The National Association of Insurance Commissioners adopted the new Actuarial Guideline 49 (AG 49), which provides standardized requirements for calculating maximum illustrated rates for indexed universal life (IUL) policies. The new requirements also impact illustrations where the policy has a loan.
Lincoln Benefit Life (LBL) will implement the new requirements for all Ultra Index illustrations produced September 1, 2015 and later. This change applies to both new term conversion illustrations, as well as illustrations for existing policies.
Why is the New Guideline Necessary?
- The maximum illustrated rate will be reduced. For Ultra Index, requirements will result in a reduction of the illustrated rate by about 45 bps for the current cap rate.
- LBL had to remove “Scenario B” in the Policy Value Overview section, which showed illustrated values based on actual S&P performance (and the current cap rate) over the past 30 years. The average illustrated rate in Scenario B exceeds the maximum illustrated rate mandated by the new regulation. Accordingly, LBL relabeled the scenarios and made minor wording changes to ensure the narrative text flowed properly.