The new SOA/AAA tables would raise the statutory minimum reserve for newly issued long-term care policies, replacing the 32-year-old 1994 Group Annuity Mortality Table in VM-25 with the 2012 Individual Annuity Mortality Table and resetting an embedded lapse floor of 4 percent (VM-25) toward the roughly 1 percent carriers actually experience (SOA/LIMRA, 2000-2011). Legacy in-force blocks are untouched.

On May 27, 2026, the NAIC Long-Term Care Actuarial (B) Working Group held a public session to review the proposed replacements from the Society of Actuaries Research Institute and the American Academy of Actuaries (NAIC LTC Actuarial Working Group, May 27, 2026), swapping in the 2012 Individual Annuity Mortality Table and resetting the embedded lapse assumption to match observed carrier experience. VM-25 still rests the new-business floor on a 1994 annuity basis that predates any systematic LTC claims database, so both changes push that floor upward while leaving the in-force legacy blocks where the industry’s losses already live untouched.

That scope distinction is the first thing to fix in most readers’ mental model. The legacy blocks issued by Genworth, MetLife, Prudential, and the others are governed by policy-by-policy rate increase filings, state approvals, and the NAIC Multistate Actuarial framework, none of which a table swap disturbs. What the update reaches is the cost of writing a new standalone LTC policy: how much capital a carrier must hold from day one, 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 section of the Valuation Manual, fixes the required reserve mortality for newly issued LTC business at the 1994 Group Annuity Mortality (GAM) Table. For lapse, it permits the lesser of 80 percent of the voluntary lapse rate used in gross premium calculations or 4 percent in policy years two through four; from policy year five onward the ceiling drops to the lesser of 100 percent of the pricing lapse rate or 2 percent. These parameters define a statutory floor, not a best-estimate projection. The minimum is the backstop state regulators check in examinations, and for a product where claims typically begin decades after issue and can run for years once they start, the mortality and lapse inputs baked into that floor compound into required capital from the outset.

The 1994 GAM Table was the reserve standard when the legacy carriers wrote the policies now driving the rate increase cycle that has consumed regulatory attention since the mid-2000s. Nothing in VM-25 forced it to keep pace as the industry’s understanding of LTC claimant longevity changed over the following three decades, and it never did.

A mortality baseline three decades out of date

The 1994 GAM Table was built for group annuity valuation, from mortality experience collected in the early 1990s, before statin therapy was widespread, before evidence-based stroke and cardiac care became standard, and before much of the chronic-disease management that extended survival among the populations most likely to eventually file LTC claims. The annuity population and the LTC claimant population have different mortality dynamics to begin with, and neither has stood still since.

The proposed replacement, the 2012 Individual Annuity Mortality (IAM) Table, was developed by the SOA Committee on Life Insurance Research and is the current standard basis for individual annuity reserving. It carries eighteen additional years of observed longevity improvement over the 1994 GAM, with generational improvement scales extending projections further. The SOA/AAA work group specified the 2012 IAM as the base table and built LTC-specific margins on top of it, varying by issue age, gender, and individual versus group policy form, rather than importing the broader annuity population’s dynamics wholesale.

The direction is unambiguous: lower underlying death rates mean policyholders are modeled as living longer, and that cuts two ways against the reserve. For active lives, longer projected survival extends the window of exposure to future claim incidence. For disabled lives already collecting benefits, lower assumed mortality lengthens expected claim durations and raises the present value of future benefit payments. The literature on 1994-to-2012 mortality improvement documents material gains precisely at the ages most relevant to LTC, roughly 65 through 85, where better cardiovascular survival, lower smoking rates, and improved chronic-condition management compounded. A reserve calculated on 1994 GAM is structurally lighter than one calibrated to modern longevity for the same cohort.

The lapse gap, where VM-25 and experience diverge most

The mortality update matters, but the lapse assumption likely carries more reserve impact in practice, and the gap there is the single largest source of the shortfall. A carrier can currently reserve a new policy on a lapse rate as high as 4 percent in years two through four, subject to the 80-percent-of-pricing cap. A reserve computed on 4 percent early-year lapses expects a meaningful share of the cohort to walk away, shrinking the projected in-force and the reserve required to cover future claims.

Actual LTC voluntary lapse runs near 1 percent a year. The SOA/LIMRA LTC Voluntary Lapse and Mortality Experience Study, covering 2000 through 2011 across 22 participating companies, is the empirical backbone of the work group’s lapse recommendation, and across multiple prior VM-25 review cycles the contributing carriers reported voluntary lapse 30 to 40 percent below the floors the current tables permit, a gap that held across economic cycles, interest rate regimes, and policy cohorts spanning decades. The behavior is easy to explain. A policyholder who bought at age 58 and has held the contract fifteen years owns an embedded option worth several hundred thousand dollars: guaranteed-renewable, with trigger and elimination-period definitions locked in and a premium that would be dramatically higher if repriced today. Surrendering that is uncommon, gets rarer as the insured approaches the utilization window, and rarer still once a policyholder has seen a rate increase request and chosen to keep the coverage anyway.

A selection effect compounds the impact. Policyholders who lapse tend to be healthier than those who persist, so lower lapse does not merely add average-cost lives to the reserve base, it preferentially retains the higher-cost lives most aware of their own LTC risk and most motivated to hold the coverage. A floor that assumes 4 percent early-year lapse understates the eventual claimant count; one calibrated to the actual 1 percent comes closer to the true claim population. And the arithmetic accumulates: a 3-percentage-point annual lapse overshoot compounds over 20 years into an in-force population roughly 45 percent smaller than the pricing actuary actually keeps. Every extra policyholder who survives to claim inception is a liability the old minimum never funded.

The SOA/AAA joint study: methodology and scope

The American Academy of Actuaries Long-Term Care Valuation Work Group and the SOA Research Institute completed the proposed tables (AAA/SOA, November 2021) and transmitted them to the NAIC Health Actuarial Task Force and the LTC Actuarial (B) Working Group, with comment letters due July 13, 2022. The May 27, 2026 session is the active review phase, more than four years on. The methodology sets the 2012 IAM as the base mortality and develops margins to reach the prudent estimate the statutory minimum requires, with the margin work reflecting LTC-specific mortality rather than the annuity population the 2012 IAM was calibrated on. The lapse assumption comes straight from the 2000 through 2011 SOA/LIMRA data, adjusted conservatively for minimum-reserve purposes; the 22-company database spans enough vintages, benefit designs, and economic environments to separate structural persistency from cyclical noise.

This is the first purpose-built LTC mortality and lapse basis developed specifically for statutory minimum reserve calibration. The prior standard was adapted from early-1990s annuity practice, before the industry had any meaningful LTC claims history; the joint study closes that gap and grounds the floor in LTC-specific data rather than a structurally different product line. Comment letters from ACLI, AHIP, and state regulators engaged the customary implementation questions, the appropriate margin above the 2012 IAM base, transition relief for carriers with filings in development, and whether the effective date should grandfather policies mid-underwriting, none of which signals disagreement with the direction of the update.

Reserve impact for new business: higher floors, narrower margins

The directional impact of adopting both tables is upward; the magnitude turns on product design and on how far a carrier’s own pricing sits above the floor. A policy with an extended or unlimited benefit period is far more sensitive to lapse and mortality than a three- or five-year design, because the longer the claim tail, the more the present value of obligations depends on survival and persistency at distant durations. Rich inflation protection amplifies this: a benefit that grows with time and runs long makes the reserve hinge on how many policyholders reach utilization and how long they stay in claim.

For carriers already pricing new standalone LTC conservatively, the minimum may not bind today. If a carrier’s own prudent-estimate reserves already clear the 1994 GAM floor, the statutory minimum does not set its capital. But if the updated tables lift the floor above where a carrier’s pricing lands, the minimum becomes binding and adds capital. That strain is front-loaded, held from policy inception, long before earned premium and investment income offset the initial drain; for a product where issue-to-first-claim can span 20 or more years, that upfront requirement is a real cost of participation, compounding from day one of every policy written after the effective date.

It also moves pricing. LTC premiums must be certified as adequate to maintain rates without future increases under moderately adverse experience, and a higher statutory floor lifts the premium needed to meet that bar. Products that cleared certification under 1994 GAM may need repricing on the 2012 IAM basis, raising the published premium and shifting competitive position in a market where hybrid alternatives chase the same buyer.

The new-business market these tables would reach

About 5.8 million Americans held individual standalone LTC coverage as of 2024, a count that has fallen for a decade as the in-force blocks age and no new cohort of comparable size replaces them. The industry reported roughly $16 billion in incurred claims (NAIC, 2023), reflecting an aging book and claim patterns shaped by COVID-era care-setting disruption and its reversion. The standalone market has narrowed to about 13 active carriers, roughly two-thirds of premium, who agreed to join a new comprehensive LTC experience study from LIMRA, the SOA Research Institute, and the NAIC covering 2000 through 2023 (LIMRA/SOA/NAIC, August 2025).

New standalone filings did appear in 2025 from insurers that had largely exited, most visibly CareScout Insurance, the Genworth subsidiary that launched its "Care Assurance" product in roughly 40 states by early 2026 (CareScout, early 2026). These re-entrants price on modern, conservative assumptions, with lapse near 1 percent and morbidity grounded in post-2010 experience, so the distance between their pricing and the 1994 GAM floor is likely already wide enough that the updated tables would not bind them immediately. The standard bites hardest on any carrier pricing close to the minimum or managing capital against the statutory floor rather than its own best estimate.

Hybrid life-LTC products sit outside VM-25’s scope

Combination life-LTC products, where a life policy delivers accelerated or extended benefits for qualifying care, are now the dominant channel for new private LTC sales, and they reserve under life frameworks, typically VM-20 for principle-based life reserves, with the LTC benefit riding inside the life chassis. VM-25, a health insurance reserves standard, does not govern the life base policy. Annuity-LTC combinations follow the same logic under annuity standards. Neither linked-benefit form falls within the direct scope of the proposed table update.

The edge case is an LTC rider separately classified as an accident and health benefit for state filing purposes; there, health reserve standards may apply to the rider independently of the base policy, and the updated tables could reach it through that channel. The working group documentation does not resolve this cleanly, since the proposed adoption text centers on standalone and group LTC contracts, the forms where the 1994 GAM Table and the current lapse floors apply most directly. For the hybrid market the update functions mainly as a regulatory signal: carriers still need defensible lapse and mortality for the LTC components of their principle-based models, and a data-grounded reference point shapes what examiners and appointed actuaries expect in the support documentation even where VM-25 is not the literal statutory floor.

What the May 2026 meeting signals

The session was a discussion meeting, not an adoption vote. The NAIC process for Valuation Manual changes runs through exposure drafts, extended comment periods, and multiple review cycles before formal adoption, and the May 2026 meeting is one point on that arc. What it communicates is movement: a 2021 study sat for four years before a dedicated public review was placed on the 2026 calendar, and that scheduling, against a working group also juggling the MSA rate review framework, cost-sharing factor revisions, and a major new experience study, reads as a near-term deliverable rather than a deferred project.

For anyone designing a new LTC product, that means the reserve floor can shift mid-development. LTC product timelines, from concept through state filing, actuarial opinion, and approval, typically run 18 to 36 months, so a carrier starting today on current VM-25 assumptions and finishing after adoption faces higher required capital than its initial models projected. Capital planning that ignores the transition risk understates the economics of entry. The August 2025 LIMRA/SOA/NAIC study, with the 13 carriers reporting 2000 through 2023 mortality, persistency, claim incidence, and claim termination, is the longer-horizon infrastructure, the most comprehensive LTC data collection in the product line’s history, and its outputs will be the basis for revising VM-25 again once the 2021 tables are in use.

What it means for life and health actuaries

For valuation actuaries on LTC blocks, the near-term task is to anticipate where the minimum floor moves and fold that into asset adequacy testing and appointed actuary work. A higher floor does not restate in-force reserves on existing policies, but it sets the basis for new-business additions and can shift the rate-certification context on blocks mixing legacy and newly issued business. For pricing actuaries on new standalone LTC or rider designs, the updated tables define the regulatory floor their assumptions get tested against in state filings: premiums must be certified adequate to avoid future increases under moderately adverse conditions, and pricing materially more optimistic than the statutory floor invites scrutiny in review.

For enterprise risk managers, the episode is a clean illustration of a structural hazard in long-duration health products. Regulatory minimums can lag experience by decades, and the space between the statutory floor and actual expected outcomes holds latent reserve risk that stays hidden until standard and data realign. The 1994 GAM Table sat in VM-25 for 32 years while LTC claimant longevity, care utilization, and voluntary persistency all moved toward higher claim costs, so business reserved against that floor carried undisclosed adequacy risk relative to its real obligations. The lesson generalizes: know the vintage of the tables your minimum reserves rest on, track the gap between those tables and current experience, and never treat the statutory floor as a stand-in for a prudent best estimate. VM-25 for LTC is the clearest case study of what happens when that gap is left to widen. The 2021 SOA/AAA tables and the 2026 adoption process are the correction, arriving, as these corrections usually do, after the industry has already absorbed the cost of the original gap.

Further Reading

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