Article 4.--GENERAL PROVISIONS RELATING TO LIFE INSURANCE COMPANIES
40-409.Valuation of policies; compensation ofactuary; standard valuation law; commissioners' reserve valuation method;lapse rates; aggregate reserves; calculations; Kansas companies doing businessin anotherstate; annual opinion by actuary on reserves; confidential.(a) Every life insurance company transacting business in this stateshall annually file, on or before March 1 of each year, with thecommissioner of insurance a certified valuation of its policies in forceas of December 31 of the preceding year, and it shall be theduty of the commissioner of insurance to annuallymake or cause to be made net valuations of all the outstanding policies andadditions thereto of every life insurance company transacting businessin this state, except that in the case of an alien company suchvaluation shall be limited to its insurance transactions in the UnitedStates. In making the valuations of life insurance companies organizedunder the laws of this state, the valuation shall include unpaiddividends, and all other policy obligations. Whenever the laws of anyother state of the United States shall authorize the valuation of lifeinsurance policies by some designated state officer according to thesame standard as herein provided, or some other standard which willrequire a reserve not less than the standard herein provided, thevaluation made according to the standard by such officer of thepolicies and other obligations of any life insurance company notorganized under the laws of this state, and certified by such officer,may be received as true and correct, and no further valuation of thesame shall be required of such company by the commissioner of insurance.It shall be the duty of the commissioner of insurance, wheneverrequested so to do by any life insurance company organized under thelaws of this state, to make annual valuations of all the outstandingpolicies and additions thereto of every such company and deliver to suchcompany certificates of such valuation, specifying the amount of thecompany's reserve on policies thus valued. And for the performance ofthe duties prescribed by this section the commissioner of insuranceshall be authorized to employ an actuary, whose compensation shall bepaid by the company whose policies, additions, unpaid dividends or otheroutstanding policy obligations are valued, upon a certificate by thecommissioner of insurance showing the compensation due therefor.
Any such company which at any time shall have adopted any standardsof valuation producing greater aggregate reserves than those calculatedaccording to the minimum standards hereinafter provided may, with theapproval of the commissioner of insurance, adopt any lower standard ofvaluation, but not lower than the minimum herein provided.
(b) This subsection shall become operative for the year ending December31, 1995, and each subsequent calendar year.
(1) Every life insurance company doing business in this state shall annuallysubmit the opinion of a qualified actuary as to whether the reserves andrelated actuarial items held in support of the policies and contracts specifiedby the commissioner by regulation are computed appropriately, are based onassumptions which satisfy contractual provisions, are consistent with priorreported amounts and comply with applicable laws of this state. Thecommissioner shall adopt an administrative regulation defining the specificapplication, scope and content of this opinion.
(2) Except as otherwise provided by law or rules and regulations of thecommissioner, every life insurance company shall also annually include in theopinion required by subsection (1), an opinion of the same qualified actuary asto whether the reserves and related actuarial items held in support of thepolicies and contracts specified by the commissioner, when considered in lightof the assets held by the company with respect to the reservesand related actuarial items, including but not limited to the investmentearnings on the assets and the considerations anticipated to be received andretained under the policies and contracts, making adequate provision for thecompany's obligations under the policies and contracts, including but notlimited to the benefits under and expenses associated with the policies andcontracts.
(3) The commissioner may provide for a transition period for establishingany higher reserves which the qualified actuary deems necessary in order torender the opinion required by this section.
(4) Each opinion required by subsection (2) shall comply with the followingprovisions:
(A) A memorandum, in form and substance acceptable to or prescribed by thecommissioner shall be prepared to support each actuarial opinion.
(B) If the insurance company fails to provide a supporting memorandum withina period specified or the commissioner determines that the supportingmemorandum provided by the insurance company fails to meet the prescribedstandards or is otherwise unacceptable to the commissioner, the commissioner isauthorized to employ an actuary whose compensation and expenses shall be paidby the company whose policies, additions, unpaid dividends or other outstandingpolicy or contractual obligations are valued upon a certificate by thecommissioner showing the compensation and expenses due therefor.
(5) Every opinion of the actuary shall comply with the following provisions:
(A) The opinion shall be submitted with the annual statement required byK.S.A. 40-225 and amendments thereto reflecting the valuation of such reserveliabilities for each year ending on or after December 31, 1995.
(B) The opinion shall apply to all business in force including individualand group health insurance plans.
(C) The opinion shall be based on standards adopted from time to time by theactuarial standards board of the American academy of actuaries and on suchadditional standards as the commissioner prescribes.
(D) In the case of an opinion required to be submitted by an insurancecompany not domiciled in this state, the commissioner may accept the opinionfiled by that company with the insurance supervisory official of another stateif the commissioner determines that the opinion reasonably meets therequirements applicable to a company domiciled in this state.
(E) For the purposes of this section, "qualified actuary" means a member ingood standing of the American academy of actuaries.
(F) Except in cases of fraud or willful misconduct, the qualified actuaryshall not be liable for damages to any person, other than the insurance companyand the commissioner, for any act, error, omission, decision or conduct withrespect to the actuary's opinion required by this act.
(G) Any memorandum in support of the opinion, and any other materialprovided by the company to the commissioner in connection with the opinion,shall be kept confidential by the commissioner and shall not be made public andshall not be subject to subpoena, other than for the purpose of defending anaction seeking damages from any person by reason of any action required by thissection or by rules and regulations adopted pursuant to this section.Notwithstanding the provisions of this subpart (G), the memorandum or othermaterial may be released by the commissioner: (i) With the written consent ofthe company, or (ii) to the American academy of actuaries upon request statingthat the memorandum or other material is required for the purpose ofprofessional disciplinary proceedings and setting forth procedures satisfactoryto the commissioner for preserving the confidentiality of the memorandum orother material. Once any portion of the confidential memorandum is cited bythe company in its marketing or is cited before any governmental agency otherthan a state insurance department or is released by the company to the newsmedia, all portions of the confidential memorandum shall be no longerconfidential.
(c) This subsection shall apply to only those policies andcontractsissued prior to the operative date of K.S.A. 40-428, and amendments thereto,(the standard nonforfeiture law), except as provided in subsection (d) ofthis section.
For the purpose of such valuations and for making specialexaminations of the condition of life insurance companies, as providedby the laws of this state, and for valuing all outstanding policies ofevery life insurance company, the method and basis of valuation shall bethe same as prescribed by the insurance code of this state in thevaluation of such contracts before June 1, 1927. The legal minimumstandard for the valuation of life insurance contracts issued on orafter June 1, 1927, shall be the one-year preliminary-term method ofvaluation, except as hereinafter modified, on the basis of the Americanexperience table of mortality with interest at 4% perannum. If the premium charged for term insurance under limited-paymentlife preliminary-term policy providing for the payment of all premiumsthereon in less than 20 years from the date of policy, or under an endowmentpreliminary-term policy, exceeds that charged for lifeinsurance under twenty-payment life preliminary-term policy of the samecompany, the reserve thereon at the end of any year, including thefirst, shall not be less than the reserve on a twenty-payment lifepreliminary-term policy issued in the same year and at the same age,together with an amount which shall be equivalent to the accumulation ofa net level premium sufficient to provide for a pure endowment at theend of the premium-payment period, equal to the difference between thevalue at the end of such period of such a twenty-payment lifepreliminary-term policy and the full net level premium reserve at suchtime of such a limited-payment life or endowment policy. Thepremium-payment period is the period during which premiums areconcurrently payable, under such twenty-payment life preliminary-termpolicy and such limited-payment life or endowment policy. Policiesissued on the preliminary-term method shall contain a clause specifyingthat the reserve thereof shall be computed in accordance with themodified preliminary-term method of valuation provided therein. Exceptas otherwise provided for group annuity and pure endowment contracts inparagraphs (1-a) and (1-b) of subsection (d) of this section, thelegal minimumstandard for the valuation of annuities shall be McClintock's "table ofmortality among annuitants," with interest at 4% perannum, but annuities deferred 10 or more years and written inconnection with life insurance shall be valued on the same basis as thatused in computing the consideration or premiums therefor, or upon anyhigher standard at the option of the company. The commissioner ofinsurance may, in the commissioner's discretion, vary the above standardof interest and mortality in cases of companies organized under the lawsof a foreign country and in particular cases of invalid lives or otherextra hazards.
Reserves for all such policies and contracts may be calculated, atthe option of the company, according to any standards which producegreater aggregate reserves for all such policies and contracts than theminimum reserves required by this subsection.
(d) Standard valuation law. This subsection shall apply toonly those policies and contracts issued on or after the operative date ofK.S.A. 40-428, and amendments thereto, (the standard nonforfeiture law), exceptas otherwise provided in paragraphs (1-a) and (1-b) of this subsection forgroup annuity and pure endowment contracts issued prior to such operative date,and except as provided in subsection (e) of this section.
(1) Except as otherwise provided in paragraphs (1-a) and (1-b) of thissubsection, the minimum standard for the valuation of all such policiesand contracts shall be the commissioners' reserve valuation methodsdefined in paragraphs (2), (2-a) and (5) of this subsection, 3 ½%interest or in the case of policies and contracts, other than annuity andpure endowment contracts, issued on orafter July 1, 1973, 4% interest for such policies issued prior to July 1, 1978,5 ½% interest for single premium life insurance policies and4 ½% interest for all other such policies issued on or after July 1,1978, and the following specified tables:
(i) For all ordinary policies of life insurance issued on thestandard basis, excluding any disability and accidental death benefitsin such policies--the commissioners' 1941 standard ordinary mortalitytable for such policies issued prior to the operative date of K.S.A. 40-428(d-1), and amendments thereto, the commissioners' 1958 standard ordinarymortality table and the commissioners' 1958 extended term insurancetable, as applicable, for such policies issued on or after theoperative date of K.S.A. 40-428 (d-1), and amendments thereto, and priorto the operative date of K.S.A. 40-428 (d-3), and amendments thereto, providedthat for any category of such policies issued on femalerisks, the modified net premiums and present values, referred to insubsection (d)(2) of this section, may be calculated, accordingto anage not more than six years younger than the actual age of theinsured; and for such policies issued on or after the operative date ofK.S.A. 40-428 (d-3), and amendments thereto: (i) The commissioners' 1980standard ordinary mortality table; or (ii) at the election of the companyfor any one or more specified plans of life insurance, the commissioners'1980 standard ordinary mortality table with ten-year select mortality factors;or (iii) any ordinary mortality table, adopted after 1980 by the nationalassociation of insurance commissioners, that is approved by regulationpromulgatedby the commissioner for use in determining the minimum standard of valuationfor such policies.
(ii) For all industrial life insurance policies issued on thestandard basis, excluding any disability and accidental death benefitsin such policies--the 1941 standard industrial mortality table forsuch policies issued prior to the operative date of K.S.A. 40-428 (d-2),and amendments thereto, and for such policies issued on or after such operativedate the commissioners' 1961 standard industrial mortality table or anyindustrial mortality table, adopted after 1980 by the national associationof insurance commissioners, that is approved by regulation promulgated bythe commissioner for use in determining the minimum standard of valuationfor such policies.
(iii) For individual annuity and pure endowment contracts, excludingany disability and accidental death benefits in such policies, andexcluding annuities involving life contingencies provided or availableunder optional modes of settlement in life insurance policies or annuitycontracts--the 1937 standard annuity mortality table, or, at theoption of the company, the annuity mortality table for 1949, ultimate,or any modification of either of these tables approved by thecommissioner.
(iv) For group annuity and pure endowment contracts, excluding anydisability and accidental death benefits in such policies--the groupannuity mortality table for 1951, any modification of such tableapproved by the commissioner, or at the option of the company, any ofthe tables or modifications of tables specified for individual annuityand pure endowment contracts.
(v) For total and permanent disability benefits in or supplementaryto ordinary policies or contracts--for policies or contracts issued onor after January 1, 1961, either the tables of period 2 disablementrates and the 1930 to 1950 termination rates of the 1952 disabilitystudy of the society of actuaries, with due regard to the type ofbenefit, any tables of disablement rates and termination rates, adoptedafter 1980 by the national association of insurance commissioners, thatare approved by regulation promulgated by the commissioner for use indeterminingthe minimum standard of valuation for such policies, or, at the option ofthe company, the class (3) disability table(1926); and for policies issued prior to January 1, 1961, the class (3)disability table (1926). Any such table shall, for active lives, becombined with a mortality table permitted for calculating the reservefor life insurance policies.
(vi) For accidental death benefits in or supplementary topolicies--for policies issued on or after January 1, 1961, either the 1959accidental death benefits table, any accidental death benefits table, adoptedafter 1980 by the national association of insurance commissioners, thatis approved by regulation promulgated by the commissioner for use indetermining the minimum standard of valuation for such policies, or, atthe option of the company, theinter-company double indemnity mortality table; and for policies issuedprior to January 1, 1961, the inter-company double indemnity mortalitytable. Either table shall be combined with a mortality table permittedfor calculating the reserves for life insurance policies.
(vii) For group life insurance, life insurance issued on thesubstandard basis, annuities involving life contingencies provided oravailable under optional modes of settlement in life insurance policiesor annuity contracts and other special benefits--such tables as may beapproved by the commissioner of insurance.
(viii) For all credit life insurance having initial terms of10 years or less, excluding any disability and accidental deathbenefits in such policies, the 1980 commissioners' extendedterm mortality table or any later version as established in rules andregulations adopted by the commissioner of insurance.
(1-a) Except as provided in paragraph (1-b), the minimum standardfor the valuation of all individualannuity and pure endowment contracts issued on or after the operativedate of this paragraph (1-a), as defined herein, and for all annuitiesand pure endowments purchased on or after such operative date undergroup annuity and pure endowment contracts, shall be the commissioners'reserve valuation methods defined in paragraphs (2) and (2-a) and thefollowing tables and interest rates:
(i) For individual annuity and pure endowment contracts issued priorto July 1, 1978, excluding any disability and accidental death benefitsin such contracts--the 1971 individual annuity mortality table, or anymodification of this table approved by the commissioner of insurance,and 6% interest for single premium immediate annuitycontracts, and 4% interest for all other individualannuity and pure endowment contracts.
(ii) For individual single premium immediate annuity contractsissued on or after July 1, 1978, excluding any disability and accidentaldeath benefits in such contracts--the 1971 individual annuity mortalitytable, or any individual annuity mortality table, adopted after 1980 bythe national association of insurance commissioners, that is approved byregulation promulgated by the commissioner for use in determining the minimumstandard of valuation for such contracts, or any modification of these tablesapproved by the commissioner,and 7 ½% interest.
(iii) For individual annuity and pure endowment contracts issued onor after July 1, 1978, other than single premium immediate annuitycontracts, excluding any disability and accidental death benefits insuch contracts--the 1971 individual annuity mortality table, or anyindividualannuity mortality table, adopted after 1980 by the national associationof insurance commissioners, that is approved by regulation promulgated bythe commissioner for use in determining the minimum standard of valuationfor such contracts, or anymodification of these tables approved by the commissioner, and 5 ½%interest for single premium deferred annuity and pure endowment contractsand 4 ½% interest for all other such individual annuity and pureendowmentcontracts.
(iv) For all annuities and pure endowments purchased prior to July1, 1978, under group annuity and pure endowment contracts, excluding anydisability and accidental death benefits purchased under suchcontracts--the 1971 group annuity mortality table, or any modification ofthistable approved by the commissioner of insurance, and6% interest.
(v) For all annuities and pure endowments purchased on or after July1, 1978, under group annuity and pure endowment contracts, excluding anydisability and accidental death benefits purchased under suchcontracts--the 1971 group annuity mortality table, or any group annuitymortality table, adopted after 1980 by the national association of insurancecommissioners, that is approved by regulation promulgated by the commissionerfor use in determining the minimum standard of valuation for such annuitiesand pure endowments, or any modificationof these tables approved by the commissioner, and 7 ½% interest.
After July 1, 1973, any company may file with the commissioner ofinsurance a written notice of its election to comply with the provisionsof this paragraph after a specified date before January 1, 1979, whichshall be the operative date of this paragraph for such company. Acompany may elect a different operative date for individual annuity andpure endowment contracts from that elected for group annuity and pureendowment contracts. If a company makes no such election, the operativedate of this paragraph for such company shall be January 1, 1979.
(1-b) (A) Applicability of this paragraph:
(1) The interest rates used in determining the minimum standard for thevaluation of:
(a) All life insurance policies issued in a particular calendar year,on or after the operative date of K.S.A. 40-428(d-3), and amendments thereto;
(b) all individual annuity and pure endowment contracts issued in aparticular calendar year on or after January 1, 1983;
(c) all annuities and pure endowments purchased in a particular calendaryear on or after January 1, 1983, under group annuity and pure endowmentcontracts; and
(d) the net increase, if any, in a particular calendar year after January1, 1983, in amounts held under guaranteed interest contracts shall be thecalendar year statutory valuation interest rates as defined in this paragraph(1-b).
(B) Calendar year statutory valuation interest rates:
(1) The calendar year statutory valuation interest rates, I, shall bedetermined as follows and the results rounded to the nearer 1/4%:
(a) For life insurance,
I = .03 + W (R1 - .03) + W/2 (R2 - .09);
(b) For single premium immediate annuities and for annuity benefitsinvolving life contingencies arising from other annuities with cash settlementoptions 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 paragraph and W is theweighting factor defined in this paragraph.
(c) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on an issue year basis, exceptas stated in (b) above, the formula for life insurance stated in (a) aboveshall apply to annuities and guaranteed interest contractswith guarantee durations in excess of 10 years and the formula for singlepremium immediate annuities stated in (b) above shall apply to annuitiesand guaranteed interest contracts with guarantee duration of 10 years or less.
(d) For other annuities with no cash settlement options and for guaranteedinterest contracts with no cash settlement options, the formula for singlepremium immediate annuities stated in (b) above shall apply.
(e) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a change in fund basis,the formula for single premium immediate annuities stated in (b) above shallapply.
(2) However, if the calendar year statutory valuation interest rate forany life insurance policies issued in any calendar year determined withoutreference to this sentence differs from the corresponding actual rate forsimilar policies issued in the immediately preceding calendar year by lessthan ½%, the calendar year statutory valuation interest rate for suchlife insurance policies shall be equal to the corresponding actual ratefor the immediately preceding calendar year. For purposes of applying theimmediately preceding sentence, the calendar year statutory valuation interestrate for life insurance policies issued in a calendar year shall be determinedfor 1980 (using the reference interest rate defined for 1979) and shallbe determined for each subsequent calendar year regardless of when K.S.A.40-428(d-3), and amendments thereto, becomes operative.
(C) Weighting factors:
(1) The weighting factors referred to in the formulas stated above aregiven in the following tables:
(a) 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 yearsthe life insurance can remain in force on a basis guaranteed in the policyor under options to convert to plans of life insurance with premium ratesor nonforfeiture values, or both, which are guaranteed in the original policy;
(b) Weighting factor for single premium immediate annuities and for annuitybenefits involving life contingencies arising from other annuities withcash settlement options and guaranteed interest contracts with cash settlementoptions:
.80
(c) Weighting factors for other annuities and for guaranteed interestcontracts, except as stated in (b) above, shall be as specified in tables(i), (ii) and (iii) below, according to the rules and definitions in (iv),(v) and (vi) below:
(i) For annuities and guaranteed interest contracts valued on an issue yearbasis:
Guarantee Duration (Years) Weighting Factor
for Plan Type A B C
5 or less..................80 .60 .50
More than five, 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)
Plan Type A B C
For annuities and guaranteed interest contracts valued on a change in fundbasis, the factors shown in (i) above increased by..................15 .25 .05
(iii)
Plan Type A B C
For annuities and guaranteed interest contracts valued on an issue yearbasis (other than those with no cash settlement options) which do not guaranteeinterest on considerations received more than one year after issue or purchaseand for annuities and guaranteed interest contracts valued on a change infund basis which do not guarantee interest rates on considerations receivedmore than 12 months beyond the valuation date, the factors shown in (i)or derived in (ii) increased by..................05 .05 .05
(iv) For other annuities with cash settlement options and guaranteedinterestcontracts with cash settlement options, the guarantee duration is the numberof years for which the contract guarantees interest rates in excess of thecalendar year statutory valuation interest rate for life insurance policieswith guarantee duration in excess of 20 years. For other annuities withno cash settlement options and for guaranteed interest contracts with nocash settlement options, the guarantee duration is the number of years fromthe date of issue or date of purchase to the date annuity benefits arescheduled 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) Withan adjustment to reflect changes in interest rates or asset values sincereceipt of the funds by the insurer; or (2) without such adjustment butin installments over five years or more; or (3) as an immediate lifeannuity; or (4) no withdrawal permitted.
Plan type B: Before expiration of the interest rate guarantee, policyholdermay withdraw funds only: (1) With an adjustment to reflect changes in interestrates or asset values since receipt of the funds by the insurer; or (2)without such adjustment but in installments over five years or more; or(3) no withdrawal permitted. At the end of interest rate guarantee, fundsmay be withdrawn without such adjustment in a single sum or installmentsover less than five years.
Plan type C: Policyholder may withdraw funds before expiration of interestrate guarantee in a single sum or installments over less than five yearseither: (1) Without adjustment to reflect changes in interest rates or assetvalues since receipt of the funds by the insurance company; or (2) subjectonly to a fixed surrender charge stipulated in the contract as a percentage ofthe fund.
(vi) A company may elect to value guaranteed interest contracts with cashsettlement options and annuities with cash settlement options on eitheran issue year basis or on a change in fund basis. Guaranteed interestcontractswith no cash settlement options and other annuities with no cash settlementoptions must be valued on an issue year basis. As used in this paragraph(1-b), an issue year basis of valuation refers to a valuation basis underwhich the interest rate used to determine the minimum valuation standardfor the entire duration of the annuity or guaranteed interest contract isthe calendar year valuation interest rate for the year of issue or yearof purchase of the annuity or guaranteed interest contract, and the changein fund basis of valuation refers to a valuation basis under which the interestrate used to determine the minimum valuation standard applicable to eachchange in the fund held under the annuity or guaranteed interest contractis the calendar year valuation interest rate for the year of the change in thefund.
(D) Reference interest rate:
(1) The reference interest rate referred to in paragraph (B) of thisparagraph(1-b) shall be defined as follows:
(a) For all life insurance, the lesser of the average over a period of36 months and the average over a period of 12 months, ending on June 30of the calendar year next preceding the year of issue, of Moody's corporatebond yield average--monthly average corporates, as published by Moody'sinvestors service, inc.
(b) For single premium immediate annuities and for annuity benefitsinvolving life contingencies arising from other annuities with cash settlementoptions and guaranteed interest contracts with cash settlement options,the average over a period of 12 months, ending on June 30 of the calendaryear of issue or year of purchase, of Moody's corporate bond yieldaverage--monthly average corporates, as published by Moody's investorsservice, inc.
(c) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a year of issuebasis, except as stated in (b) above, with guarantee duration in excessof 10 years, the lesser of the average over a period of 36 months and theaverage over a period of 12 months, ending on June 30 of the calendar yearof issue or purchase, of Moody's corporate bond yield average--monthlyaverage corporates, as published by Moody's investors service, inc.
(d) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a year of issuebasis, except as stated in (b) above, with guaranteed duration of 10 yearsor less, the average over a period of 12 months, ending on June 30 of thecalendar year of issue or purchase, of Moody's corporate bond yieldaverage--monthly average corporates, as published by Moody's investorsservice, inc.
(e) For other annuities with no cash settlement options and for guaranteedinterest contracts with no cash settlement options, the average over a periodof 12 months, ending on June 30 of the calendar year of issue or purchase,of Moody's corporate bond yield average--monthly average corporates, aspublished by Moody's investors service, inc.
(f) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a change in fund basis,except as stated in (b) above, the average over a period of 12 months, endingon June 30 of the calendar year of the change in the fund, of Moody'scorporate bond yield average--monthly average corporates, as publishedby Moody's investors service, inc.
(E) Alternative method for determining reference interest rates:
(1) In the event that Moody's corporate bond yield average--monthlyaverage corporates is no longer published by Moody's investors service,inc., or in the event that the national association of insurance commissionersdetermines that Moody's corporate bond yield average--monthly averagecorporates as published by Moody's investors service, inc., is no longerappropriate for the determination of the reference interest rate, then analternative method for determination of the reference interest rate, whichis adopted by the national association of insurance commissioners and approvedby regulation promulgated by the commissioner, may be substituted.
(2) Commissioners' reserve valuation method. Except asotherwise provided in paragraphs (2-a) and (5) of this subsection,reserves according to the commissioners' reserve valuation method, forthe life insurance and endowment benefits of policies providing for auniform amount of insurance and requiring the payment of uniformpremiums, shall be the excess, if any, of the present value, at the dateof valuation, of such future guaranteed benefits provided for by suchpolicies, over the then present value of any future modified netpremiums therefor.
The modified net premiums for any such policy shall be such uniformpercentage of the respective contract premiums for such benefits thatthe present value, at the date of issue of the policy, of all suchmodified net premiums shall be equal to the sum of the then presentvalue of such benefits provided for by the policy and the excess of (A)over (B), as follows:
(A) A net level annual premium equal to the present value, at thedate of issue, of such benefits provided for after the first policyyear, divided by the present value, at the date of issue, of an annuityof one per annum payable on the first and each subsequent anniversary ofsuch policy on which a premium falls due. Such net level annual premiumshall not exceed the net level annual premium on thenineteen-year premium whole life plan for insurance of the same amount atan age one year higher than the age at issue of such policy.
(B) A net one-year term premium for such benefits provided for in thefirst policy year.
Except for any life insurance policy issued on or after January 1, 1985,for which the contract premium in the first policy year exceeds that ofthe second year and for which no comparable additional benefit is providedin the first year for such excess and which provides an endowment benefitor a cash surrender value or a combination thereof in an amount greaterthan such excess premium, the reserve according to the commissioners' reservevaluation method as of any policy anniversary occurring on or before theassumed ending date defined herein as the first policy anniversary on whichthe sum of any endowment benefit and any cash surrender value then availableis greater than such excess premium shall, except as otherwise providedin paragraph (5), be the greater of the reserve as of such policy anniversarycalculated as described in this paragraph and the reserve as of such policyanniversary calculated as described in this paragraph, but with: (i) Thevalue defined in subparagraph (A) of this paragraph being reduced by 15%of the amount of such excess first-year premium; (ii) all present valuesof benefits and premiums being determined without reference to premiumsor benefits provided for by the policy after the assumed ending date; (iii)the policy being assumed to mature on such date as an endowment; and (iv)the cash surrender value provided on such date being considered as an endowmentbenefit. In making the above comparison the mortality and interest basesstated in paragraphs (1) and (1-b) shall be used.
Reserves according to the commissioners' reserve valuation method for:(i) Life insurance policies providing for a varying amount of insuranceor requiring the payment of varying premiums; (ii) group annuity andpure endowment contracts purchased under a retirement plan or plan ofdeferred compensation, established or maintained by an employer(including a partnership or sole proprietorship) or by an employeeorganization, or by both, other than a plan providing individualretirement accounts or individual retirement annuities under section 408of the internal revenue code, as now or hereafter amended; (iii)disability and accidental death benefits in all policies and contracts;and (iv) all other benefits, except life insurance and endowmentbenefits in life insurance policies and benefits provided by all otherannuity and pure endowment contracts, shall be calculated by a methodconsistent with the principles of this paragraph (2).
Reserves according to the commissioners' reserve valuation method foruniversal life contracts issued after December 31, 2006 providing for deathbenefits that are guaranteed to remain in effect if specified conditions, asdefined in the universal life insurance contract are met by the contract owner,shall calculate the value of the guarantee by a method consistent with theprinciples of this paragraph (2). The use of anticipated lapse rates in suchcalculations shall not exceed 2% per annum.
(2-a) This section shall apply to all annuity and pure endowmentcontracts other than group annuity and pure endowment contractspurchased under a retirement plan or plan of deferred compensation,established or maintained by an employer (including a partnership orsole proprietorship) or by an employee organization, or by both, otherthan a plan providing individual retirement accounts or individualretirement annuities under section 408 of the internal revenue code, asnow or hereafter amended.
Reserves according to the commissioners' annuity reserve method forbenefits under annuity or pure endowment contracts, excluding anydisability and accidental death benefits in such contracts, shall be thegreatest of the respective excesses of the present values, at the dateof valuation, of the future guaranteed benefits, including guaranteednonforfeiture benefits, provided for by such contracts at the end ofeach respective contract year, over the present value, at the date ofvaluation, of any future valuation considerations derived from futuregross considerations, required by the terms of such contract, thatbecome payable prior to the end of such respective contract year. Thefuture guaranteed benefits shall be determined by using the mortalitytable, if any, and the interest rate, or rates, specified in suchcontracts for determining guaranteed benefits. The valuationconsiderations are the portions of the respective gross considerationsapplied under the terms of such contracts to determine nonforfeiturevalues.
(3) In no event shall a company's aggregate reserves for all lifeinsurance policies, excluding disability and accidental death benefits,be less than the aggregate reserves calculated in accordance with themethods set forth in paragraphs (2), (2-a), (5) and (6)and the mortalitytable or tables and rate or rates of interest used in calculatingnonforfeiture benefits for such policies.
(3-a) In no event shall the aggregate reserves for all policies, contractsand benefits be less than the aggregate reserves determined by the qualifiedactuary rendering the opinion required by subsection (b).
(4) Reserves for any category of policies, contracts or benefits asestablished by the commissioner of insurance may be calculated at theoption of the company, according to any standards which produce greateraggregate reserves for such category than those calculated according tothe minimum standard herein provided, but the rate or rates of interestused for policies and contracts, other than annuity and pure endowmentcontracts, shall not be higher than the corresponding rate or rates ofinterest used in calculating any nonforfeiture benefits provided fortherein.
(5) If in any contract year the gross premium charged by any lifeinsurance company on any policy or contract is less than the valuationnet premium for the policy or contract calculated by the method used incalculating the reserve thereon but using the minimum valuationstandards of mortality and rate of interest, the minimum reserverequired for such policy or contract shall be the greater of either thereserve calculated according to the mortality table, rate of interest,and method actually used for such policy or contract, or the reservecalculated by the method actually used for such policy or contract butusing the minimum valuation standards of mortality and rate of interest andreplacing the valuation net premium by the actual gross premium in eachcontract year for which the valuation net premium exceeds the actualgross premium.
The minimum valuation standards of mortality and rate of interest referredto in this section are those standards stated in paragraphs (1) and (1-b).
Except for any life insurance policy issued on or after January 1,1988, for which the gross premium in the first policy year exceeds that ofthesecond year and for which no comparable additional benefit is providedin the first year for such excess and which provides an endowment benefitor a cash surrender value or a combination thereof in an amount greaterthan such excess premium, the foregoing provisions of this paragraph (5)shall be applied as if the method actually used in calculating the reservefor such policy were the method described in paragraph (2), ignoring thethird paragraph of paragraph (2). The minimum reserve at each policyanniversaryof such a policy shall be the greater of the minimum reserve calculatedin accordance with paragraph (2), including the third paragraph of paragraph(2), and the minimum reserve calculated in accordance with this paragraph (5).
(6) In the case of any plan of life insurance which provides for futurepremium determination, the amounts of which are to be determined by theinsurance company based on then estimates of future experience, or in thecase of any plan of life insurance or annuity which is of such a naturethat the minimum reserves cannot be determined by the methods describedin paragraphs (2), (2-a) and (5), the reserves which are held under any suchplan must:
(a) Be appropriate in relation to the benefits and the pattern of premiumsfor that plan, and
(b) be computed by a method which is consistent with the principlesof this standard valuation law, as determined by regulations promulgatedby the commissioner.
(e) Any company organized under the laws of this state, whichshall desire to do business in any other states wherein it is not permitted toissue or deliver policies valued as provided in subsection (d) ofthis section, may value its policies issued and delivered in such otherstates as provided in subsection (c) of this section.
(f) The commissioner shall adopt rules and regulations establishing theminimum standards applicable to the valuation of accident and sicknessinsurance and may adopt other rules and regulations necessary to administer theprovisions of this act.
History: L. 1927, ch. 231, 40-409; L. 1947, ch. 277, § 1; L.1957, ch. 280, § 1; L. 1959, ch. 213, § 1; L. 1965, ch. 302, § 1; L.1973, ch. 193, § 1; L. 1978, ch. 175, § 1; L. 1980, ch. 129, §2; L. 1982, ch. 202, § 1;L. 1994, ch. 101, § 1;L. 2004, ch. 128, § 1;L. 2007, ch. 105, § 1; July 1.
Article 4.--GENERAL PROVISIONS RELATING TO LIFE INSURANCE COMPANIES
40-409.Valuation of policies; compensation ofactuary; standard valuation law; commissioners' reserve valuation method;lapse rates; aggregate reserves; calculations; Kansas companies doing businessin anotherstate; annual opinion by actuary on reserves; confidential.(a) Every life insurance company transacting business in this stateshall annually file, on or before March 1 of each year, with thecommissioner of insurance a certified valuation of its policies in forceas of December 31 of the preceding year, and it shall be theduty of the commissioner of insurance to annuallymake or cause to be made net valuations of all the outstanding policies andadditions thereto of every life insurance company transacting businessin this state, except that in the case of an alien company suchvaluation shall be limited to its insurance transactions in the UnitedStates. In making the valuations of life insurance companies organizedunder the laws of this state, the valuation shall include unpaiddividends, and all other policy obligations. Whenever the laws of anyother state of the United States shall authorize the valuation of lifeinsurance policies by some designated state officer according to thesame standard as herein provided, or some other standard which willrequire a reserve not less than the standard herein provided, thevaluation made according to the standard by such officer of thepolicies and other obligations of any life insurance company notorganized under the laws of this state, and certified by such officer,may be received as true and correct, and no further valuation of thesame shall be required of such company by the commissioner of insurance.It shall be the duty of the commissioner of insurance, wheneverrequested so to do by any life insurance company organized under thelaws of this state, to make annual valuations of all the outstandingpolicies and additions thereto of every such company and deliver to suchcompany certificates of such valuation, specifying the amount of thecompany's reserve on policies thus valued. And for the performance ofthe duties prescribed by this section the commissioner of insuranceshall be authorized to employ an actuary, whose compensation shall bepaid by the company whose policies, additions, unpaid dividends or otheroutstanding policy obligations are valued, upon a certificate by thecommissioner of insurance showing the compensation due therefor.
Any such company which at any time shall have adopted any standardsof valuation producing greater aggregate reserves than those calculatedaccording to the minimum standards hereinafter provided may, with theapproval of the commissioner of insurance, adopt any lower standard ofvaluation, but not lower than the minimum herein provided.
(b) This subsection shall become operative for the year ending December31, 1995, and each subsequent calendar year.
(1) Every life insurance company doing business in this state shall annuallysubmit the opinion of a qualified actuary as to whether the reserves andrelated actuarial items held in support of the policies and contracts specifiedby the commissioner by regulation are computed appropriately, are based onassumptions which satisfy contractual provisions, are consistent with priorreported amounts and comply with applicable laws of this state. Thecommissioner shall adopt an administrative regulation defining the specificapplication, scope and content of this opinion.
(2) Except as otherwise provided by law or rules and regulations of thecommissioner, every life insurance company shall also annually include in theopinion required by subsection (1), an opinion of the same qualified actuary asto whether the reserves and related actuarial items held in support of thepolicies and contracts specified by the commissioner, when considered in lightof the assets held by the company with respect to the reservesand related actuarial items, including but not limited to the investmentearnings on the assets and the considerations anticipated to be received andretained under the policies and contracts, making adequate provision for thecompany's obligations under the policies and contracts, including but notlimited to the benefits under and expenses associated with the policies andcontracts.
(3) The commissioner may provide for a transition period for establishingany higher reserves which the qualified actuary deems necessary in order torender the opinion required by this section.
(4) Each opinion required by subsection (2) shall comply with the followingprovisions:
(A) A memorandum, in form and substance acceptable to or prescribed by thecommissioner shall be prepared to support each actuarial opinion.
(B) If the insurance company fails to provide a supporting memorandum withina period specified or the commissioner determines that the supportingmemorandum provided by the insurance company fails to meet the prescribedstandards or is otherwise unacceptable to the commissioner, the commissioner isauthorized to employ an actuary whose compensation and expenses shall be paidby the company whose policies, additions, unpaid dividends or other outstandingpolicy or contractual obligations are valued upon a certificate by thecommissioner showing the compensation and expenses due therefor.
(5) Every opinion of the actuary shall comply with the following provisions:
(A) The opinion shall be submitted with the annual statement required byK.S.A. 40-225 and amendments thereto reflecting the valuation of such reserveliabilities for each year ending on or after December 31, 1995.
(B) The opinion shall apply to all business in force including individualand group health insurance plans.
(C) The opinion shall be based on standards adopted from time to time by theactuarial standards board of the American academy of actuaries and on suchadditional standards as the commissioner prescribes.
(D) In the case of an opinion required to be submitted by an insurancecompany not domiciled in this state, the commissioner may accept the opinionfiled by that company with the insurance supervisory official of another stateif the commissioner determines that the opinion reasonably meets therequirements applicable to a company domiciled in this state.
(E) For the purposes of this section, "qualified actuary" means a member ingood standing of the American academy of actuaries.
(F) Except in cases of fraud or willful misconduct, the qualified actuaryshall not be liable for damages to any person, other than the insurance companyand the commissioner, for any act, error, omission, decision or conduct withrespect to the actuary's opinion required by this act.
(G) Any memorandum in support of the opinion, and any other materialprovided by the company to the commissioner in connection with the opinion,shall be kept confidential by the commissioner and shall not be made public andshall not be subject to subpoena, other than for the purpose of defending anaction seeking damages from any person by reason of any action required by thissection or by rules and regulations adopted pursuant to this section.Notwithstanding the provisions of this subpart (G), the memorandum or othermaterial may be released by the commissioner: (i) With the written consent ofthe company, or (ii) to the American academy of actuaries upon request statingthat the memorandum or other material is required for the purpose ofprofessional disciplinary proceedings and setting forth procedures satisfactoryto the commissioner for preserving the confidentiality of the memorandum orother material. Once any portion of the confidential memorandum is cited bythe company in its marketing or is cited before any governmental agency otherthan a state insurance department or is released by the company to the newsmedia, all portions of the confidential memorandum shall be no longerconfidential.
(c) This subsection shall apply to only those policies andcontractsissued prior to the operative date of K.S.A. 40-428, and amendments thereto,(the standard nonforfeiture law), except as provided in subsection (d) ofthis section.
For the purpose of such valuations and for making specialexaminations of the condition of life insurance companies, as providedby the laws of this state, and for valuing all outstanding policies ofevery life insurance company, the method and basis of valuation shall bethe same as prescribed by the insurance code of this state in thevaluation of such contracts before June 1, 1927. The legal minimumstandard for the valuation of life insurance contracts issued on orafter June 1, 1927, shall be the one-year preliminary-term method ofvaluation, except as hereinafter modified, on the basis of the Americanexperience table of mortality with interest at 4% perannum. If the premium charged for term insurance under limited-paymentlife preliminary-term policy providing for the payment of all premiumsthereon in less than 20 years from the date of policy, or under an endowmentpreliminary-term policy, exceeds that charged for lifeinsurance under twenty-payment life preliminary-term policy of the samecompany, the reserve thereon at the end of any year, including thefirst, shall not be less than the reserve on a twenty-payment lifepreliminary-term policy issued in the same year and at the same age,together with an amount which shall be equivalent to the accumulation ofa net level premium sufficient to provide for a pure endowment at theend of the premium-payment period, equal to the difference between thevalue at the end of such period of such a twenty-payment lifepreliminary-term policy and the full net level premium reserve at suchtime of such a limited-payment life or endowment policy. Thepremium-payment period is the period during which premiums areconcurrently payable, under such twenty-payment life preliminary-termpolicy and such limited-payment life or endowment policy. Policiesissued on the preliminary-term method shall contain a clause specifyingthat the reserve thereof shall be computed in accordance with themodified preliminary-term method of valuation provided therein. Exceptas otherwise provided for group annuity and pure endowment contracts inparagraphs (1-a) and (1-b) of subsection (d) of this section, thelegal minimumstandard for the valuation of annuities shall be McClintock's "table ofmortality among annuitants," with interest at 4% perannum, but annuities deferred 10 or more years and written inconnection with life insurance shall be valued on the same basis as thatused in computing the consideration or premiums therefor, or upon anyhigher standard at the option of the company. The commissioner ofinsurance may, in the commissioner's discretion, vary the above standardof interest and mortality in cases of companies organized under the lawsof a foreign country and in particular cases of invalid lives or otherextra hazards.
Reserves for all such policies and contracts may be calculated, atthe option of the company, according to any standards which producegreater aggregate reserves for all such policies and contracts than theminimum reserves required by this subsection.
(d) Standard valuation law. This subsection shall apply toonly those policies and contracts issued on or after the operative date ofK.S.A. 40-428, and amendments thereto, (the standard nonforfeiture law), exceptas otherwise provided in paragraphs (1-a) and (1-b) of this subsection forgroup annuity and pure endowment contracts issued prior to such operative date,and except as provided in subsection (e) of this section.
(1) Except as otherwise provided in paragraphs (1-a) and (1-b) of thissubsection, the minimum standard for the valuation of all such policiesand contracts shall be the commissioners' reserve valuation methodsdefined in paragraphs (2), (2-a) and (5) of this subsection, 3 ½%interest or in the case of policies and contracts, other than annuity andpure endowment contracts, issued on orafter July 1, 1973, 4% interest for such policies issued prior to July 1, 1978,5 ½% interest for single premium life insurance policies and4 ½% interest for all other such policies issued on or after July 1,1978, and the following specified tables:
(i) For all ordinary policies of life insurance issued on thestandard basis, excluding any disability and accidental death benefitsin such policies--the commissioners' 1941 standard ordinary mortalitytable for such policies issued prior to the operative date of K.S.A. 40-428(d-1), and amendments thereto, the commissioners' 1958 standard ordinarymortality table and the commissioners' 1958 extended term insurancetable, as applicable, for such policies issued on or after theoperative date of K.S.A. 40-428 (d-1), and amendments thereto, and priorto the operative date of K.S.A. 40-428 (d-3), and amendments thereto, providedthat for any category of such policies issued on femalerisks, the modified net premiums and present values, referred to insubsection (d)(2) of this section, may be calculated, accordingto anage not more than six years younger than the actual age of theinsured; and for such policies issued on or after the operative date ofK.S.A. 40-428 (d-3), and amendments thereto: (i) The commissioners' 1980standard ordinary mortality table; or (ii) at the election of the companyfor any one or more specified plans of life insurance, the commissioners'1980 standard ordinary mortality table with ten-year select mortality factors;or (iii) any ordinary mortality table, adopted after 1980 by the nationalassociation of insurance commissioners, that is approved by regulationpromulgatedby the commissioner for use in determining the minimum standard of valuationfor such policies.
(ii) For all industrial life insurance policies issued on thestandard basis, excluding any disability and accidental death benefitsin such policies--the 1941 standard industrial mortality table forsuch policies issued prior to the operative date of K.S.A. 40-428 (d-2),and amendments thereto, and for such policies issued on or after such operativedate the commissioners' 1961 standard industrial mortality table or anyindustrial mortality table, adopted after 1980 by the national associationof insurance commissioners, that is approved by regulation promulgated bythe commissioner for use in determining the minimum standard of valuationfor such policies.
(iii) For individual annuity and pure endowment contracts, excludingany disability and accidental death benefits in such policies, andexcluding annuities involving life contingencies provided or availableunder optional modes of settlement in life insurance policies or annuitycontracts--the 1937 standard annuity mortality table, or, at theoption of the company, the annuity mortality table for 1949, ultimate,or any modification of either of these tables approved by thecommissioner.
(iv) For group annuity and pure endowment contracts, excluding anydisability and accidental death benefits in such policies--the groupannuity mortality table for 1951, any modification of such tableapproved by the commissioner, or at the option of the company, any ofthe tables or modifications of tables specified for individual annuityand pure endowment contracts.
(v) For total and permanent disability benefits in or supplementaryto ordinary policies or contracts--for policies or contracts issued onor after January 1, 1961, either the tables of period 2 disablementrates and the 1930 to 1950 termination rates of the 1952 disabilitystudy of the society of actuaries, with due regard to the type ofbenefit, any tables of disablement rates and termination rates, adoptedafter 1980 by the national association of insurance commissioners, thatare approved by regulation promulgated by the commissioner for use indeterminingthe minimum standard of valuation for such policies, or, at the option ofthe company, the class (3) disability table(1926); and for policies issued prior to January 1, 1961, the class (3)disability table (1926). Any such table shall, for active lives, becombined with a mortality table permitted for calculating the reservefor life insurance policies.
(vi) For accidental death benefits in or supplementary topolicies--for policies issued on or after January 1, 1961, either the 1959accidental death benefits table, any accidental death benefits table, adoptedafter 1980 by the national association of insurance commissioners, thatis approved by regulation promulgated by the commissioner for use indetermining the minimum standard of valuation for such policies, or, atthe option of the company, theinter-company double indemnity mortality table; and for policies issuedprior to January 1, 1961, the inter-company double indemnity mortalitytable. Either table shall be combined with a mortality table permittedfor calculating the reserves for life insurance policies.
(vii) For group life insurance, life insurance issued on thesubstandard basis, annuities involving life contingencies provided oravailable under optional modes of settlement in life insurance policiesor annuity contracts and other special benefits--such tables as may beapproved by the commissioner of insurance.
(viii) For all credit life insurance having initial terms of10 years or less, excluding any disability and accidental deathbenefits in such policies, the 1980 commissioners' extendedterm mortality table or any later version as established in rules andregulations adopted by the commissioner of insurance.
(1-a) Except as provided in paragraph (1-b), the minimum standardfor the valuation of all individualannuity and pure endowment contracts issued on or after the operativedate of this paragraph (1-a), as defined herein, and for all annuitiesand pure endowments purchased on or after such operative date undergroup annuity and pure endowment contracts, shall be the commissioners'reserve valuation methods defined in paragraphs (2) and (2-a) and thefollowing tables and interest rates:
(i) For individual annuity and pure endowment contracts issued priorto July 1, 1978, excluding any disability and accidental death benefitsin such contracts--the 1971 individual annuity mortality table, or anymodification of this table approved by the commissioner of insurance,and 6% interest for single premium immediate annuitycontracts, and 4% interest for all other individualannuity and pure endowment contracts.
(ii) For individual single premium immediate annuity contractsissued on or after July 1, 1978, excluding any disability and accidentaldeath benefits in such contracts--the 1971 individual annuity mortalitytable, or any individual annuity mortality table, adopted after 1980 bythe national association of insurance commissioners, that is approved byregulation promulgated by the commissioner for use in determining the minimumstandard of valuation for such contracts, or any modification of these tablesapproved by the commissioner,and 7 ½% interest.
(iii) For individual annuity and pure endowment contracts issued onor after July 1, 1978, other than single premium immediate annuitycontracts, excluding any disability and accidental death benefits insuch contracts--the 1971 individual annuity mortality table, or anyindividualannuity mortality table, adopted after 1980 by the national associationof insurance commissioners, that is approved by regulation promulgated bythe commissioner for use in determining the minimum standard of valuationfor such contracts, or anymodification of these tables approved by the commissioner, and 5 ½%interest for single premium deferred annuity and pure endowment contractsand 4 ½% interest for all other such individual annuity and pureendowmentcontracts.
(iv) For all annuities and pure endowments purchased prior to July1, 1978, under group annuity and pure endowment contracts, excluding anydisability and accidental death benefits purchased under suchcontracts--the 1971 group annuity mortality table, or any modification ofthistable approved by the commissioner of insurance, and6% interest.
(v) For all annuities and pure endowments purchased on or after July1, 1978, under group annuity and pure endowment contracts, excluding anydisability and accidental death benefits purchased under suchcontracts--the 1971 group annuity mortality table, or any group annuitymortality table, adopted after 1980 by the national association of insurancecommissioners, that is approved by regulation promulgated by the commissionerfor use in determining the minimum standard of valuation for such annuitiesand pure endowments, or any modificationof these tables approved by the commissioner, and 7 ½% interest.
After July 1, 1973, any company may file with the commissioner ofinsurance a written notice of its election to comply with the provisionsof this paragraph after a specified date before January 1, 1979, whichshall be the operative date of this paragraph for such company. Acompany may elect a different operative date for individual annuity andpure endowment contracts from that elected for group annuity and pureendowment contracts. If a company makes no such election, the operativedate of this paragraph for such company shall be January 1, 1979.
(1-b) (A) Applicability of this paragraph:
(1) The interest rates used in determining the minimum standard for thevaluation of:
(a) All life insurance policies issued in a particular calendar year,on or after the operative date of K.S.A. 40-428(d-3), and amendments thereto;
(b) all individual annuity and pure endowment contracts issued in aparticular calendar year on or after January 1, 1983;
(c) all annuities and pure endowments purchased in a particular calendaryear on or after January 1, 1983, under group annuity and pure endowmentcontracts; and
(d) the net increase, if any, in a particular calendar year after January1, 1983, in amounts held under guaranteed interest contracts shall be thecalendar year statutory valuation interest rates as defined in this paragraph(1-b).
(B) Calendar year statutory valuation interest rates:
(1) The calendar year statutory valuation interest rates, I, shall bedetermined as follows and the results rounded to the nearer 1/4%:
(a) For life insurance,
I = .03 + W (R1 - .03) + W/2 (R2 - .09);
(b) For single premium immediate annuities and for annuity benefitsinvolving life contingencies arising from other annuities with cash settlementoptions 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 paragraph and W is theweighting factor defined in this paragraph.
(c) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on an issue year basis, exceptas stated in (b) above, the formula for life insurance stated in (a) aboveshall apply to annuities and guaranteed interest contractswith guarantee durations in excess of 10 years and the formula for singlepremium immediate annuities stated in (b) above shall apply to annuitiesand guaranteed interest contracts with guarantee duration of 10 years or less.
(d) For other annuities with no cash settlement options and for guaranteedinterest contracts with no cash settlement options, the formula for singlepremium immediate annuities stated in (b) above shall apply.
(e) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a change in fund basis,the formula for single premium immediate annuities stated in (b) above shallapply.
(2) However, if the calendar year statutory valuation interest rate forany life insurance policies issued in any calendar year determined withoutreference to this sentence differs from the corresponding actual rate forsimilar policies issued in the immediately preceding calendar year by lessthan ½%, the calendar year statutory valuation interest rate for suchlife insurance policies shall be equal to the corresponding actual ratefor the immediately preceding calendar year. For purposes of applying theimmediately preceding sentence, the calendar year statutory valuation interestrate for life insurance policies issued in a calendar year shall be determinedfor 1980 (using the reference interest rate defined for 1979) and shallbe determined for each subsequent calendar year regardless of when K.S.A.40-428(d-3), and amendments thereto, becomes operative.
(C) Weighting factors:
(1) The weighting factors referred to in the formulas stated above aregiven in the following tables:
(a) 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 yearsthe life insurance can remain in force on a basis guaranteed in the policyor under options to convert to plans of life insurance with premium ratesor nonforfeiture values, or both, which are guaranteed in the original policy;
(b) Weighting factor for single premium immediate annuities and for annuitybenefits involving life contingencies arising from other annuities withcash settlement options and guaranteed interest contracts with cash settlementoptions:
.80
(c) Weighting factors for other annuities and for guaranteed interestcontracts, except as stated in (b) above, shall be as specified in tables(i), (ii) and (iii) below, according to the rules and definitions in (iv),(v) and (vi) below:
(i) For annuities and guaranteed interest contracts valued on an issue yearbasis:
Guarantee Duration (Years) Weighting Factor
for Plan Type A B C
5 or less..................80 .60 .50
More than five, 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)
Plan Type A B C
For annuities and guaranteed interest contracts valued on a change in fundbasis, the factors shown in (i) above increased by..................15 .25 .05
(iii)
Plan Type A B C
For annuities and guaranteed interest contracts valued on an issue yearbasis (other than those with no cash settlement options) which do not guaranteeinterest on considerations received more than one year after issue or purchaseand for annuities and guaranteed interest contracts valued on a change infund basis which do not guarantee interest rates on considerations receivedmore than 12 months beyond the valuation date, the factors shown in (i)or derived in (ii) increased by..................05 .05 .05
(iv) For other annuities with cash settlement options and guaranteedinterestcontracts with cash settlement options, the guarantee duration is the numberof years for which the contract guarantees interest rates in excess of thecalendar year statutory valuation interest rate for life insurance policieswith guarantee duration in excess of 20 years. For other annuities withno cash settlement options and for guaranteed interest contracts with nocash settlement options, the guarantee duration is the number of years fromthe date of issue or date of purchase to the date annuity benefits arescheduled 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) Withan adjustment to reflect changes in interest rates or asset values sincereceipt of the funds by the insurer; or (2) without such adjustment butin installments over five years or more; or (3) as an immediate lifeannuity; or (4) no withdrawal permitted.
Plan type B: Before expiration of the interest rate guarantee, policyholdermay withdraw funds only: (1) With an adjustment to reflect changes in interestrates or asset values since receipt of the funds by the insurer; or (2)without such adjustment but in installments over five years or more; or(3) no withdrawal permitted. At the end of interest rate guarantee, fundsmay be withdrawn without such adjustment in a single sum or installmentsover less than five years.
Plan type C: Policyholder may withdraw funds before expiration of interestrate guarantee in a single sum or installments over less than five yearseither: (1) Without adjustment to reflect changes in interest rates or assetvalues since receipt of the funds by the insurance company; or (2) subjectonly to a fixed surrender charge stipulated in the contract as a percentage ofthe fund.
(vi) A company may elect to value guaranteed interest contracts with cashsettlement options and annuities with cash settlement options on eitheran issue year basis or on a change in fund basis. Guaranteed interestcontractswith no cash settlement options and other annuities with no cash settlementoptions must be valued on an issue year basis. As used in this paragraph(1-b), an issue year basis of valuation refers to a valuation basis underwhich the interest rate used to determine the minimum valuation standardfor the entire duration of the annuity or guaranteed interest contract isthe calendar year valuation interest rate for the year of issue or yearof purchase of the annuity or guaranteed interest contract, and the changein fund basis of valuation refers to a valuation basis under which the interestrate used to determine the minimum valuation standard applicable to eachchange in the fund held under the annuity or guaranteed interest contractis the calendar year valuation interest rate for the year of the change in thefund.
(D) Reference interest rate:
(1) The reference interest rate referred to in paragraph (B) of thisparagraph(1-b) shall be defined as follows:
(a) For all life insurance, the lesser of the average over a period of36 months and the average over a period of 12 months, ending on June 30of the calendar year next preceding the year of issue, of Moody's corporatebond yield average--monthly average corporates, as published by Moody'sinvestors service, inc.
(b) For single premium immediate annuities and for annuity benefitsinvolving life contingencies arising from other annuities with cash settlementoptions and guaranteed interest contracts with cash settlement options,the average over a period of 12 months, ending on June 30 of the calendaryear of issue or year of purchase, of Moody's corporate bond yieldaverage--monthly average corporates, as published by Moody's investorsservice, inc.
(c) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a year of issuebasis, except as stated in (b) above, with guarantee duration in excessof 10 years, the lesser of the average over a period of 36 months and theaverage over a period of 12 months, ending on June 30 of the calendar yearof issue or purchase, of Moody's corporate bond yield average--monthlyaverage corporates, as published by Moody's investors service, inc.
(d) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a year of issuebasis, except as stated in (b) above, with guaranteed duration of 10 yearsor less, the average over a period of 12 months, ending on June 30 of thecalendar year of issue or purchase, of Moody's corporate bond yieldaverage--monthly average corporates, as published by Moody's investorsservice, inc.
(e) For other annuities with no cash settlement options and for guaranteedinterest contracts with no cash settlement options, the average over a periodof 12 months, ending on June 30 of the calendar year of issue or purchase,of Moody's corporate bond yield average--monthly average corporates, aspublished by Moody's investors service, inc.
(f) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a change in fund basis,except as stated in (b) above, the average over a period of 12 months, endingon June 30 of the calendar year of the change in the fund, of Moody'scorporate bond yield average--monthly average corporates, as publishedby Moody's investors service, inc.
(E) Alternative method for determining reference interest rates:
(1) In the event that Moody's corporate bond yield average--monthlyaverage corporates is no longer published by Moody's investors service,inc., or in the event that the national association of insurance commissionersdetermines that Moody's corporate bond yield average--monthly averagecorporates as published by Moody's investors service, inc., is no longerappropriate for the determination of the reference interest rate, then analternative method for determination of the reference interest rate, whichis adopted by the national association of insurance commissioners and approvedby regulation promulgated by the commissioner, may be substituted.
(2) Commissioners' reserve valuation method. Except asotherwise provided in paragraphs (2-a) and (5) of this subsection,reserves according to the commissioners' reserve valuation method, forthe life insurance and endowment benefits of policies providing for auniform amount of insurance and requiring the payment of uniformpremiums, shall be the excess, if any, of the present value, at the dateof valuation, of such future guaranteed benefits provided for by suchpolicies, over the then present value of any future modified netpremiums therefor.
The modified net premiums for any such policy shall be such uniformpercentage of the respective contract premiums for such benefits thatthe present value, at the date of issue of the policy, of all suchmodified net premiums shall be equal to the sum of the then presentvalue of such benefits provided for by the policy and the excess of (A)over (B), as follows:
(A) A net level annual premium equal to the present value, at thedate of issue, of such benefits provided for after the first policyyear, divided by the present value, at the date of issue, of an annuityof one per annum payable on the first and each subsequent anniversary ofsuch policy on which a premium falls due. Such net level annual premiumshall not exceed the net level annual premium on thenineteen-year premium whole life plan for insurance of the same amount atan age one year higher than the age at issue of such policy.
(B) A net one-year term premium for such benefits provided for in thefirst policy year.
Except for any life insurance policy issued on or after January 1, 1985,for which the contract premium in the first policy year exceeds that ofthe second year and for which no comparable additional benefit is providedin the first year for such excess and which provides an endowment benefitor a cash surrender value or a combination thereof in an amount greaterthan such excess premium, the reserve according to the commissioners' reservevaluation method as of any policy anniversary occurring on or before theassumed ending date defined herein as the first policy anniversary on whichthe sum of any endowment benefit and any cash surrender value then availableis greater than such excess premium shall, except as otherwise providedin paragraph (5), be the greater of the reserve as of such policy anniversarycalculated as described in this paragraph and the reserve as of such policyanniversary calculated as described in this paragraph, but with: (i) Thevalue defined in subparagraph (A) of this paragraph being reduced by 15%of the amount of such excess first-year premium; (ii) all present valuesof benefits and premiums being determined without reference to premiumsor benefits provided for by the policy after the assumed ending date; (iii)the policy being assumed to mature on such date as an endowment; and (iv)the cash surrender value provided on such date being considered as an endowmentbenefit. In making the above comparison the mortality and interest basesstated in paragraphs (1) and (1-b) shall be used.
Reserves according to the commissioners' reserve valuation method for:(i) Life insurance policies providing for a varying amount of insuranceor requiring the payment of varying premiums; (ii) group annuity andpure endowment contracts purchased under a retirement plan or plan ofdeferred compensation, established or maintained by an employer(including a partnership or sole proprietorship) or by an employeeorganization, or by both, other than a plan providing individualretirement accounts or individual retirement annuities under section 408of the internal revenue code, as now or hereafter amended; (iii)disability and accidental death benefits in all policies and contracts;and (iv) all other benefits, except life insurance and endowmentbenefits in life insurance policies and benefits provided by all otherannuity and pure endowment contracts, shall be calculated by a methodconsistent with the principles of this paragraph (2).
Reserves according to the commissioners' reserve valuation method foruniversal life contracts issued after December 31, 2006 providing for deathbenefits that are guaranteed to remain in effect if specified conditions, asdefined in the universal life insurance contract are met by the contract owner,shall calculate the value of the guarantee by a method consistent with theprinciples of this paragraph (2). The use of anticipated lapse rates in suchcalculations shall not exceed 2% per annum.
(2-a) This section shall apply to all annuity and pure endowmentcontracts other than group annuity and pure endowment contractspurchased under a retirement plan or plan of deferred compensation,established or maintained by an employer (including a partnership orsole proprietorship) or by an employee organization, or by both, otherthan a plan providing individual retirement accounts or individualretirement annuities under section 408 of the internal revenue code, asnow or hereafter amended.
Reserves according to the commissioners' annuity reserve method forbenefits under annuity or pure endowment contracts, excluding anydisability and accidental death benefits in such contracts, shall be thegreatest of the respective excesses of the present values, at the dateof valuation, of the future guaranteed benefits, including guaranteednonforfeiture benefits, provided for by such contracts at the end ofeach respective contract year, over the present value, at the date ofvaluation, of any future valuation considerations derived from futuregross considerations, required by the terms of such contract, thatbecome payable prior to the end of such respective contract year. Thefuture guaranteed benefits shall be determined by using the mortalitytable, if any, and the interest rate, or rates, specified in suchcontracts for determining guaranteed benefits. The valuationconsiderations are the portions of the respective gross considerationsapplied under the terms of such contracts to determine nonforfeiturevalues.
(3) In no event shall a company's aggregate reserves for all lifeinsurance policies, excluding disability and accidental death benefits,be less than the aggregate reserves calculated in accordance with themethods set forth in paragraphs (2), (2-a), (5) and (6)and the mortalitytable or tables and rate or rates of interest used in calculatingnonforfeiture benefits for such policies.
(3-a) In no event shall the aggregate reserves for all policies, contractsand benefits be less than the aggregate reserves determined by the qualifiedactuary rendering the opinion required by subsection (b).
(4) Reserves for any category of policies, contracts or benefits asestablished by the commissioner of insurance may be calculated at theoption of the company, according to any standards which produce greateraggregate reserves for such category than those calculated according tothe minimum standard herein provided, but the rate or rates of interestused for policies and contracts, other than annuity and pure endowmentcontracts, shall not be higher than the corresponding rate or rates ofinterest used in calculating any nonforfeiture benefits provided fortherein.
(5) If in any contract year the gross premium charged by any lifeinsurance company on any policy or contract is less than the valuationnet premium for the policy or contract calculated by the method used incalculating the reserve thereon but using the minimum valuationstandards of mortality and rate of interest, the minimum reserverequired for such policy or contract shall be the greater of either thereserve calculated according to the mortality table, rate of interest,and method actually used for such policy or contract, or the reservecalculated by the method actually used for such policy or contract butusing the minimum valuation standards of mortality and rate of interest andreplacing the valuation net premium by the actual gross premium in eachcontract year for which the valuation net premium exceeds the actualgross premium.
The minimum valuation standards of mortality and rate of interest referredto in this section are those standards stated in paragraphs (1) and (1-b).
Except for any life insurance policy issued on or after January 1,1988, for which the gross premium in the first policy year exceeds that ofthesecond year and for which no comparable additional benefit is providedin the first year for such excess and which provides an endowment benefitor a cash surrender value or a combination thereof in an amount greaterthan such excess premium, the foregoing provisions of this paragraph (5)shall be applied as if the method actually used in calculating the reservefor such policy were the method described in paragraph (2), ignoring thethird paragraph of paragraph (2). The minimum reserve at each policyanniversaryof such a policy shall be the greater of the minimum reserve calculatedin accordance with paragraph (2), including the third paragraph of paragraph(2), and the minimum reserve calculated in accordance with this paragraph (5).
(6) In the case of any plan of life insurance which provides for futurepremium determination, the amounts of which are to be determined by theinsurance company based on then estimates of future experience, or in thecase of any plan of life insurance or annuity which is of such a naturethat the minimum reserves cannot be determined by the methods describedin paragraphs (2), (2-a) and (5), the reserves which are held under any suchplan must:
(a) Be appropriate in relation to the benefits and the pattern of premiumsfor that plan, and
(b) be computed by a method which is consistent with the principlesof this standard valuation law, as determined by regulations promulgatedby the commissioner.
(e) Any company organized under the laws of this state, whichshall desire to do business in any other states wherein it is not permitted toissue or deliver policies valued as provided in subsection (d) ofthis section, may value its policies issued and delivered in such otherstates as provided in subsection (c) of this section.
(f) The commissioner shall adopt rules and regulations establishing theminimum standards applicable to the valuation of accident and sicknessinsurance and may adopt other rules and regulations necessary to administer theprovisions of this act.
History: L. 1927, ch. 231, 40-409; L. 1947, ch. 277, § 1; L.1957, ch. 280, § 1; L. 1959, ch. 213, § 1; L. 1965, ch. 302, § 1; L.1973, ch. 193, § 1; L. 1978, ch. 175, § 1; L. 1980, ch. 129, §2; L. 1982, ch. 202, § 1;L. 1994, ch. 101, § 1;L. 2004, ch. 128, § 1;L. 2007, ch. 105, § 1; July 1.
Article 4.--GENERAL PROVISIONS RELATING TO LIFE INSURANCE COMPANIES
40-409.Valuation of policies; compensation ofactuary; standard valuation law; commissioners' reserve valuation method;lapse rates; aggregate reserves; calculations; Kansas companies doing businessin anotherstate; annual opinion by actuary on reserves; confidential.(a) Every life insurance company transacting business in this stateshall annually file, on or before March 1 of each year, with thecommissioner of insurance a certified valuation of its policies in forceas of December 31 of the preceding year, and it shall be theduty of the commissioner of insurance to annuallymake or cause to be made net valuations of all the outstanding policies andadditions thereto of every life insurance company transacting businessin this state, except that in the case of an alien company suchvaluation shall be limited to its insurance transactions in the UnitedStates. In making the valuations of life insurance companies organizedunder the laws of this state, the valuation shall include unpaiddividends, and all other policy obligations. Whenever the laws of anyother state of the United States shall authorize the valuation of lifeinsurance policies by some designated state officer according to thesame standard as herein provided, or some other standard which willrequire a reserve not less than the standard herein provided, thevaluation made according to the standard by such officer of thepolicies and other obligations of any life insurance company notorganized under the laws of this state, and certified by such officer,may be received as true and correct, and no further valuation of thesame shall be required of such company by the commissioner of insurance.It shall be the duty of the commissioner of insurance, wheneverrequested so to do by any life insurance company organized under thelaws of this state, to make annual valuations of all the outstandingpolicies and additions thereto of every such company and deliver to suchcompany certificates of such valuation, specifying the amount of thecompany's reserve on policies thus valued. And for the performance ofthe duties prescribed by this section the commissioner of insuranceshall be authorized to employ an actuary, whose compensation shall bepaid by the company whose policies, additions, unpaid dividends or otheroutstanding policy obligations are valued, upon a certificate by thecommissioner of insurance showing the compensation due therefor.
Any such company which at any time shall have adopted any standardsof valuation producing greater aggregate reserves than those calculatedaccording to the minimum standards hereinafter provided may, with theapproval of the commissioner of insurance, adopt any lower standard ofvaluation, but not lower than the minimum herein provided.
(b) This subsection shall become operative for the year ending December31, 1995, and each subsequent calendar year.
(1) Every life insurance company doing business in this state shall annuallysubmit the opinion of a qualified actuary as to whether the reserves andrelated actuarial items held in support of the policies and contracts specifiedby the commissioner by regulation are computed appropriately, are based onassumptions which satisfy contractual provisions, are consistent with priorreported amounts and comply with applicable laws of this state. Thecommissioner shall adopt an administrative regulation defining the specificapplication, scope and content of this opinion.
(2) Except as otherwise provided by law or rules and regulations of thecommissioner, every life insurance company shall also annually include in theopinion required by subsection (1), an opinion of the same qualified actuary asto whether the reserves and related actuarial items held in support of thepolicies and contracts specified by the commissioner, when considered in lightof the assets held by the company with respect to the reservesand related actuarial items, including but not limited to the investmentearnings on the assets and the considerations anticipated to be received andretained under the policies and contracts, making adequate provision for thecompany's obligations under the policies and contracts, including but notlimited to the benefits under and expenses associated with the policies andcontracts.
(3) The commissioner may provide for a transition period for establishingany higher reserves which the qualified actuary deems necessary in order torender the opinion required by this section.
(4) Each opinion required by subsection (2) shall comply with the followingprovisions:
(A) A memorandum, in form and substance acceptable to or prescribed by thecommissioner shall be prepared to support each actuarial opinion.
(B) If the insurance company fails to provide a supporting memorandum withina period specified or the commissioner determines that the supportingmemorandum provided by the insurance company fails to meet the prescribedstandards or is otherwise unacceptable to the commissioner, the commissioner isauthorized to employ an actuary whose compensation and expenses shall be paidby the company whose policies, additions, unpaid dividends or other outstandingpolicy or contractual obligations are valued upon a certificate by thecommissioner showing the compensation and expenses due therefor.
(5) Every opinion of the actuary shall comply with the following provisions:
(A) The opinion shall be submitted with the annual statement required byK.S.A. 40-225 and amendments thereto reflecting the valuation of such reserveliabilities for each year ending on or after December 31, 1995.
(B) The opinion shall apply to all business in force including individualand group health insurance plans.
(C) The opinion shall be based on standards adopted from time to time by theactuarial standards board of the American academy of actuaries and on suchadditional standards as the commissioner prescribes.
(D) In the case of an opinion required to be submitted by an insurancecompany not domiciled in this state, the commissioner may accept the opinionfiled by that company with the insurance supervisory official of another stateif the commissioner determines that the opinion reasonably meets therequirements applicable to a company domiciled in this state.
(E) For the purposes of this section, "qualified actuary" means a member ingood standing of the American academy of actuaries.
(F) Except in cases of fraud or willful misconduct, the qualified actuaryshall not be liable for damages to any person, other than the insurance companyand the commissioner, for any act, error, omission, decision or conduct withrespect to the actuary's opinion required by this act.
(G) Any memorandum in support of the opinion, and any other materialprovided by the company to the commissioner in connection with the opinion,shall be kept confidential by the commissioner and shall not be made public andshall not be subject to subpoena, other than for the purpose of defending anaction seeking damages from any person by reason of any action required by thissection or by rules and regulations adopted pursuant to this section.Notwithstanding the provisions of this subpart (G), the memorandum or othermaterial may be released by the commissioner: (i) With the written consent ofthe company, or (ii) to the American academy of actuaries upon request statingthat the memorandum or other material is required for the purpose ofprofessional disciplinary proceedings and setting forth procedures satisfactoryto the commissioner for preserving the confidentiality of the memorandum orother material. Once any portion of the confidential memorandum is cited bythe company in its marketing or is cited before any governmental agency otherthan a state insurance department or is released by the company to the newsmedia, all portions of the confidential memorandum shall be no longerconfidential.
(c) This subsection shall apply to only those policies andcontractsissued prior to the operative date of K.S.A. 40-428, and amendments thereto,(the standard nonforfeiture law), except as provided in subsection (d) ofthis section.
For the purpose of such valuations and for making specialexaminations of the condition of life insurance companies, as providedby the laws of this state, and for valuing all outstanding policies ofevery life insurance company, the method and basis of valuation shall bethe same as prescribed by the insurance code of this state in thevaluation of such contracts before June 1, 1927. The legal minimumstandard for the valuation of life insurance contracts issued on orafter June 1, 1927, shall be the one-year preliminary-term method ofvaluation, except as hereinafter modified, on the basis of the Americanexperience table of mortality with interest at 4% perannum. If the premium charged for term insurance under limited-paymentlife preliminary-term policy providing for the payment of all premiumsthereon in less than 20 years from the date of policy, or under an endowmentpreliminary-term policy, exceeds that charged for lifeinsurance under twenty-payment life preliminary-term policy of the samecompany, the reserve thereon at the end of any year, including thefirst, shall not be less than the reserve on a twenty-payment lifepreliminary-term policy issued in the same year and at the same age,together with an amount which shall be equivalent to the accumulation ofa net level premium sufficient to provide for a pure endowment at theend of the premium-payment period, equal to the difference between thevalue at the end of such period of such a twenty-payment lifepreliminary-term policy and the full net level premium reserve at suchtime of such a limited-payment life or endowment policy. Thepremium-payment period is the period during which premiums areconcurrently payable, under such twenty-payment life preliminary-termpolicy and such limited-payment life or endowment policy. Policiesissued on the preliminary-term method shall contain a clause specifyingthat the reserve thereof shall be computed in accordance with themodified preliminary-term method of valuation provided therein. Exceptas otherwise provided for group annuity and pure endowment contracts inparagraphs (1-a) and (1-b) of subsection (d) of this section, thelegal minimumstandard for the valuation of annuities shall be McClintock's "table ofmortality among annuitants," with interest at 4% perannum, but annuities deferred 10 or more years and written inconnection with life insurance shall be valued on the same basis as thatused in computing the consideration or premiums therefor, or upon anyhigher standard at the option of the company. The commissioner ofinsurance may, in the commissioner's discretion, vary the above standardof interest and mortality in cases of companies organized under the lawsof a foreign country and in particular cases of invalid lives or otherextra hazards.
Reserves for all such policies and contracts may be calculated, atthe option of the company, according to any standards which producegreater aggregate reserves for all such policies and contracts than theminimum reserves required by this subsection.
(d) Standard valuation law. This subsection shall apply toonly those policies and contracts issued on or after the operative date ofK.S.A. 40-428, and amendments thereto, (the standard nonforfeiture law), exceptas otherwise provided in paragraphs (1-a) and (1-b) of this subsection forgroup annuity and pure endowment contracts issued prior to such operative date,and except as provided in subsection (e) of this section.
(1) Except as otherwise provided in paragraphs (1-a) and (1-b) of thissubsection, the minimum standard for the valuation of all such policiesand contracts shall be the commissioners' reserve valuation methodsdefined in paragraphs (2), (2-a) and (5) of this subsection, 3 ½%interest or in the case of policies and contracts, other than annuity andpure endowment contracts, issued on orafter July 1, 1973, 4% interest for such policies issued prior to July 1, 1978,5 ½% interest for single premium life insurance policies and4 ½% interest for all other such policies issued on or after July 1,1978, and the following specified tables:
(i) For all ordinary policies of life insurance issued on thestandard basis, excluding any disability and accidental death benefitsin such policies--the commissioners' 1941 standard ordinary mortalitytable for such policies issued prior to the operative date of K.S.A. 40-428(d-1), and amendments thereto, the commissioners' 1958 standard ordinarymortality table and the commissioners' 1958 extended term insurancetable, as applicable, for such policies issued on or after theoperative date of K.S.A. 40-428 (d-1), and amendments thereto, and priorto the operative date of K.S.A. 40-428 (d-3), and amendments thereto, providedthat for any category of such policies issued on femalerisks, the modified net premiums and present values, referred to insubsection (d)(2) of this section, may be calculated, accordingto anage not more than six years younger than the actual age of theinsured; and for such policies issued on or after the operative date ofK.S.A. 40-428 (d-3), and amendments thereto: (i) The commissioners' 1980standard ordinary mortality table; or (ii) at the election of the companyfor any one or more specified plans of life insurance, the commissioners'1980 standard ordinary mortality table with ten-year select mortality factors;or (iii) any ordinary mortality table, adopted after 1980 by the nationalassociation of insurance commissioners, that is approved by regulationpromulgatedby the commissioner for use in determining the minimum standard of valuationfor such policies.
(ii) For all industrial life insurance policies issued on thestandard basis, excluding any disability and accidental death benefitsin such policies--the 1941 standard industrial mortality table forsuch policies issued prior to the operative date of K.S.A. 40-428 (d-2),and amendments thereto, and for such policies issued on or after such operativedate the commissioners' 1961 standard industrial mortality table or anyindustrial mortality table, adopted after 1980 by the national associationof insurance commissioners, that is approved by regulation promulgated bythe commissioner for use in determining the minimum standard of valuationfor such policies.
(iii) For individual annuity and pure endowment contracts, excludingany disability and accidental death benefits in such policies, andexcluding annuities involving life contingencies provided or availableunder optional modes of settlement in life insurance policies or annuitycontracts--the 1937 standard annuity mortality table, or, at theoption of the company, the annuity mortality table for 1949, ultimate,or any modification of either of these tables approved by thecommissioner.
(iv) For group annuity and pure endowment contracts, excluding anydisability and accidental death benefits in such policies--the groupannuity mortality table for 1951, any modification of such tableapproved by the commissioner, or at the option of the company, any ofthe tables or modifications of tables specified for individual annuityand pure endowment contracts.
(v) For total and permanent disability benefits in or supplementaryto ordinary policies or contracts--for policies or contracts issued onor after January 1, 1961, either the tables of period 2 disablementrates and the 1930 to 1950 termination rates of the 1952 disabilitystudy of the society of actuaries, with due regard to the type ofbenefit, any tables of disablement rates and termination rates, adoptedafter 1980 by the national association of insurance commissioners, thatare approved by regulation promulgated by the commissioner for use indeterminingthe minimum standard of valuation for such policies, or, at the option ofthe company, the class (3) disability table(1926); and for policies issued prior to January 1, 1961, the class (3)disability table (1926). Any such table shall, for active lives, becombined with a mortality table permitted for calculating the reservefor life insurance policies.
(vi) For accidental death benefits in or supplementary topolicies--for policies issued on or after January 1, 1961, either the 1959accidental death benefits table, any accidental death benefits table, adoptedafter 1980 by the national association of insurance commissioners, thatis approved by regulation promulgated by the commissioner for use indetermining the minimum standard of valuation for such policies, or, atthe option of the company, theinter-company double indemnity mortality table; and for policies issuedprior to January 1, 1961, the inter-company double indemnity mortalitytable. Either table shall be combined with a mortality table permittedfor calculating the reserves for life insurance policies.
(vii) For group life insurance, life insurance issued on thesubstandard basis, annuities involving life contingencies provided oravailable under optional modes of settlement in life insurance policiesor annuity contracts and other special benefits--such tables as may beapproved by the commissioner of insurance.
(viii) For all credit life insurance having initial terms of10 years or less, excluding any disability and accidental deathbenefits in such policies, the 1980 commissioners' extendedterm mortality table or any later version as established in rules andregulations adopted by the commissioner of insurance.
(1-a) Except as provided in paragraph (1-b), the minimum standardfor the valuation of all individualannuity and pure endowment contracts issued on or after the operativedate of this paragraph (1-a), as defined herein, and for all annuitiesand pure endowments purchased on or after such operative date undergroup annuity and pure endowment contracts, shall be the commissioners'reserve valuation methods defined in paragraphs (2) and (2-a) and thefollowing tables and interest rates:
(i) For individual annuity and pure endowment contracts issued priorto July 1, 1978, excluding any disability and accidental death benefitsin such contracts--the 1971 individual annuity mortality table, or anymodification of this table approved by the commissioner of insurance,and 6% interest for single premium immediate annuitycontracts, and 4% interest for all other individualannuity and pure endowment contracts.
(ii) For individual single premium immediate annuity contractsissued on or after July 1, 1978, excluding any disability and accidentaldeath benefits in such contracts--the 1971 individual annuity mortalitytable, or any individual annuity mortality table, adopted after 1980 bythe national association of insurance commissioners, that is approved byregulation promulgated by the commissioner for use in determining the minimumstandard of valuation for such contracts, or any modification of these tablesapproved by the commissioner,and 7 ½% interest.
(iii) For individual annuity and pure endowment contracts issued onor after July 1, 1978, other than single premium immediate annuitycontracts, excluding any disability and accidental death benefits insuch contracts--the 1971 individual annuity mortality table, or anyindividualannuity mortality table, adopted after 1980 by the national associationof insurance commissioners, that is approved by regulation promulgated bythe commissioner for use in determining the minimum standard of valuationfor such contracts, or anymodification of these tables approved by the commissioner, and 5 ½%interest for single premium deferred annuity and pure endowment contractsand 4 ½% interest for all other such individual annuity and pureendowmentcontracts.
(iv) For all annuities and pure endowments purchased prior to July1, 1978, under group annuity and pure endowment contracts, excluding anydisability and accidental death benefits purchased under suchcontracts--the 1971 group annuity mortality table, or any modification ofthistable approved by the commissioner of insurance, and6% interest.
(v) For all annuities and pure endowments purchased on or after July1, 1978, under group annuity and pure endowment contracts, excluding anydisability and accidental death benefits purchased under suchcontracts--the 1971 group annuity mortality table, or any group annuitymortality table, adopted after 1980 by the national association of insurancecommissioners, that is approved by regulation promulgated by the commissionerfor use in determining the minimum standard of valuation for such annuitiesand pure endowments, or any modificationof these tables approved by the commissioner, and 7 ½% interest.
After July 1, 1973, any company may file with the commissioner ofinsurance a written notice of its election to comply with the provisionsof this paragraph after a specified date before January 1, 1979, whichshall be the operative date of this paragraph for such company. Acompany may elect a different operative date for individual annuity andpure endowment contracts from that elected for group annuity and pureendowment contracts. If a company makes no such election, the operativedate of this paragraph for such company shall be January 1, 1979.
(1-b) (A) Applicability of this paragraph:
(1) The interest rates used in determining the minimum standard for thevaluation of:
(a) All life insurance policies issued in a particular calendar year,on or after the operative date of K.S.A. 40-428(d-3), and amendments thereto;
(b) all individual annuity and pure endowment contracts issued in aparticular calendar year on or after January 1, 1983;
(c) all annuities and pure endowments purchased in a particular calendaryear on or after January 1, 1983, under group annuity and pure endowmentcontracts; and
(d) the net increase, if any, in a particular calendar year after January1, 1983, in amounts held under guaranteed interest contracts shall be thecalendar year statutory valuation interest rates as defined in this paragraph(1-b).
(B) Calendar year statutory valuation interest rates:
(1) The calendar year statutory valuation interest rates, I, shall bedetermined as follows and the results rounded to the nearer 1/4%:
(a) For life insurance,
I = .03 + W (R1 - .03) + W/2 (R2 - .09);
(b) For single premium immediate annuities and for annuity benefitsinvolving life contingencies arising from other annuities with cash settlementoptions 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 paragraph and W is theweighting factor defined in this paragraph.
(c) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on an issue year basis, exceptas stated in (b) above, the formula for life insurance stated in (a) aboveshall apply to annuities and guaranteed interest contractswith guarantee durations in excess of 10 years and the formula for singlepremium immediate annuities stated in (b) above shall apply to annuitiesand guaranteed interest contracts with guarantee duration of 10 years or less.
(d) For other annuities with no cash settlement options and for guaranteedinterest contracts with no cash settlement options, the formula for singlepremium immediate annuities stated in (b) above shall apply.
(e) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a change in fund basis,the formula for single premium immediate annuities stated in (b) above shallapply.
(2) However, if the calendar year statutory valuation interest rate forany life insurance policies issued in any calendar year determined withoutreference to this sentence differs from the corresponding actual rate forsimilar policies issued in the immediately preceding calendar year by lessthan ½%, the calendar year statutory valuation interest rate for suchlife insurance policies shall be equal to the corresponding actual ratefor the immediately preceding calendar year. For purposes of applying theimmediately preceding sentence, the calendar year statutory valuation interestrate for life insurance policies issued in a calendar year shall be determinedfor 1980 (using the reference interest rate defined for 1979) and shallbe determined for each subsequent calendar year regardless of when K.S.A.40-428(d-3), and amendments thereto, becomes operative.
(C) Weighting factors:
(1) The weighting factors referred to in the formulas stated above aregiven in the following tables:
(a) 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 yearsthe life insurance can remain in force on a basis guaranteed in the policyor under options to convert to plans of life insurance with premium ratesor nonforfeiture values, or both, which are guaranteed in the original policy;
(b) Weighting factor for single premium immediate annuities and for annuitybenefits involving life contingencies arising from other annuities withcash settlement options and guaranteed interest contracts with cash settlementoptions:
.80
(c) Weighting factors for other annuities and for guaranteed interestcontracts, except as stated in (b) above, shall be as specified in tables(i), (ii) and (iii) below, according to the rules and definitions in (iv),(v) and (vi) below:
(i) For annuities and guaranteed interest contracts valued on an issue yearbasis:
Guarantee Duration (Years) Weighting Factor
for Plan Type A B C
5 or less..................80 .60 .50
More than five, 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)
Plan Type A B C
For annuities and guaranteed interest contracts valued on a change in fundbasis, the factors shown in (i) above increased by..................15 .25 .05
(iii)
Plan Type A B C
For annuities and guaranteed interest contracts valued on an issue yearbasis (other than those with no cash settlement options) which do not guaranteeinterest on considerations received more than one year after issue or purchaseand for annuities and guaranteed interest contracts valued on a change infund basis which do not guarantee interest rates on considerations receivedmore than 12 months beyond the valuation date, the factors shown in (i)or derived in (ii) increased by..................05 .05 .05
(iv) For other annuities with cash settlement options and guaranteedinterestcontracts with cash settlement options, the guarantee duration is the numberof years for which the contract guarantees interest rates in excess of thecalendar year statutory valuation interest rate for life insurance policieswith guarantee duration in excess of 20 years. For other annuities withno cash settlement options and for guaranteed interest contracts with nocash settlement options, the guarantee duration is the number of years fromthe date of issue or date of purchase to the date annuity benefits arescheduled 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) Withan adjustment to reflect changes in interest rates or asset values sincereceipt of the funds by the insurer; or (2) without such adjustment butin installments over five years or more; or (3) as an immediate lifeannuity; or (4) no withdrawal permitted.
Plan type B: Before expiration of the interest rate guarantee, policyholdermay withdraw funds only: (1) With an adjustment to reflect changes in interestrates or asset values since receipt of the funds by the insurer; or (2)without such adjustment but in installments over five years or more; or(3) no withdrawal permitted. At the end of interest rate guarantee, fundsmay be withdrawn without such adjustment in a single sum or installmentsover less than five years.
Plan type C: Policyholder may withdraw funds before expiration of interestrate guarantee in a single sum or installments over less than five yearseither: (1) Without adjustment to reflect changes in interest rates or assetvalues since receipt of the funds by the insurance company; or (2) subjectonly to a fixed surrender charge stipulated in the contract as a percentage ofthe fund.
(vi) A company may elect to value guaranteed interest contracts with cashsettlement options and annuities with cash settlement options on eitheran issue year basis or on a change in fund basis. Guaranteed interestcontractswith no cash settlement options and other annuities with no cash settlementoptions must be valued on an issue year basis. As used in this paragraph(1-b), an issue year basis of valuation refers to a valuation basis underwhich the interest rate used to determine the minimum valuation standardfor the entire duration of the annuity or guaranteed interest contract isthe calendar year valuation interest rate for the year of issue or yearof purchase of the annuity or guaranteed interest contract, and the changein fund basis of valuation refers to a valuation basis under which the interestrate used to determine the minimum valuation standard applicable to eachchange in the fund held under the annuity or guaranteed interest contractis the calendar year valuation interest rate for the year of the change in thefund.
(D) Reference interest rate:
(1) The reference interest rate referred to in paragraph (B) of thisparagraph(1-b) shall be defined as follows:
(a) For all life insurance, the lesser of the average over a period of36 months and the average over a period of 12 months, ending on June 30of the calendar year next preceding the year of issue, of Moody's corporatebond yield average--monthly average corporates, as published by Moody'sinvestors service, inc.
(b) For single premium immediate annuities and for annuity benefitsinvolving life contingencies arising from other annuities with cash settlementoptions and guaranteed interest contracts with cash settlement options,the average over a period of 12 months, ending on June 30 of the calendaryear of issue or year of purchase, of Moody's corporate bond yieldaverage--monthly average corporates, as published by Moody's investorsservice, inc.
(c) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a year of issuebasis, except as stated in (b) above, with guarantee duration in excessof 10 years, the lesser of the average over a period of 36 months and theaverage over a period of 12 months, ending on June 30 of the calendar yearof issue or purchase, of Moody's corporate bond yield average--monthlyaverage corporates, as published by Moody's investors service, inc.
(d) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a year of issuebasis, except as stated in (b) above, with guaranteed duration of 10 yearsor less, the average over a period of 12 months, ending on June 30 of thecalendar year of issue or purchase, of Moody's corporate bond yieldaverage--monthly average corporates, as published by Moody's investorsservice, inc.
(e) For other annuities with no cash settlement options and for guaranteedinterest contracts with no cash settlement options, the average over a periodof 12 months, ending on June 30 of the calendar year of issue or purchase,of Moody's corporate bond yield average--monthly average corporates, aspublished by Moody's investors service, inc.
(f) For other annuities with cash settlement options and guaranteed interestcontracts with cash settlement options, valued on a change in fund basis,except as stated in (b) above, the average over a period of 12 months, endingon June 30 of the calendar year of the change in the fund, of Moody'scorporate bond yield average--monthly average corporates, as publishedby Moody's investors service, inc.
(E) Alternative method for determining reference interest rates:
(1) In the event that Moody's corporate bond yield average--monthlyaverage corporates is no longer published by Moody's investors service,inc., or in the event that the national association of insurance commissionersdetermines that Moody's corporate bond yield average--monthly averagecorporates as published by Moody's investors service, inc., is no longerappropriate for the determination of the reference interest rate, then analternative method for determination of the reference interest rate, whichis adopted by the national association of insurance commissioners and approvedby regulation promulgated by the commissioner, may be substituted.
(2) Commissioners' reserve valuation method. Except asotherwise provided in paragraphs (2-a) and (5) of this subsection,reserves according to the commissioners' reserve valuation method, forthe life insurance and endowment benefits of policies providing for auniform amount of insurance and requiring the payment of uniformpremiums, shall be the excess, if any, of the present value, at the dateof valuation, of such future guaranteed benefits provided for by suchpolicies, over the then present value of any future modified netpremiums therefor.
The modified net premiums for any such policy shall be such uniformpercentage of the respective contract premiums for such benefits thatthe present value, at the date of issue of the policy, of all suchmodified net premiums shall be equal to the sum of the then presentvalue of such benefits provided for by the policy and the excess of (A)over (B), as follows:
(A) A net level annual premium equal to the present value, at thedate of issue, of such benefits provided for after the first policyyear, divided by the present value, at the date of issue, of an annuityof one per annum payable on the first and each subsequent anniversary ofsuch policy on which a premium falls due. Such net level annual premiumshall not exceed the net level annual premium on thenineteen-year premium whole life plan for insurance of the same amount atan age one year higher than the age at issue of such policy.
(B) A net one-year term premium for such benefits provided for in thefirst policy year.
Except for any life insurance policy issued on or after January 1, 1985,for which the contract premium in the first policy year exceeds that ofthe second year and for which no comparable additional benefit is providedin the first year for such excess and which provides an endowment benefitor a cash surrender value or a combination thereof in an amount greaterthan such excess premium, the reserve according to the commissioners' reservevaluation method as of any policy anniversary occurring on or before theassumed ending date defined herein as the first policy anniversary on whichthe sum of any endowment benefit and any cash surrender value then availableis greater than such excess premium shall, except as otherwise providedin paragraph (5), be the greater of the reserve as of such policy anniversarycalculated as described in this paragraph and the reserve as of such policyanniversary calculated as described in this paragraph, but with: (i) Thevalue defined in subparagraph (A) of this paragraph being reduced by 15%of the amount of such excess first-year premium; (ii) all present valuesof benefits and premiums being determined without reference to premiumsor benefits provided for by the policy after the assumed ending date; (iii)the policy being assumed to mature on such date as an endowment; and (iv)the cash surrender value provided on such date being considered as an endowmentbenefit. In making the above comparison the mortality and interest basesstated in paragraphs (1) and (1-b) shall be used.
Reserves according to the commissioners' reserve valuation method for:(i) Life insurance policies providing for a varying amount of insuranceor requiring the payment of varying premiums; (ii) group annuity andpure endowment contracts purchased under a retirement plan or plan ofdeferred compensation, established or maintained by an employer(including a partnership or sole proprietorship) or by an employeeorganization, or by both, other than a plan providing individualretirement accounts or individual retirement annuities under section 408of the internal revenue code, as now or hereafter amended; (iii)disability and accidental death benefits in all policies and contracts;and (iv) all other benefits, except life insurance and endowmentbenefits in life insurance policies and benefits provided by all otherannuity and pure endowment contracts, shall be calculated by a methodconsistent with the principles of this paragraph (2).
Reserves according to the commissioners' reserve valuation method foruniversal life contracts issued after December 31, 2006 providing for deathbenefits that are guaranteed to remain in effect if specified conditions, asdefined in the universal life insurance contract are met by the contract owner,shall calculate the value of the guarantee by a method consistent with theprinciples of this paragraph (2). The use of anticipated lapse rates in suchcalculations shall not exceed 2% per annum.
(2-a) This section shall apply to all annuity and pure endowmentcontracts other than group annuity and pure endowment contractspurchased under a retirement plan or plan of deferred compensation,established or maintained by an employer (including a partnership orsole proprietorship) or by an employee organization, or by both, otherthan a plan providing individual retirement accounts or individualretirement annuities under section 408 of the internal revenue code, asnow or hereafter amended.
Reserves according to the commissioners' annuity reserve method forbenefits under annuity or pure endowment contracts, excluding anydisability and accidental death benefits in such contracts, shall be thegreatest of the respective excesses of the present values, at the dateof valuation, of the future guaranteed benefits, including guaranteednonforfeiture benefits, provided for by such contracts at the end ofeach respective contract year, over the present value, at the date ofvaluation, of any future valuation considerations derived from futuregross considerations, required by the terms of such contract, thatbecome payable prior to the end of such respective contract year. Thefuture guaranteed benefits shall be determined by using the mortalitytable, if any, and the interest rate, or rates, specified in suchcontracts for determining guaranteed benefits. The valuationconsiderations are the portions of the respective gross considerationsapplied under the terms of such contracts to determine nonforfeiturevalues.
(3) In no event shall a company's aggregate reserves for all lifeinsurance policies, excluding disability and accidental death benefits,be less than the aggregate reserves calculated in accordance with themethods set forth in paragraphs (2), (2-a), (5) and (6)and the mortalitytable or tables and rate or rates of interest used in calculatingnonforfeiture benefits for such policies.
(3-a) In no event shall the aggregate reserves for all policies, contractsand benefits be less than the aggregate reserves determined by the qualifiedactuary rendering the opinion required by subsection (b).
(4) Reserves for any category of policies, contracts or benefits asestablished by the commissioner of insurance may be calculated at theoption of the company, according to any standards which produce greateraggregate reserves for such category than those calculated according tothe minimum standard herein provided, but the rate or rates of interestused for policies and contracts, other than annuity and pure endowmentcontracts, shall not be higher than the corresponding rate or rates ofinterest used in calculating any nonforfeiture benefits provided fortherein.
(5) If in any contract year the gross premium charged by any lifeinsurance company on any policy or contract is less than the valuationnet premium for the policy or contract calculated by the method used incalculating the reserve thereon but using the minimum valuationstandards of mortality and rate of interest, the minimum reserverequired for such policy or contract shall be the greater of either thereserve calculated according to the mortality table, rate of interest,and method actually used for such policy or contract, or the reservecalculated by the method actually used for such policy or contract butusing the minimum valuation standards of mortality and rate of interest andreplacing the valuation net premium by the actual gross premium in eachcontract year for which the valuation net premium exceeds the actualgross premium.
The minimum valuation standards of mortality and rate of interest referredto in this section are those standards stated in paragraphs (1) and (1-b).
Except for any life insurance policy issued on or after January 1,1988, for which the gross premium in the first policy year exceeds that ofthesecond year and for which no comparable additional benefit is providedin the first year for such excess and which provides an endowment benefitor a cash surrender value or a combination thereof in an amount greaterthan such excess premium, the foregoing provisions of this paragraph (5)shall be applied as if the method actually used in calculating the reservefor such policy were the method described in paragraph (2), ignoring thethird paragraph of paragraph (2). The minimum reserve at each policyanniversaryof such a policy shall be the greater of the minimum reserve calculatedin accordance with paragraph (2), including the third paragraph of paragraph(2), and the minimum reserve calculated in accordance with this paragraph (5).
(6) In the case of any plan of life insurance which provides for futurepremium determination, the amounts of which are to be determined by theinsurance company based on then estimates of future experience, or in thecase of any plan of life insurance or annuity which is of such a naturethat the minimum reserves cannot be determined by the methods describedin paragraphs (2), (2-a) and (5), the reserves which are held under any suchplan must:
(a) Be appropriate in relation to the benefits and the pattern of premiumsfor that plan, and
(b) be computed by a method which is consistent with the principlesof this standard valuation law, as determined by regulations promulgatedby the commissioner.
(e) Any company organized under the laws of this state, whichshall desire to do business in any other states wherein it is not permitted toissue or deliver policies valued as provided in subsection (d) ofthis section, may value its policies issued and delivered in such otherstates as provided in subsection (c) of this section.
(f) The commissioner shall adopt rules and regulations establishing theminimum standards applicable to the valuation of accident and sicknessinsurance and may adopt other rules and regulations necessary to administer theprovisions of this act.
History: L. 1927, ch. 231, 40-409; L. 1947, ch. 277, § 1; L.1957, ch. 280, § 1; L. 1959, ch. 213, § 1; L. 1965, ch. 302, § 1; L.1973, ch. 193, § 1; L. 1978, ch. 175, § 1; L. 1980, ch. 129, §2; L. 1982, ch. 202, § 1;L. 1994, ch. 101, § 1;L. 2004, ch. 128, § 1;L. 2007, ch. 105, § 1; July 1.
