Senate Bill No. 420
(By Senators Helmick, Ross, Prezioso, Fanning and Kessler)
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[Introduced February 6, 1998; referred to the Committee
on Banking and Insurance; and then to the Committee on the
Judiciary.]
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A BILL to amend and reenact section nine, article seven, chapter
thirty-three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, relating to authorizing the
insurance commissioner to make an emergency rule amending
the effective date of the legislative rule that appears as
title one hundred fourteen, series forty-nine in the code of
state rules; and with respect to that emergency rule,
altering certain requirements imposed by article three,
chapter twenty-nine-a of said code.
Be it enacted by the Legislature of West Virginia:
That section nine, article seven, chapter thirty-three of
the code of West Virginia, one thousand nine hundred thirty-one,
as amended, be amended and reenacted to read as follows:
ARTICLE 7. ASSETS AND LIABILITIES.
§33-7-9. Standard valuation law.
(a) Title. -- This section shall be known as the standard
valuation law.
(b) Reserve valuation. -- The commissioner shall annually
value, or cause to be valued, the reserve liabilities
(hereinafter called reserves) 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 such 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 such reserves. In
calculating such reserves, he may use group methods and
approximate averages for fractions of a year or otherwise. In
lieu of the valuation of the reserves herein required of any
foreign or alien company, he may accept any valuation made, or
caused to be made, by the insurance supervisory official of any
state or other jurisdiction when such valuation complies with the
minimum standard herein provided and if the official of such
state or jurisdiction accepts as sufficient and for all valid
legal purposes the certificate of valuation of the commissioner
when such 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.
(c) Actuarial opinion of reserves. -- This subsection shall
become operative on the first day of January, one thousand nine
hundred ninety-six.
(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 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 by regulation shall define
the specifics of this opinion and add any other items deemed to
be necessary to its scope.
(2) Actuarial analysis of reserves and assets supporting
such reserves. --
(A) Every life insurance company, except as exempted by or
pursuant to regulation, shall also annually include in the
opinion required by subdivision (1) of this subsection, 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 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.
(B) The commissioner may provide by regulation for a
transition period for establishing any higher reserves which the
qualified actuary may deem necessary in order to render the
opinion required by this subsection.
(3) Requirement for opinion under subdivision (2). -- Each
opinion required by subdivision (2) of this subsection shall be
governed by the following provisions:
(A) A memorandum in form and substance acceptable to the
commissioner as specified by regulation shall be prepared to
support each actuarial opinion.
(B) If the insurance company fails to provide a supporting
memorandum at the request of the commissioner within a period
specified by regulation or the commissioner 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, 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 such supporting
memorandum as is required by the commissioner.
(4) Requirement for all opinions. -- Every opinion shall be
governed by the following provisions:
(A) The opinion shall be submitted with the annual statement
reflecting the valuation of such reserve liabilities for each
year ending on or after the thirty-first day of December, one
thousand nine hundred ninety-five.
(B) The opinion shall apply to all business in force,
including individual and group health insurance plans, in form
and substance acceptable to the commissioner as specified by
regulation.
(C) The opinion shall be based on standards adopted from
time to time by the actuarial standards board and on such
additional standards as the commissioner may by regulation
prescribe.
(D) 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.
(E) For the purposes of this section, "qualified actuary"
means a member in good standing of the American academy of
actuaries who meets the requirements set forth in such
regulations.
(F) 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) for any
act, error, omission, decision or conduct with respect to the
actuary's opinion.
(G) Disciplinary action by the commissioner against the
company or the qualified actuary shall be defined in regulations
by the commissioner.
(H) Any memorandum in support of the opinion, and any other
material provided by the company to the commissioner in
connection therewith, shall be kept confidential by the
commissioner and shall not be made public and shall not be
subject to subpoena, 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 hereunder:
Provided, That the memorandum or other material may otherwise be
released by the commissioner: (i) With the written consent of
the company; or (ii) to the American academy of actuaries upon
request 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. 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.
(d) Computation of minimum standards. -- Except as otherwise
provided in subsections (e), (f) and (m) of this section, the
minimum standard for the valuation of all such policies and
contracts issued prior to the effective date of this section
shall be that provided by the laws in effect immediately prior to
such date. Except as otherwise provided in subsections (e), (f)
and (m) of this section, the minimum standard for the valuation
of all such policies and contracts issued on or after the
effective date of this section shall be the commissioners reserve
valuation methods defined in subsections (g), (h), (k) and (m) of
this section, three and one-half percent interest, or in the case
of life insurance policies and contracts, other than annuity and
pure endowment contracts, issued on or after the first day of
June, one thousand nine hundred seventy-four, four percent
interest for such policies issued prior to the sixth day of
April, one thousand nine hundred seventy-seven, five and one-half
percent interest for single premium life insurance policies and
four and one-half percent interest for all other such policies
issued on and after the sixth day of April, one thousand nine
hundred seventy-seven, and the following tables:
(1) For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death
benefits in such policies: The commissioners 1941 standard
ordinary mortality table for such policies issued prior to the
operative date of subsection (4a), section thirty, article
thirteen of this chapter, the commissioners 1958 standard
ordinary mortality table for such policies issued on or after the
operative date of said subsection and prior to the operative date
of subsection (4c) of said section: Provided, That for any
category of such policies issued on female risks, all modified
net premiums and present values referred to in this section may
be calculated according to an age not more than six years younger
than the actual age of the insured; and for such policies issued
on or after the operative date of subsection (4c), section
thirty, article thirteen of this chapter: (i) The commissioners
1980 standard ordinary mortality table; or (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-year select mortality factors; or (iii) any
ordinary mortality table, adopted after the year one thousand
nine hundred eighty 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 such policies.
(2) For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death
benefits in such policies: The 1941 standard industrial
mortality table for such policies issued prior to the operative
date of subsection (4b), section thirty, article thirteen of this
chapter, and for such policies issued on or after such operative
date, the commissioners 1961 standard industrial mortality table
or any industrial mortality table, adopted after the year one
thousand nine hundred eighty 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 such policies.
(3) For individual annuity and pure endowment contracts,
excluding any disability and accidental death benefits in such
policies: The 1937 standard annuity mortality table, or at the
option of the company, the annuity mortality table for 1949,
ultimate, or any modification of either of these tables approved
by the commissioner.
(4) For group annuity and pure endowment contracts,
excluding any disability and accidental death benefits in such
policies: The group annuity mortality table for 1951, any
modification of such table approved by the commissioner, or at
the option of the company, any of the tables or modifications of
tables specified for individual annuity and pure endowment
contracts.
(5) For total and permanent disability benefits in or
supplementary to ordinary policies or contracts: For policies or
contracts issued on or after the first day of January, one
thousand nine hundred sixty-six, the tables of period two
disablement rates and the 1930 to 1950 termination rates of the
1952 disability study of the society of actuaries, with due
regard to the type of benefit or any tables of disablement rates
and termination rates adopted after the year one thousand nine
hundred eighty by the national association of insurance
commissioners, that are approved by regulation promulgated by the
commissioner for use in determining the minimum standard of
valuation for such policies; for policies or contracts issued on
or after the first day of January, one thousand nine hundred
sixty-one, and prior to the first day of January, one thousand
nine hundred sixty-six, either such tables or, at the option of
the company, the Class (3) disability table (1926); and for
policies issued prior to the first day of January, one thousand
nine hundred sixty-one, the Class (3) disability table (1926).
Any such table shall, for active lives, be combined with a
mortality table permitted for calculating the reserves for life
insurance policies.
(6) For accidental death benefits in or supplementary to
policies issued on or after the first day of January, one
thousand nine hundred sixty-six, the 1959 accidental death benefits table or any accidental death benefits table adopted
after the year one thousand nine hundred eighty 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 such policies, for policies
issued on or after the first day of January, one thousand nine
hundred sixty-one, and prior to the first day of January, one
thousand nine hundred sixty-six, either such table or, at the
option of the company, the inter-company double indemnity
mortality table; and for policies issued prior to the first day
of January, one thousand nine hundred sixty-one, the
inter-company double indemnity mortality table. Either table
shall be combined with a mortality table for calculating the
reserves for life insurance policies.
(7) For group life insurance, life insurance issued on the
substandard basis and other special benefits: Such tables as may
be approved by the commissioner.
(e) Computation of minimum standard for annuities. -- Except
as provided in subsection (f) of this section, the minimum
standard for the valuation of all individual annuity and pure
endowment contracts issued on or after the operative date of this
subsection, as defined herein, and for all annuities and pure
endowments purchased on or after such operative date under group
annuity and pure endowment contracts, shall be the commissioner's reserve valuation methods defined in subsections (g) and (h) of
this section and the following tables and interest rates:
(1) For individual annuity and pure endowment contracts
issued prior to the sixth day of April, one thousand nine
hundred seventy-seven, excluding any disability and accidental
death benefits in such contracts: The 1971 individual annuity
mortality table, or any modification of this table approved by
the commissioner, and six percent interest for single premium
immediate annuity contracts and four percent interest for all
other individual annuity and pure endowment contracts;
(2) For individual single premium immediate annuity
contracts issued on or after the sixth day of April, one thousand
nine hundred seventy-seven, excluding any disability and
accidental death benefits in such contracts: The 1971 individual
annuity mortality table or any individual annuity mortality
table, adopted after the year one thousand nine hundred eighty 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 such contracts,
or any modification of these tables approved by the commissioner,
and seven and one-half percent interest;
(3) For individual annuity and pure endowment contracts
issued on or after the sixth day of April, one thousand nine
hundred seventy-seven, other than single premium immediate annuity contracts, excluding any disability and accidental death
benefits in such contracts: The 1971 individual annuity
mortality table or any individual annuity mortality table adopted
after the year one thousand nine hundred eighty 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 such contracts, or any
modification of these tables approved by the commissioner, and
five and one-half percent interest for single premium deferred
annuity and pure endowment contracts and four and one-half
percent interest for all other such individual annuity and pure
endowment contracts;
(4) For all annuities and pure endowments purchased prior to
the sixth day of April, one thousand nine hundred seventy-seven,
under group annuity and pure endowment contracts, excluding any
disability and accidental death benefits purchased under such
contracts: The 1971 group annuity mortality table, or any
modification of this table approved by the commissioner, and six
percent interest;
(5) For all annuities and pure endowments purchased on or
after the sixth day of April, one thousand nine hundred
seventy-seven, under group annuity and pure endowment contracts,
excluding any disability and accidental death benefits purchased
under such contracts: The 1971 group annuity mortality table, or any group annuity mortality table adopted after the year one
thousand nine hundred eight, 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 such annuities and pure
endowments, or any modification of these tables approved by the
commissioner, and seven and one-half percent interest.
After the third day of June, one thousand nine hundred
seventy-four, any company may file with the commissioner a
written notice of its election to comply with the provisions of
this subsection after a specified date before the first day of
January, one thousand nine hundred seventy-nine, which shall be
the operative date of this subsection for such company, provided,
if a company makes no such election, the operative date of this
section for such company shall be the first day of January, one
thousand nine hundred seventy-nine.
(f) Computation of minimum standard by calendar year of
issue. --
(1) Applicability of this subsection. -- The interest rates
used in determining the minimum standard for the valuation of:
(A) All life insurance policies issued in a particular
calendar year, on or after the operative date of subsection (4c),
section thirty, article thirteen of this chapter as amended;
(B) All individual annuity and pure endowment contracts issued in a particular calendar year on or after the first day of
January, one thousand nine hundred eighty-two;
(C) All annuities and pure endowments purchased in a
particular calendar year on or after the first day of January,
one thousand nine hundred eighty-two, under group annuity and
pure endowment contracts; and
(D) The net increase, if any, in a particular calendar year
after the first day of January, one thousand nine hundred
eighty-two, in amounts held under guaranteed interest contracts,
shall be the calendar year statutory valuation interest rates as
defined in this subsection.
(2) Calendar year statutory valuation interest rates. --
(A) 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:
(i) For life insurance,
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(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 subsection,
and 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 issue year basis, except as stated in subparagraph
(ii) of this paragraph, the formula for life insurance stated in
subparagraph (i) of this paragraph shall apply to annuities and
guaranteed interest contracts with guarantee durations in excess
of ten years and the formula for single premium immediate
annuities stated in subparagraph (ii) of this paragraph shall
apply to annuities and guaranteed interest contracts with
guarantee duration of ten 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 subparagraph (ii) of this paragraph shall apply;
(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 subparagraph (ii) of this paragraph
shall apply.
(B) However, if the calendar year statutory valuation
interest rate for any life insurance policies issued in any
calendar year determined without reference to this 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 the calendar year statutory valuation
interest rate for such 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 the year one thousand nine hundred
eighty (using the reference interest rate defined for the year
one thousand nine hundred seventy-nine) and shall be determined
for each subsequent calendar year regardless of when subsection
(4c), section thirty, article thirteen of this chapter, as
amended, becomes operative.
(3) Weighting factors. --
(A) The weighting factors referred to in the formulas stated
above are given in the following tables:
(i) Weighting Factors for Life Insurance:
Guarantee
DurationWeighting
(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 nonforfeiture values or both
which are guaranteed in the original policy;
(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: .80;
(iii) Weighting factors for other annuities and for
guaranteed interest contracts, except as stated in subparagraph
(ii) of this paragraph, shall be as specified in clauses (I),
(II) and (III) below, according to the rules and definitions in
clauses (IV), (V) and (VI) below:
(I) For annuities and guaranteed interest contracts valued
on an issue year basis:
GuaranteeWeighting Factor
Durationfor Plan Type
(Years) 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) For annuities and guaranteed interest contracts valued
on a change in fund basis, the factors shown in subparagraph (i)
of this paragraph increased by:
Weighting Factor
for Plan Type
A B C1
.15 .25 .05
(III) For annuities and guaranteed interest contracts valued
on an 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 do not guarantee interest rates on
considerations received more than twelve months beyond the
valuation date, the factors shown in (I) or derived in (II)
increased by:
Weighting Factor
for Plan Type
A B C1
.05 .05 .05
(IV) 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 duration in excess of twenty 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) Plan type as used in the above tables is defined as
follows:
Plan Type A:
At any time policyholder may withdraw funds only: (1) With
an adjustment to reflect changes in interest rates or asset
values since receipt of the funds by the insurance company; or
(2) without such adjustment but in installments over five years
or more; or (3) as an immediate life annuity; or (4) no
withdrawal permitted;
Plan Type B:
Before expiration of the interest rate guarantee,
policyholder may withdraw funds only: (1) With an adjustment to
reflect changes in interest rates or asset values since receipt
of the funds by the insurance company; or (2) without such
adjustment but in installments over five years or more; or (3) no
withdrawal permitted. At the end of interest rate guarantee,
funds may be withdrawn without such adjustment in a single sum or
installments over less than five years;
Plan Type C:
Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less
than five years either: (1) Without adjustment to reflect
changes in interest rates or asset values since receipt of the
funds by the insurance company; or (2) subject only to a fixed
surrender charge stipulated in the contract as a percentage of
the fund.
(VI) 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, an 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 the 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.
(4) Reference interest rate. --
(A) Reference interest rate referred to in subparagraph
(ii), paragraph (A), subdivision (2) of this subsection shall be
defined as follows:
(i) For all life insurance, the lesser of the average over
a period of thirty-six months and the average over a period of
twelve months, ending on the thirtieth day of June 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.
(ii) 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 months, ending on the thirtieth day of June 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.
(iii) 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 subparagraph
(ii) of this paragraph, with guarantee duration in excess of ten
years, the lesser of the average over a period of thirty-six
months and the average over a period of twelve months, ending on
the thirtieth day of June 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.
(iv) 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 (ii) above,
with guarantee duration of ten years or less, the average over a
period of twelve months, ending on the thirtieth day of June 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.
(v) 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 months, ending on
the thirtieth day of June 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.
(vi) 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
subparagraph (ii) of this paragraph, the average over a period of
twelve months, ending on the thirtieth day of June 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.
(5) 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, may be substituted.
(g) Reserve valuation method -- life insurance and endowment
benefits.--
Except as otherwise provided in subsections (h), (k) and (m)
of this section, 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 such
future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums
therefor. The modified net premiums for any such policy shall be
such uniform percentage of the respective contract premiums for
such benefits that the present value, at the date of issue of the
policy, of all such modified net premiums shall be equal to the
sum of the then present value of such benefits provided for by
the policy and the excess of subdivision (1) over subdivision
(2), as follows:
(1) A net level annual premium equal to the present value,
at the date of issue, of such 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 such policy on which a premium
falls due: Provided, That such net level annual premium shall
not exceed the net level annual premium on the nineteen year
premium whole life plan for insurance of the same amount at an
age one year higher than the age at issue of such policy.
(2) A net one year term premium for such benefits provided
for in the first policy year: Provided, That for any life
insurance policy issued on or after the first day of January, one
thousand nine hundred eighty-five, 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 such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount
greater than such excess premium, the reserve according to the
commissioners' 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 such excess premium shall, except as
otherwise provided in subsection (k) of this section, be the
greater of the reserve as of such policy anniversary calculated
as described in the preceding paragraph and the reserve as of
such policy anniversary calculated as described in that
paragraph, but with: (i) The value defined in subdivision (1) of
that paragraph being reduced by fifteen percent of the amount of
such excess first year premium; (ii) 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; (iii) the policy being assumed to mature on such
date as an endowment; and (iv) the cash surrender value provided
on such date being considered as an endowment benefit. In making
the above comparison the mortality and interest bases stated in
subsections (d) and (f) of this section shall be used.
Reserves according to the commissioners' reserve valuation
method for: (i) Life insurance policies providing for a varying
amount of insurance or requiring the payment of varying premiums; (ii) 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 Section 408 of the Internal
Revenue Code (26 U.S.C. §408), as now or hereafter amended; (iii)
disability and accidental death benefits in all policies and
contracts; and (iv) 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 the
preceding paragraphs of this section.
(h) Reserve valuation method -- annuity and pure endowment
benefits. --
This subsection shall apply to all annuity and pure
endowment contracts other than 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
Section 408 of the Internal Revenue Code (26 U.S.C. §408), as now
or hereafter amended.
Reserves according to the commissioners' annuity reserve
method for benefits under annuity or pure endowment contracts,
excluding any disability and accidental death benefits in such
contracts, shall be the greatest of the respective excesses of
the present values, at the date of valuation, of the future
guaranteed benefits, including guaranteed nonforfeiture benefits,
provided for by such contracts at the end of each respective
contract year, over the present value, at the date of valuation,
of any future valuation considerations derived from future gross
considerations, required by the terms of such contract, that
become payable prior to the end of such respective contract year.
The future guaranteed benefits shall be determined by using the
mortality table, if any, and the interest rate, or rates,
specified in such contracts for determining guaranteed benefits.
The valuation considerations are the portions of the respective
gross considerations applied under the terms of such contracts to
determine nonforfeiture values.
(i) Minimum reserves. --
(1) In no event shall a company's aggregate reserves for all
life insurance policies, excluding disability and accidental
death benefits, issued on or after the effective date of this
section, be less than the aggregate reserves calculated in
accordance with the methods set forth in subsections (g), (h),
(k) and (l) of this section and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture
benefits for such policies.
(2) In no event shall the aggregate reserves for all
policies, contracts and benefits be less than the aggregate
reserves determined by the qualified actuary to be necessary to
render the opinion required by subsection (c) of this section.
(j) Optional reserve calculation. --
Reserves for all policies and contracts issued prior to the
effective date of this section may be calculated, at the option
of the company, according to any standards which produce greater
aggregate reserves for all such policies and contracts than the
minimum reserves required by the laws in effect immediately prior
to such date.
Reserves for any category of policies, contracts or benefits
as established by the commissioner, issued on or after the
effective date of this section, may be calculated, at the option
of the company, according to any standards which produce greater
aggregate reserves for such category than those calculated
according to the minimum standard herein provided, but the rate
or rates of interest used for policies and contracts, other than
annuity and pure endowment contracts, shall not be higher than
the corresponding rate or rates of interest used in calculating
any nonforfeiture benefits provided therein.
Any such company which at any time shall have adopted any standard of valuation producing greater aggregate reserves than
those calculated according to the minimum standard herein
provided may, with the approval of the commissioner, adopt any
lower standard of valuation, but not lower than the minimum
herein provided: Provided, That for the purposes of this
section, the holding of additional reserves previously determined
by a qualified actuary to be necessary to render the opinion
required by subsection (c) of this section shall not be deemed to
be the adoption of a higher standard of valuation.
(k) Reserve calculation -- valuation net premium exceeding
the gross premium charged. --
If in any contract year the gross premium charged by 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 thereon but using the
minimum valuation standards of mortality and rate of interest,
the minimum reserve required for such 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
such policy or contract, or the reserve calculated by the method
actually used for such 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 subsections (d) and (f) of this
section: Provided, That for any life insurance policy issued on
or after the first day of January, one thousand nine hundred
eighty-five, 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 such excess
and which provides an endowment benefit or a cash surrender value
or a combination thereof in an amount greater than such excess
premium, the foregoing provisions of this subsection shall be
applied as if the method actually used in calculating the reserve
for such policy were the method described in subsection (g) of
this section, ignoring the second paragraph of said subsection.
The minimum reserve at each policy anniversary of such a policy
shall be the greater of the minimum reserve calculated in
accordance with said subsection, including the second paragraph
of that section, and the minimum reserve calculated in accordance
with this subsection.
(l) Reserve calculation -- indeterminate premium plans. --
In the case of any plan of life insurance which provides for
future premium determination, the amounts of which are to be
determined by the insurance company based on then estimates of
future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves
cannot be determined by the methods described in subsections (g),
(h) and (k) of this section, the reserves which are held under
any such plan must:
(1) Be appropriate in relation to the benefits and the
pattern of premiums for that plan; and
(2) Be computed by a method which is consistent with the
principles of this standard valuation law, as determined by
regulations promulgated by the commissioner.
(m) Minimum standards for health (disability, accident and
sickness) plans. --
The commissioner shall promulgate a regulation containing
the minimum standards applicable to the valuation of health
(disability, sickness and accident) plans.
(n) The commissioner shall promulgate a rule on or before
the first day of November, one thousand nine hundred ninety-five,
prescribing the guidelines and standards for statements of
actuarial opinion which are to be submitted in accordance with
subsection (c) of this section and for memoranda in support
thereof; guidelines and standards for statements of actuarial
opinion which are to be submitted when a company is exempt from
subdivision (2), subsection (c) of the standard valuation law;
and rules applicable to the appointment of an appointed actuary.
(o) Effective date. --
All acts and parts of acts inconsistent with the provision
of this section are hereby repealed as of the effective date of
this section. This section shall take effect the first day of
January, one thousand nine hundred ninety-six.
(p) Within one hundred and eighty days of the effective date
of this subsection, the commissioner shall make, by the
procedures for the making of emergency legislative rules set
forth in article three, chapter twenty-nine of this code an
emergency legislative rule amending the effective date of the
legislative rule designated title one hundred fourteen, series
forty-nine in the code of state rules: Provided, That for the
purposes of applying those requirements to a rule made pursuant
to the subsection, an emergency sufficient to justify the making
of the rule shall be considered to exist, notwithstanding any
contrary finding by the secretary of state or the attorney
general: Provided, however, That amendments made pursuant to
this subsection shall be effective retroactively to the first day
of January, one thousand nine hundred ninety-eight: Provided
further, That amendments made pursuant to this subsection shall
be effective for eighteen months or until the occurrence of one
of the events set forth in subdivisions (2) through (5), section
fifteen, article three, chapter twenty-nine-a of this code.
Amendments made though a rule made pursuant to this subsection
may accomplish no other purpose than changing the effective date of the legislative rule designated title one hundred fourteen,
series forty-nine in the code of state rules to the following:
the first day of January of the calendar year immediately
following the adoption of substantially similar requirements by
states with an aggregate population of at least fifty-one percent
of the total population of the United States of America,
according to the most recent General Federal Census.
NOTE: The purpose of this bill is to authorize the
insurance commissioner to make an emergency rule amending the
effective date of the legislative rule that appears as Title 114,
Series 49 of the code of state rules.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.