State Codes and Statutes

Standard Valuation Law.

(a) This section shall be known as the Standard Valuation Law.

(b) 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 insurer doing business in this state and the commissioner may certify the amount of the reserves, specifying the mortality table or tables, rate or rates of interest, and methods (net level premium method or others) used in the calculation of the reserves. In calculating 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 title of any foreign or alien insurer, the commissioner may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when valuation complies with the minimum standard provided in this section, and if the official of the state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the commissioner 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. The commissioner, in making any valuation, may use the actuary of the department or employ an actuary for the purpose, and the reasonable compensation and expenses of the actuary, at a rate approved by the commissioner, upon demand by the commissioner, supported by an itemized statement of the compensation and expenses, shall be paid by the insurer. When a domestic insurer furnishes the commissioner with a valuation of its outstanding policies as computed by its own actuary or by an actuary deemed satisfactory for the purpose by the commissioner, the valuation shall be verified by the actuary of the department.

(c) This subsection shall become operative January 1, 1998.

(1) GENERAL. Every life insurer 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 THE RESERVES.

a. Every life insurer, except as exempted pursuant to regulation, shall also annually include in the opinion required by subdivision (1) of this subsection (c), 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 insurer'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 higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this subsection (c).

(3) REQUIREMENT FOR OPINION UNDER SUBDIVISION (2). Each opinion required by subdivision (2) of this subsection (c) 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 insurer 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 insurer 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 the actuary shall prepare the 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 the reserve liabilities for each year ending on or after December 31, 1996.

b. The opinion shall apply to all business in force including individual and group health insurance plans. The form and substance shall comply with regulation of the commissioner.

c. The opinion shall be based on standards adopted, from time to time, by the Actuarial Standards Board and on any 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 insurer, the commissioner may accept the opinion filed by that insurer 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 subsection, "qualified actuary" means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in the regulations.

f. Disciplinary action by the commissioner against the insurer or the qualified actuary shall be defined by regulation of the commissioner.

g. Any memorandum in support of the opinion, and any other material included by the insurer to the commissioner, 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 prosecuting an action seeking damages from any person by reason of any action required by this section or by regulations promulgated hereunder. Except the memorandum or other material may otherwise be released by the commissioner: (i) with the written consent of the insurer, 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 insurer in its marketing or is cited before any governmental agency other than a state insurance department or is released by the insurer to the news media, all portions of the confidential memorandum shall be no longer confidential.

(d)(1) Except as otherwise provided in subdivisions (2) and (3) of this subsection and in subsection (k), the minimum standard for the valuation of all the policies and contracts issued prior to May 28, 1996, shall be that provided by the laws in effect immediately prior to May 28, 1996.

Except as otherwise provided in subdivisions (2) and (3) of this subsection and in subsection (k), the minimum standard for the valuation of all policies and contracts issued on or after May 28, 1996, shall be the commissioner's reserve valuation method defined in subsections (e), (i), and (k) 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 August 23, 1976, four percent interest for the policies issued prior to July 30, 1979, and five and one-half percent interest for single premium life insurance policies and four and one-half percent interest for all other policies issued on or after July 30, 1979, and the following tables:

a. For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in the policies, the commissioner's 1958 Standard Ordinary Mortality Table for the policies issued on or after the operative date of subsection (j) of the Standard Nonforfeiture Law for Life Insurance, as amended; and prior to the operative date of Section 5c of the Standard Nonforfeiture Law for Life Insurance as amended, except, that for any category of the 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 three years younger than the actual age of the insured; and for policies issued on or after the operative date of subsection (j) of the Standard Nonforfeiture Law for Life Insurance, as amended:

1. The commissioner's 1980 Standard Ordinary Mortality Table; or

2. At the election of the insurer for any one or more specified plans of life insurance, the commissioner's 1980 Standard Ordinary Mortality Table with 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 the policies.

b. For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in the policies, the commissioner's 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 the policies;

c. For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies, the 1937 Standard Annuity Mortality Table or, at the option of the insurer, the Annuity Mortality Table For 1949, ultimate, or any modification of either of these tables approved by the commissioner;

d. For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies, the Group Annuity Mortality Table For 1951, any modification of the table approved by the commissioner or, at the option of the insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts;

e. For total and permanent disability benefits in, or supplementary to, ordinary policies or contracts for policies or contracts issued on or after January 1, 1972, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of 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 1980 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 the policies; for policies or contracts issued prior to January 1, 1972, either of the tables or, at the option of the insurer, the Class (3) Disability Table (1926). Any table shall, for active lives, be combined with a mortality table permitted for calculating the reserve for life insurance policies;

f. For accidental death benefits in or supplementary to policies, for policies issued on or after January 1, 1972, the 1959 Accidental Death Benefits Table or any accidental death benefits 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 the policies; for policies issued prior to January 1, 1972, the intercompany double indemnity mortality table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies;

g. For group life insurance, life insurance issued on the substandard basis and other special benefits, the tables as may be approved by the commissioner.

(2) Except as provided in subdivision (3) of this subsection, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after May 28, 1996, and for all annuities and pure endowments purchased on or after the operative date under group annuity and pure endowment contracts, shall be the commissioner's reserve valuation methods defined in subsection (e) of this section and the following tables and interest rates:

a. For individual annuity and pure endowment contracts issued prior to July 30, 1979, excluding any disability and accidental death benefits in the 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;

b. For individual single premium immediate annuity contracts issued on or after July 30, 1979, excluding any disability and accidental death benefits in the contracts, the 1971 Individual Annuity Mortality Table or any individual annuity 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 the contracts, or any modification of these tables approved by the commissioner, and seven and one-half percent interest;

c. For individual annuity and pure endowment contracts issued on or after July 30, 1979, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in the contracts, the 1971 Individual Annuity Mortality Table or any individual annuity 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 the 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 individual annuity and pure endowment contracts;

d. For all annuities and pure endowments purchased prior to July 30, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts, the 1971 Group Annuity Mortality Table, or any modification of this table approved by the commissioner, and six percent interest;

e. For all annuities and pure endowments purchased on or after July 30, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts, the 1971 Group Annuity Mortality Table or any group annuity 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 such annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.

After August 23, 1976, any insurer may file with the commissioner a written notice of its election to comply with this subdivision after a specified date but before January 1, 1980, which shall be the operative date of this subdivision for the insurer. If an insurer makes no election, the operative date of this subdivision for such insurer shall be January 1, 1980.

(3)a. The interest rates used in determining the minimum standard for the valuation of:

1. all life insurance policies issued in a particular calendar year, on or after the operative date of subsection (j) of the Standard Nonforfeiture Law for Life Insurance;

2. all individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982;

3. all annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts; and

4. the net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts; shall be the calendar year statutory valuation interest rates as defined in this subdivision.

b.1. The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearest one-quarter of one percent:

(i) For life insurance,

(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,

(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 item (ii) of this paragraph, the formula for life insurance stated in item (i) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years and the formula for single premium immediate annuities stated in item (ii) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee duration of 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 item (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 item (ii) of this paragraph shall apply.

2. 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 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 for 1979) and shall be determined for each subsequent calendar year regardless of when subsection (j) of the Standard Nonforfeiture Law for Life Insurance becomes operative.

c. The weighting factors referred to in the formulas stated in paragraph b. of this subsection are given in the following tables:

1. Weighting Factors for Life Insurance

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. 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:

3. Weighting factors for other annuities and for guaranteed interest contracts, except as stated in subparagraph 2. of this paragraph, shall be as specified in tables in items (i), (ii), and (iii) below, according to the rules and definitions in items (iv), (v), and (vi) below:

(i) For annuities and guaranteed interest contracts valued on an issue year basis:

(ii) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in item (i) of this subparagraph increased by:

(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 12 months beyond the valuation date, the factors shown in item (i) of this subparagraph or derived in item (ii) of this subparagraph increased by:

(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 20 years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee 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 insurer, or (2) without the 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 insurer, or (2) without the 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 the 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 insurer or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(vi) An insurer 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 subdivision, 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. 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.

d. The reference interest rate referred to in paragraph b. of this subdivision shall be defined as follows:

1. For all life insurance, the lesser of the average over a period of 36 months and the average over a period of 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.

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 12 months, ending on June 30 of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, 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 subparagraph 2. of this paragraph, with guarantee duration in excess of 10 years, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates 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 subparagraph 2. of this paragraph, with guarantee duration of 10 years or less, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates 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 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.

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 subparagraph 2. of this paragraph, the average over a period of 12 months, ending on June 30 of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average - Monthly Average Corporates as published by Moody's Investors Service, Inc.

e. In the event that 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 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 reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by regulation promulgated by the commissioner, may be substituted.

(e)(1) Except as otherwise provided in subdivisions (3) and (4) of this subsection and in subsections (i) and (k) of this section, reserves according to the commissioner's 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 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 the benefits, excluding extra premiums on a substandard policy, 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 benefits provided for by the policy and the excess of paragraph a. over paragraph b. of this subdivision as follows:

a. 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 percent per annum payable on the first and each subsequent anniversary of the policy on which a premium falls due; however, the net level annual premium shall not exceed the net level annual premium on the 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

b. A net one-year term premium for the benefits provided for in the first policy year; provided, that for any life insurance policy issued on or after January 1, 1985, 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 thereof in an amount greater than the excess premium, the reserve according to the commissioner's reserve valuation method on the 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 otherwise provided in subsection (i) of this section, be the greater of the reserve on the policy anniversary, calculated pursuant to the preceding paragraph and the reserve as of the policy anniversary calculated pursuant to the preceding paragraph, except the following: (i) the value defined in subparagraph a. of that paragraph being reduced by 15 percent of the amount of 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 the date as an endowment; and (iv) the cash surrender value provided on the date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in subsection (d) of this section, shall be used.

(2) Reserves according to the commissioner's reserve valuation method for:

a. Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums;

b. Group annuity and pure endowment contracts purchased under a retirement plan or a 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, as now or hereafter amended;

c. Disability and accidental death benefits in all policies and contracts; and

d. 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 subdivision (1) of this subsection.

(3) Subdivision (4) of 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, as now or hereafter amended.

(4) Reserves according to the commissioner's annuity reserves method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in the 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 the 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 the contract, that become payable prior to the end of the 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 the contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contracts to determine nonforfeiture values.

(f)(1) In no event shall an insurer's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after January 1, 1972, be less than the aggregate reserves calculated in accordance with the methods set forth in subsections (e), (i), and (j) of this section and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for the 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).

(g)(1) Reserves for all policies and contracts issued prior to January 1, 1972, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for all policies and contracts than the minimum reserves required by the laws in effect immediately prior to that date.

(2) Reserves for any category of policies, contracts, or benefits issued on or after January 1, 1972, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for the category than those calculated according to the minimum standard provided in this section, 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 for therein.

(h) An insurer which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this section may, with the approval of the commissioner, adopt any lower standard of valuation, but not lower than the minimum provided in this section.

(i) If in any contract year the gross premium charged by any life insurer on any policy or contract issued on or after January 1, 1972, 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 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 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 subsection are those standards stated in subsections (c) and (d) of this section.

Any life insurance policy issued on or after January 1, 1985, 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 thereof in an amount greater than excess premium, the foregoing provisions of this subsection shall be applied as if the method actually used in calculating the reserve for the policy were the method described in subdivisions (1) and (2) of subsection (e) of this section, ignoring the second paragraph of subdivision (1) of subsection (e) of this section. The minimum reserve at each policy anniversary of the policy shall be the greater of the minimum reserve calculated in accordance with subsection (e) of this section, including the second paragraph of subdivision (1) of subsection (e) of this section, and the minimum reserve calculated in accordance with this subsection.

(j) 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 insurer based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of a nature that the minimum reserves cannot be determined by the methods described in subsections (e) and (i) of this section, the reserves which are held under any plan shall comply with all of the following:

(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.

(k) The commissioner shall promulgate a regulation containing the minimum standards applicable to the valuation of health (disability, sickness, and accident) plans.

State Codes and Statutes

Standard Valuation Law.

(a) This section shall be known as the Standard Valuation Law.

(b) 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 insurer doing business in this state and the commissioner may certify the amount of the reserves, specifying the mortality table or tables, rate or rates of interest, and methods (net level premium method or others) used in the calculation of the reserves. In calculating 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 title of any foreign or alien insurer, the commissioner may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when valuation complies with the minimum standard provided in this section, and if the official of the state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the commissioner 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. The commissioner, in making any valuation, may use the actuary of the department or employ an actuary for the purpose, and the reasonable compensation and expenses of the actuary, at a rate approved by the commissioner, upon demand by the commissioner, supported by an itemized statement of the compensation and expenses, shall be paid by the insurer. When a domestic insurer furnishes the commissioner with a valuation of its outstanding policies as computed by its own actuary or by an actuary deemed satisfactory for the purpose by the commissioner, the valuation shall be verified by the actuary of the department.

(c) This subsection shall become operative January 1, 1998.

(1) GENERAL. Every life insurer 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 THE RESERVES.

a. Every life insurer, except as exempted pursuant to regulation, shall also annually include in the opinion required by subdivision (1) of this subsection (c), 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 insurer'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 higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this subsection (c).

(3) REQUIREMENT FOR OPINION UNDER SUBDIVISION (2). Each opinion required by subdivision (2) of this subsection (c) 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 insurer 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 insurer 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 the actuary shall prepare the 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 the reserve liabilities for each year ending on or after December 31, 1996.

b. The opinion shall apply to all business in force including individual and group health insurance plans. The form and substance shall comply with regulation of the commissioner.

c. The opinion shall be based on standards adopted, from time to time, by the Actuarial Standards Board and on any 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 insurer, the commissioner may accept the opinion filed by that insurer 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 subsection, "qualified actuary" means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in the regulations.

f. Disciplinary action by the commissioner against the insurer or the qualified actuary shall be defined by regulation of the commissioner.

g. Any memorandum in support of the opinion, and any other material included by the insurer to the commissioner, 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 prosecuting an action seeking damages from any person by reason of any action required by this section or by regulations promulgated hereunder. Except the memorandum or other material may otherwise be released by the commissioner: (i) with the written consent of the insurer, 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 insurer in its marketing or is cited before any governmental agency other than a state insurance department or is released by the insurer to the news media, all portions of the confidential memorandum shall be no longer confidential.

(d)(1) Except as otherwise provided in subdivisions (2) and (3) of this subsection and in subsection (k), the minimum standard for the valuation of all the policies and contracts issued prior to May 28, 1996, shall be that provided by the laws in effect immediately prior to May 28, 1996.

Except as otherwise provided in subdivisions (2) and (3) of this subsection and in subsection (k), the minimum standard for the valuation of all policies and contracts issued on or after May 28, 1996, shall be the commissioner's reserve valuation method defined in subsections (e), (i), and (k) 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 August 23, 1976, four percent interest for the policies issued prior to July 30, 1979, and five and one-half percent interest for single premium life insurance policies and four and one-half percent interest for all other policies issued on or after July 30, 1979, and the following tables:

a. For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in the policies, the commissioner's 1958 Standard Ordinary Mortality Table for the policies issued on or after the operative date of subsection (j) of the Standard Nonforfeiture Law for Life Insurance, as amended; and prior to the operative date of Section 5c of the Standard Nonforfeiture Law for Life Insurance as amended, except, that for any category of the 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 three years younger than the actual age of the insured; and for policies issued on or after the operative date of subsection (j) of the Standard Nonforfeiture Law for Life Insurance, as amended:

1. The commissioner's 1980 Standard Ordinary Mortality Table; or

2. At the election of the insurer for any one or more specified plans of life insurance, the commissioner's 1980 Standard Ordinary Mortality Table with 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 the policies.

b. For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in the policies, the commissioner's 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 the policies;

c. For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies, the 1937 Standard Annuity Mortality Table or, at the option of the insurer, the Annuity Mortality Table For 1949, ultimate, or any modification of either of these tables approved by the commissioner;

d. For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies, the Group Annuity Mortality Table For 1951, any modification of the table approved by the commissioner or, at the option of the insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts;

e. For total and permanent disability benefits in, or supplementary to, ordinary policies or contracts for policies or contracts issued on or after January 1, 1972, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of 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 1980 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 the policies; for policies or contracts issued prior to January 1, 1972, either of the tables or, at the option of the insurer, the Class (3) Disability Table (1926). Any table shall, for active lives, be combined with a mortality table permitted for calculating the reserve for life insurance policies;

f. For accidental death benefits in or supplementary to policies, for policies issued on or after January 1, 1972, the 1959 Accidental Death Benefits Table or any accidental death benefits 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 the policies; for policies issued prior to January 1, 1972, the intercompany double indemnity mortality table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies;

g. For group life insurance, life insurance issued on the substandard basis and other special benefits, the tables as may be approved by the commissioner.

(2) Except as provided in subdivision (3) of this subsection, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after May 28, 1996, and for all annuities and pure endowments purchased on or after the operative date under group annuity and pure endowment contracts, shall be the commissioner's reserve valuation methods defined in subsection (e) of this section and the following tables and interest rates:

a. For individual annuity and pure endowment contracts issued prior to July 30, 1979, excluding any disability and accidental death benefits in the 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;

b. For individual single premium immediate annuity contracts issued on or after July 30, 1979, excluding any disability and accidental death benefits in the contracts, the 1971 Individual Annuity Mortality Table or any individual annuity 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 the contracts, or any modification of these tables approved by the commissioner, and seven and one-half percent interest;

c. For individual annuity and pure endowment contracts issued on or after July 30, 1979, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in the contracts, the 1971 Individual Annuity Mortality Table or any individual annuity 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 the 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 individual annuity and pure endowment contracts;

d. For all annuities and pure endowments purchased prior to July 30, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts, the 1971 Group Annuity Mortality Table, or any modification of this table approved by the commissioner, and six percent interest;

e. For all annuities and pure endowments purchased on or after July 30, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts, the 1971 Group Annuity Mortality Table or any group annuity 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 such annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.

After August 23, 1976, any insurer may file with the commissioner a written notice of its election to comply with this subdivision after a specified date but before January 1, 1980, which shall be the operative date of this subdivision for the insurer. If an insurer makes no election, the operative date of this subdivision for such insurer shall be January 1, 1980.

(3)a. The interest rates used in determining the minimum standard for the valuation of:

1. all life insurance policies issued in a particular calendar year, on or after the operative date of subsection (j) of the Standard Nonforfeiture Law for Life Insurance;

2. all individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982;

3. all annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts; and

4. the net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts; shall be the calendar year statutory valuation interest rates as defined in this subdivision.

b.1. The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearest one-quarter of one percent:

(i) For life insurance,

(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,

(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 item (ii) of this paragraph, the formula for life insurance stated in item (i) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years and the formula for single premium immediate annuities stated in item (ii) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee duration of 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 item (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 item (ii) of this paragraph shall apply.

2. 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 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 for 1979) and shall be determined for each subsequent calendar year regardless of when subsection (j) of the Standard Nonforfeiture Law for Life Insurance becomes operative.

c. The weighting factors referred to in the formulas stated in paragraph b. of this subsection are given in the following tables:

1. Weighting Factors for Life Insurance

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. 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:

3. Weighting factors for other annuities and for guaranteed interest contracts, except as stated in subparagraph 2. of this paragraph, shall be as specified in tables in items (i), (ii), and (iii) below, according to the rules and definitions in items (iv), (v), and (vi) below:

(i) For annuities and guaranteed interest contracts valued on an issue year basis:

(ii) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in item (i) of this subparagraph increased by:

(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 12 months beyond the valuation date, the factors shown in item (i) of this subparagraph or derived in item (ii) of this subparagraph increased by:

(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 20 years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee 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 insurer, or (2) without the 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 insurer, or (2) without the 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 the 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 insurer or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(vi) An insurer 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 subdivision, 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. 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.

d. The reference interest rate referred to in paragraph b. of this subdivision shall be defined as follows:

1. For all life insurance, the lesser of the average over a period of 36 months and the average over a period of 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.

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 12 months, ending on June 30 of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, 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 subparagraph 2. of this paragraph, with guarantee duration in excess of 10 years, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates 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 subparagraph 2. of this paragraph, with guarantee duration of 10 years or less, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates 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 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.

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 subparagraph 2. of this paragraph, the average over a period of 12 months, ending on June 30 of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average - Monthly Average Corporates as published by Moody's Investors Service, Inc.

e. In the event that 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 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 reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by regulation promulgated by the commissioner, may be substituted.

(e)(1) Except as otherwise provided in subdivisions (3) and (4) of this subsection and in subsections (i) and (k) of this section, reserves according to the commissioner's 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 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 the benefits, excluding extra premiums on a substandard policy, 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 benefits provided for by the policy and the excess of paragraph a. over paragraph b. of this subdivision as follows:

a. 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 percent per annum payable on the first and each subsequent anniversary of the policy on which a premium falls due; however, the net level annual premium shall not exceed the net level annual premium on the 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

b. A net one-year term premium for the benefits provided for in the first policy year; provided, that for any life insurance policy issued on or after January 1, 1985, 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 thereof in an amount greater than the excess premium, the reserve according to the commissioner's reserve valuation method on the 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 otherwise provided in subsection (i) of this section, be the greater of the reserve on the policy anniversary, calculated pursuant to the preceding paragraph and the reserve as of the policy anniversary calculated pursuant to the preceding paragraph, except the following: (i) the value defined in subparagraph a. of that paragraph being reduced by 15 percent of the amount of 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 the date as an endowment; and (iv) the cash surrender value provided on the date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in subsection (d) of this section, shall be used.

(2) Reserves according to the commissioner's reserve valuation method for:

a. Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums;

b. Group annuity and pure endowment contracts purchased under a retirement plan or a 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, as now or hereafter amended;

c. Disability and accidental death benefits in all policies and contracts; and

d. 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 subdivision (1) of this subsection.

(3) Subdivision (4) of 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, as now or hereafter amended.

(4) Reserves according to the commissioner's annuity reserves method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in the 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 the 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 the contract, that become payable prior to the end of the 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 the contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contracts to determine nonforfeiture values.

(f)(1) In no event shall an insurer's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after January 1, 1972, be less than the aggregate reserves calculated in accordance with the methods set forth in subsections (e), (i), and (j) of this section and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for the 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).

(g)(1) Reserves for all policies and contracts issued prior to January 1, 1972, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for all policies and contracts than the minimum reserves required by the laws in effect immediately prior to that date.

(2) Reserves for any category of policies, contracts, or benefits issued on or after January 1, 1972, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for the category than those calculated according to the minimum standard provided in this section, 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 for therein.

(h) An insurer which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this section may, with the approval of the commissioner, adopt any lower standard of valuation, but not lower than the minimum provided in this section.

(i) If in any contract year the gross premium charged by any life insurer on any policy or contract issued on or after January 1, 1972, 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 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 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 subsection are those standards stated in subsections (c) and (d) of this section.

Any life insurance policy issued on or after January 1, 1985, 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 thereof in an amount greater than excess premium, the foregoing provisions of this subsection shall be applied as if the method actually used in calculating the reserve for the policy were the method described in subdivisions (1) and (2) of subsection (e) of this section, ignoring the second paragraph of subdivision (1) of subsection (e) of this section. The minimum reserve at each policy anniversary of the policy shall be the greater of the minimum reserve calculated in accordance with subsection (e) of this section, including the second paragraph of subdivision (1) of subsection (e) of this section, and the minimum reserve calculated in accordance with this subsection.

(j) 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 insurer based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of a nature that the minimum reserves cannot be determined by the methods described in subsections (e) and (i) of this section, the reserves which are held under any plan shall comply with all of the following:

(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.

(k) The commissioner shall promulgate a regulation containing the minimum standards applicable to the valuation of health (disability, sickness, and accident) plans.

• Laws
• Lawyers
• Find Laws
• Legal Forms
• State Laws

• Laws
• Lawyers
• Find Laws
• Legal Forms
• State Laws

Share 0  Share 0  Tweet 0  +1 0  Share

State Codes and Statutes

Back To Homepage

State Codes and Statutes

Statutes > Alabama > Title27 > Chapter36 > 27-36-7

Section 27-36-7

Standard Valuation Law.

(a) This section shall be known as the Standard Valuation Law.

(b) 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 insurer doing business in this state and the commissioner may certify the amount of the reserves, specifying the mortality table or tables, rate or rates of interest, and methods (net level premium method or others) used in the calculation of the reserves. In calculating 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 title of any foreign or alien insurer, the commissioner may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when valuation complies with the minimum standard provided in this section, and if the official of the state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the commissioner 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. The commissioner, in making any valuation, may use the actuary of the department or employ an actuary for the purpose, and the reasonable compensation and expenses of the actuary, at a rate approved by the commissioner, upon demand by the commissioner, supported by an itemized statement of the compensation and expenses, shall be paid by the insurer. When a domestic insurer furnishes the commissioner with a valuation of its outstanding policies as computed by its own actuary or by an actuary deemed satisfactory for the purpose by the commissioner, the valuation shall be verified by the actuary of the department.

(c) This subsection shall become operative January 1, 1998.

(1) GENERAL. Every life insurer 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 THE RESERVES.

a. Every life insurer, except as exempted pursuant to regulation, shall also annually include in the opinion required by subdivision (1) of this subsection (c), 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 insurer'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 higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this subsection (c).

(3) REQUIREMENT FOR OPINION UNDER SUBDIVISION (2). Each opinion required by subdivision (2) of this subsection (c) 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 insurer 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 insurer 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 the actuary shall prepare the 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 the reserve liabilities for each year ending on or after December 31, 1996.

b. The opinion shall apply to all business in force including individual and group health insurance plans. The form and substance shall comply with regulation of the commissioner.

c. The opinion shall be based on standards adopted, from time to time, by the Actuarial Standards Board and on any 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 insurer, the commissioner may accept the opinion filed by that insurer 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 subsection, "qualified actuary" means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in the regulations.

f. Disciplinary action by the commissioner against the insurer or the qualified actuary shall be defined by regulation of the commissioner.

g. Any memorandum in support of the opinion, and any other material included by the insurer to the commissioner, 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 prosecuting an action seeking damages from any person by reason of any action required by this section or by regulations promulgated hereunder. Except the memorandum or other material may otherwise be released by the commissioner: (i) with the written consent of the insurer, 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 insurer in its marketing or is cited before any governmental agency other than a state insurance department or is released by the insurer to the news media, all portions of the confidential memorandum shall be no longer confidential.

(d)(1) Except as otherwise provided in subdivisions (2) and (3) of this subsection and in subsection (k), the minimum standard for the valuation of all the policies and contracts issued prior to May 28, 1996, shall be that provided by the laws in effect immediately prior to May 28, 1996.

Except as otherwise provided in subdivisions (2) and (3) of this subsection and in subsection (k), the minimum standard for the valuation of all policies and contracts issued on or after May 28, 1996, shall be the commissioner's reserve valuation method defined in subsections (e), (i), and (k) 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 August 23, 1976, four percent interest for the policies issued prior to July 30, 1979, and five and one-half percent interest for single premium life insurance policies and four and one-half percent interest for all other policies issued on or after July 30, 1979, and the following tables:

a. For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in the policies, the commissioner's 1958 Standard Ordinary Mortality Table for the policies issued on or after the operative date of subsection (j) of the Standard Nonforfeiture Law for Life Insurance, as amended; and prior to the operative date of Section 5c of the Standard Nonforfeiture Law for Life Insurance as amended, except, that for any category of the 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 three years younger than the actual age of the insured; and for policies issued on or after the operative date of subsection (j) of the Standard Nonforfeiture Law for Life Insurance, as amended:

1. The commissioner's 1980 Standard Ordinary Mortality Table; or

2. At the election of the insurer for any one or more specified plans of life insurance, the commissioner's 1980 Standard Ordinary Mortality Table with 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 the policies.

b. For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in the policies, the commissioner's 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 the policies;

c. For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies, the 1937 Standard Annuity Mortality Table or, at the option of the insurer, the Annuity Mortality Table For 1949, ultimate, or any modification of either of these tables approved by the commissioner;

d. For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies, the Group Annuity Mortality Table For 1951, any modification of the table approved by the commissioner or, at the option of the insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts;

e. For total and permanent disability benefits in, or supplementary to, ordinary policies or contracts for policies or contracts issued on or after January 1, 1972, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of 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 1980 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 the policies; for policies or contracts issued prior to January 1, 1972, either of the tables or, at the option of the insurer, the Class (3) Disability Table (1926). Any table shall, for active lives, be combined with a mortality table permitted for calculating the reserve for life insurance policies;

f. For accidental death benefits in or supplementary to policies, for policies issued on or after January 1, 1972, the 1959 Accidental Death Benefits Table or any accidental death benefits 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 the policies; for policies issued prior to January 1, 1972, the intercompany double indemnity mortality table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies;

g. For group life insurance, life insurance issued on the substandard basis and other special benefits, the tables as may be approved by the commissioner.

(2) Except as provided in subdivision (3) of this subsection, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after May 28, 1996, and for all annuities and pure endowments purchased on or after the operative date under group annuity and pure endowment contracts, shall be the commissioner's reserve valuation methods defined in subsection (e) of this section and the following tables and interest rates:

a. For individual annuity and pure endowment contracts issued prior to July 30, 1979, excluding any disability and accidental death benefits in the 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;

b. For individual single premium immediate annuity contracts issued on or after July 30, 1979, excluding any disability and accidental death benefits in the contracts, the 1971 Individual Annuity Mortality Table or any individual annuity 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 the contracts, or any modification of these tables approved by the commissioner, and seven and one-half percent interest;

c. For individual annuity and pure endowment contracts issued on or after July 30, 1979, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in the contracts, the 1971 Individual Annuity Mortality Table or any individual annuity 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 the 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 individual annuity and pure endowment contracts;

d. For all annuities and pure endowments purchased prior to July 30, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts, the 1971 Group Annuity Mortality Table, or any modification of this table approved by the commissioner, and six percent interest;

e. For all annuities and pure endowments purchased on or after July 30, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts, the 1971 Group Annuity Mortality Table or any group annuity 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 such annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.

After August 23, 1976, any insurer may file with the commissioner a written notice of its election to comply with this subdivision after a specified date but before January 1, 1980, which shall be the operative date of this subdivision for the insurer. If an insurer makes no election, the operative date of this subdivision for such insurer shall be January 1, 1980.

(3)a. The interest rates used in determining the minimum standard for the valuation of:

1. all life insurance policies issued in a particular calendar year, on or after the operative date of subsection (j) of the Standard Nonforfeiture Law for Life Insurance;

2. all individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982;

3. all annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts; and

4. the net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts; shall be the calendar year statutory valuation interest rates as defined in this subdivision.

b.1. The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearest 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 subdivision, and W is the weighting factor defined in this subdivision;

(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 item (ii) of this paragraph, the formula for life insurance stated in item (i) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years and the formula for single premium immediate annuities stated in item (ii) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee duration of 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 item (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 item (ii) of this paragraph shall apply.

2. 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 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 for 1979) and shall be determined for each subsequent calendar year regardless of when subsection (j) of the Standard Nonforfeiture Law for Life Insurance becomes operative.

c. The weighting factors referred to in the formulas stated in paragraph b. of this subsection are given in the following tables:

1. 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. 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;

3. Weighting factors for other annuities and for guaranteed interest contracts, except as stated in subparagraph 2. of this paragraph, shall be as specified in tables in items (i), (ii), and (iii) below, according to the rules and definitions in items (iv), (v), and (vi) below:

(i) For annuities and guaranteed interest contracts valued on an issue year basis:

Guarantee Duration		Weighting Factor for 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 item (i) of this subparagraph increased by:

	Plan Type
A	B	C
.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 12 months beyond the valuation date, the factors shown in item (i) of this subparagraph or derived in item (ii) of this subparagraph increased by:

	Plan Type
A	B	C
.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 20 years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee 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 insurer, or (2) without the 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 insurer, or (2) without the 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 the 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 insurer or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(vi) An insurer 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 subdivision, 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. 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.

d. The reference interest rate referred to in paragraph b. of this subdivision shall be defined as follows:

1. For all life insurance, the lesser of the average over a period of 36 months and the average over a period of 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.

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 12 months, ending on June 30 of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, 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 subparagraph 2. of this paragraph, with guarantee duration in excess of 10 years, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates 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 subparagraph 2. of this paragraph, with guarantee duration of 10 years or less, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates 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 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.

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 subparagraph 2. of this paragraph, the average over a period of 12 months, ending on June 30 of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average - Monthly Average Corporates as published by Moody's Investors Service, Inc.

e. In the event that 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 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 reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by regulation promulgated by the commissioner, may be substituted.

(e)(1) Except as otherwise provided in subdivisions (3) and (4) of this subsection and in subsections (i) and (k) of this section, reserves according to the commissioner's 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 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 the benefits, excluding extra premiums on a substandard policy, 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 benefits provided for by the policy and the excess of paragraph a. over paragraph b. of this subdivision as follows:

a. 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 percent per annum payable on the first and each subsequent anniversary of the policy on which a premium falls due; however, the net level annual premium shall not exceed the net level annual premium on the 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

b. A net one-year term premium for the benefits provided for in the first policy year; provided, that for any life insurance policy issued on or after January 1, 1985, 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 thereof in an amount greater than the excess premium, the reserve according to the commissioner's reserve valuation method on the 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 otherwise provided in subsection (i) of this section, be the greater of the reserve on the policy anniversary, calculated pursuant to the preceding paragraph and the reserve as of the policy anniversary calculated pursuant to the preceding paragraph, except the following: (i) the value defined in subparagraph a. of that paragraph being reduced by 15 percent of the amount of 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 the date as an endowment; and (iv) the cash surrender value provided on the date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in subsection (d) of this section, shall be used.

(2) Reserves according to the commissioner's reserve valuation method for:

a. Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums;

b. Group annuity and pure endowment contracts purchased under a retirement plan or a 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, as now or hereafter amended;

c. Disability and accidental death benefits in all policies and contracts; and

d. 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 subdivision (1) of this subsection.

(3) Subdivision (4) of 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, as now or hereafter amended.

(4) Reserves according to the commissioner's annuity reserves method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in the 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 the 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 the contract, that become payable prior to the end of the 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 the contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contracts to determine nonforfeiture values.

(f)(1) In no event shall an insurer's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after January 1, 1972, be less than the aggregate reserves calculated in accordance with the methods set forth in subsections (e), (i), and (j) of this section and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for the 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).

(g)(1) Reserves for all policies and contracts issued prior to January 1, 1972, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for all policies and contracts than the minimum reserves required by the laws in effect immediately prior to that date.

(2) Reserves for any category of policies, contracts, or benefits issued on or after January 1, 1972, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for the category than those calculated according to the minimum standard provided in this section, 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 for therein.

(h) An insurer which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this section may, with the approval of the commissioner, adopt any lower standard of valuation, but not lower than the minimum provided in this section.

(i) If in any contract year the gross premium charged by any life insurer on any policy or contract issued on or after January 1, 1972, 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 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 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 subsection are those standards stated in subsections (c) and (d) of this section.

Any life insurance policy issued on or after January 1, 1985, 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 thereof in an amount greater than excess premium, the foregoing provisions of this subsection shall be applied as if the method actually used in calculating the reserve for the policy were the method described in subdivisions (1) and (2) of subsection (e) of this section, ignoring the second paragraph of subdivision (1) of subsection (e) of this section. The minimum reserve at each policy anniversary of the policy shall be the greater of the minimum reserve calculated in accordance with subsection (e) of this section, including the second paragraph of subdivision (1) of subsection (e) of this section, and the minimum reserve calculated in accordance with this subsection.

(j) 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 insurer based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of a nature that the minimum reserves cannot be determined by the methods described in subsections (e) and (i) of this section, the reserves which are held under any plan shall comply with all of the following:

(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.

(k) The commissioner shall promulgate a regulation containing the minimum standards applicable to the valuation of health (disability, sickness, and accident) plans.

(Acts 1971, No. 407, p. 707, §744; Acts 1976, No. 370, p. 459, §2; Acts 1979, No. 79-661, p. 1142, §2; Acts 1981, No. 81-783, p. 1347, §2; Acts 1996, No. 96-784, p. 1426, §1.)

• Laws
• Lawyers
• Find Laws
• Legal Forms
• State Laws

• Laws
• Lawyers
• Find Laws
• Legal Forms
• State Laws

• Alabama Forms
• Alaska Forms
• Arizona Forms
• Arkansas Forms
• California Forms
• Colorado Forms
• Connecticut Forms
• District Of Columbia Forms
• Delaware Forms
• Florida Forms
• Georgia Forms
• Idaho Forms
• Hawaii Forms
• Illinois Forms
• Indiana Forms
• Iowa Forms
• Kansas Forms
• Kentucky Forms
• Louisiana Forms
• Maine Forms
• Maryland Forms
• Massachusetts Forms
• Michigan Forms
• Minnesota Forms
• Mississippi Forms
• Missouri Forms
• Montana Forms
• Nebraska Forms
• Nevada Forms
• New Hampshire Forms
• New Jersey Forms
• New Mexico Forms
• New York Forms
• North Carolina Forms
• North Dakota Forms
• Ohio Forms
• Oklahoma Forms
• Oregon Forms
• Pennsylvania Forms
• Rhode Island Forms
• South Carolina Forms
• South Dakota Forms
• Tennessee Forms
• Texas Forms
• Utah Forms
• Vermont Forms
• Virginia Forms
• Washington Forms
• West Virginia Forms
• Wisconsin Forms
• Wyoming Forms

• Alabama Codes & Statutes
• Alaska Codes & Statutes
• Arizona Codes & Statutes
• Arkansas Codes & Statutes
• California Codes & Statutes
• Connecticut Codes & Statutes
• Delaware Codes & Statutes
• District of Columbia Codes & Statutes
• Florida Codes & Statutes
• Georgia Codes & Statutes
• Hawaii Codes & Statutes
• Idaho Codes & Statutes
• Illinois Codes & Statutes
• Indiana Codes & Statutes
• Iowa Codes & Statutes
• Kansas Codes & Statutes
• Kentucky Codes & Statutes
• Louisiana Codes & Statutes
• Maine Codes & Statutes
• Maryland Codes & Statutes
• Massachusetts Codes & Statutes
• Michigan Codes & Statutes
• Minnesota Codes & Statutes
• Mississippi Codes & Statutes
• Missouri Codes & Statutes
• Montana Codes & Statutes
• Nebraska Codes & Statutes
• Nevada Codes & Statutes
• New Hampshire Codes & Statutes
• New Jersey Codes & Statutes
• New Mexico Codes & Statutes
• New York Codes & Statutes
• North Carolina Codes & Statutes
• North Dakota Codes & Statutes
• Ohio Codes & Statutes
• Oklahoma Codes & Statutes
• Oregon Codes & Statutes
• Pennsylvania Codes & Statutes
• Rhode Island Codes & Statutes
• South Carolina Codes & Statutes
• South Dakota Codes & Statutes
• Tennessee Codes & Statutes
• Texas Codes & Statutes
• Utah Codes & Statutes
• Vermont Codes & Statutes
• Washington Codes & Statutes
• West Virginia Codes & Statutes
• Wisconsin Codes & Statutes
• Wyoming Codes & Statutes

• Contact Us
• Lawyer Marketing
• Advertise on Laws.com
• About Us
• Terms of Use
• Privacy Policy
• Advertising Policy

Disclaimer
There is no confidential attorney-client relationship formed by using Laws.com website and information provided on this site is not legal advice. For legal advice, please contact your attorney. Attorneys listed on this website are not referred or endorsed by this website. By using Laws.com you agree to Laws.com Terms Of Use.
Copyright © 2017 Laws.com | All rights reserved

Loading..

Close Window

Loading, Please Wait!

This may take a second or two.