Best’s Special Report: An Approach to Comparing Insurers’ Interest Rate Assumption Changes
AM Best believes using a 20-year annuity factor facilitates a level playing field in comparing the conservatism of insurers GAAP interest rate assumptions embedded in their reserve calculations.
- AM Best believes using a 20-year annuity factor facilitates a level playing field in comparing the conservatism of insurers GAAP interest rate assumptions embedded in their reserve calculations.
- In a new Bests Special Report, An Approach to Comparing Insurers Interest Rate Assumption Changes, AM Best notes that the long-term low interest rate environment has been a challenge for life and annuity insurers with regard to the interest rate assumption they use to calculate reserves.
- The 20-year annuity factor approach generates a comprehensive metric that allows AM Best to compare all ultimate discount rate yield curves across the life/annuity industry.
- The reserves may be more sensitive to changes in interest assumptions for companies with longer duration products than those with shorter duration products.