Thomas Sutton

  • The Actuarial Foundation – Emeritus Trustees – 2023  —  [BonkNote]
  • Pacific Life
  • ACLI
  • SOA
  • 1983 – SOA – Surplus Distribution and Allocation for New and Inforce Policies, Society of Actuaries – 22p
  • 1991 0509 – GOV (Senate) – Insurance Company Solvency – Tom Sutton – ACLI – Pacific Life  —  [BonkNote]
  • The situation is always very fuzzy without a great deal of background knowledge as to what the value of the assets is in their case, and how it matches up against the liabilities.

—  Thomas S. Sutton, Pacific Life / ACLI

1991 0227, 0507, 0509 and 0523 – GOV (House) – Insurance Company Solvency, (CSPAN) Insurance Company Insolvencies, Cardiss Collins (D-IL)  —  [BonkNote]

  • Walter Miller:  The problem might go away if the new money rate from point X henceforward would always equal the average money rate. I think we have to prepare for some other contingencies however.  [Bonk: Grading?]
  • Thomas SUTTON: From my point of view, the key feature is sensitivity analysis of pricing. One set of illustration numbers implies, at least based on past experience, that they do correspond to some kind of a minimum floor that Mr. Miller was referring to. Instead, a logical approach would be to have a range of results, depending on the degree to which emerging experience is tied to the actual situation. That in a sense is what Mr. Miller is suggesting when he mentions using an increasing portfolio rate that is consistent with a given level of current money rate.
    • A difficulty is that communicating such information to a buyer in some meaningful fashion is almost impossible. Internally, it may be useful, and it may be useful in communicating to your agents a feeling about the range of results that is possible.
    • If you only look at the illustrated scales, two products may appear to be widely divergent in terms of result twenty years from now, but in fact are not all that different if you look at the reasonable range of results for any one of them.
    • But I really do not have much hope for being able to pass that information to a client in a way that is understandable.

1983 – SOA – Surplus Distribution and Allocation for New and Inforce Policies, Society of Actuaries – 22p

  • At one point in the dividend philosophy discussion, there was some consideration of how to enunciate a principle that would clearly state that new money presentations for illustrations based on elements that reflected a rate of inflation were acceptable, whereas other types of projections were not.
    • This becomes very difficult because inflation can be viewed as the difference in a changed situation.
    • It is a rate of change.
  • ⇒  If you take the traditional approach that says that illustrations must be based on current experience, it is the portfolio rate that represents current experience.
  • A new money rate may not represent current experience because it includes within it an element that corresponds to inflation.
  • If you take a theoretical approach that accepts use of a rate of change as the basis of illustration, for the purpose of investment return, then
    you can easily suggest that you ought to be able to use rate of change in other elements; rates of change in mortality, for example, or expenses.
  • As it turned out, we never did manage to enunciate a very clear principle in that regard. It is probably just as well because the actual situation has bypassed the theory in any case. 

—  Thomas Sutton

1983 – SOA – Surplus Distribution and Allocation for New and Inforce Policies, Society of Actuaries – 22p