Month: June 2021

NAIC Forms Work Group To Better Regulate Index-Linked Annuities

Mary Pat Campbell
NAIC Forms Work Group To Better Regulate Index-Linked Annuities

Excerpt:

A National Association of Insurance Commissioners’ task force today created a subgroup to focus solely on the index-linked annuity products.

“These products are exclusively filed in the states as variable annuities and are funded through non-unitized separate accounts,” read a notice to the task force from Pete Weber, chief life actuary at the Ohio Department of Insurance. “The task force has discussed developing a draft standard for minimum interim values for these products and providing direction for implementing the standard.”

Regulators gave the Index-Linked Variable Annuity Subgroup a 2021 charge to: Provide recommendations and changes, as appropriate, to nonforfeiture, or interim value requirements related to Index-Linked Variable Annuities.

Author(s): John Hilton

Publication Date: June 2021

Publication Site: insurancesnewsnet

These States Lead the Way on Pension Reform

Mary Pat Campbell

Link: https://www.wsj.com/articles/these-states-lead-the-way-on-pension-reform-11624038916

Excerpt:

Arizona and Michigan have enacted more than a dozen substantive pension reform bills over the past five years. Credit-rating agencies and national retirement experts have cited Arizona’s public-safety pension reforms. Moody’s Investors Service gave Michigan’s teacher retirement reform a “credit positive” review because the state and participating local governments “will no longer carry the entire burden of investment performance risk for new employee pensions.”

Pension reform need not be partisan. After gaining input and buy-in from unions for police officers, firefighters and other public employees, New Mexico Gov. Michelle Lujan Grisham, a Democrat, overhauled her state’s public-employee pension plan for workers who aren’t teachers. “We must make changes now—the alternative is to saddle New Mexicans with unacceptable risk,” Ms. Grisham said, urging fellow Democrats to pass reforms. In 2018, Colorado legislators bridged their differences in a divided government to pass comprehensive reforms that increased employee and employer contributions, reduced cost-of-living adjustments, raised the retirement age, and expanded the use of defined-contribution plans for future employees to address the chronic structural underfunding of the state’s main public pension system.

Author(s): Leonard Gilroy, Steven Gassenberger

Publication Date: 18 June 2021

Publication Site: WSJ

Young American Adults Are Dying — and Not Just From Covid

Mary Pat Campbell

Link: https://www.bloomberg.com/opinion/articles/2021-06-18/young-american-adults-are-dying-and-not-just-from-covid

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Excerpt:

The observation that downward mortality trends have reversed in recent years for some groups of Americans is not new. Economists Ann Case and Angus Deaton helped start the discussion with their 2015 paper on rising mortality among middle-aged, non-Hispanic White Americans, and subsequently gave the phenomenon a resonant name: “deaths of despair.” Research has also identified those without college degrees and rural Americans as especially troubled.

In March, a National Academies of Sciences, Engineering, and Medicine committee summed up the current state of knowledge in a 475-page report on “High and Rising Mortality Rates Among Working-Age Adults.” Advances in overall life expectancy stalled in the U.S. after 2010 even while continuing in other wealthy countries, the committee summed up, attributing this mainly to (1) rising mortality due to external causes such as drugs, alcohol and suicide among those aged 25 through 64 and (2) a slowing in declines in deaths from internal causes, chiefly cardiovascular diseases.

Author(s): Justin Fox

Publication Date: 18 June 2021

Publication Site: Bloomberg

Report and Recommendations of the Task Force on Nursing Homes and Long-Term Care

Mary Pat Campbell

Link: https://nysba.org/app/uploads/2021/06/11.-Task-Force-on-Nursing-Home-and-Long-Term-Care-Report-staff-memo-and-comments-6.11.2021.pdf

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Excerpt:

Because of the anticipated need for large numbers of hospital beds, the Governor, in his first Executive Order issued under his emergency powers, authorized hospitals to “rapidly discharge” patients47. An especially important event in terms of the State’s health care capacity occurred on March 23rd. On that date, Governor Cuomo issued an Executive Order requiring that all hospitals cancel elective surgeries to free up hospital beds, and urged that hospitals go beyond the order and increase their capacity by 100%. Health officials said that day that New York had 53,000 hospital
beds with an anticipated need due to COVID-19 of 113,000. Officials also stated that New York had 3,000 ICU beds with an anticipated need due to COVID-19 of 18,000.


Two days later, on March 25th, the Department of Health issued the now infamous Advisory to nursing homes. The Advisory was explicitly issued out of concern for hospital capacity. It said so in its second sentence. “There is an urgent need to expand hospital capacity in New York State to be able to meet the demand for patients
with COVID-19 requiring acute care.” The Advisory went on to state the expectations for nursing homes.

Author(s): New York State Bar Association Task Force on COVID-19 in New York Nursing Homes and Long-Term Care

Publication Date: June 2021

Publication Site: New York State Bar Association

In landmark move, Maine becomes first state to pass legislation to divest from fossil fuels

Mary Pat Campbell
In landmark move, Maine becomes first state to pass legislation to divest from fossil fuels

Excerpt:

In what environmental advocates called an important step forward for climate justice, Maine became the first state to commit through legislation to divest from fossil fuel companies after Gov. Janet Mills signed a bill this week.

The legislation, LD 99, sponsored by Rep. Maggie O’Neil (D-Saco), “directs the $17 billion Maine Public Employee Retirement System to divest $1.3 billion from fossil fuels within five years” and directs the state treasurer to “do the same with other state funds,” according to a news release by 350 Maine. The bill was amended to grant the retirement system some flexibility in pursuing a gradual divestment from fossil fuels. 

The move comes as momentum for fossil fuel divestment is building around the country, including in states such as New York as well as some cities. All in all, more than 1,300 institutions with a total of $14 trillion in assets have committed to some form of fossil fuel divestment. 

Author(s): Evan Popp

Publication Date: 19 June 2021

Publication Site: Maine Beacon

Death rates for young American adults rise due to overdoses, traffic accidents

Mary Pat Campbell

Link: https://thepostmillennial.com/death-rates-for-young-american-adults-rise-due-to-overdoses-traffic-accidents

Excerpt:

Those aged 15-to-44 have seen fluctuating mortality rates since the 1950s, deviating from all other age groups that have seen steady decreases over the years. The age group’s mortality rate for the COVID-19 pandemic “pales in comparison” to the 1918 pandemic, according to Bloomberg.

“In March, a National Academies of Sciences, Engineering, and Medicine committee summed up their findings in a report titled ‘High and Rising Mortality Rates Among Working-Age Adults.’ Advances in overall life expectancy stalled in the US after 2010 even while continuing in other wealthy countries, the committee summed up, attributing this mainly to (1) rising mortality due to external causes such as drugs, alcohol and suicide among those aged 25 through 64 and (2) a slowing in declines in deaths from internal causes, chiefly cardiovascular diseases,” wrote Bloomberg.

Author(s): Hannah Nightingale

Publication Date: 18 June 2021

Publication Site: The Post Millennial

Not Even Bond Traders Can Predict the Future

Mary Pat Campbell

Link: https://www.bloomberg.com/opinion/articles/2021-06-18/bond-traders-can-t-predict-inflation-any-better-than-anyone-else

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Excerpt:

Historically, bond yields have not been very good at predicting inflation.

In the last 70 years, bond yields rarely rose ahead of inflation, going up only after inflation takes hold.  One study indicated that past inflation trends were a better predictor of bond rates than what future inflation turned out to be.

Does this mean bond traders are wrong? Not necessarily. It may just reflect that inflation is unpredictable and bond traders don’t know any more about the future than the rest of us. All they have is the past data and current prices to make their predictions, too. So when inflation suddenly spikes — as it has in the past — bond traders are as surprised as everyone else.

Author(s): Allison Schrager

Publication Date: 18 June 2021

Publication Site: Bloomberg

Recent inflation figures should not be ignored

Mary Pat Campbell

Link: https://thehill.com/opinion/finance/559121-recent-inflation-figures-should-not-be-ignored

Excerpt:

The sharp increase in consumer prices this Spring may be a blip but may also be a sign that inflation is returning as a chronic problem. For those of us who can accurately recall the 1970s economy, it is a frightening prospect. Everyone else would benefit from reading contemporaneous news coverage.

Recent events call into question pronouncements of the leading Modern Monetary Theorists who thought that the U.S. could sustain much larger deficits without triggering major hikes in the cost of living. Instead, it appears that the traditional rules of public finance still hold: deficit spending financed by Federal Reserve money creation is inflationary.

Analogies between today’s situation and the 1970s are not quite on target. By the early 70s, inflation was well underway. Instead, we should be drawing lessons from the year 1965, when price inflation began to take off. Prior to that year, inflation seemed to be under control with annual CPI growth ranging from 1.1 percent to 1.5 percent annually between 1960 and 1964 — not unlike the years prior to this one.

Author(s): Marc Joffe

Publication Date: 18 June 2021

Publication Site: The Hill

Towards Explainability of Machine Learning Models in Insurance Pricing

Mary Pat Campbell

Link: https://arxiv.org/abs/2003.10674

Paper: https://arxiv.org/pdf/2003.10674.pdf

Citation:


arXiv:2003.10674 [q-fin.RM]

Graphic:

Abstract:

Machine learning methods have garnered increasing interest among actuaries in recent years. However, their adoption by practitioners has been limited, partly due to the lack of transparency of these methods, as compared to generalized linear models. In this paper, we discuss the need for model interpretability in property & casualty insurance ratemaking, propose a framework for explaining models, and present a case study to illustrate the framework.

Author(s): Kevin Kuo, Daniel Lupton

Publication Date: 24 March 2020

Publication Site: arXiv

The Challenge of Covid-19 Vaccines for the Immunosuppressed

Mary Pat Campbell

Link: https://www.wired.com/story/the-challenge-of-covid-19-vaccines-for-the-immunosuppressed/?

Excerpt:

Millions of Americans are immunosuppressed or immune-compromised. That is, they take drugs to make sure that a transplanted organ is not rejected or to tamp down the overactive immunity that produces rheumatoid arthritis and lupus; or, alternatively, they have illnesses that undermine their ability to defend against pathogens. A handful of research papers published over the past few months all find the same result: When these patients receive Covid vaccines, their bodies don’t create as many defensive antibodies as those of healthy people. Some have contracted the disease despite being fully vaccinated—meaning that, to protect themselves, they must continue to behave as though their vaccinations never occurred.

As a result, some are seeking extra vaccinations, arranging for third doses that they hope will act like booster shots. A study published Monday in the Annals of Internal Medicine by a team at Johns Hopkins University School of Medicine documents the experience of 30 people living with organ transplants who sought out a third shot in hopes of boosting their immune responses. After their second shots, none of the 30 had high antibody levels; in fact, only six showed any antibody response at all. After the third shot, 14 out of 30 saw some improvement, and 12 of 30 had antibody levels that the researchers considered protective.

Author(s): Maryn McKenna

Publication Date: 16 June 2021

Publication Site: Wired

A More Hawkish Federal Reserve — and Federal Trade Commission

Mary Pat Campbell

Link: https://www.nationalreview.com/2021/06/a-more-hawkish-federal-reserve-and-federal-trade-commission/

Excerpt:

For the first time since the start of the COVID-19 pandemic, the Federal Reserve has bucked investor expectations and taken a more hawkish policy stance. After months of projecting near-zero interest rates through 2023, yesterday the Federal Open Market Committee forecast two rate hikes by the end of 2023. With consumer prices and spending rising in tandem of late, the revised projections are a tacit admission that recent inflation may not be as transitory as the Fed has maintained.

“Is there a risk that inflation will be higher than we think? Yes,” said chair Jay Powell. The ten-year Treasury yield increased roughly 80 basis points to 1.57 percent after the press conference.

But the Fed’s revised policy outlook was not matched by an increased medium-term inflation forecast. The central bank continues to expect an average inflation rate of 2.1 percent over the next three years. Goldman Sachs’s macro researchers interpret that to mean that “the FOMC sees the 2021 inflation overshoot, which will bring the average inflation rate since the recession began above 2 percent, as largely sufficient to accomplish its averaging goal.”

Ever since the Fed adopted an average inflation target last summer, markets have been left guessing as to the time horizon over which the Fed would target 2 percent. Yesterday’s projections suggest it will be two to three years.

Author(s):DANIEL TENREIRO

Publication Date: 17 June

Publication Site: National Review

How Stupid are Credit Rating Agencies?

Mary Pat Campbell
How Stupid are Credit Rating Agencies?

Excerpt:

Yes, unfunded liabilities as of June 30, 2020 are “more than $60 billion”. Much more ($128 billion under GASB68 and and $94 billion using understated valuation liabilities). But, setting that aside , how is Sweeney planning on reducing that massive debt?

Simple: lower pension payments…..

Clearly, we need to do everything we can to cut the cost of our annual pension payments at both the state and local levels in order to continue to guarantee the retirement payments our retirees have earned and to reduce the unfunded liability that is such a burden to taxpayers.

That is why we have developed legislation to enable our state and local pension systems to add revenue-generating assets like water and sewage treatment systems, High Occupancy Toll (HOT) lanes, parking facilities and real estate to provide new, diversified sources of revenue for their investment portfolios.

Author(s): John Bury

Publication Date: 17 June 2021

Publication Site: Burypensions