Chapter 017
2013 -- H 5596 SUBSTITUTE A
Enacted 05/20/13
A N A C T
RELATING TO
INSURANCE -- THE STANDARD NONFORFEITURE LAW FOR LIFE
INSURANCE
Introduced By: Representatives Messier, Kennedy, San Bento, Palumbo, and Keable
Date Introduced: February 27, 2013
It is enacted by the
General Assembly as follows:
SECTION 1. Section 27-4.3-5 of the General Laws in Chapter
27-4.3 entitled "The
Standard Nonforfeiture Law for Life Insurance" is hereby
amended to read as follows:
27-4.3-5. Calculations
of adjusted premiums by the nonforfeiture net level
premium
method. -- (a)
This section shall apply to all policies issued on or
after January 1, 1994. Except as
provided in subsection (g) of this section, the adjusted
premiums for any policy shall be
calculated on an annual basis and shall be such a uniform
percentage of the respective premiums
specified in the policy for each policy year, excluding amounts
payable as extra premiums to
cover impairments or special hazards, and also excluding any
uniform annual contract charge or
policy fee specified in the policy in a statement of the
method to be used in calculating the cash
surrender values and paid up nonforfeiture
benefits, so that the present value, at the date of issue
of the policy, of all adjusted premiums shall be equal
to the sum of: (1) the then present value of
the future guaranteed benefits provided for by the
policy; (2) one percent (1%) of either the
amount of insurance, if the insurance is be uniform
in amount, or the average amount of insurance
at the beginning of each of the first ten (10) policy
years; and (3) one hundred twenty-five percent
(125%) of the nonforfeiture
net level premium as defined in subsection (b); provided, however,
that in applying the percentage specified in subdivision
(a)(3), no nonforfeiture net level premium
shall be deemed to exceed four percent (4%) of either the
amount of insurance, if the insurance is
be uniform in amount, or the average amount of insurance
at the beginning of each of the first ten
(10) policy years. The date
of issue of a policy for the purpose of this section shall be the date as
of which the rated age of the insured is determined.
(b) The nonforfeiture net level premium shall be equal to the
present value, at the date of
issue of the policy, of the guaranteed benefits provided
for by the policy divided by the present
value, at the date of issue of the policy of an annuity of
one per annum payable on the date of
issue of the policy and on each anniversary of the policy
on which a premium falls due.
(c) In the case of
policies which cause, on a basis guaranteed in the policy,
unscheduled
changes in benefits or premiums, or which provide an
option for changes in benefits or premiums,
other than a change to a new policy, the adjusted premiums
and present values shall initially be
calculated on the assumption that future benefits and premiums
do not change from those
stipulated at the date of issue of the policy. At the time of
any change in the benefits or premiums,
the future adjusted premiums, nonforfeiture
net level premiums, and present values shall be
recalculated on the assumption that future benefits and premiums
do not change from those
stipulated by the policy immediately after the change.
(d) Except as otherwise
provided in subsection (g), the recalculated future adjusted
premiums for any policy shall be a uniform percentage of the
future premiums specified in the
policy for each policy year, excluding amounts payable as
extra premiums to cover impairments
and special hazards, and also excluding any uniform
annual contract charge or policy fee
specified in the policy in a statement of the method to be used
in calculating the cash surrender
values and paid up nonforfeiture
benefits, so that the present value, at the time of change to the
newly defined benefits or premiums, of all future adjusted
premiums shall be equal to the excess
of: (1) the sum of: (i) the
then present value of the then future guaranteed benefits provided for by
the policy and (ii) the additional expense allowance, if
any, over (2) the then cash surrender
value, if any, or present value of any paid up nonforfeiture benefit under this policy.
(e) The additional
expense allowance, at the time of the change to the newly defined
benefits or premiums, shall be the sum of: (1) one percent
(1%) of the excess, if positive, of the
average amount of insurance at the beginning of each of the
first ten (10) policy years subsequent
to the change over the average amount of insurance prior
to the change at the beginning of each
of the first ten (10) policy years subsequent to the
time of the most recent previous change, or, if
there has been no previous change, the date of issue of the
policy; and (2) one hundred twenty-
five percent (125%) of the increase, if positive, in the nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium shall be equal to the
result obtained
by dividing subdivision (f)(1) by subdivision (f)(2)
where:
(1) Equals the sum of:
(i)
The nonforfeiture net level premium applicable prior
to the change multiplied by the
present value of an annuity of one per annum payable on each
anniversary of the policy on or
subsequent to the date of the change on which a premium would
have fallen due had the change
not occurred, and
(ii) The present value
of the increase in future guaranteed benefits provided for by the
policy; and
(2) Equals the present
value of an annuity of one per annum payable on each anniversary
of the policy on or subsequent to the date of change on
which a premium falls due.
(g) Notwithstanding any
other provisions of this section to the contrary, in the case of a
policy issued on a substandard basis which provides reduced
graded amounts of insurance so that,
in each policy year, the policy has the same tabular
mortality cost as a similar policy issued on the
standard basis which provides for a higher uniform amount of
insurance, adjusted premiums and
present values for the substandard policy may be calculated
as if it were issued to provide the
higher uniform amounts of insurance on the standard basis.
(h) All adjusted
premiums and present values referred to in this chapter shall for all
policies of ordinary insurance be calculated on the basis of
the commissioners 1980 standard
ordinary mortality table or, at the election of the insurance
company for any one or more
specified plans of life insurance, the commissioners 1980
standard ordinary mortality table with
ten (10) year select mortality factors; adjusted premiums
and present values shall for all policies
of industrial insurance be calculated on the basis of
the commissioners 1961 standard industrial
mortality table; and adjusted premiums and present values
shall for all policies issued in a
particular calendar year be calculated on the basis of a rate of
interest not exceeding the
nonforfeiture interest rate as defined in this section, for
policies issued in that calendar year; .
Provided provided, however that:
(1) At the option of
the insurance company, calculations for all policies issued in a
particular calendar year may be made on the basis of a rate of
interest not exceeding the
nonforfeiture interest rate, as defined in this section, for
policies issued in the immediately
preceding calendar year;
(2) Under any paid-up nonforfeiture benefit, including any paid-up dividend
additions,
any cash surrender value available, whether or not
required by section 27-4.3-2, shall be
calculated on the basis of the mortality table and rate of
interest used in determining the amount
of any paid-up nonforfeiture
benefit and paid-up dividend additions, if any;
(3) An insurance
company may calculate the amount of any guaranteed paid-up
nonforfeiture benefit including any paid-up additions under the
policy on the basis of an interest
rate no lower than that specified in the policy for
calculating cash surrender values;
(4) In calculating the
present value of any paid-up term insurance with accompanying
pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be
not more than those shown in the commissioners 1980 extended
term insurance table for policies
of ordinary insurance and not more than the
commissioners 1961 industrial extended term
insurance table for policies of industrial insurance;
(5) For insurance
issued on a substandard basis, the calculation of any adjusted
premiums and present values may be based on appropriate
modifications of the tables mentioned
in this subsection;
(6)(i) For policies issued prior to the operative date of the
valuation manual, any Any
commissioners' standard
ordinary mortality tables, adopted after 1980 by the National
Association of Insurance Commissioners, that are
approved by regulation promulgated by the
commissioner of insurance for use in determining the minimum nonforfeiture standard, may be
substituted for the commissioners 1980 standard ordinary
mortality table with or without ten (10)
year select mortality factors or for the commissioners
1980 extended term insurance table.; and
(ii) For policies
issued on or after the operative date of the valuation manual the valuation
manual shall provide the commissioners' standard mortality
table for use in determining the
minimum nonforfeiture standard that
may be substituted for the commissioners 1980 Standard
Ordinary Mortality Table with or without ten (10) year
Select Mortality Factors or for the
Commissioners 1980 Extended Term Insurance Table. If
the commissioner approves by
regulation any commissioners' standard ordinary mortality table
adopted by the NAIC for use in
determining the minimum nonforfeiture
standard for policies issued on or after the operative date
of the valuation manual then that minimum nonforfeiture standard supersedes the minimum
nonforfeiture standard provided by the valuation manual.
(7)(i) For policies issued prior to the operative date of the
valuation manual, any Any
commissioners' standard
industrial mortality tables, adopted after 1980 by the National
Association of Insurance Commissioners, that are
approved by regulation promulgated by the
commissioner of insurance for use in determining the minimum nonforfeiture standard, may be
substituted for the commissioners 1961 standard industrial
mortality table or the commissioners
1961 industrial extended term insurance table.
(ii) For policies
issued on or after the operative date of the valuation manual the valuation
manual shall provide the commissioners' standard mortality
table for use in determining the
minimum nonforfeiture standard that
may be substituted for the Commissioners 1961 Standard
Industrial Mortality Table or the Commissioners 1961
Industrial Extended Term Insurance Table.
If the commissioner approves by regulation any
commissioners' standard industrial mortality
table adopted by the NAIC for use in determining the
minimum nonforfeiture standard for
policies issued on or after the operative date of the
valuation manual then that minimum
nonforfeiture standard supersedes the minimum nonforfeiture
standard provided by the valuation
manual.
(i)
The nonforfeiture interest rate is defined below:
(A) For policies
issued prior to the operative date of the valuation manual, the
nonforfeiture interest rate
per annum for any policy issued in a particular calendar year shall be
equal to one hundred and twenty-five percent (125%) of the
calendar year statutory valuation
interest rate for the policy as defined in chapter 4.5 of this
title, rounded to the nearer one-quarter
of one percent (.25%).
(B) For policies
issued on and after the operative date of the valuation manual the
nonforfeiture interest rate per annum for any policy issued in a
particular calendar year shall be
provided by the valuation manual.
(j) Notwithstanding any
other provision in this title to the contrary, any re-filing of
nonforfeiture values or their methods of computation for any
previously approved policy form
which involves only a change in the interest rate or
mortality table used to compute nonforfeiture
values shall not require re-filing of any other provisions
of that policy form.
SECTION 2. Sections 27-4.5-1, 27-4.5-2, 27-4.5-3, 27-4.5-4,
27-4.5-4.1, 27-4.5-5, 27-
4.5-6, 27-4.5-7, 27-4.5-8,
27-4.5-9 and 27-4.5-10 of the General Laws in Chapter 27-4.5 entitled
"The Standard
Valuation Law" are hereby amended to read as
follows:
27-4.5-1.
Short title Short title and Definitions. --
(a) This chapter shall be known as
the "Standard Valuation Law."
(b) For the purpose
of this chapter, the following definitions shall apply on or after the
operative date of the valuation manual:
(1) "Accident
and health insurance" means contracts that incorporate morbidity risk and
provide protection against economic loss resulting from
accident, sickness, or medical conditions
and as may be specified in the valuation manual.
(2) "Appointed
actuary" means a qualified actuary who is appointed in accordance with
the valuation manual to prepare the actuarial opinion
required in subsection 27-4.5-3(a).
(3)
"Commissioner of insurance" means the director of the department of
business
regulation or his or her designee.
(4)
"Company" means an entity, which: (i) Has written, issued, or reinsured life insurance
contracts, accident and health insurance contracts, or deposit-type
contracts in this state and has at
least one such policy in force or on claim; or (ii) Has
written, issued, or reinsured life insurance
contracts, accident and health insurance contracts, or
deposit-type contracts in any state and is
required to hold a certificate of authority to write life
insurance, accident and health insurance, or
deposit-type contracts in this state.
(5)
"Deposit-type contract" means contracts that do not incorporate
mortality or
morbidity risks and as may be specified in the valuation
manual.
(6) "Life
insurance" means contracts that incorporate mortality risk, including
annuity
and pure endowment contracts, and as may be specified in
the valuation manual.
(7) "NAIC" means
the National Association of Insurance Commissioners.
(8)
"Policyholder behavior" means any action a policyholder, contract
holder or any other
person with the right to elect options, such as a
certificate holder, may take under a policy or
contract subject to this chapter including, but not limited
to, lapse, withdrawal, transfer, deposit,
premium payment, loan, annuitization
, or benefit elections prescribed by the policy or contract,
but excluding events of mortality or morbidity that result
in benefits prescribed in their essential
aspects by the terms of the policy or contract.
(9)
"Principle-based valuation" means a reserve valuation that uses one
or more methods
or one or more assumptions determined by the insurer and
is required to comply with section 27-
4.5-14 as specified in the valuation manual.
(10) "Qualified
actuary" means an individual who is qualified to sign the applicable
statement of actuarial opinion in accordance with the
qualification standards for actuaries signing such statements and
who meets the requirements
specified in the valuation manual.
(11) "Tail
risk" means a risk that occurs either where the frequency of low
probability
events is higher than expected under a normal probability
distribution or where there are observed
events of very significant size or magnitude.
(12) "Valuation
manual" means the manual of valuation instructions adopted by the
NAIC as specified in this chapter or as subsequently
amended.
27-4.5-2.
Reserve valuation. -- (a) Policies and
contracts issued prior to the operative
date of the valuation manual:
(1) The
commissioner of insurance shall annually value, or cause to be valued, the
reserve liabilities, called "reserves" in this
chapter, for all outstanding life insurance policies and
annuity and pure endowment contracts of every life insurance
company doing business in this
state, and may certify the amount of any reserves,
specifying the mortality table or tables, rate or
rates of interest, and methods, net level premium method or
other, used in the calculation of the
reserves issued on or after January 1, 1994, and prior to
the operative date of the valuation
manual. In calculating the reserves, the commissioner may use
group methods and approximate
averages for fractions of a year or otherwise. In lieu of the
valuation of the reserves required in
this chapter of any foreign or alien company
companies, the commissioner may accept any the
valuation made or caused to be made by the insurance
supervisory official of any state or other
jurisdiction when the valuation complies with the minimum standard
provided in this chapter, and
if the official of the other state or jurisdiction
accepts as sufficient and for all valid legal purposes
the certificate of valuation of the commissioner of
insurance when the certificate states the
valuation to have been made in a specified manner according to
which the aggregate reserves
would be at least as large as if they had been computed in
the manner prescribed by the law of
that state or jurisdiction.
(2) The provisions set forth in sections 27-4.5-4, 27-4.5-4.1, 27-4.5-5, 27-4.5-5.1, 27-4.5-
6, 27-4.5-7, 27-4.5-8, 27-4.5-9, and 27-4.5-10 shall apply to all policies and contracts, as
appropriate, subject to this chapter issued on or after January 1, 1994 and prior to the operative
date of the valuation manual and the provisions set forth in sections 27-4.5-13 and 27-4.5-14 shall
not apply to any such policies and contracts.
(3) The minimum
standard for the valuation of policies and contracts issued prior to
January 1, 1994 shall be that provided by the laws in
effect immediately prior to that date.
(b) Policies and
contracts issued on or after the operative date of the valuation manual.
(1) The commissioner shall annually value, or cause to
be valued, the reserve liabilities
(hereinafter called reserves)
for all outstanding life insurance contracts, annuity and pure
endowment contracts, accident and health contracts, and
deposit-type contracts of every company
issued on or after the operative date of the valuation
manual. In lieu of the valuation of the
reserves required of a foreign or alien company, the
commissioner may accept a valuation made,
or caused to be made, by the insurance supervisory
official of any state or other jurisdiction when
the valuation complies with the minimum standard provided
in this chapter.
(2) The provisions
set forth in sections 27-4.5-13 and 27-4.5-14 shall apply to all policies
and contracts issued on or after the operative date of
the valuation manual.
27-4.5-3.
Actuarial opinion of reserves. -- (a) Actuarial
opinion prior to the operative
date of the valuation manual:
(1) General. -
Every life insurance company doing business in this state shall annually
submit the opinion of a qualified actuary as to whether the
reserves and related actuarial items
held in support of the policies and contracts specified by
the commissioner of insurance by
regulation are computed appropriately, are based on assumptions
which satisfy contractual
provisions, are consistent with prior reported amounts, and
comply with applicable laws of this
state. The commissioner of insurance by regulation shall
define the specifics of this opinion and
add any other items deemed to be necessary to its scope.
(b)(2)
Actuarial analysis of reserves and assets supporting the reserves. -
(1)(i) Every life insurance company, except as exempted by or
pursuant to regulation,
shall also annually include in the opinion required by
subsection (a) above an opinion of the same
qualified actuary as to whether the reserves and related
actuarial items held in support of the
policies and contracts specified by the commissioner of
insurance by regulation, when considered
in light of the assets held by the company with respect
to the reserves and related actuarial items,
including, but not limited to, the investment earnings on the
assets and the considerations
anticipated to be received and retained under the policies and
contracts, make adequate provision
for the company's obligations under the policies and
contracts, including, but not limited to, the
benefits under and expenses associated with the policies and
contracts.
(2)(ii)
The commissioner of insurance may provide by regulation for a transition period
for establishing any higher reserves that the qualified
actuary may deem necessary in order to
render the opinion required by this section.
(c)(3)
Requirement for opinion under subsection (b) subdivision (2) above.
- Each
opinion required by subdivision (2) shall be governed
by the following provisions:
(1)(i) A memorandum, in form and substance acceptable to
the commissioner of
insurance as specified by regulation, shall be prepared to
support each actuarial opinion; and
(2)(ii)
If the insurance company fails to provide a supporting memorandum at the
request
of the commissioner of insurance within a period
specified by regulation or the commissioner of
insurance determines that the supporting memorandum provided by
the insurance company fails
to meet the standards prescribed by the regulations or
is otherwise unacceptable to the
commissioner of insurance, the commissioner of insurance may
engage a qualified actuary at the
expense of the company to review the opinion and the basis for the opinion and prepare the
supporting memorandum required by the commissioner of insurance.
(d)(4)
Requirement for all opinions subject to subsection (a). - Every opinion required
by
subsection (a) shall
be governed by the following provisions:
(1)(i) The opinion shall be submitted with the annual
statement reflecting the valuation
of the reserve liabilities for each year ending on or
after December 31, 1994;
(2)(ii)
The opinion shall apply to all business in force including individual and group
health insurance plans, in a form and substance acceptable
to the commissioner of insurance as
specified by regulation;
(3)(iii)
The opinion shall be based on standards adopted by the actuarial standards
board
and on any additional standards as that commissioner of
insurance may by regulation prescribe;
(4)(iv) In the case of an opinion required to be
submitted by a foreign or alien company,
the commissioner of insurance may accept the opinion
filed by that company with the insurance
supervisory official of another state if the commissioner of
insurance determines that the opinion
reasonably meets the requirements applicable to a company
domiciled in this state;
(5)(v)
For the purposes of this section, "qualified actuary" means a member
in good
standing of the American
regulations;
(6)(vi) Except in cases of fraud or willful misconduct,
the qualified actuary shall not be
liable for damages to any person, other than the insurance
company and the commissioner of
insurance, for any act, error, omission, decision, or conduct with
respect to the actuary's opinion;
(7)(vii)
Disciplinary action by the commissioner of insurance against the company or the
qualified actuary shall be defined in regulations by the
commissioner of insurance; and
(8)(viii)
Except as provided in paragraphs (xii), (xiii) and (xiv) below, documents,
materials or other information in the possession or control of
the department of insurance that are
a Any memorandum in support of the opinion, and any other
material provided by the company
to the commissioner in connection with the memorandum,
shall be confidential and privileged,
shall not be subject to chapter 42-35, the company to the commissioner of insurance in
connection with the opinion, shall be kept confidential by the
commissioner of insurance and
shall not be made public and shall not be subject to subpoena, and shall not be
subject to
discovery or admissible in evidence as any private/civil
action. other
than for the purpose of
defending an action seeking damages from any person by reason
of any action required by this
section or by regulations promulgated under this section;
provided, that the memorandum or other
material may be released by the commissioner of insurance (i) with the written consent of the
company or (ii) to the
memorandum or other material is required for the purpose of
professional disciplinary
proceedings and setting forth procedures satisfactory to the
commissioner of insurance for
preserving the confidentiality of the memorandum or other
material. Once any portion of the
confidential memorandum is cited by the company in its marketing
or is cited before any
governmental agency other than a state insurance department or is
released by the company to the
news media, all portions of the confidential memorandum
shall be no longer confidential.
However, the commissioner is authorized to use the
documents, materials or other information in
the furtherance of any regulatory or legal action brought
as a part of the commissioner's official
duties.
(ix) Neither the
commissioner nor any person who received documents, materials or other
information while acting under the authority of the commissioner
shall be permitted or required to
testify in any private civil action concerning any
confidential documents, materials or information
subject to paragraph (viii).
(x) In order to
assist in the performance of the commissioner's duties, the commissioner:
(A) May share
documents, materials or other information, including the confidential and
privileged documents, materials or information subject to
paragraph (viii) with other state, federal
and international regulatory agencies, with the NAIC and
its affiliates and subsidiaries, and with
state, federal and international law enforcement
authorities, provided that the recipient agrees to
maintain the confidentiality and privileged status of the
document, material or other information;
(B) May receive
documents, materials or information, including otherwise confidential
and privileged documents, materials or information, from
the NAIC and its affiliates and
subsidiaries, and from regulatory and law enforcement officials of
other foreign or domestic
jurisdictions, and shall maintain as confidential or privileged any
document, material or
information received with notice or the understanding that it is
confidential or privileged under
the laws of the jurisdiction that is the source of the
document, material or information; and
(C) May enter into
agreements governing sharing and use of information consistent with
paragraphs (viii) through (x).
(xi) No waiver of any
applicable privilege or claim of confidentiality in the documents,
materials or information shall occur as a result of disclosure
to the commissioner under this
section or as a result of sharing as authorized in paragraph
(x).
(xii) A memorandum in
support of the opinion, and any other material provided by the
company to the commissioner in connection with the
memorandum, may be subject to subpoena
for the purpose of defending an action seeking damages
from the actuary submitting the
memorandum by reason of an action required by this section or by
regulations promulgated
hereunder.
(xiii) The memorandum
or other material may otherwise be released by the commissioner
with the written consent of the company or to the
stating that the memorandum or other material is required for
the purpose of professional
disciplinary proceedings and setting forth procedures satisfactory
to the commissioner for
preserving the confidentiality of the memorandum or other
material.
(xiv) Once any
portion of the confidential memorandum is cited by the company in its
marketing or is cited before a governmental agency other than a
state insurance department or is
released by the company to the news media, all portions of the
confidential memorandum shall be
no longer confidential.
(b) Actuarial opinion
of reserves after the operative date of the valuation manual.
(1) General. Every
company with outstanding life insurance contracts, accident and
health insurance contracts or deposit-type contracts in this
state and subject to regulation by the
commissioner shall annually submit the opinion of the appointed
actuary as to whether the
reserves and related actuarial items held in support of the
policies and contracts are computed
appropriately, are based on assumptions that satisfy contractual
provisions, are consistent with
prior reported amounts and comply with applicable laws of
this state. The valuation manual will
prescribe the specifics of this opinion including any items
deemed to be necessary to its scope.
(2) Actuarial
analysis of reserves and assets supporting reserves. Every company with
outstanding life insurance contracts, accident and health
insurance contracts or deposit-type
contracts in this state and subject to regulation by the
commissioner, except as exempted in the
valuation manual, shall also annually include in the opinion
required by subdivision (1) of this
section, an opinion of the same appointed actuary as to
whether the reserves and related actuarial
items held in support of the policies and contracts
specified in the valuation manual, when
considered in light of the assets held by the company with
respect to the reserves and related
actuarial items, including, but not limited to, the investment
earnings on the assets and the
considerations anticipated to be received and retained under the
policies and contracts, make
adequate provision for the company's obligations under the
policies and contracts, including but
not limited to the benefits under and expenses associated
with the policies and contracts.
(3) Requirements for
opinions subject to subdivision 27-4.5-3(b)(2). Each
opinion
required by subdivision 27-4.5-3(b)(2) shall be governed by
the following provisions:
(i)
A memorandum, in form and substance as specified in the valuation manual, and
acceptable to the commissioner, shall be prepared to support
each actuarial opinion.
(ii) If the insurance
company fails to provide a supporting memorandum at the request of
the commissioner within a period specified in the valuation
manual or the commissioner
determines that the supporting memorandum provided by the
insurance company fails to meet the
standards prescribed by the valuation manual or is otherwise
unacceptable to the commissioner,
the commissioner may engage a qualified actuary at the
expense of the company to review the
opinion and the basis for the opinion and prepare the
supporting memorandum required by the
commissioner.
(4) Requirement for
all opinions Subject to subsection 27-4.5-3(b). Every opinion shall
be governed by the following provisions:
(i)
The opinion shall be in form and substance as specified in the valuation manual
and
acceptable to the commissioner.
(ii) The opinion shall
be submitted with the annual statement reflecting the valuation of
such reserve liabilities for each year ending on or after
the operative date of the valuation manual.
(iii) The opinion
shall apply to all policies and contracts subject to subdivision 27-4.5-
3(b)(2), plus other actuarial
liabilities as may be specified in the valuation manual.
(iv)
The opinion shall be based on standards adopted from time to time
by the actuarial
standards board or its successor, and on such additional standards
as may be prescribed in the
valuation manual.
(v) In the case of an
opinion required to be submitted by a foreign or alien company, the
commissioner may accept the opinion filed by that company with the
insurance supervisory
official of another state if the commissioner determines that
the opinion reasonably meets the
requirements applicable to a company domiciled in this state.
(vi)
Except in cases of fraud or willful misconduct, the appointed
actuary shall not be
liable for damages to any person (other than the insurance
company and the commissioner) for
any act, error, omission, decision or conduct with
respect to the appointed actuary's opinion.
(vii) Disciplinary
action by the commissioner against the company or the appointed
actuary shall be defined in regulations by the commissioner.
27-4.5-4.
Computation of minimum standard. -- (a) Except as provided in this section,
section 27-4.5-4.1 and section 27-4.5-10, the The minimum
standard for valuation of all policies
and contracts described in section 27-4.5-2 shall be
consistent with the provisions of section 27-4-
17 issued
prior to the effective date of this chapter shall be that provided by the laws
in effect
immediately prior to that date. Except as otherwise provided in sections 27-4.5-4, 27-4.5-4.1 and
27-4.5-10, the minimum standard for the valuation of
all policies and contracts issued on or after
the effective date of this chapter and prior to the
effective date of the valuation manual shall be
the commissioners reserve valuation methods defined in
sections 27-4.5-5, 27-4.5-5.1, 27-4.5-8
and 27-4.5-10 and the following tables:
(b) The valuation of
all policies and contracts issued on or after January 1, 2000 shall be
subject to sections 27-4.5-4.1 and 27-4.5-10 and the
following tables:
(1) For ordinary
policies of life insurance issued on the standard basis:
(i)
The Commissioners 1980 Standard Ordinary Mortality Table;
(ii) At the election
of the company for any one or more specified plans of life insurance,
the Commissioners 1980 Standard Ordinary Mortality Table
with Ten (10) Year Select Mortality
Factors; or
(iii) Any ordinary
mortality table, adopted after 1980 by the NAIC, which is approved by
regulation promulgated by the commissioner for use in
determining the minimum standard of
valuation for such policies;
(2) For industrial
life insurance policies issued on the standard basis, excluding any
disability and accidental death benefits in the policies: the 1941
Standard Industrial Mortality
Table for policies issued prior to the operative date
of section 27-4.3-5.3, and for policies issued
on or after the operative date of section 27-4.3-5.3,
the Commissioners 1961 Standard Industrial
Mortality Table or any industrial mortality table
adopted after 1980 by the NAIC that is approved
by regulation promulgated by the commissioner for use in
determining the minimum standard of
valuation for the policies;
(b) The valuation of
all policies and contracts issued on or after January 1, 2000 shall be
subject to sections 27-4.5-4.1 and 27-4.5-10 and the
following tables:
(1) For individual
annuity and pure endowment contracts, excluding any disability and
accidental death benefits in those contracts, the Annuity 2000
Mortality Table or any individual
annuity mortality table adopted after 2000 by the National
Association of Insurance
Commissioners, that is approved by regulation promulgated by the
insurance commissioner for
use in determining the minimum standard of valuation for
those contracts;
(2) For all annuities
and pure endowments purchased under group annuity and pure
endowment contracts, excluding any disability and accidental
death benefits purchased under
those contracts, the 1994 Group Annuity Reserving Table, or
any group annuity mortality table
adopted after 2000 by the National Association of Insurance
Commissioners that is approved by
regulation promulgated by the insurance commissioner for use in
determining the minimum
standard of valuation for annuities and pure endowments, or
any modification of these tables
approved by the insurance commissioner; and
(c) For group life
insurance, life insurance issued on the substandard basis and other
special benefits and tables approved by the insurance
commissioner.
27-4.5-4.1.
Computation of minimum standard by calendar year of issue.
-- (a)
Applicability. - The
interest rates used in determining the minimum standards standard
for the
valuation of the following shall be calendar year statutory
valuation interest rates as defined in
this section:
(1) all life insurance policies issued in a particular calendar year
on or after January
1, 1994; (2) all individual annuity and pure
endowment contracts issued in a particular calendar
year on or after January 1, 1994; (3) all annuities
and pure endowments purchased in a particular
calendar year on or after January 1, 1994, under group annuity
and pure endowment contracts;
and (4) the net increase, if any, in a particular
calendar year after January 1, 1994, in amounts
held under guaranteed interest contracts; shall be the
calendar year statutory valuation interest
rates as defined in this section.
(b) Calendar year
statutory valuation interest rates. (1) The calendar year statutory
valuation interest rates, "I", shall be determined as
follows and the results rounded to the nearer
one-quarter of one percent (.25%) (1/4 of 1%),
where R1 is the lesser of R and .09, R2 is the
greater of R and .09, R is the reference interest rate as
defined in this section, and W is the
weighting factor as defined in this section:
(i)
For life insurance: I = .03 + W(R1 -.03) + W/2(R2
-.09) I=.03+W(R1-.03)+W/2(R2-
.09);
(ii) For single premium
immediate annuities and for annuity benefits involving life
contingencies arising from other annuities with cash settlement
options and from guaranteed
interest contracts with cash settlement options: I = .03 +
W(R1 -.03) I=.03+W(R-.03);
Where R1 is the lesser
of R and .09,
R2 is the greater of
R and .09,
R is the reference
interest rate defined in this section,
W is the weighting
factor defined in this section;
(iii) For other
annuities with cash settlement options and guaranteed interest contracts
with cash settlement options, valued on an issued issue
year basis, except as stated in subdivision
paragraph (b)(1)(ii)
above, the formula for life insurance stated in subdivision paragraph
(b)(1)(i)
above shall apply to annuities and guaranteed interest
contracts with guarantee durations in
excess of ten (10) years and the formula for single premium
immediate annuities stated in
subdivision paragraph (b)(1)(ii) above shall
apply to annuities and guaranteed interest contracts
with guarantee duration of ten (10) years or less;
(iv)
For other annuities with no cash settlement options and for guaranteed
interest
contracts with no cash settlement options, the formula for
single premium immediate annuities
stated in subdivision paragraph (b)(1)(ii)
above shall apply; and
(v) For other annuities
with cash settlement options and guaranteed interest contracts with
cash settlement options, valued on a change in fund basis,
the formula for single premium
immediate annuities stated in subdivision paragraph
(b)(1)(ii) above shall apply; and
(2) If However
if the calendar year statutory valuation interest rate for any life
insurance
policies issued in any calendar year determined without
reference to this subsection sentence
differs from the corresponding actual rate for similar
policies issued in the immediately preceding
calendar year by less than one-half of one percent (.5%)
(1/2 of 1%), the calendar year statutory
valuation interest rate for those the life
insurance policies shall be equal to the corresponding
actual rate for the immediately preceding calendar year.
For purposes of
applying the immediately preceding sentence, the calendar year statutory
valuation interest rate for life insurance policies issued in a
calendar year shall be determined for
1980 (using the reference interest rate defined in
1979) and shall be determined for each
subsequent calendar year regardless of when section 27-4.3-5
becomes operative.
(c) Weighting factors. -
(1) The weighting factors referred to in the formulas
stated in
subdivisions (b)(1)(i) and (ii) above are as follows given in the
following tables:
(i)
WEIGHTING FACTORS FOR LIFE INSURANCE:
Guarantee Duration
(Years) Weighting
Factors
10 or less .50
More than 10, but not
more than 20
.45
More than 20 .35
For life insurance, the
guarantee duration is the maximum number of years the life
insurance can remain in force on a basis guaranteed in the
policy or under options to convert to
plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in
the original policy;
(2)(ii)
Weighting factor for single premium immediate annuities and for annuity
benefits
involving life contingencies arising from other annuities with
cash settlement options and
guaranteed interest contracts with cash settlement options is
.80;
(3)(iii)
Weighting factors for other annuities and for guaranteed interest contracts,
except
as stated in subdivision (c)(2) paragraph (ii)
above, shall be as specified in paragraphs
subparagraphs (i)(A), (ii)(B)
and (iii)(C) in this subdivision below, according
to the rules and
definitions in paragraphs subparagraphs (iv)(D),
(v)(E) and (vi)(F) in this subdivision below:
(i)(A) For annuities and guaranteed
interest contracts valued on an issue year basis:
Guarantee Duration (Years) Weighting Factor for Plan
Type
A B C
5 or less: .80
.60 .50
More than 5, but not
more than 10: .75
.60 .50
More than 10, but not
more than 20: .65
.50 .45
More than 20: .45
.35 .35
(ii)(B)
For annuities and guaranteed interest contracts valued on a change in fund
basis,
the factors show in subdivision (c)(3) paragraph
(i) above increased by:
Plan Type
A B C
.15 .25 .05
(iii)(C) For
annuities and guaranteed interest contracts valued on an issued issue
year
basis, other than those with no cash settlement options,
which do not guarantee interest on
considerations received more than one year after issue or purchase
and for annuities and
guaranteed interest contracts valued on a change in fund basis which
that do not guarantee
interest rates on consideration considerations
received more than twelve (12) months beyond the
valuation date, the factors shown in subdivision (c)(3) paragraph
(i) or derived in subdivision
(c)(3) paragraph (ii) increased by:
Plan Type
A B C
.05 .05 .05
(iv)(D)
For other annuities with cash settlement options and guaranteed interest
contracts
with cash settlement options, the guarantee duration is
the number of years for which the contract
guarantees interest rates in excess of the calendar year
statutory valuation interest rate for life
insurance policies with guarantee durations in excess of twenty
(20) years. For other annuities
with no cash settlement options and for guaranteed
interest contracts with no cash settlement
options, the guaranteed duration is the number of years from
the date of issue or date of purchase
to the date annuity benefits are scheduled to commence;
(v)(E)
Plan Type as used in the tables in this subdivision is defined as follows:
(A)(I)
Plan Type A: At any time the policyholder may withdraw funds only (I) with an
adjustment to reflect changes in interest rates or asset values
since receipt of the funds by the
insurance company, or (II) without an adjustment but in
installments over five (5) years or more,
or (III) as an immediate life annuity, or (IV) no
withdrawal permitted;
(B)(II) Plan
Type B: Before expiration of the interest rate guarantee, the policyholder
may withdraw funds only (I) with an adjustment to reflect
changes in interest rates or asset values
since receipt of the funds by the insurance company, or
(II) without an adjustment but in
installments over five (5) years or more, or (III) no withdrawal
permitted. At the end of the
interest rate guarantee, funds may be withdrawn without the
an adjustment in a single sum or
installments over less than five (5) years; and
(C)(III)
Plan Type C: The policyholder Policyholder
may withdraw funds before the
expiration of interest rate guarantee in a single sum or
installments over less than five (5) years
either (I) without adjustment to reflect changes in interest
rates or asset values since receipt of the
funds by the insurance company, or (II) subject only to a
fixed surrender charge stipulated in the
contract as a percentage of the fund; and
(vi)(F)
A company may elect to value guaranteed interest contracts with cash settlement
options and annuities with cash settlement options on either
an issue year basis or on a change in
fund basis. Guaranteed interest contracts with no cash
settlement options and other annuities with
no cash settlement options must be valued on an issue
year basis. As used in this section, "issue
year basis of valuation" refers to a valuation basis
under which the interest rate used to determine
the minimum valuation standard for the entire duration of
the annuity or guaranteed interest
contract is the calendar year valuation interest rate for the
year of issue or year of purchase of the
annuity or guaranteed interest contract, and "change in
fund basis of valuation" refers to a
valuation basis under which the interest rate used to determine
the minimum valuation standard
applicable to each change in the fund held under the annuity or
guaranteed interest contract is the
calendar year valuation interest rate for the year of the
change in the fund.
(d) Reference interest
rate. - Reference interest rate referred to in subsection (b) is
defined as follows:
(1) For all life
insurance, the lesser of the average over a period of thirty-six (36) months
and the average over a period of twelve (12) months,
ending on June 30 of the calendar year next
preceding the year of issue, of the monthly average of the
composite yield on seasoned corporate
bonds, as published by Moody's Investors Service, Inc.;
(2) For single premium
immediate annuities and for annuity benefits involving life
contingencies arising from other annuities with cash settlement
options and guaranteed interest
contracts with cash settlement options, the average over a
period of twelve (12) months, ending
on June 30 of the calendar year of issue or year of purchase,
of the monthly average of the
composite yield on seasoned corporate bonds, as published by
Moody's Investors Service, Inc.;
(3) For other annuities
with cash settlement options and guaranteed interest contracts with
cash settlement options, valued on a year of issue basis,
except as stated in subdivision paragraph
(d)(2) above, with guarantee duration in excess of ten (10)
years, the lesser of the average over a
period of thirty-six (36) months and the average over a
period of twelve (12) months, ending on
June 30 of the calendar year of issue or purchase, of
the monthly average of the composite yield
on seasoned corporate bonds, as published by Moody's
Investors Service, Inc.;
(4) For other annuities
with cash settlement options and guaranteed interest contracts with
cash settlement options, valued on a year of issue basis,
except as stated in subdivision paragraph
(d)(2) above, with guarantee duration of ten (10) years or
less, the average over a period of twelve
(12) months, ending on June
30 of the calendar year of issue or purchase, of the monthly average
of the composite yield on seasoned corporate bonds, as
published by Moody's Investors Service,
Inc.;
(5) For other annuities
with no cash settlement options and for guaranteed interest
contracts with no cash settlement options, the average over a
period of twelve (12) months,
ending on June 30 of the calendar year of issue or purchase,
of the monthly average of the
composite yield on seasoned corporate bonds, as published by
Moody's Investors Service, Inc.;
and
(6) For other annuities
with cash settlement options and guaranteed interest contracts with
cash settlement options, valued on a change in fund basis,
except as stated in subdivision (d)(2),
the average over a period of twelve (12) months, ending
on June 30 of the calendar year of the
change in the fund, of the monthly average of the composite
yield on seasoned corporate bonds,
as published by Moody's Investors Service, Inc.
(e) Alternative method
for determining reference interest rates. - In the event that the
monthly average of the composite yield on seasoned corporate
bonds is no longer published by
Moody's Investors Service, Inc., or in the event that
the National Association of Insurance
Commissioners determines that the monthly average of
the composite yield on seasoned
corporate bonds as published by Moody's Investors Service, Inc.
is no longer appropriate for the
determination of the reference interest rate, then an alternative method
for determination of the
reference interest rate, which is adopted by the National
Association of Insurance Commissioners
and approved by regulation promulgated by the
commissioner of insurance, may be substituted.
27-4.5-5.
Reserve valuation method -- Life insurance and endowment benefits.
-- (a)
Except as provided in sections 27-4.5-5.1, 27-4.5-8
and 27-4.5-10, reserves according to the
commissioners' reserve valuation method for the life insurance and
endowment benefits of
policies providing for a uniform amount of insurance and
requiring the payment of uniform
premiums shall be the excess, if any, of the present value, at
the date of valuation, of the future
guaranteed benefits provided for by the policies therefor, over the then present value of any future
modified net premiums. The modified net premiums for any
policy shall be a the uniform
percentage of the respective contract premiums for the
benefits so such that the present value, at
the date of issue of the policy, of all modified net
premiums shall be equal to the sum of the then
present value of the benefits provided for by the policy and
the excess of (1) over (2), as follows:
(1) A net level annual
premium equal to the present value, at the date of issue, of the
benefits provided for after the first policy year, divided by
the present value, at the date of issue,
of an annuity of one per annum payable on the first and
each subsequent anniversary of the policy
on which a premium falls due; provided however,
that the net level annual premium shall not
exceed the net level annual premium on the nineteen (19)
year premium whole life plan for
insurance of the same amount at an age one year higher than the
age at issue of the policy; and
(2) A net one year term
premium for the benefits provided for in the first policy year.
(b) For any life
insurance policy issued on or after January 1, 1994 for which the contract
premium in the first policy year exceeds that of the second
year and for which no comparable
additional benefit is provided in the first year for the excess,
and which provides an endowment
benefit or a cash surrender value or a combination of them
in an amount greater than the excess
premium, the reserve according to the commissioner's reserve
valuation method as of any policy
anniversary occurring on or before the assumed ending date,
defined herein as the first policy
anniversary on which the sum of any endowment benefit and any
cash surrender value then
available is greater than the excess premium, shall, except as
provided in section 27-4.5-8, be the
greater of the reserve as of the policy anniversary
calculated as described in subsection (a) and the
reserve as of the policy anniversary calculated as described
in subsection (a), but with:
(1) the
value defined in subdivision subsection (a)(1) being
reduced by fifteen percent
(15%) of the amount of the such excess
first year premium,
(2) all
present values of benefits and premiums being determined without reference to
premiums or benefits provided for by the policy after the
assumed ending date,
(3) the
policy being assumed to mature on the that date as an endowment,
and
(4) the
cash surrender value provided on the that date being considered
as an endowment
benefit. In making the above comparison contained
in this subsection the mortality and interest
basis bases stated in sections 27-4.5-4 and
27-4.5-4.1 shall be used.
(c) Reserves according
to the commissioner's reserve valuation method shall be
calculated by a method consistent with the principles of the
preceding paragraphs of this section
for: (1) life insurance policies providing for a varying
amount of insurance or requiring the
payment of varying premiums; (2) group annuity and pure
endowment contracts purchased under
a retirement plan or plan of deferred compensation,
established or maintained by an employer
including a partnership or sole proprietorship or by an
employee organization, or by both, other
than a plan providing individual retirement accounts or
individual retirement annuities under 26
U.S.C. section 408 as now or hereafter amended;
(3) disability and accidental death benefits in all
policies and contracts; and (4) all other benefits, except
life insurance and endowment benefits in
life insurance policies and benefits provided by all other
annuity and pure endowment contracts;
shall be calculated by a method consistent with the
principles of subsections (a) and (b) of this
section.
27-4.5-6.
Minimum reserves. -- (a) In
no event shall a company's aggregate reserves for
all life insurance policies, excluding disability and
accidental death benefits, issued on or after
January 1, 1994, be less than the aggregate reserves
calculated in accordance with the methods set
forth in sections 27-4.5-5, 27-4.5-5.1, 27-4.5-8 and
27-4.5-9 and the mortality table or tables and
rate or rates of interest used in calculating nonforfeiture benefits for the policies.
(b) In no event shall the
aggregate reserves for all policies, contracts, and benefits be less
than the aggregate reserves determined by the qualified
appointed actuary to be necessary to
render the opinion required by section 27-4.5-3.
27-4.5-7.
Optional reserve calculation. -- (a) Reserves for
all policies and contracts
issued prior to January 1, 1994, may be calculated, at the
option of the company, according to any
standards that produce greater aggregate reserves for all
such policies and contracts than the
minimum reserves required by consistent with the laws in effect immediately
prior to that date.
(b) Reserves for any
category of policies, contracts, or benefits as established by the
commissioner of insurance, issued on or after the January 1, 1994,
may be calculated, at the
option of the company, according to any standards which
produce greater aggregate reserves for
the category than those calculated according to the
minimum standard provided in this chapter,
but the rate or rates of interest used for policies and
contracts, other than annuity and pure
endowment contracts, shall not be higher greater
than the corresponding rate or rates of interest
used in calculating any nonforfeiture
benefits provided in them the policies or contracts.
(c) Any A company which adopts at any time shall
have adopted any a standard of
valuation producing greater aggregate reserves than those
calculated according to the minimum
standard provided in this chapter may adopt a lower
standard of valuation, with the approval of
the commissioner of insurance, adopt any lower
standard of valuation, but not lower than the
minimum provided in this chapter; provided that, for the
purposes of this section, the holding of
additional reserves previously determined by a qualified the
appointed actuary to be necessary to
render the opinion required by section 27-4.5-3 shall not be
deemed to be the adoption of a higher
standard of valuation.
27-4.5-8. Reserve
calculation -- Valuation net premium exceeding the gross
premium charged. -- (a) If in any contract year the gross premium charged by the any
life
insurance company on
any policy or contract is less than the valuation net premium for the policy
or contract calculated by the method used in calculating
the reserve on it but using the minimum
valuation standards of mortality and rate of interest, the
minimum reserve required for the policy
or contract shall be the greater of either the reserve
calculated according to the mortality table,
rate of interest, and method actually used for the policy
or contract, or the reserve calculated by
the method actually used for the policy or contract but
using the minimum valuation standards of
mortality and rate of interest and replacing the valuation net
premium by the actual gross
premium in each contract year for which the valuation net
premium exceeds the actual gross
premium. The minimum valuation standards of mortality and
rate of interest referred to in this
section are those standards stated in sections 27-4.5-4 and
27-4.5-4.1.
(b) For any life
insurance policy issued on or after January 1, 1994, for which the gross
premium in the first policy year exceeds that of the second
year and for which no comparable
additional benefit is provided in the first year for the excess,
and which provides an endowment
benefit or a cash surrender value or a combination of them
in an amount greater than the excess
premium, the provisions of subsection (a) this
section shall be applied as if the method actually
used in calculating the reserve for the policy were the
method described in section 27-4.5-5,
ignoring section 27-4.5-5(b). The minimum reserve at each
policy anniversary of the such a
policy shall be the greater of the minimum reserve
calculated in accordance with section 27-4.5-5,
including section 27-4.5-5(b), and the minimum reserve
calculated in accordance with this
section.
27-4.5-9. Reserve
calculation -- Indeterminate premium plans. -- In the case of any
plan of life insurance which that provides
for future premium determination, the amounts of
which are to be determined by the insurance company based
on the then estimates of future
experience, or in the case of any plan of life insurance or
annuity which that is of such a nature
that the minimum reserves cannot be determined by the
methods described in sections 27-4.5-5,
27-4.5-5.1 and 27-4.5-8, the reserves which that
are held under that the plan must shall:
(1) Be appropriate in
relation to the benefits and the pattern of premiums for that plan;
and
(2) Be computed by a
method that is consistent with the principles of this chapter, as
determined by regulations promulgated by the commissioner of
insurance.
Notwithstanding any other
provision in the laws of this state, a policy, contract or
certificate providing life insurance under such a plan shall be
affirmatively approved by the
commissioner before it can be marketed, issued, delivered or used
in this state.
27-4.5-10. Minimum
standards for accident and sickness plans Minimum standards
for accident and health insurance contracts. -- The commissioner of insurance shall
promulgate a regulation containing the minimum standards
applicable to the valuation of accident
and sickness plans. For accident and health insurance contracts issued on or after the
operative
date of the valuation manual, the standard prescribed in
the valuation manual is the minimum
standard of valuation required under subsection 27-4.5-2(b).
For accident and health insurance
contracts issued on or after January 1, 1994 and prior to the
operative date of the valuation
manual the minimum standard of valuation is the standard
adopted by the commissioner by
regulation.
SECTION 3. Chapter 27-4.3 of the General Laws entitled
"The Standard Nonforfeiture
Law for Life
Insurance" is hereby amended by adding thereto the following section:
27-4.3-1.1.
Definitions. -- "Operative date of the
valuation manual" means January 1 of
the first calendar year that the valuation manual as
defined in chapter 27-4.5 is effective.
SECTION 4. Chapter 27-4.5 of the General Laws entitled
"The Standard Valuation Law"
is hereby amended by adding thereto the following
sections:
27-4.5-13.
Valuation manual for policies issued on or after the operative date of the
valuation manual. --
(a) For policies issued on or after the operative
date of the valuation
manual, the standard prescribed in the valuation manual is
the minimum standard of valuation
required under subsection 27-4.5-2(b), except as provided
under subsections (e) or (g) of this
section.
(b) The operative
date of the valuation manual is January 1 of the first calendar year
following the first July 1 as of which all of the following
have occurred:
(1) The valuation
manual has been adopted by the NAIC by an affirmative vote of at least
forty-two (42) members, or three-fourths (3/4) of the
members voting, whichever is greater.
(2) The Standard
Valuation Law, as amended by the NAIC in 2009, or legislation
including substantially similar terms and provisions, has been
enacted by states representing
greater than seventy-five percent (75%) of the direct
premiums written as reported in the
following annual statements submitted for 2008: life, accident
and health annual statements;
health annual statements; or fraternal annual statements.
(3) The Standard
Valuation Law, as amended by the NAIC in 2009, or legislation
including substantially similar terms and provisions, has been
enacted by at least forty-two (42)
of the following fifty-five (55) jurisdictions: The
fifty (50) States of the
Samoa, the American Virgin
Islands, the
(c) Unless a change
in the valuation manual specifies a later effective date, changes to the
valuation manual shall be effective on January 1 following the
date when all of the following
have occurred:
(1) The change to the
valuation manual has been adopted by the NAIC by an affirmative
vote representing:
(i)
At least three-fourths (3/4) of the members of the NAIC voting, but not less
than a
majority of the total membership, and
(ii) Members of the
NAIC representing jurisdictions totaling greater than seventy-five
percent (75%) of the direct premiums written as reported in
the following annual statements most
recently available prior to the vote in subsection (c)(1)(i): life, accident and health annual
statements, health annual statements, or fraternal annual
statements.
(2) The valuation
manual becomes effective pursuant to a regulation adopted by the
commissioner.
(d) The valuation
manual must specify all of the following:
(1) Minimum valuation
standards for and definitions of the policies or contracts subject
to subsection 27-4.5-2(b). Such minimum valuation
standards shall be:
(i)
The commissioner's reserve valuation method for life insurance contracts, other
than
annuity contracts, subject to subsection 27-4.5-2(b);
(ii) The
commissioner's annuity reserve valuation method for annuity contracts subject
to
subsection 27-4.5- 2(b); and
(iii) Minimum
reserves for all other policies or contracts subject to subsection 27-4.5-
2(b).
(2) Which policies or
contracts or types of policies or contracts that are subject to the
requirements of a principle-based valuation in subsection
27-4.5-14(a) and the minimum
valuation standards consistent with those requirements;
(3) For policies and
contracts subject to a principle-based valuation under section 27-4.5-
14:
(i)
Requirements for the format of reports to the commissioner under subdivision
27-4.5-
14(b)(2) and which shall include
information necessary to determine if the valuation is
appropriate and in compliance with this chapter;
(ii) Assumptions
shall be prescribed for risks over which the company does not have
significant control or influence.
(iii) Procedures for
corporate governance and oversight of the actuarial function, and a
process for appropriate waiver or modification of such
procedures.
(4) For policies not
subject to a principle-based valuation under section 27-4.5-14 the
minimum valuation standard shall either:
(i) Be consistent with the minimum standard of
valuation prior to the operative date of
the valuation manual; or
(ii) Develop reserves
that quantify the benefits and guarantees, and the funding,
associated with the contracts and their risks at a level of
conservatism that reflects conditions that
include unfavorable events that have a reasonable probability
of occurring.
(5) Other
requirements, including, but not limited to, those relating to reserve methods,
models for measuring risk, generation of economic scenarios,
assumptions, margins, use of
company experience, risk measurement, disclosure,
certifications, reports, actuarial opinions and
memorandums, transition rules and internal controls; and
(6) The data and form
of the data required under section 27-4.5-15, with whom the data
must be submitted, and may specify other requirements
including data analyses and reporting of
analyses.
(e) In the absence of
a specific valuation requirement or if a specific valuation
requirement in the valuation manual is not, in the opinion of the
commissioner, in compliance
with this chapter, then the company shall, with respect to
such requirements, comply with
minimum valuation standards prescribed by the commissioner by
regulation.
(f) The commissioner
may engage a qualified actuary, at the expense of the company, to
perform an actuarial examination of the company and opine on
the appropriateness of any reserve
assumption or method used by the company, or to review and opine
on a company's compliance
with any requirement set forth in this chapter. The
commissioner may rely upon the opinion,
regarding provisions contained within this chapter, of a
qualified actuary engaged by the
commissioner of another state, district or territory of the
subsection, term "engage" includes employment and
contracting.
(g) The commissioner
may require a company to change any assumption or method that
in the opinion of the commissioner is necessary in order
to comply with the requirements of the
valuation manual or this chapter; and the company shall adjust
the reserves as required by the
commissioner. The commissioner may take other disciplinary action
as permitted pursuant to
section 42-14-16.
27-4.5-14.
Requirements of a principle-based valuation. -- (a)
A company must
establish reserves using a principle-based valuation that meets
the following conditions for
policies or contracts as specified in the valuation manual:
(1) Quantify the
benefits and guarantees, and the funding, associated with the contracts
and their risks at a level of conservatism that reflects
conditions that include unfavorable events
that have a reasonable probability of occurring during the
lifetime of the contracts. For policies
or contracts with significant tail risk, reflects
conditions appropriately adverse to quantify the tail
risk.
(2) Incorporate
assumptions, risk analysis methods and financial models and management
techniques that are consistent with, but not necessarily
identical to, those utilized within the
company's overall risk assessment process, while recognizing
potential differences in financial
reporting structures and any prescribed assumptions or methods.
(3) Incorporate
assumptions that are derived in one of the following manners:
(i)
The assumption is prescribed in the valuation manual.
(ii) For assumptions
that are not prescribed, the assumptions shall:
(A) Be established
utilizing the company's available experience, to the extent it is
relevant and statistically credible; or
(B) To the extent
that company data is not available, relevant, or statistically credible, be
established utilizing other relevant, statistically credible
experience.
(4) Provide margins
for uncertainty including adverse deviation and estimation error,
such that the greater the uncertainty the larger the
margin and resulting reserve.
(b) A company using a
principle-based valuation for one or more policies or contracts
subject to this section as specified in the valuation manual
shall:
(1) Establish
procedures for corporate governance and oversight of the actuarial valuation
function consistent with those described in the valuation
manual.
(2) Provide to the
commissioner and the board of directors an annual certification of the
effectiveness of the internal controls with respect to the
principle-based valuation. Such controls
shall be designed to assure that all material risks inherent
in the liabilities and associated assets
subject to such valuation are included in the valuation, and
that valuations are made in accordance
with the valuation manual. The certification shall be
based on the controls in place as of the end
of the preceding calendar year.
(3) Develop, and file
with the commissioner upon request, a principle-based valuation
report that complies with standards prescribed in the
valuation manual.
(c) A principle-based
valuation may include a prescribed formulaic reserve component.
27-4.5-15.
Experience reporting for policies in force on or after the operative date of
the valuation manual. -- A company shall submit mortality, morbidity,
policyholder behavior, or
expense experience and other data as prescribed in the
valuation manual.
27-4.5-16.
Confidentiality. -- (a) For
purposes of this section, "confidential information"
shall mean:
(1) A memorandum in
support of an opinion submitted under section 27-4-3 and any
other documents, materials and other information,
including, but not limited to, all working
papers, and copies thereof, created, produced or obtained by
or disclosed to the commissioner or
any other person in connection with such memorandum;
(2) All documents,
materials and other information, including, but not limited to, all
working papers, and copies thereof, created, produced or
obtained by or disclosed to the
commissioner or any other person in the course of an examination
made under subsection 27-4.5-
13(f); provided, however, that if an examination
report or other material prepared in connection
with an examination made under chapter 27-13.1 is not held
as private and confidential
information under chapter 27-13.1, an examination report or other
material prepared in
connection with an examination made under subsection
27-4.5-13(f) of this chapter shall not be
"confidential
information" to the same extent as if such examination report or other
material had
been prepared in accordance with chapter 27-13.1;
(3) Any reports,
documents, materials and other information developed by a company in
support of, or in connection with, an annual certification by
the company under subdivision 27-
4.5- 14(b)(1) of this chapter
evaluating the effectiveness of the company's internal controls with
respect to a principle-based valuation and any other
documents, materials and other information,
including, but not limited to, all working papers, and copies
thereof, created, produced or
obtained by or disclosed to the commissioner or any other
person in connection with such reports,
documents, materials and other information;
(4) Any
principle-based valuation report developed under subdivision 27-4.5-14(b)(2)
and any other documents, materials and other information,
including, but not limited to, all
working papers, and copies thereof, created, produced or
obtained by or disclosed to the
commissioner or any other person in connection with such report;
and
(5) Any documents,
materials, data and other information submitted by a company under
section 27-4.5- 15 (collectively, "experience
data") and any other documents, materials, data and
other information, including, but not limited to, all working
papers, and copies thereof, created or
produced in connection with such experience data, in each case
that include any potentially
company-identifying or personally identifiable information, that is
provided to or obtained by the
commissioner (together with any "experience data", the
"experience materials") and any other
documents, materials, data and other information, including,
but not limited to, all working
papers, and copies thereof, created, produced or obtained by
or disclosed to the commissioner or
any other person in connection with such experience
materials.
(b) Privilege for,
and confidentiality of, confidential information.
(1) Except as
provided in this section 27-4.5-16, a company's confidential information is
confidential by law and privileged, and shall not be subject to
chapter 38-2, shall not be subject to
subpoena and shall not be subject to discovery or admissible
in evidence in any private civil
action; provided, however, that the commissioner is
authorized to use the confidential information
in the furtherance of any regulatory or legal action
brought against the company as a part of the
commissioner's official duties.
(2) Neither the
commissioner nor any person who received confidential information
while acting under the authority of the commissioner shall
be permitted or required to testify in
any private civil action concerning any confidential
information.
(3) In order to
assist in the performance of the commissioner's duties, the commissioner
may share confidential information: (i)
With other state, federal and international regulatory
agencies and with the NAIC and its affiliates and
subsidiaries; and (ii) In the case of confidential
information specified in subdivisions 27-4.5-16(a)(1) and
27-4.5-16(a)(4) only, with the actuarial
board for counseling and discipline or its successor upon
request stating that the confidential
information is required for the purpose of professional
disciplinary proceedings and with state,
federal and international law enforcement officials; in the
case of subsections (a) and (b),
provided, that, such recipient agrees, and has the legal
authority to agree, to maintain the
confidentiality and privileged status of such documents, materials,
data and other information in
the same manner and to the same extent as required for
the commissioner.
(4) The commissioner
may receive documents, materials, data and other information,
including otherwise confidential and privileged documents,
materials, data or information, from
the NAIC and its affiliates and subsidiaries, from
regulatory or law enforcement officials of other
foreign or domestic jurisdictions and from the actuarial
board for counseling and discipline or its
successor and shall maintain as confidential or privileged any
document, material, data or other
information received with notice or the understanding that it is
confidential or privileged under
the laws of the jurisdiction that is the source of the
document, material or other information.
(5) The commissioner
may enter into agreements governing sharing and use of
information consistent with subsection 27-4.5-16(b).
(6) No waiver of any applicable
privilege or claim of confidentiality in the confidential
information shall occur as a result of disclosure to the
commissioner under this section or as a
result of sharing as authorized in subdivision
27-4.5-16(b)(3).
(7) A privilege established
under the law of any state or jurisdiction that is substantially
similar to the privilege established under subsection
27-4.5-16(b) shall be available and enforced
in any proceeding in, and in any court of, this state.
(8) In section 27-4.5-16
"regulatory agency," "law enforcement agency" and the
"NAIC"
include, but are not limited to, their employees, agents,
consultants and contractors.
(c) Notwithstanding
subsection 27-4.5-16(b), any confidential information specified in
subdivisions 27-4.5-16(a)(1) and 27-4.5-14(a)(4):
(1) May be subject to
subpoena for the purpose of defending an action seeking damages
from the appointed actuary submitting the related
memorandum in support of an opinion
submitted under section 27-4.5-3 or principle-based valuation
report developed under subdivision
27-4.5-14(b)(3) by reason of
an action required by this chapter or by regulations promulgated
hereunder;
(2) May otherwise be
released by the commissioner with the written consent of the
company; and
(3) Once any portion
of a memorandum in support of an opinion submitted under section
27-4.5-3 or a principle-based valuation report
developed under subdivision 27-4.5-14(b)(3) is
cited by the company in its marketing or is publicly volunteered
to or before a governmental
agency other than a state insurance department or is
released by the company to the news media,
all portions of such memorandum or report shall no longer
be confidential.
27-4.5-17.
Single state exemption. -- (a) The commissioner may exempt specific product
forms or product lines of a domestic company that is
licensed and doing business only in Rhode
Island from the requirements of section 27-4.5-13
provided:
(1) The commissioner
has issued an exemption in writing to the company and has not
subsequently revoked the exemption in writing; and
(2) The company
computes reserves using assumptions and methods used prior to the
operative date of the valuation manual in addition to any
requirements established by the
commissioner and promulgated by regulation.
(b) For any company
granted an exemption under this section, and sections 27-4.5-3, 27-
4.5-4, 27-4.5-4.1, 27-4.5-4.2, 27-4.5-5, 27-4.5-5.1,
27-4.5-6, 27-4.5-7, 27-4.5-8, 27-4.5-9 and 27-
4.5-10 shall be applicable. With respect to any
company applying this exemption, any reference
to section 27-4.5-13 found in sections 27-4.5-3,
27-4.5-4, 27-4.5-4.1, 27-4.5-4.2, 27-4.5-5, 27-
4.5-5.1, 27-4.5-6, 27-4.5-7, 27-4.5-8, 27-4.5-9 and
27-4.5-10 shall not be applicable.
SECTION 5. Sections 27-4-17, 27-4-18, 27-4-19, 27-4-20 and
27-4-21 of the General
Laws in Chapter 27-4
entitled "Life Insurance Policies and Reserves" are hereby repealed.
27-4-17.
Annual valuation of policies and reserves. --
(a) The director of business
regulation shall make annual valuations of all outstanding
policies, additions to policies, unpaid
dividends, and all other obligations of every life insurance
corporation doing business in this
state. All valuations made by the director, or by his or
her authority, shall be made upon the net
premium basis. The legal minimum standard for valuation of
contracts issued before January 1,
1907, shall be the American experience table of mortality
with the interest at four percent (4%)
per annum, and for contracts issued on or after that date
the same table of mortality with interest
at three and one-half percent (3 1/2%) per annum. Any
company may adopt as a legal minimum
standard, for the valuation of life insurance policies issued
on or after January 1, 1948, the
commissioners reserve valuation method, with interest at three and
one-half percent (3 1/2%) per
annum, or in the case of policies issued on or after April 17,
1975, four percent (4%) per annum
for policies issued prior to April 27, 1979, and four and
one-half percent (4 1/2%) per annum for
policies issued on or after April 27, 1979, and either the
commissioners 1941 standard ordinary
mortality table or the commissioners 1958 standard ordinary
mortality table for ordinary policies,
and either the 1941 standard industrial mortality table
or the commissioners 1961 standard
industrial mortality table or any industrial mortality table,
adopted after 1980 by the National
Association of Insurance Commissioners, that is
approved by regulation promulgated by the
commissioner for use in determining the minimum standard of
valuation for industrial policies,
for industrial policies in lieu of the legal minimum standard
allowed by this section. (b) The
interest rates used in determining the minimum standard for
the valuation of all life insurance
policies issued in a particular calendar year on or after May
15, 1981, shall be the calendar year
statutory valuation interest rates as defined in this section.
(c) (1) The calendar year statutory
valuation interest rates shall be determined as follows and the
results rounded to the nearer one-
quarter of one percent (.25%): For life insurance: = I = .03
+ W (R1 -.03) + W/2 (R1 -.09);
where R1 is the lesser of R and .09, R2 is the greater of R
and .09, R is the reference interest rate
defined in this section, and W is the weighting factor
defined in this section; (2) If the calendar
year statutory valuation interest rate for any life
insurance policies issued in any calendar year
determined without reference to subdivision (c)(1) differs from
the corresponding actual rate for
similar policies issued in the immediately preceding calendar
year by less than one-half of one
percent (.5%), the calendar year statutory valuation interest
rate for these life insurance policies
shall be equal to the corresponding actual rate for the
immediately preceding calendar year. For
the purposes of applying the provisions in this subdivision,
the calendar year statutory valuation
interest rate for life insurance policies issued in a calendar
year shall be determined for 1980
using the reference interest rate defined for 1979 and
shall be determined for each subsequent
calendar year. (3) The weighting factors referred to in the
formula stated in subdivision (c)(1) are
given in the following table:
Weighting Factors for
Life Insurance: Guarantee Duration
Weighting (Years) Factors
10 or less .50 More than 10, but not more than 20 .45
More than 20 .35 For life insurance,
the guarantee duration is the maximum number of years the
life insurance can remain in force on
a basis guaranteed in the policy or under options to
convert to plans of life insurance with
premium rates or non-forfeiture values or both which are
guaranteed in the original policy.
(4) The reference
interest rate referred to in subdivision (c)(1) shall
be defined as
follows: (i) For all life
insurance, the lesser of the average over a period of thirty-six (36) months
and the average over a period of twelve (12) months,
ending on June 30 of the calendar year next
preceding the year of issue, of Moody's corporate bond yield
average -- monthly average
corporates, as published by Moody's Investors Service, Inc., or
any successor; or (ii) In the event
that the Moody's corporate bond yield average -- monthly
average corporates is no longer
published by Moody's Investors Service, Inc., or in the event
that the National Association of
Insurance Commissioners determines that the Moody's
corporate bond yield average -- monthly
average corporates, as published by
Moody's Investors Service, Inc., is no longer appropriate for
the determination of the reference interest rate, then an
alternative method for determination of
the references interest rate, which is adopted by the
National Association of Insurance
Commissioners and approved by regulation promulgated
by the commissioner, may be
substituted. (d) The mortality table used in determining the minimum
standard for the valuation
of ordinary life insurance policies issued on or after
May 15, 1981, shall be: (1) The
commissioners 1980 standard ordinary mortality table; (2) At the
election of the company for
any one or more specified plans of life insurance, the
commissioners 1980 standard ordinary
mortality table with ten (10) year select mortality factors; or
(3) Any ordinary mortality table,
adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by
regulation promulgated by the commissioner for use in
determining the minimum standard of
valuation for these policies. (e) Reserves for any category of
policies or contracts may be
calculated, at the option of the insurer, according to any
standard or standards which produce
greater aggregate reserves for all policies or contracts than
the legal minimum standard or
standards.
27-4-18.
Variance from valuation standards. --
The director of business regulation may
vary the standards of interest and mortality in the case
of corporations from foreign countries as
to contracts issued by these corporations in countries
other than the
particular cases of invalid lives and other extra hazards, and value
policies seriatim or in groups,
use approximate averages for fractions of a year and
otherwise, and accept the valuation of the
department of insurance of any other state or country if made
upon the basis of, and according to,
standards not lower than required or authorized by sections
27-4-17 -- 27-4-20, in place of the
valuation required by sections 27-4-17 -- 27-4-20.
27-4-19.
Valuation of bonds and fixed obligation investments.
-- All bonds or other
evidences of debt having a fixed term and rate held by any life
insurance company, assessment
life association, or fraternal beneficiary association
authorized to do business in this state, may, if
amply secured and not in default as to principal or
interest, be valued as follows: if purchased at
par, at the par value; and if purchased above or below
par, on the basis of the purchase price
adjusted so as to bring the value to par at maturity and so as
to yield in the meantime the effective
rate of interest at which the purchase was made; provided,
that the purchase price shall in no case
be taken at a higher figure than the actual market value
at the time of purchase; and provided, that
the director of business regulation shall have full
discretion in determining the method of
calculating values according to this rule.
27-4-20.
Employment of actuary to make valuation -- Acceptance of valuation by
company. --
For the purpose of making a valuation, the director of business regulation may
employ a competent actuary to do the valuation, who shall be
paid by the company for which the
services are rendered, but nothing in this chapter shall
prevent any company from making the
valuation contemplated in this section, which may be received
by the director upon the proof that
he or she may determine. The expense of procuring that
proof shall be paid by the company.
27-4-21.
Certificate of compliance with reserve requirements.
-- Upon the valuation
being made as provided in sections 27-4-17 -- 27-4-20, the
director of business regulation shall
issue a certificate setting forth the corporate name of the
company, its principal office, that it has
fully complied with the provisions of this chapter, stating
the amount of the net reserve value of
outstanding policies and the table upon which that value is
computed, and that it is authorized to
transact the business of life insurance in this state.
SECTION 6. This act shall take effect upon passage.
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LC01413/SUB A
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