additional voluntary contributions premiums, except where provided for as a unilateral option under the contract.
    • For insurance contracts with variable premiums (such as universal life contracts), the cash-flows should include voluntary contributions above the minimum required to the extent that there are guarantees, under the current contract eg no-lapse and premium rate guarantees.
    • The current estimate should reflect the expected rate of payment of additional contributions and the expected level of such contributions.
  • 14.8.4 - For insurance contracts with variable premiums (such as universal life contracts), the cash-flows should include voluntary contributions above the minimum required to the extent that there are guarantees, under the current contract e.g. no-lapse and premium rate guarantees. The current estimate should reflect the expected rate of payment of additional contributions and the expected level of such contributions.
  • 15.4.4 - However, close matching of assets and liabilities is usually possible and should be considered as a potential requirement in the case of unit-linked or universal life policies where there is a direct link between policyholder benefits and investment funds or indices. 

2018 - IAIS All_Adopted_ICPs_  updated_November_2018)

2 Universal life is a combination flexible premium, adjustable life insurance policy.

  • The policyholder may select the amount of premium he or she can pay and the policy benefits are those which the premium will purchase.
  • Or, the premium payer may change the amount of insurance and pay premium accordingly.

26. Universal life policy: is a combination flexible premium, adjustable life insurance policy.

  • The policyholder may select the amount of premium to pay and the policy benefits are those which the premium will purchase.
  • If the policyholder may choose to pay a premium that is greater than that required to support the chosen benefit, the excess accumulates as an investment.

2006 20 - IAIS Issues_Paper_on_Asset-liability_Management__October_2006 - 20p