§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 causeto be valued, the reserve liabilities, hereinafter called reserves, for alloutstanding life insurance, annuity, and pure endowment contracts of every lifeinsurer doing business in this State.  The commissioner may certify the amountof any reserves, specifying the mortality table or tables, rate or rates ofinterest, and methods (net level premium method or others) used in thecalculation of the reserves.  In calculating the reserves, the commissioner mayuse group methods and approximate averages for fractions of a year orotherwise.  In lieu of the valuation of the reserves required under thissection of any foreign or alien insurer, the commissioner may accept anyvaluation made, or caused to be made, by the insurance supervisory official ofany state or other jurisdiction, when the valuation complies with the minimum standardunder this section, and if the official of that state or jurisdiction acceptsas sufficient and valid for all legal purposes the certificate of valuation ofthe commissioner when the certification states the valuation to have been madein a specified manner according to which the aggregate reserves would be atleast as large as if they had been computed in the manner prescribed by the lawof that state or jurisdiction;

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

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

(c)  Computation of minimum standard:

(1)  Old policies:  Except as otherwise provided inparagraph (3), the minimum standard for the valuation of all policies andcontracts issued prior to the operative date of section 431:10D-104, shall bethat 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 onor after the operative date of section 431:10D-104, shall be the commissioner'sreserve valuation methods defined in subsections (d), (e), and (h), three andone-half per cent interest; in the case of policies and contracts, other thanannuity and pure endowment contracts, issued on or after June 1, 1976, four percent interest; for the policies issued prior to June 1, 1979, five and one-halfper cent interest for single premium life insurance policies and four andone-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 lifeinsurance issued on the standard basis, excluding any accident and health or sicknessand accidental death benefits in the policies--the Commissioners 1941 StandardOrdinary Mortality Table for the policies issued prior to the operative date ofsection 431:10D-104(e)(8), and the Commissioners 1958 Standard OrdinaryMortality Table for the policies issued on or after the operative date;provided that for any category of the policies issued on female risks, allmodified net premiums and present values referred to in this section may becalculated according to an age not more than six years younger than the actualage of the insured; and for the policies issued on or after the operative dateof section 431:10D-104(e)(8), the Commissioners 1980 Standard OrdinaryMortality Table, or at the election of the company for any one or more specifiedplans of life insurance, the Commissioners 1980 Standard Ordinary MortalityTable with Ten-Year Select Mortality Factors, or any ordinary mortality tableadopted after 1980 by the National Association of Insurance Commissioners thatis approved by rules adopted by the commissioner for use in determining theminimum standard of valuation for policies;

(B)  For all industrial life insurance policiesissued on the standard basis, excluding any accident and health or sickness andaccidental death benefits in the policies--the 1941 Standard IndustrialMortality Table for the policies issued prior to the operative date of section431:10D-104(e)(7), and for the policies issued on or after the operative date,the Commissioners 1961 Standard Industrial Mortality Table or any industrialmortality table adopted after 1980 by the National Association of InsuranceCommissioners, that is approved by rules adopted by the commissioner for use indetermining the minimum standard of valuation for those policies;

(C)  For individual annuity and pure endowmentcontracts, excluding any accident and health or sickness and accidental deathbenefits in the policies--the 1937 Standard Annuity Mortality Table or, at theoption of the insurer, the Annuity Mortality Table for 1949, ultimate, or anymodification of either of these tables approved by the commissioner;

(D)  For group annuity and pure endowmentcontracts, excluding any accident and health or sickness and accidental deathbenefits in the policies--the Group Annuity Mortality Table for 1951, anymodification of the table approved by the commissioner or, at the option of theinsurer, any of the tables or modifications of tables specified for individualannuity and pure endowment contracts;

(E)  For total and permanent disabilitybenefits in or supplementary to ordinary policies or contracts--for policies orcontracts issued after December 31, 1965, the tables of period 2 disablementrates and the 1930 to 1950 termination rates of the 1952 disability study ofthe Society of Actuaries, with due regard to the type of benefit or any tablesof disablement rates and termination rates, adopted after 1980 by the NationalAssociation of Insurance Commissioners that are approved by rules adopted bythe commissioner for use in determining the minimum standard of valuation forthe policies; for policies or contracts issued after December 31, 1960, andprior 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 January1, 1961, the Class (3) Disability Table (1926).  Any table, for active lives,shall be combined with a mortality table permitted for calculating the reservesfor life insurance policies;

(F)  For accidental death benefits in or supplementaryto policies--for policies issued after December 31, 1965, the 1959 AccidentalDeath Benefits Table or any accidental death benefits table, adopted after 1980by the National Association of Insurance Commissioners, that is approved byrules adopted by the commissioner for use in determining the minimum standardof valuation for the policies; for policies issued after December 31, 1960, andprior to January 1, 1966, either the table or, at the option of the insurer,the Inter-company Double Indemnity Mortality Table; and for policies issuedprior to January 1, 1961, the Inter-company Double Indemnity Mortality Table. Either table shall be combined with a mortality table permitted for calculatingthe reserves for life insurance policies; and

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

(3)  Except as provided in paragraph (4), the minimumstandard for the valuation of all individual annuity and pure endowmentcontracts issued on or after the operative date of this paragraph, and for allannuities and pure endowments purchased on or after the operative date undergroup annuity and pure endowment contracts, shall be the commissioner's reservevaluation methods defined in subsections (d) and (e) and the following tablesand interest rates:

(A)  For individual annuity and pure endowmentcontracts issued prior to June 1, 1979, excluding any accident and health orsickness and accidental death benefits in the contracts--the 1971 IndividualAnnuity Mortality Table, or any modification of this table approved by thecommissioner, and six per cent interest for single premium immediate annuitycontracts, and four per cent interest for all other individual annuity and pureendowment contracts;

(B)  For individual single premium immediateannuity contracts issued on or after June 1, 1979, excluding any accident andhealth or sickness and accidental death benefits in the contracts--the 1971Individual Annuity Mortality Table, or any individual annuity mortality table,adopted after 1980 by the National Association of Insurance Commissioners, thatis approved by rules adopted by the commissioner for use in determining theminimum standard of valuation for the contracts, or any modification of thesetables approved by the commissioner, and seven and one-half per cent interest;

(C)  For individual annuity and pure endowmentcontracts issued on or after June 1, 1979, other than single premium immediateannuity contracts, excluding any accident and health or sickness and accidentaldeath benefits in the contracts--the 1971 Individual Annuity Mortality Table orany individual annuity mortality table, adopted after 1980 by the NationalAssociation of Insurance Commissioners, that is approved by rules adopted bythe commissioner for use in determining the minimum standard of valuation forthe contracts, or any modification of these tables approved by thecommissioner, and five and one-half per cent interest for single premiumdeferred annuity and pure endowment contracts and four and one-half per centinterest for all other individual annuity and pure endowment contracts; and

(D)  For all annuities and pure endowmentspurchased on or after June 1, 1979, under group annuity and pure endowmentcontracts, excluding any accident and health or sickness and accidental deathbenefits in the contracts--the 1971 Group Annuity Mortality Table or any groupannuity mortality table, adopted after 1980 by the National Association ofInsurance Commissioners, that is approved by rules adopted by the commissionerfor use in determining the minimum standard of valuation for the annuities andpure endowments, or any modification of these tables approved by thecommissioner and seven and one-half per cent interest.

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

(4)  Applicability of this section:

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

(i)  All life insurance policies issued in aparticular calendar year, on or after the operative date of section431:10D-104(e)(8);

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

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

(iv)  The net increase, if any, in a particularcalendar year after 1982, in amounts held under guaranteed interest contractsshall be the calendar year statutory valuation rates as defined in thisparagraph;

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

(i)  For life insurance,

 

W

I = .03 + W (R1 - .03) + —(R2- .09);

2

 

(ii)  For single premium immediate annuities andfor annuity benefits involving life contingencies arising from other annuitieswith cash settlement options and from guaranteed interest contracts with cashsettlement options,

 

I= .03 + W (R - .03)

 

whereR1 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 theweighting factor defined in this section;

(iii)  For other annuities with cash settlementoptions and guaranteed interest contracts with cash settlement options, valuedon an issue year basis, except as stated in clause (ii), the formula for lifeinsurance stated in clause (i) shall apply to annuities and guaranteed interestcontracts with guarantee durations in excess of ten years, and the formula forsingle premium immediate annuities stated in clause (ii) shall apply toannuities and guaranteed interest contracts with guarantee duration of tenyears or less;

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

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

(C)  However, if the calendar year statutoryvaluation interest rate for any life insurance policies issued in any calendaryear determined without reference to this sentence differs from thecorresponding actual rate for similar policies issued in the immediatelypreceding calendar year by less than one-half of one per cent, the calendar yearstatutory valuation interest rate for those life insurance policies shall beequal to the corresponding actual rate for the immediately preceding calendaryear.  For purposes of applying the immediately preceding sentence, thecalendar year statutory valuation interest rate for life insurance policiesissued in a calendar year shall be determined for 1980 (using the referenceinterest rate defined for 1979) and shall be determined for each subsequentcalendar year regardless of when section 431:10D-104(e)(8) becomes operative;

(D)  The weighting factors referred to in theformulas 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 guaranteeduration is the maximum number of years the life insurance can remain in forceon a basis guaranteed in the policy, or under options to convert to plans oflife insurance with premium rates or nonforfeiture values, or both, which areguaranteed in the original policy;

(ii)  Weighting factor for single premiumimmediate annuities and for annuity benefits involving life contingenciesarising from other annuities with cash settlement options and guaranteedinterest contracts with cash settlement options:  .80; and

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

 

Table I:

For annuities and guaranteedinterest contracts valued on an issue year basis;

 

Guarantee Weighting Factor

Duration ForPlan Type

(Years) A B C 

5 or less: .80  .60  .50

More than 5, butnot more

than 10: .75  .60  .50

More than 10, butnot more

than 20: .65  .50  .45

More than 20: .45  .35  .35

Plan Type

Table II: A B C 

For annuities andguaranteed

interestcontracts valued on

a change in fundbasis, the

factors shown inclause (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 IIincreased by:  .05  .05  .05

For other annuities with cashsettlement options and guaranteed interest contracts with cash settlementoptions, the guarantee duration is the number of years for which the contractguarantees interest rates in excess of the calendar year statutory valuationinterest rate for life insurance policies with guarantee duration in excess oftwenty years.  For other annuities with no cash settlement options and forguaranteed interest contracts with no cash settlement options, the guaranteeduration is the number of years from the date of issue or date of purchase tothe date annuity benefits are scheduled to commence.  Plan type as used in theabove tables is defined as follows:

Plan Type A: At any time the policyholder may withdraw funds only: (1) with an adjustment toreflect changes in interest rates or asset values since receipt of the funds bythe insurance company; (2) without adjustment but in installments over five yearsor 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 withdrawfunds only: (1) with an adjustment to reflect changes in interest rates orasset values since receipt of the funds by the insurance company; (2) withoutadjustment but in installments over five years or more; or (3) no withdrawalpermitted.  At the end of the interest rate guarantee, funds may be withdrawnwithout adjustment in a single sum or in installments over less than fiveyears;

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

A company mayelect to value guaranteed interest contracts with cash settlement options andannuities with cash settlement options on either an issue year basis or on achange in fund basis.  Guaranteed interest contracts with no cash settlementoptions and other annuities with no cash settlement options shall be valued onan issue year basis.  As used in this section, an issue year basis of valuationrefers to a valuation basis under which the interest rate used to determine theminimum valuation standard for the entire duration of the annuity or guaranteedinterest contract is the calendar year valuation interest rate for the year ofissue or year of purchase of the annuity or guaranteed interest contract, andthe change in fund basis of valuation refers to a valuation basis under whichthe interest rate used to determine the minimum valuation standard applicableto each change in the fund held under the annuity or guaranteed interestcontract is the calendar year valuation interest rate for the year of thechange in the fund;

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

(i)  For all life insurance, the lesser of theaverage over a period of thirty-six months and the average over a period oftwelve months, ending on June 30 of the calendar year next preceding the yearof 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 andfor annuity benefits involving life contingencies arising from other annuitieswith cash settlement options and guaranteed interest contracts with cashsettlement options, the average over a period of twelve months, ending on June30 of the calendar year of issue or year of purchase, of Moody's Corporate BondYield Average-Monthly Average Corporates, as published by Moody's InvestorsService, Inc.;

(iii)  For other annuities with cash settlementoptions and guaranteed interest contracts with cash settlement options, valuedon a year of issue basis, except as stated in clause (ii), with guaranteeduration in excess of ten years, the lesser of the average over a period ofthirty-six months and the average over a period of twelve months, ending onJune 30 of the calendar year of issue or purchase, of Moody's Corporate BondYield Average-Monthly Average Corporates, as published by Moody's InvestorsService, Inc.;

(iv)  For other annuities with cash settlementoptions and guaranteed interest contracts with cash settlement options, valuedon a year of issue basis, except as stated in clause (ii), with guaranteeduration 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'sCorporate Bond Yield Average-Monthly Average Corporates, as published by Moody'sInvestors Service, Inc.;

(v)  For other annuities with no cash settlementoptions and for guaranteed interest contracts with no cash settlement options,the average over a period of twelve months, ending on June 30 of the calendaryear of issue or purchase, of Moody's Corporate Bond Yield Average-MonthlyAverage Corporates, as published by Moody's Investors Service, Inc.; and

(vi)  For other annuities with cash settlementoptions and guaranteed interest contracts with cash settlement options, valuedon a change in fund basis, except as stated in clause (ii), the average over aperiod of twelve months, ending on June 30 of the calendar year of the changein the fund, of Moody's Corporate Bond Yield Average-Monthly AverageCorporates, as published by Moody's Investors Service, Inc.; and

(F)  Alternative method for determiningreferences interest rates: In the event that Moody's Corporate Bond YieldAverage-Monthly Average Corporates is no longer published by Moody's InvestorsService, Inc., or in the event that the National Association of InsuranceCommissioners determines that Moody's Corporate Bond Yield Average-MonthlyAverage Corporates as published by Moody's Investors Service, Inc., is nolonger appropriate for the determination of the reference interest rate, thenan alternative method for determination of the reference interest rate, whichis adopted by the National Association of Insurance Commissioners and approvedby 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 auniform amount of insurance and requiring the payment of uniform premiums shallbe the excess, if any, of the present value, at the date of valuation, of thefuture guaranteed benefits provided for by the policies, over the then presentvalue of any future modified net premiums therefor.  The modified net premiumsfor any such policy shall be the uniform percentage of the respective contractpremiums 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 modifiednet premiums shall be equal to the sum of the then present value of thebenefits provided for by the policy and the excess of subparagraph (A) oversubparagraph (B) as follows:

(A)  A net level annual premium equal to thepresent value, at the date of issue, of the benefits provided for after thefirst policy year, divided by the present value, at the date of issue, of anannuity of one a year payable on the first and each subsequent anniversary ofthe policy on which a premium falls due; provided that the net level annualpremium shall not exceed the net level annual premium on the nineteen-yearpremium whole life plan for insurance of the same amount at an age one yearhigher than the age of issue of the policy; and

(B)  A net one-year term premium for thebenefits provided for in the first policy year; provided that for any lifeinsurance policy issued on or after January 1, 1986, for which the contractpremium in the first policy year exceeds that of the second year, and nocomparable additional benefit is provided in the first year for the excess,which provides an endowment benefit, a cash surrender value, or a combinationthereof, in an amount greater than the excess premium, the reserve, accordingto the commissioner's reserve valuation method as of any policy anniversaryoccurring on or before the assumed ending date, defined herein as the firstpolicy anniversary on which the sum of any endowment benefit and any cashsurrender value then available is greater than the excess premium, except asotherwise provided in subsection (h), shall be the greater of the reserve asthe policy anniversary calculated as described above and the reserve as of thepolicy anniversary calculated as described, but with:

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

(ii)  All present values benefits and premiumsbeing determined without reference to premiums or benefits provided for by thepolicy after the assumed ending date;

(iii)  The policy being assumed to mature on thatdate as an endowment; and

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

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

(2)  Reserve according to the commissioner's reservevaluation methods for:

(A)  Life insurance policies providing for avarying amount of insurance or requiring the payment of varying premiums;

(B)  Group annuity and pure endowment contractspurchased under a retirement plan or plan of deferred compensation, establishedor maintained by an employer (including a partnership or sole proprietorship)or by an employee organization, or by both, other than a plan providingindividual retirement accounts or individual retirement annuities under section408 of the Internal Revenue Code, as now or hereafter amended;

(C)  Accident and health or sickness andaccidental death benefits in all policies and contracts; and

(D)  All other benefits, except life insuranceand endowment benefits in life insurance policies and benefits provided by allother annuity and pure endowment contracts;

shall be calculated by a method consistentwith the principles of this subsection.

(e)  This subsection shall apply to all annuityand pure endowment contracts other than group annuity and pure endowmentcontracts purchased under a retirement plan or plan of deferred compensation,established or maintained by an employer (including a partnership or soleproprietorship) or by an employee organization, or by both, other than a planproviding individual retirement accounts or individual retirement annuitiesunder section 408 of the Internal Revenue Code, as now or hereafter amended.

Reserves according to the commissioner'sannuity reserve method for benefits under annuity or pure endowment contracts,excluding any accident and health or sickness and accidental death benefits inthose contracts, shall be the greatest of the respective excesses of thepresent values, at the date of valuation, of the future guaranteed benefits,including guaranteed nonforfeiture benefits, provided for by those contracts atthe end of each respective contract year, over the present value, at the dateof valuation, of any future valuation considerations derived from future grossconsiderations, required by the terms of the contract, that become payableprior to the end of such respective contract year.  The future guaranteedbenefits shall be determined by using the mortality table, if any, and theinterest rate, or rates, specified in the contracts for determining guaranteedbenefits.  The valuation considerations are the portions of the respectivegross considerations applied under the terms of the contracts to determine nonforfeiturevalues.

(f)  Minimum aggregate reserves:  In no eventshall an insurer's aggregate reserves for all life insurance policies excludingaccident and health or sickness and accidental death benefits, issued on orafter the operative date of section 431:10D-104, be less than the aggregatereserves calculated in accordance with the methods set forth in subsections(d), (e), (h), and (i), and the mortality tables and rates of interest used incalculating nonforfeiture benefits for those policies.  In no event shall theaggregate reserves for all policies, contracts, and benefits be less than theaggregate reserves determined by the qualified actuary to be necessary torender the opinion required by subsection (j).

(g)  Optional reserves bases:  Reserves for anycategory of policies, contracts, or benefits as established by thecommissioner, issued on or after the operative date of section 431:10D-104, maybe calculated, at the option of the insurer, according to any standards whichproduce greater aggregate reserves for the category than those calculatedaccording to the minimum standard herein provided.  The rates of interest usedfor policies and contracts, other than annuity and pure endowment contracts,shall not be higher than the corresponding rates of interest used incalculating any nonforfeiture benefits provided for therein.  Any company whichat any time shall have adopted any standard valuation producing greateraggregate reserves than those calculated according to the minimum standard hereinprovided, with the approval of the commissioner, may adopt any lower standardof valuation, but not lower than the minimum herein provided; provided that forthe purposes of this section, the holding of additional reserves previouslydetermined by a qualified actuary to be necessary to render the opinionrequired by subsection (j) shall not be deemed to be the adoption of a higherstandard of valuation.

(h)  Minimum reserve:  If in any contract yearthe gross premium charged by any life insurer on any policy or contract is lessthan the valuation net premium for the policy or contract calculated by themethod used in calculating the reserve thereon but using the minimum valuationstandards of mortality and rate of interest, the minimum reserve required forthat policy or contract shall be the greater of either the reserve calculatedaccording to the mortality table, rate of interest, and method actually usedfor the policy or contract, or the reserve calculated by the method actuallyused for the policy or contract using the minimum standards of mortality andrate of interest and replacing the valuation net premium by the actual grosspremium in each contract year for which the valuation net premium exceeds theactual gross premium.  The minimum valuation standards of mortality and rate ofinterest 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 orafter January 1, 1986, for which the gross premium in the first policyyear exceeds that of the second year and for which no comparable additionalbenefit is provided in the first year for the excess and which provides anendowment benefit or a cash surrender value, or a combination thereof, in anamount greater than the excess premium, this subsection shall be applied as ifthe method actually used in calculating the reserve for the policy were themethod described in subsection (d), ignoring the second paragraph of thatsubsection.  The minimum reserve at each policy anniversary of such a policyshall be the greater of the minimum reserve calculated in accordance withsubsection (d), including subsection (d)(2) and the minimum reserve calculatedin accordance with this subsection.

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

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

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

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

(1)  Every life insurance company doing business inthis State shall annually submit the opinion of a qualified actuary as towhether the reserves and related actuarial items held in support of thepolicies and contracts specified by the commissioner, by rules, are computedappropriately, are based on assumptions which satisfy contractual provisions,are consistent with prior reported amounts, and comply with the applicable lawsof this State.  The commissioner, by rules, shall define the specifics of thisopinion and add any other items deemed to be necessary to its scope;

(2)  Actuarial analysis of reserves and assetssupporting the reserves:

(A)  Every life insurance company, except asexempted by or pursuant to rules, also shall include annually in the opinionrequired by paragraph (1), an opinion of the same qualified actuary as towhether the reserves and related actuarial items held in support of thepolicies and contracts specified by the commissioner by rules, when consideredin light of the assets held by the company with respect to the reserves andrelated actuarial items, including but not limited to the investment earningson the assets and the considerations anticipated to be received and retainedunder the policies and contracts, make adequate provision for the company'sobligations under the policies and contracts, including but not limited to thebenefits 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 thequalified actuary may deem necessary in order to render the opinion required bythis section;

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

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

(B)  If the insurance company fails to providea supporting memorandum at the request of the commissioner within a periodspecified by rules or if the commissioner determines that the supportingmemorandum provided by the insurer fails to meet the standards prescribed byrules or is otherwise unacceptable to the commissioner, the commissioner mayengage a qualified actuary at the expense of the insurer to review the opinionand the basis for the opinion and prepare any supporting memorandum that isrequired by the commissioner; and

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

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

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

(C)  The opinion shall be based on standardsadopted 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 besubmitted by a foreign or alien insurer, the commissioner may accept theopinion filed by that insurer with the insurance supervisory official ofanother state if the commissioner determines that the opinion reasonably meetsthe 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 AmericanAcademy of Actuaries who meets the requirements set forth in the regulationsadopted by the American Academy of Actuaries;

(F)  Except in cases of fraud or wilfulmisconduct, the qualified actuary shall not be liable for damages to anyperson, 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 inconnection therewith, shall be kept confidential by the commissioner and shallnot be made public and shall not be subject to subpoena, other than for thepurpose of defending an action seeking damages from any person by reason of anyaction required by this section, or by rules adopted hereunder; provided thatthe memorandum or other material may otherwise be released by the commissionerwith the written consent of the insurer or be released to the American Academyof Actuaries upon request stating that the memorandum or other material isrequired for the purpose of professional disciplinary proceedings and settingforth procedures satisfactory to the commissioner for preserving theconfidentiality of the memorandum or other material.  Once any portion of theconfidential memorandum is cited by the insurer in its marketing material or iscited before any governmental agency, other than a state insurance department,or is released by the insurer to the news media, all portions of theconfidential 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]