I’m a little confused by this line in VM-20 about allocations of reserves to the GA/SA and why it works this way:
"If a company has separate account business, the company shall allocate the minimum reserve between the general and separate accounts subject to the following:
- The amount allocated to the general account shall not be less than zero and shall include any liability related to contractual guarantees provided by the general account.
- The amount allocated to the separate account shall not be less than the sum of the cash surrender values and not be greater than the sum of the account values attributable to the separate account portion of all such contracts."
Is it not a requirement for the SA reserve to equal the SA assets? I’m not sure why it would be appropriate to fall below the AV to the CSV. I understand that the total reserve calculation could equal the CSV, but I still would assume that differential should be allocated to the GA instead of causing a discrepancy between SA assets and liabilities on the balance sheet.