The minimum reserve tables for newly issued long-term care insurance policies in VM-25 of the NAIC Valuation Manual cite the 1994 Group Annuity Mortality Table. That table is 32 years old. It was developed from annuitant mortality experience collected largely in the 1980s, predates any systematic LTC claims database by more than a decade, and has never been revised to reflect the care setting shifts, claim termination patterns, and claimant longevity that actuaries working these blocks have documented over the intervening three decades. On May 27, 2026, the NAIC Long-Term Care Actuarial (B) Working Group held a public session to review proposed replacement tables from the Society of Actuaries Research Institute and the American Academy of Actuaries, tables that would update both the mortality basis and the lapse assumption embedded in VM-25 for business issued on and after the adoption date.

The stakes are specific and bounded. Replacement would not touch the in-force blocks where the industry’s legacy losses live; those are governed by policy-by-policy rate increase filings, state-by-state approvals, and the NAIC Multistate Actuarial framework. The stakes are on the new-business side: how much capital a carrier must hold from day one on a freshly issued standalone LTC policy, and whether updated tables make re-entry economics more or less viable for the handful of insurers now evaluating the space.

What VM-25 Currently Requires for New LTC Reserves

VM-25, the Health Insurance Reserves Minimum Reserve Requirements section of the NAIC Valuation Manual, specifies the statutory floor for long-term care insurance reserves. The required mortality table for newly issued business is the 1994 Group Annuity Mortality (GAM) Table. For lapse rates, the standard permits the lesser of 80 percent of the voluntary lapse rate used in gross premium calculations or 4 percent for policy years two through four; for policy years five and later, the cap is the lesser of 100 percent of the pricing lapse rate or 2 percent.

In practice, these parameters define a reserve floor, not a best-estimate projection. A carrier issuing new LTC policies must also certify rate stability under ASOP No. 18, which requires assumptions capable of withstanding moderately adverse experience, but the VM-25 minimum is the statutory backstop that state regulators check in examinations. For products where claims typically begin decades after issue and can extend for years or more in claim, the mortality and lapse inputs embedded in the minimum reserve have compounding effects on required capital from the outset.

The 1994 GAM Table was the reserve mortality standard when Genworth, MetLife, Prudential, and the other legacy carriers issued the policies now generating the rate increase cycle that has consumed regulatory attention since the mid-2000s. Nothing in VM-25 required the table to be updated as the industry’s understanding of LTC claimant longevity changed. It was not updated.

A Mortality Baseline Three Decades Out of Date

The 1994 Group Annuity Mortality Table was designed for group annuity valuation, not for long-term care insurance. The annuity population and the LTC claimant population have different mortality dynamics, and neither has remained static since 1994. The table reflects mortality experience from the early 1990s, a period before the widespread adoption of statin therapy, before evidence-based stroke and cardiac care became standard, and before several of the advances in chronic disease management that extended survival among the populations most likely to eventually file LTC claims.

The proposed replacement is the 2012 Individual Annuity Mortality (IAM) Table. The 2012 IAM was developed by the SOA Committee on Life Insurance Research and is the current standard mortality basis for individual annuity reserving; it incorporates eighteen additional years of observed longevity improvement over the 1994 GAM, with generational improvement scales extending projections further. The SOA/AAA work group specified that the 2012 IAM would serve as the base table for LTC reserves and that margins would be developed separately to reflect the specific mortality dynamics of LTC claimants, varying by issue age, gender, and individual versus group policy form.

The direction of the change is unambiguous. Replacing the 1994 GAM with the 2012 IAM means lower underlying death rates: policyholders are modeled as living longer. For active lives, longer projected survival extends the period of exposure to future claim incidence. For disabled lives already receiving benefits, lower assumed mortality means longer expected claim durations and higher present values of future benefit payments. Both effects push the statutory minimum reserve upward.

This is not a marginal adjustment. The actuarial literature on mortality improvement between 1994 and 2012 documents material changes at the ages most relevant to LTC, particularly ages 65 through 85, where improvements in cardiovascular survival, reduced smoking rates, and better management of chronic conditions collectively produced significant longevity gains. A reserve calculated on 1994 GAM assumptions is structurally lighter than one calibrated to modern longevity expectations for the same cohort of policyholders.

The Lapse Rate Gap: Where VM-25 and Experience Diverge Most

The mortality update matters, but the lapse assumption may carry more reserve impact in practice. The gap between what VM-25 currently permits and what carriers actually observe is substantial, persistent across carrier and vintage, and well-documented in the SOA experience database.

Under current standards, a carrier reserving a new LTC policy can use a lapse rate as high as 4 percent in policy years two through four, provided that rate does not exceed 80 percent of the voluntary lapse rate assumed in pricing. For policy years five and later, the permitted ceiling falls to 2 percent. A reserve computed with a 4 percent early-year lapse assumption expects a meaningful share of the in-force population to exit voluntarily, reducing the projected cohort and correspondingly reducing the reserve required to cover future claim obligations.

Actual LTC voluntary lapse rates run approximately 1 percent per year. The SOA/LIMRA LTC Voluntary Lapse and Mortality Experience Study, which covered experience data from 2000 through 2011 across 22 participating companies, formed the empirical backbone of the SOA/AAA work group’s lapse recommendation. From reviewing publicly filed NAIC comments and carrier data submissions across multiple prior VM-25 review cycles, carriers that contributed to the joint study consistently reported voluntary lapse rates 30 to 40 percent below the floors that current VM-25 tables permit, a gap that has held across economic cycles, interest rate environments, and policy cohorts spanning multiple decades.

The behavioral explanation is straightforward. A policyholder who purchased LTC coverage at age 58 and has held the policy for fifteen years holds an embedded option worth several hundred thousand dollars: a guaranteed-renewable policy with guaranteed-issue benefits, elimination period and trigger definitions already documented, and a premium that would be dramatically higher if repriced to modern assumptions. Voluntarily surrendering that option is uncommon. It becomes rarer as the insured ages closer to the likely utilization window, and rarer still once the policyholder has observed a rate increase request and chosen to maintain coverage rather than lapse.

There is also a selection interaction that compounds the reserve impact. Policyholders who do lapse tend to be healthier than those who persist; those who remain in-force are disproportionately the individuals with a heightened awareness of their own LTC risk. Lower lapse rates do not simply add more average-cost policyholders to the reserve base. They preferentially retain higher-cost policyholders, because the cohort most likely to eventually file a claim is the cohort most motivated to maintain coverage. A reserve that assumes 4 percent early-year lapses understates the number of eventual claimants; a reserve calibrated to the actual 1 percent experience comes closer to the true expected claim population.

The mathematical effect compounds over a policy’s lifetime. A 3-percentage-point annual lapse overshoot accumulates over 20 years into an in-force population roughly 45 percent smaller than the pricing actuary actually retains. Every additional in-force policyholder who survives to potential claim inception represents a liability that the VM-25 minimum did not account for.

The SOA/AAA Joint Study: Methodology and Scope

The American Academy of Actuaries Long-Term Care Valuation Work Group and the SOA Research Institute jointly developed the proposed replacement tables. The study was completed in November 2021 and transmitted to the NAIC Health Actuarial Task Force and the LTC Actuarial (B) Working Group for regulatory review, with comment letters due July 13, 2022. The May 27, 2026 working group session represents the active regulatory review phase, more than four years after the study’s completion.

The methodology defines the 2012 IAM Table as the base mortality and develops margins on top of that foundation to produce the required prudent estimate for statutory minimum reserves. The margin development reflects LTC-specific mortality dynamics, not the broader individual annuity population on which the 2012 IAM was calibrated. Variation by issue age, gender, and individual versus group policy form was built into the framework to allow more precise reserve calibration across the range of LTC product designs in the market.

The lapse assumption was developed directly from the 2000 through 2011 SOA/LIMRA experience data, adjusted conservatively for minimum reserve purposes. The 22-company database underlying the experience study represents a substantial share of LTC premium written during that period, covering a span of policy vintages, benefit designs, and economic environments sufficient to distinguish structural persistency patterns from cyclical noise.

The study represents the first purpose-built LTC mortality and lapse basis developed specifically for statutory minimum reserve calibration. The prior VM-25 standard was not the product of an LTC-specific study; it was adapted from annuity reserving practice in the early 1990s, before the industry had accumulated any meaningful LTC claims history. The joint study closes that methodological gap. It provides, for the first time, a statutory reserve floor grounded in LTC-specific data rather than borrowed from a structurally different product line.

Industry comment letters from ACLI, AHIP, and state regulators engaged the working group on several implementation questions: the appropriate margin level above the 2012 IAM base, transition relief for carriers with pending product filings in development, and whether the effective date should allow any grandfathering for policies in mid-underwriting cycles. These are the customary negotiating points in a standard adoption, and their presence in the record does not suggest fundamental disagreement with the direction of the update.

Reserve Impact for New Business: Higher Floors, Narrower Margins

The directional reserve impact of adopting both updated tables is upward. The magnitude depends on product design, benefit period, and the relationship between a carrier’s own pricing assumptions and the updated VM-25 floor.

A policy with an extended or unlimited benefit period is more sensitive to lapse and mortality assumptions than one with a three-year or five-year cap. The longer the tail of potential claims, the more the present value of future obligations depends on the survival and persistency of the in-force population at distant policy durations. Richer inflation protection riders amplify this sensitivity further: the benefit amount grows with time, and the present value of a growing, long-duration benefit stream depends heavily on how many policyholders survive to the point of utilization and how long they remain in claim once benefits begin.

For carriers currently pricing new standalone LTC business on conservative assumptions, the VM-25 minimum may not be a binding constraint today. If a carrier’s own prudent-estimate reserves already exceed the 1994 GAM floor, the minimum does not determine the required capital. But if updated VM-25 tables lift the floor above where a carrier’s pricing assumptions land, the minimum becomes binding and imposes incremental capital requirements.

The capital strain is front-loaded. Statutory minimum reserves are held from policy inception, long before earned premium accumulation and investment income have had time to offset the initial reserve drain. For a product where the expected period from issue to first claim spans 20 or more years, this upfront capital requirement is a real and material cost of market participation. Higher floors compound that cost from day one of every policy issued after the effective date of adoption.

For carriers evaluating new LTC product launches, the reserve increase also affects the pricing economics. LTC premiums must be actuarially certified as adequate to maintain rates without future increases under moderately adverse experience; a higher statutory reserve floor shifts the premium level required to meet that standard upward. Products that cleared the rate certification bar under 1994 GAM assumptions may require repricing under the 2012 IAM basis. That repricing increases the published premium, which affects competitive positioning in a market where hybrid alternatives compete for the same purchaser.

The New-Business LTC Market These Tables Would Reach

Approximately 5.8 million Americans held individual standalone LTC coverage as of 2024, a number that has declined for a decade as the in-force blocks age and no new cohorts of comparable size enter the standalone market. The LTCI industry reported approximately $16 billion in incurred claims in 2023, reflecting the combination of an aging in-force population and claim patterns shaped by COVID-era care setting disruptions and subsequent reversion.

The standalone market has contracted to roughly 13 active carriers, representing approximately two-thirds of the market by premium, who agreed in August 2025 to participate in the new comprehensive LTC experience study jointly launched by LIMRA, the SOA Research Institute, and the NAIC. That study covers experience data from 2000 through 2023, capturing two decades of post-reform pricing and modern care setting evolution; its results are expected to form the foundation for the next generation of VM-25 updates after the 2021 SOA/AAA tables are adopted.

New standalone LTCI product filings appeared in 2025 from insurers that had previously ceased most sales, most visibly CareScout Insurance, the Genworth subsidiary that launched its "Care Assurance" product in approximately 40 states by early 2026. These re-entering carriers are pricing on modern, conservative assumptions, with lapse rates near 1 percent and morbidity tables grounded in post-2010 experience. For them, the distance between their own pricing assumptions and the 1994 GAM floor is likely already large enough that updated VM-25 tables would not impose an immediate binding constraint. The standard matters more for any carrier pricing closer to the regulatory minimum or managing its capital position against the statutory floor rather than internal best-estimate reserves.

Hybrid Life-LTC Products: Outside VM-25’s Scope

Combination life-LTC products, where a life insurance policy delivers accelerated or extended benefits for qualifying long-term care needs, are now the dominant channel for new private LTC coverage sales. These products are reserved under life insurance frameworks, typically VM-20 for principle-based life reserves, with the LTC benefit rider embedded within the life chassis. VM-25, as a health insurance reserves standard, does not govern the life insurance base policy.

Annuity-LTC combination products follow a similar logic: the annuity chassis falls under annuity reserving standards, and the LTC benefit component is treated within that framework rather than under the health insurance reserve model. Neither the linked-benefit life-LTC nor the annuity-LTC product form falls within the direct scope of the proposed VM-25 table update.

The edge case involves LTC benefit riders attached to life or annuity products that are separately classified as accident and health benefits for state insurance filing purposes. For those riders, health insurance reserve standards may apply to the rider component independently of the base policy, and the updated VM-25 tables could reach them through that channel. The working group documentation does not definitively resolve this question; the text of the proposed adoption focuses on standalone LTC and group LTC contracts, which are the product forms where the 1994 GAM Table and current lapse floors are most directly applicable.

For the hybrid market, the VM-25 update is relevant primarily as a regulatory signal rather than a direct reserve requirement. Carriers writing combination products still need actuarially defensible lapse and mortality assumptions for the LTC benefit components in their principle-based reserve models. Updated VM-25 tables establish a data-grounded regulatory reference point that shapes what state examiners and appointed actuaries expect to see in the support documentation for hybrid product reserves, even where VM-25 does not technically apply as the direct statutory floor.

What the NAIC May 2026 Meeting Signals

The May 27, 2026 working group session was a discussion meeting, not a final adoption vote. The NAIC standard-adoption process for Valuation Manual changes typically involves exposure drafts, extended comment periods, and multiple working group review cycles before formal adoption. The May 2026 session is part of that arc, not the end of it.

What the scheduling communicates is movement. The 2021 SOA/AAA study sat with the working group for four years before a dedicated public review session was placed on the 2026 calendar. That scheduling decision, in the context of a working group simultaneously managing the MSA rate review framework, cost-sharing factor revisions, and a major new industry experience study, suggests that table adoption is being treated as a near-term regulatory deliverable rather than a multi-cycle deferred project.

For carriers evaluating new LTC product design, the practical implication is that the VM-25 reserve floor could change during a product development cycle. Development timelines for LTC products, from initial product concept through state filing, actuarial opinion, and approval, typically span 18 to 36 months. A carrier that begins development today using current VM-25 assumptions and completes the process after updated tables are adopted faces higher required capital than its initial models projected. Pricing and capital planning that ignores the regulatory transition risk will understate the economics of market participation.

The August 2025 LIMRA/SOA/NAIC experience study, with 13 carriers reporting 2000 through 2023 mortality, persistency, claim incidence, and claim termination data, is the longer-horizon infrastructure. Its results will provide the basis for revising VM-25 again after the 2021 tables are adopted and in use. That study represents the most comprehensive LTC experience data collection effort in the history of the product line; its eventual outputs will be the benchmark against which future statutory reserve assumptions are calibrated.

Why This Matters for Life and Health Actuaries

For valuation actuaries responsible for LTC blocks, the near-term significance of the working group’s trajectory is in understanding where the statutory minimum floor may move and building that into asset adequacy testing and appointed actuary opinion work. A change in the VM-25 floor does not directly restate in-force reserves on existing policies, but it affects the basis against which new-business additions to the block are measured and can shift the actuarial context for rate certification on blocks that include both legacy and newly issued business.

For pricing actuaries working on new standalone LTC or evaluating LTC benefit rider designs, updated VM-25 tables define the regulatory floor against which pricing assumptions will be tested in state filings. ASOP No. 18 requires pricing actuaries to certify that premiums are adequate to avoid future rate increases under moderately adverse conditions; the VM-25 minimum reserve is one dimension of what regulators consider the prudent floor, and assumptions materially more optimistic than that floor invite scrutiny during the filing review process.

For enterprise risk managers, the table update illustrates a persistent structural issue in long-duration health products: regulatory minimums can lag experience by decades, and the gap between statutory floors and actual expected outcomes contains latent reserve risk that does not surface until the standard and the data come back into alignment. The 1994 GAM Table remained in VM-25 for 32 years while LTC claimant longevity, care utilization patterns, and voluntary persistency all moved materially in the direction of higher claim costs. Products reserved against that floor during those three decades were carrying undisclosed reserve adequacy risk relative to the actual expected obligations.

The lesson for actuaries working on any long-duration product line is to understand the vintage of the statutory tables their minimum reserves depend on, to track the gap between those tables and current experience data, and to build reserve adequacy analysis that does not rely solely on the statutory floor as a proxy for prudent best-estimate reserves. VM-25 for LTC is the clearest available case study in what happens when that gap is allowed to widen unchecked. The 2021 SOA/AAA study and the NAIC adoption process underway in 2026 are the corrective mechanism. They arrive, as corrective mechanisms in regulatory standards often do, after the industry has already absorbed the consequences of the original gap.

Further Reading

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