§431:5-307 - Standard valuation law; life.

§431:5-307 Standard valuation law; life.
(a) This section shall be known as the standard valuation law.

(b) Reserve valuation:

(1) The commissioner, annually, shall value, or cause
to be valued, the reserve liabilities, hereinafter called reserves, for all
outstanding life insurance, annuity, and pure endowment contracts of every life
insurer doing business in this State. The commissioner may certify the amount
of any reserves, specifying the mortality table or tables, rate or rates of
interest, and methods (net level premium method or others) used in the
calculation of the reserves. In calculating the reserves, the commissioner may
use group methods and approximate averages for fractions of a year or
otherwise. In lieu of the valuation of the reserves required under this
section 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 the valuation complies with the minimum standard
under this section, and if the official of that state or jurisdiction accepts
as sufficient and valid for all legal purposes the certificate of valuation of
the commissioner when the certification states the valuation to have been made
in a specified manner according to which the aggregate reserves would be at
least as large as if they had been computed in the manner prescribed by the law
of that state or jurisdiction;

(2) The actual cost of making valuations under this
section shall be assessed on the insurer, whose policies are so valued, by the
commissioner; and

(3) Any insurer, at any time, that has adopted any
standard of valuation producing greater aggregate reserves than those
calculated according to the minimum standard herein provided, with the approval
of the commissioner, may adopt any lower standard of valuation, but not lower
than the minimum provided in this section.

(1) Old policies: Except as otherwise provided in
paragraph (3), the minimum standard for the valuation of all policies and
contracts issued prior to the operative date of section 431:10D-104, shall be
that provided by the laws in effect immediately prior to January 1, 1956;

(2) Except as otherwise provided in paragraph (3),
the minimum standard for the valuation of all policies and contracts issued on
or after the operative date of section 431:10D-104, shall be the commissioner's
reserve valuation methods defined in subsections (d), (e), and (h), three and
one-half per cent interest; in the case of policies and contracts, other than
annuity and pure endowment contracts, issued on or after June 1, 1976, four per
cent interest; for the policies issued prior to June 1, 1979, five and one-half
per cent interest for single premium life insurance policies and four and
one-half per cent interest for all other policies issued on or after June 1,
1979; and the following tables:

(A) For all ordinary policies of life
insurance issued on the standard basis, excluding any accident and health or sickness
and accidental death benefits in the policies--the Commissioners 1941 Standard
Ordinary Mortality Table for the policies issued prior to the operative date of
section 431:10D-104(e)(8), and the Commissioners 1958 Standard Ordinary
Mortality Table for the policies issued on or after the operative date;
provided 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 six years younger than the actual
age of the insured; and for the policies issued on or after the operative date
of section 431:10D-104(e)(8), the Commissioners 1980 Standard Ordinary
Mortality Table, or at the election of the company for any one or more specified
plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality
Table with Ten-Year Select Mortality Factors, or any ordinary mortality table
adopted after 1980 by the National Association of Insurance Commissioners that
is approved by rules adopted by the commissioner for use in determining the
minimum standard of valuation for policies;

(B) For all industrial life insurance policies
issued on the standard basis, excluding any accident and health or sickness and
accidental death benefits in the policies--the 1941 Standard Industrial
Mortality Table for the policies issued prior to the operative date of section
431:10D-104(e)(7), and for the policies issued on or after the operative date,
the Commissioners 1961 Standard Industrial Mortality Table or any industrial
mortality table adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by rules adopted by the commissioner for use in
determining the minimum standard of valuation for those policies;

(C) For individual annuity and pure endowment
contracts, excluding any accident and health or sickness 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 accident and health or sickness 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 after December 31, 1965, the tables of period 2 disablement
rates and the 1930 to 1950 termination rates of the 1952 disability study of
the Society of Actuaries, with due regard to the type of benefit or any tables
of disablement rates and termination rates, adopted after 1980 by the National
Association of Insurance Commissioners that are approved by rules adopted by
the commissioner for use in determining the minimum standard of valuation for
the policies; for policies or contracts issued after December 31, 1960, and
prior to January 1, 1966, either the tables or, at the option of the insurer,
the Class (3) Disability Table (1926); and for policies issued prior to January
1, 1961, the Class (3) Disability Table (1926). Any table, for active lives,
shall be combined with a mortality table permitted for calculating the reserves
for life insurance policies;

(F) For accidental death benefits in or supplementary
to policies--for policies issued after December 31, 1965, 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
rules adopted by the commissioner for use in determining the minimum standard
of valuation for the policies; for policies issued after December 31, 1960, and
prior to January 1, 1966, either the table or, at the option of the insurer,
the Inter-company Double Indemnity Mortality Table; and for policies issued
prior to January 1, 1961, the Inter-company Double Indemnity Mortality Table.
Either table shall be combined with a mortality table permitted for calculating
the reserves for life insurance policies; and

(G) For group life insurance, life insurance
issued on the substandard basis, and other special benefits--any tables that
may be approved by the commissioner;

(3) Except as provided in paragraph (4), the minimum
standard for the valuation of all individual annuity and pure endowment
contracts issued on or after the operative date of this paragraph, 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 subsections (d) and (e) and the following tables
and interest rates:

(A) For individual annuity and pure endowment
contracts issued prior to June 1, 1979, excluding any accident and health or
sickness 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 per cent interest for single premium immediate annuity
contracts, and four per cent interest for all other individual annuity and pure
endowment contracts;

(B) For individual single premium immediate
annuity contracts issued on or after June 1, 1979, excluding any accident and
health or sickness 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 rules adopted 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 per cent interest;

(C) For individual annuity and pure endowment
contracts issued on or after June 1, 1979, other than single premium immediate
annuity contracts, excluding any accident and health or sickness 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 rules adopted 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 per cent interest for single premium
deferred annuity and pure endowment contracts and four and one-half per cent
interest for all other individual annuity and pure endowment contracts; and

(D) For all annuities and pure endowments
purchased on or after June 1, 1979, under group annuity and pure endowment
contracts, excluding any accident and health or sickness and accidental death
benefits in 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 rules adopted by the commissioner
for use in determining the minimum standard of valuation for the annuities and
pure endowments, or any modification of these tables approved by the
commissioner and seven and one-half per cent interest.

After June 1, 1976, any insurer may file
with the commissioner a written notice of its election to comply with this
paragraph after a specified date before January 1, 1979, which shall be the
operative date of this paragraph for the insurer; provided that an insurer may
elect a different operative date for individual annuity and pure endowment
contracts from that elected for group annuity and pure endowment contracts. If
an insurer makes no election, the operative date of this paragraph for the
insurer shall be January 1, 1979; and

(4) Applicability of this section:

(A) The interest rates used in determining the
minimum for the valuation of:

(i) All life insurance policies issued in a
particular calendar year, on or after the operative date of section
431:10D-104(e)(8);

(ii) All individual annuity and pure endowment
contracts issued in a particular calendar year after December 31, 1982;

(iii) All annuities and pure endowments purchased
in a particular calendar year after December 31, 1982, under group annuity and
pure endowment contracts; and

(iv) The net increase, if any, in a particular
calendar year after 1982, in amounts held under guaranteed interest contracts
shall be the calendar year statutory valuation rates as defined in this
paragraph;

(B) The calendar year statutory valuation
interest rates, I, shall be determined as follows and the results rounded to
the nearer one-quarter of one per cent:

(i) For life insurance,

I = .03 + W (R1 - .03) + —(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 section, and W is the
weighting factor defined in this section;

(iii) For other annuities with cash settlement
options and guaranteed interest contracts with cash settlement options, valued
on an issue year basis, except as stated in clause (ii), the formula for life
insurance stated in clause (i) shall apply to annuities and guaranteed interest
contracts with guarantee durations in excess of ten years, and the formula for
single premium immediate annuities stated in clause (ii) shall apply to
annuities and guaranteed interest contracts with guarantee duration of ten
years or less;

(iv) For other annuities with no cash settlement
options and for guaranteed interest contracts with no cash settlement options,
the formula for single premium immediate annuities stated in clause (ii) shall
apply; and

(v) For other annuities with cash settlement
options and guaranteed interest contracts with cash settlement options, valued
on a change in fund basis, the formula for single premium immediate annuities
stated in clause (ii) shall apply;

(C) 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 per cent, the calendar year
statutory valuation interest rate for those 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 section 431:10D-104(e)(8) becomes operative;

(D) The weighting factors referred to in the
formulas stated above are given in the following tables:

(i) Weighting factors for life insurance:

Guarantee

Duration Weighting

(Years)
Factors

10 or fewer .50

More than 10, but not more

than 20 .45

More than 20 .35

For life insurance, the guarantee
duration is the maximum number of years the life insurance can remain in force
on a basis guaranteed in the policy, or under options to convert to plans of
life insurance with premium rates or nonforfeiture values, or both, which are
guaranteed in the original policy;

(ii) Weighting factor for single premium
immediate annuities and for annuity benefits involving life contingencies
arising from other annuities with cash settlement options and guaranteed
interest contracts with cash settlement options: .80; and

(iii) Weighting factors for other annuities and
for guaranteed interest contracts, except as stated in clause (ii), shall be as
specified in the tables below, according to the rules and definitions stated
below:

Table I:

For annuities and guaranteed
interest contracts valued on an issue year basis;

Guarantee
Weighting Factor

Duration 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

Plan Type

Table II:
A B C

For annuities and
guaranteed

interest
contracts valued on

a change in fund
basis, the

factors shown in
clause (i)

increased by: .15 .25 .05

Plan Type

Table III:
A B C

For annuities and guaranteed

interest contracts valued on

an issue year basis (other

than those with no cash

settlement options) which do

not guarantee interest on

considerations received more

than one year after issue or

purchase, and for annuities

and guaranteed interest

contracts valued on a change

in fund basis which do not

guarantee interest rates on

considerations received more

than twelve months beyond the

valuation date, the factors

shown in Table I or derived in

Table II
increased by: .05 .05 .05

For other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, the guarantee duration is the number of years for which the contract
guarantees interest rates in excess of the calendar year statutory valuation
interest rate for life insurance policies with guarantee duration in excess of
twenty years. For other annuities with no cash settlement options and for
guaranteed interest contracts with no cash settlement options, the 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. Plan type as used in the
above tables is defined as follows:

Plan Type A:
At any time the policyholder may withdraw funds only: (1) with an adjustment to
reflect changes in interest rates or asset values since receipt of the funds by
the insurance company; (2) without adjustment but in installments over five years
or more; (3) as an immediate life annuity; or (4) no withdrawal permitted;

Plan Type B:
Before expiration of the interest rate guarantee, the policyholder may withdraw
funds only: (1) with an adjustment to reflect changes in interest rates or
asset values since receipt of the funds by the insurance company; (2) without
adjustment but in installments over five years or more; or (3) no withdrawal
permitted. At the end of the interest rate guarantee, funds may be withdrawn
without adjustment in a single sum or in installments over less than five
years;

Plan Type C:
The policyholder may withdraw funds before expiration of the interest rate
guarantee in a single sum or in installments over less than five years either:
(1) without adjustment to reflect changes in interest rates or asset values
since receipt of the funds by the insurance company; or (2) subject only to a
fixed surrender charge stipulated in the contract as a percentage of the fund.

A company may
elect to value guaranteed interest contracts with cash settlement options and
annuities with cash settlement options on either an issue year basis or on a
change in fund basis. Guaranteed interest contracts with no cash settlement
options and other annuities with no cash settlement options shall be valued on
an issue year basis. As used in this section, an issue year basis of valuation
refers to a valuation basis under which the interest rate used to determine the
minimum valuation standard for the entire duration of the annuity or guaranteed
interest contract is the calendar year valuation interest rate for the year of
issue or year of purchase of the annuity or guaranteed interest contract, and
the change in fund basis of valuation refers to a valuation basis under which
the interest rate used to determine the minimum valuation standard applicable
to each change in the fund held under the annuity or guaranteed interest
contract is the calendar year valuation interest rate for the year of the
change in the fund;

(E) The reference interest rate referred to in
paragraph (4)(B) shall be defined as follows:

(i) For all life insurance, the lesser of the
average over a period of thirty-six months and the average over a period of
twelve months, ending on 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.;

(ii) For single premium immediate annuities and
for annuity benefits involving life contingencies arising from other annuities
with cash settlement options and guaranteed interest contracts with cash
settlement options, the average over a period of twelve months, ending on 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.;

(iii) For other annuities with cash settlement
options and guaranteed interest contracts with cash settlement options, valued
on a year of issue basis, except as stated in clause (ii), with guarantee
duration in excess of ten years, the lesser of the average over a period of
thirty-six months and the average over a period of twelve months, ending on
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.;

(iv) For other annuities with cash settlement
options and guaranteed interest contracts with cash settlement options, valued
on a year of issue basis, except as stated in clause (ii), with guarantee
duration of ten years or less, the average over a period of twelve 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.;

(v) For other annuities with no cash settlement
options and for guaranteed interest contracts with no cash settlement options,
the average over a period of twelve months, ending on 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.; and

(vi) For other annuities with cash settlement
options and guaranteed interest contracts with cash settlement options, valued
on a change in fund basis, except as stated in clause (ii), the average over a
period of twelve 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.; and

(F) Alternative method for determining
references interest rates: 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 rules adopted by the commissioner, may be substituted.

(d) Commissioner's reserve valuation methods:

(1) Except as otherwise provided in subsections (e)
and (h), reserves, according to the commissioner's reserve valuation methods,
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 the 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 the modified
net premiums shall be equal to the sum of the then present value of the
benefits provided for by the policy and the excess of subparagraph (A) over
subparagraph (B) 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 a year payable on the first and each subsequent anniversary of
the policy on which a premium falls due; provided that the net level annual
premium shall not exceed the net level annual premium on the nineteen-year
premium whole life plan for insurance of the same amount at an age one year
higher than the age of 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, 1986, for which the contract
premium in the first policy year exceeds that of the second year, and no
comparable additional benefit is provided in the first year for the excess,
which provides an endowment benefit, 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 as of any policy anniversary
occurring on or before the assumed ending date, defined herein as the first
policy anniversary on which the sum of any endowment benefit and any cash
surrender value then available is greater than the excess premium, except as
otherwise provided in subsection (h), shall be the greater of the reserve as
the policy anniversary calculated as described above and the reserve as of the
policy anniversary calculated as described, but with:

(i) The value defined in subparagraph (A) being
reduced by fifteen per cent of the amount of the excess first year premium;

(ii) All present values 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 that
date as an endowment; and

(iv) The cash surrender value provided on that
date being considered as an endowment benefit.

In making the above comparison, the
mortality and interest bases stated in subsection (c)(2) and (3) shall be used;
and

(2) Reserve according to the commissioner's reserve
valuation methods 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 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;

(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 this subsection.

(e) 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.

Reserves according to the commissioner's
annuity reserve method for benefits under annuity or pure endowment contracts,
excluding any accident and health or sickness and accidental death benefits in
those 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 those 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 such respective contract year. The future guaranteed
benefits shall be determined by using the mortality table, if any, and the
interest rate, or rates, specified in 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) Minimum aggregate reserves: In no event
shall an insurer's aggregate reserves for all life insurance policies excluding
accident and health or sickness and accidental death benefits, issued on or
after the operative date of section 431:10D-104, be less than the aggregate
reserves calculated in accordance with the methods set forth in subsections
(d), (e), (h), and (i), and the mortality tables and rates of interest used in
calculating nonforfeiture benefits for those policies. 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 (j).

(g) Optional reserves bases: Reserves for any
category of policies, contracts, or benefits as established by the
commissioner, issued on or after the operative date of section 431:10D-104, 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 herein provided. The rates of interest used
for policies and contracts, other than annuity and pure endowment contracts,
shall not be higher than the corresponding rates of interest used in
calculating any nonforfeiture benefits provided for therein. Any company which
at any time shall have adopted any standard valuation producing greater
aggregate reserves than those calculated according to the minimum standard herein
provided, with the approval of the commissioner, may adopt any lower standard
of valuation, but not lower than the minimum herein provided; provided that for
the purposes of this section, the holding of additional reserves previously
determined by a qualified actuary to be necessary to render the opinion
required by subsection (j) shall not be deemed to be the adoption of a higher
standard of valuation.

(h) Minimum reserve: If in any contract year
the gross premium charged by any life insurer on any policy or contract is less
than the valuation net premium for the policy or contract calculated by the
method used in calculating the reserve thereon but using the minimum valuation
standards of mortality and rate of interest, the minimum reserve required for
that policy or contract shall be the greater of either the reserve calculated
according to the mortality table, rate of interest, and method actually used
for the policy or contract, or the reserve calculated by the method actually
used for the policy or contract using the minimum standards of mortality and
rate of interest and replacing the valuation net premium by the actual gross
premium in each contract year for which the valuation net premium exceeds the
actual gross premium. The minimum valuation standards of mortality and rate of
interest referred to in this section are those standards stated in subsection
(c)(1), (2), and (4); provided that for any life insurance policy issued on or
after January 1, 1986, 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 the excess premium, this subsection shall be applied as if
the method actually used in calculating the reserve for the policy were the
method described in subsection (d), ignoring the second paragraph of that
subsection. The minimum reserve at each policy anniversary of such a policy
shall be the greater of the minimum reserve calculated in accordance with
subsection (d), including subsection (d)(2) and the minimum reserve calculated
in accordance with this subsection.

(i) In the case of any plan of life insurance
which provides for future premium determination, the amounts of which are to be
determined by the insurance company based on then estimates of future
experience, or in the case of any plan of life insurance or annuity which is of
such a nature that the minimum reserves cannot be determined by the methods
described in subsections (d), (e), and (h), the reserves which are held under
any such plan must:

(1) Be appropriate in relation to the benefits and
the pattern of premiums for that plan; and

(2) Be computed by a method which is consistent with
the principles of this section, as determined by rules adopted by the
commissioner.

(j) The actuarial opinion of reserves and this
subsection shall become effective December 31, 1995.

(1) Every life insurance company doing business in
this State shall annually submit the opinion of a qualified actuary as to
whether the reserves and related actuarial items held in support of the
policies and contracts specified by the commissioner, by rules, are computed
appropriately, are based on assumptions which satisfy contractual provisions,
are consistent with prior reported amounts, and comply with the applicable laws
of this State. The commissioner, by rules, 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 insurance company, except as
exempted by or pursuant to rules, also shall include annually in the opinion
required by paragraph (1), 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 rules, when considered
in light of the assets held by the company with respect to the reserves and
related actuarial items, including but not limited to the investment earnings
on the assets and the considerations anticipated to be received and retained
under the policies and contracts, make adequate provision for the company's
obligations under the policies and contracts, including but not limited to the
benefits under, and expenses associated with, the policies and contracts; and

(B) The commissioner may provide, by rules,
for a transition period for establishing any higher reserves which the
qualified actuary may deem necessary in order to render the opinion required by
this section;

(3) Each opinion required by paragraph (2) shall be
governed by the following:

(A) A memorandum, in form and substance
acceptable to the commissioner as specified by rules, shall be prepared to
support each actuarial opinion; and

(B) If the insurance company fails to provide
a supporting memorandum at the request of the commissioner within a period
specified by rules or if the commissioner determines that the supporting
memorandum provided by the insurer fails to meet the standards prescribed by
rules or is otherwise unacceptable to the commissioner, the commissioner may
engage a qualified actuary at the expense of the insurer to review the opinion
and the basis for the opinion and prepare any supporting memorandum that is
required by the commissioner; and

(4) Every opinion shall be governed by the following:

(A) The opinion shall be submitted with the
annual statement reflecting the valuation of reserve liabilities for each year
ending on or after December 31, 1995;

(B) The opinion shall apply to all business in
force including individual and group health insurance plans, in form and
substance acceptable to the commissioner as specified by rules;

(C) The opinion shall be based on standards
adopted from time to time by the Actuarial Standards Board and on any
[additional] standards that the commissioner may prescribe by rules;

(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 an insurer domiciled in this State;

(E) For the purposes of this section,
"qualified actuary" means a member in good standing of the American
Academy of Actuaries who meets the requirements set forth in the regulations
adopted by the American Academy of Actuaries;

(F) Except in cases of fraud or wilful
misconduct, the qualified actuary shall not be liable for damages to any
person, other than the insurer and the commissioner, for any act, error,
omission, decision, or conduct with respect to the actuary's opinion; and

(G) Any memorandum in support of the opinion,
and any other material provided by the insurer to the commissioner in
connection therewith, shall be kept confidential by the commissioner and shall
not be made public and shall not be subject to subpoena, other than for the
purpose of defending an action seeking damages from any person by reason of any
action required by this section, or by rules adopted hereunder; provided that
the memorandum or other material may otherwise be released by the commissioner
with the written consent of the insurer or be released 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 material 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 no longer be confidential. [L 1987, c 347, pt of
§2; am L 1994, c 190, §§3, 10; am L 1995, c 61, §2 as superseded by c 232, §4;
am L 1999, c 302, §9 as superseded by c 128, §2; am L 2003, c 212, §40]