Circular Letter No. 33

The subject is A Definition of "Qualified Actuary" and Guidelines Concerning Requirements for an Actuarial Opinion and Memorandum for Certain Reserves for Guaranteed Interest and Similar Contracts Under Section 205. It establishes a maximum interest rate which may be credited by a company to its policyholders under guaranteed investment contracts unless the company presents a cash flow analysis (outlined on pages 4 and 5) that demonstrates the company can safely support a higher rate under various adverse interest rate paths. On pages 6 to 12, the Letter lays out in some detail a meaningful approach to such an analysis. Although it applies specifically to life insurance, this letter is a real example of a regulation which deals constructively with mismatch risk and the role of the Valuation Actuary, and is therefore relevant to the property/casualty industry, which is heading in these directions.