S 1144 Session 109 (1991-1992)
S 1144 General Bill, By Saleeby, Land, McConnell, M.F. Mullinax and T.H. Pope
A Bill to amend Section 38-9-180, Code of Laws of South Carolina, 1976,
relating to the Insurance Standard Valuation Law, so as to provide additional
requirements regarding opinions of qualified actuaries for life insurance
companies doing business in this State and provide for the required amount of
aggregate reserves.
01/15/92 Senate Introduced and read first time SJ-159
01/15/92 Senate Referred to Committee on Banking and Insurance SJ-15
A BILL
TO AMEND SECTION 38-9-180, CODE OF LAWS OF SOUTH
CAROLINA, 1976, RELATING TO THE INSURANCE STANDARD
VALUATION LAW, SO AS TO PROVIDE ADDITIONAL
REQUIREMENTS REGARDING OPINIONS OF QUALIFIED
ACTUARIES FOR LIFE INSURANCE COMPANIES DOING
BUSINESS IN THIS STATE AND PROVIDE FOR THE REQUIRED
AMOUNT OF AGGREGATE RESERVES.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 38-9-180 of the 1976 Code is amended to read:
"Section 38-9-180. (1)(A) The commissioner
must annually shall value, or cause to be valued, the
reserve liabilities, hereinafter called referred to as
reserves, for all outstanding life insurance policies and annuity and pure
endowment contracts of every life insurer doing business in this
State. However, except that in the case of
for an alien insurer such the valuation shall
be is limited to the United States business, and may
certify the amount of any such the reserves, specifying
the mortality table or tables, rate or rates of interest, and
methods, net level premium method or other, used in the calculation of
such the reserves. In calculating such
the reserves, he may use group methods and
approximate averages for fractions of a year or otherwise. In lieu of the
valuation of the reserves required in this section of any
a foreign or an alien insurer, he may accept any
valuation made, or caused to be made, by the insurance supervisory
official of any a state or other another
jurisdiction when such the valuation complies with the
minimum standard provided in this section and if the official of any
such the state or jurisdiction accepts as sufficient and valid
for all legal purposes the certificate of valuation of the commissioner
when such the certificate states the valuation to have
been made in a specified manner according to which the aggregate
reserves would be at least as large as if they had been computed in the
manner prescribed by the law of that state or jurisdiction.
(2)(a)(B)(1) Every life insurance company
doing business in this State annually shall submit to the commissioner
the opinion of a qualified actuary as to whether the reserves and related
actuarial items held in support of the policies and contracts specified by
the commissioner by regulation are computed appropriately, are based
on assumptions which satisfy contractual provisions, are consistent with
prior reported amounts, and comply with applicable laws of this State.
The commissioner by regulation shall define the specifics of this opinion
and add other items necessary to its scope.
(2)(a) Every life insurance company, except as exempted by or
pursuant to regulation, also annually must include in the opinion
required in item (1) an opinion of the same qualified actuary as to
whether the reserves and related actuarial items held in support of the
policies and contracts specified by the commissioner by regulation,
when considered in light of the assets held by the company with respect
to the reserves and related actuarial items, including, but not limited to,
the investment earnings on the assets and the considerations anticipated
to be received and retained under the policies and contracts, make
adequate provision for the company's obligations under the policies and
contracts including, but not limited to, the benefits under and expenses
associated with the policies and contracts.
(b) The commissioner may provide by regulation for a
transition period for establishing higher reserves which the qualified
actuary considers necessary in order to render the opinion required by
this subsection.
(3) Each opinion required by item (2) is governed by the
following provisions:
(a) A memorandum, in form and substance acceptable to the
commissioner as specified by regulation, must be prepared to support
each actuarial opinion.
(b) If the insurance company fails to provide a supporting
memorandum at the request of the commissioner within a period
specified by regulation or the commissioner determines that the
supporting memorandum provided by the insurance company fails to
meet the standards prescribed by the regulations or is otherwise
unacceptable to the commissioner, the commissioner may engage a
qualified actuary at the expense of the company to review the opinion
and the basis for the opinion and prepare supporting memorandum
required by the commissioner.
(4) Every opinion is governed by the following provisions:
(a) The opinion must be submitted with the annual statement
reflecting the valuation of reserve liabilities for each year ending after
December 30, 1993.
(b) The opinion must apply to all business in force
including individual and group health insurance plans, in form and
substance acceptable to the commissioner as specified by regulation.
(c) The opinion must be based on standards adopted by the
Actuarial Standards Board and on additional standards the commissioner
by regulation prescribes.
(d) For an opinion required to be submitted by a foreign or
alien company, the commissioner may accept the opinion filed by that
company with the insurance supervisory official of another state if the
commissioner determines that the opinion reasonably meets the
requirements applicable to a company domiciled in this State.
(e) For the purposes of this subsection, `qualified actuary'
means a member in good standing of the American Academy of
Actuaries who meets the requirements set forth in regulations.
(f) Except in cases of fraud or wilful misconduct, the qualified
actuary must not be liable for damages to a person, other than the
insurance company and the commissioner, for an act, an error, an
omission, a decision, or conduct with respect to the actuary's opinion.
(g) Disciplinary action by the commissioner against the
company or the qualified actuary must be defined in regulations by the
commissioner.
(h) A memorandum in support of the opinion and related
material provided by the company to the commissioner must be kept
confidential by the commissioner and must not be made public or
subject to subpoena, other than for the purpose of defending an action
seeking damages from a person by reason of action required by this
subsection or by regulations promulgated under it. However, the
memorandum or other material may be released by the commissioner
with the written consent of the company or to the American Academy
of Actuaries upon request stating that the memorandum or other material
is required for the purpose of professional disciplinary proceedings and
setting forth procedures satisfactory to the commissioner for preserving
the confidentiality of the memorandum or other material. Once a portion
of the confidential memorandum is cited by the company in its
marketing, is cited before a governmental agency other than a state
insurance department, or is released by the company to the news media
all portions of the confidential memorandum are no longer confidential.
(C)(1) Except as otherwise provided in subparagraph
(c) item (3) of this subsection and subsection
(3)(D), the minimum standard for the valuation of all
such policies and contracts issued prior to before
March 24, 1960, shall be is that provided by the laws in
effect immediately prior to such before that date except
that the minimum standards for the valuation of annuities and
pure endowments purchased under group annuity and pure endowment
contracts issued prior to such before the effective date
shall be is that provided for by the laws in effect
immediately prior to such before that date but replacing
the interest rates as specified in such the laws by an
interest rate of five percent per annum a year.
(b)(2) Except as otherwise provided in
subparagraph (c) item (3) of this subsection and
subsection (3)(D), the minimum standard for the
valuation of all such policies and contracts issued on or
after March 24 23, 1960, shall be is the
commissioner's reserve valuation methods defined in subsections
(4)(E), (5)(F), and (8) of this
section(I), five percent interest for group annuity and pure
endowment contracts and three and one-half percent interest for all other
such policies and contracts, or in the case of for
policies and contracts, other than annuity and pure endowment
contracts, issued on or after May 2625,
1975, four percent interest for such policies issued prior
to before January 1, 1979, five and one-half percent interest
for single premium life insurance policies, and four and one-half percent
interest for all other such policies issued on or after
January 1, 1979 December 31, 1978, and the following
tables:
(i)(a) for all ordinary policies of life
insurance issued on the standard basis, excluding any disability
and accidental death benefits in such the policies, the
commissioner's 1941 Standard Ordinary Mortality Table for such
the policies issued prior to before the operative
date stated in Section 38-63-650, the commissioner's 1958 Standard
Ordinary Mortality Table for such the policies issued on
or after the operative date of Section 38-63-590 of the Standard
Nonforfeiture Law for Life Insurance and prior to
before the operative date of Section 38-63-590 of the Standard
Nonforfeiture Law for Life Insurance, provided, that if
for any category of such policies issued on female risks,
all modified net premiums and present values referred to in this section
may be calculated according to an age not more than three years younger
than the actual age of the insured; for policies issued prior to
before January 1, 1979, and not more than six years younger
than the actual age of the insured for policies issued on or after
January 1, 1979 December 31, 1978, and prior
to before the operative date of Section 38-63-600; and for
such policies issued on or after the operative date of Section
38-63-600 of the Standard Nonforfeiture Law for Life Insurance
(1) the commissioner's 1980 Standard Ordinary Mortality Table
or (2), at the election of the company for any
one or more specified plans of life insurance, the commissioner's 1980
Standard Ordinary Mortality Table with Ten-Year Select Mortality
Factors, or (3) any ordinary mortality table, adopted
after 1980 by the National Association of Insurance Commissioners, that
is approved by regulation promulgated by the commissioner for use in
determining the minimum standard of valuation for such
the policies.;
(ii)(b) for all industrial life insurance policies
issued on the standard basis, excluding any disability and
accidental death benefits in such the policies, the 1941
Standard Industrial Mortality Table for such policies issued
prior to before the operative date stated in Section
38-63-650; for all policies issued on or after such operative date,
either the 1941 Standard Industrial Mortality Table or the
commissioner's 1961 Standard Industrial Mortality Table or any
industrial mortality table, adopted after 1980 by the National
Association of Insurance Commissioners, that is approved by regulation
promulgated by the commissioner for use in determining the minimum
standard of valuation for such policies, according to which of
these tables is used to calculate adjusted premiums and present values
as specified in Section 38-63-580.;
(iii)(c) for individual annuity and pure
endowment contracts, excluding any disability and accidental
death benefits in such the policies, the 1937 Standard
Annuity Mortality Table or, at the option of the company, the Annuity
Mortality Table for 1949, Ultimate, or any a
modification of either of these tables approved by the
commissioner.;
(iv)(d) for group annuity and pure
endowment contracts, excluding any disability and accidental
death benefits in such the policies, the Group Annuity
Mortality Table for 1951, any a modification of
such the table approved by the commissioner or, at the
option of the insurer, any of the tables or modifications of tables
specified for individual annuity and pure endowment
contracts.;
(v)(e) for total and permanent disability
benefits in or supplementary to ordinary policies or contracts, for
policies or contracts issued on or after January 1, 1966
December 31, 1965, the tables of Period 2 disablement rates
and the 1930 to 1950 termination rates of the 1952 Disability Study of
the Society of Actuaries, with due regard to the type of benefit or
any tables of disablement rates and termination rates, adopted
after 1980 by the National Association of Insurance Commissioners,
that are approved by regulation promulgated by the
commissioner for use in determining the minimum standard of valuation
for such the policies; for policies or contracts issued
on or after January 1, 1961 December 31, 1960,
and prior to before January 1, 1966, either such
the tables or, at the option of the company, the Class (3)
Disability Table (1926) and for policies issued prior to
before January 1, 1961, the Class (3) Disability Table (1926) or
such other table as may be approved by the
Commissioner. Any such The table shall, for
active lives, must be combined with a mortality table permitted
for calculating the reserves for life insurance policies.;
(vi)(f) for accidental death benefits in or
supplementary to policies, for policies issued on or after
January 1, 1966 December 31, 1965, the 1959
Accidental Death Benefits Table, or any accidental death benefits table,
adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by regulation promulgated by the
commissioner for use in determining the minimum standard of valuation
for such the policies; for policies issued on or
after January 1, 1961 December 31, 1960, and prior
to before January 1, 1966, either such the
table or, at the option of the company, the Inter-Company Double
Indemnity Mortality Table; and for policies issued prior to
before January 1, 1961, the Inter-Company Double Indemnity
Mortality Table, or such other table as may be approved
by the commissioner. Any such The table shall
must be combined with a mortality table permitted for
calculating the reserves for life insurance policies.;
(vii)(g) for any extra benefits
provided in life or endowment contracts or policies under which there
is payable a series of coupons or guaranteed dividends or a series of
constant or variable pure endowments maturing either during the term
of the contract and the continuation of the life of the insured or maturing
as a series after the death of the insured, such the table
or basis of reserves as may be approved by the
commissioner.;
(viii)(h) for group life insurance, life
insurance issued on the substandard basis and other special benefits,
such the tables as may be approved by the
commissioner.;
(c)(3) Except as provided in item (3)
subsection (D), the minimum standard for the valuation of all
individual annuity and pure endowment contracts issued on or after the
operative date of this item (c), as defined herein in
this section, and for all annuities and pure endowments purchased
on or after such the operative date under group annuity
and pure endowment contracts, shall be is the
commissioner's reserve valuation methods defined in items (4)
subsections (E) and (5) of this section (F) and
the following tables and interest rates:
(i)(a) for individual annuity and pure
endowment contracts issued prior to before January 1,
1979, excluding any disability and accidental death benefits in
such the contracts, the 1971 Individual Annuity
Mortality Table, or any a modification of this table
approved by the Commissioner, and six percent interest for single
premium immediate annuity contracts, and four percent interest for all
other individual annuity and pure endowment
contracts.;
(ii)(b) for individual single premium
immediate annuity contracts issued on or after January 1,
1979 December 31, 1978, excluding any disability
and accidental death benefits in such the contracts, the
1971 Individual Annuity Mortality Table or any individual annuity
mortality table, adopted after 1980 by the National Association of
Insurance Commissioners, that is approved by regulation promulgated
by the commissioner for use in determining the minimum standard of
valuation for such the contracts, or any
a modification of these tables approved by the commissioner,
and seven and one-half percent interest.;
(iii)(c) for individual annuity and pure
endowment contracts issued on or after January 1, 1979
December 31, 1978, other than single premium immediate
annuity contracts, excluding any disability and accidental death
benefits in such the contracts, the 1971 Individual
Annuity Mortality Table or any individual annuity mortality table,
adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by regulation promulgated by the
commissioner for use in determining the minimum standard of valuation
for such the contracts, or any a
modification of these tables approved by the commissioner, and five and
one-half percent interest for single premium deferred annuity and pure
endowment contracts and four and one-half percent interest for all other
such individual annuity and pure endowment
contracts.;
(iv)(d) for all annuities and pure
endowments purchased prior to before January 1, 1979,
under group annuity and pure endowment contracts, excluding
any disability and accidental death benefits purchased under
such the contracts, the 1971 Group Annuity Mortality
Table, or any a modification of this table approved by
the Commissioner, and six percent interest.;
(v)(e) for all annuities and pure
endowments purchased on or after January 1, 1979
December 31, 1978, under group annuity and pure endowment
contracts, excluding any disability and accidental death benefits
purchased under such the contracts, the 1971 Group
Annuity Mortality Table or any a group annuity
mortality table, adopted after 1980 by the National Association of
Insurance Commissioners, that is approved by regulation promulgated
by the commissioner for use in determining the minimum standard of
valuation for such the annuities and pure endowments,
or any a modification of these tables approved by the
commissioner, and seven and one-half percent interest.
After May 26, 1975, any an insurer may file with the
commissioner a written notice of its election to comply with the
provisions of this item (c) after a specified date before
January 1, 1979, which shall be is the operative date of
this item (c) for such the insurer.
However, provided that an insurer may elect a different
effective date for individual annuity and pure endowment contracts from
that elected for group annuity and pure endowment contracts. If an
insurer makes no such election, the effective date of this item
(c) for the insurer shall be is January 1, 1979.
(3)(a)(D)(1) The calendar year statutory
valuation interest rates as defined in this subsection must
be used in determining the minimum standard for the valuation of:
(i)(a) all life insurance policies issued in a
particular calendar year, on or after the operative date of Section
38-63-600 of the Standard Nonforfeiture Law for Life
Insurance,;
(ii)(b) all individual annuity and pure
endowment contracts issued in a particular calendar year on or
after January 1, 1983, December 31, 1982;
(iii)(c) all annuities and pure endowments
purchased in a particular calendar year on or after January 1,
1983 December 31, 1982, under group annuity and pure
endowment contracts,;
(iv)(d) the net increase, if any, in a
particular calendar year after January 1, 1983, in amounts held under
guaranteed interest contracts shall be the calendar year statutory
valuation interest rates as defined in this subsection (3).
(b)(2) The calendar year statutory valuation
interest rates, I, shall must be determined as follows and
the results rounded to the nearer one-quarter of one percent:
(i)(a) for life insurance,
W
I= .03 + W (R1 - .03) + 2 (R2 - .09).;
(ii)(b) for single premium immediate
annuities and for annuity benefits involving life contingencies arising
from other annuities with cash settlement options and from guaranteed
interest contracts with cash settlement options,
I= .03 + W (R - .03),
where R 1 is the lessor of R and .09, R 2 is the greater of R and .09, R
is the reference interest rate defined in this subsection (3), and
W is the weighting factor defined in this subsection (3).;
(iii)(c) for other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, valued on an issue year basis, except as stated in (ii)
above subitem (b) of this item, the formula for life
insurance stated in (i) above shall apply subitem (a) of this
item applies to annuities and guaranteed interest contracts with
guarantee durations in excess of ten years and the formula for single
premium immediate annuities stated in (ii) above shall apply
subitem (b) applies to annuities and guaranteed interest
contracts with guarantee duration of ten years or less,;
(iv)(d) for other annuities with no cash
settlement options and for guaranteed interest contracts with no cash
settlement options, the formula for single premium immediate annuities
stated in (ii) above shall apply, subitem (b) applies;
(v)(e) for other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, valued on a change in fund basis, the formula for single
premium immediate annuities stated in (ii) above shall apply
subitem (b) applies.
However, if the calendar year statutory valuation interest rate for
any life insurance policies issued in any a
calendar year determined without reference to this sentence differs from
the corresponding actual rate for similar policies issued in the
immediately preceding calendar year by less than one-half of one
percent, the calendar year statutory valuation interest rate for
such the life insurance policies shall
must be equal to the corresponding actual rate for the
immediately preceding calendar year. For purposes of applying the
immediately preceding sentence, the calendar year statutory valuation
interest rate for life insurance policies issued in a calendar year
shall must be determined for 1980,
(using the reference interest rate defined for
1979), and shall must be determined for
each subsequent calendar year regardless of when Section 38-63-600 of
the Standard Nonforfeiture Law for Life Insurance becomes operative.
(c)(3) The weighting factors referred to in the
formulas stated above in this subsection are given in
the following tables:
(i)(a) weighting Factors for Life Insurance: Guarantee Duration Weighting
(Years) Factors
10 or less .50
More than 10, but not
more than 20 .45
More than 20 .35
For life insurance, the guarantee duration is the maximum number
of years the life insurance can may remain in force on
a basis guaranteed in the policy or under options to convert to plans of
life insurance with premium rates or nonforfeiture values or both which
are guaranteed in the original policy;
(ii)(b) weighting factor for single premium
immediate annuities and for annuity benefits involving life
contingencies arising from other annuities with cash settlement options
and guaranteed interest contracts with cash settlement options:
Weighting
Factors
.80
(iii)(c) weighting factors for other annuities
and for guaranteed interest contracts, except as stated in (ii) above,
shall be subitem (b) of this item are as specified in
tables a, b sub-subitem (i), (ii), and c below,
(iii) according to the rules and definitions in d, e,
sub-subitems (iv), (v), and f below vi:
a.(i) for annuities and guaranteed
interest contracts valued on an issue year basis:
Guarantee Weighting Factor
Duration for Plan Type
(Years) A B C
5 or less: .80 .60 .50
More than 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;
b.(ii) For annuities and guaranteed
interest contracts valued on a change in fund basis, the factors shown in
a. above sub-subitem (i) of this subitem increased by:
Plan Type
A B C
.15 .25 .05;
c.(iii) for annuities and guaranteed
interest contracts valued on an issue year basis (other than those
with no cash settlement options), which do not
guarantee interest on considerations received more than one year after
issue or purchase and for annuities and guaranteed interest contracts
valued on a change in fund basis which do not guarantee interest rates
on considerations received more than twelve months beyond the
valuation date, the factors shown in a. sub-subitem (i) of this
subitem or derived in b. sub-subitem (ii) increased
by:
Plan Type
A B C
.05 .05 .05;
d.(iv) for other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, the guarantee duration is the number of years for which the
contract guarantees interest rates in excess of the calendar year statutory
valuation interest rate for life insurance policies with guarantee duration
in excess of twenty years. For other annuities with no cash settlement
options and for guaranteed interest contracts with no cash settlement
options, the guarantee duration is the number of years from the date of
issue or date of purchase to the date annuity benefits are scheduled to
commence.
e.(d) Plan type as used in the above tables is
defined as:
(i) Plan Type A: At any time policyholder may
withdraw funds only:
(1)a. with an adjustment to reflect
changes in interest rates or asset values since receipt of the funds by the
insurer, or;
(2)b. without such the
adjustment but in installments over five years or more,
or;
(3)c. as an immediate life
annuity,; or
(4)d. no withdrawal
permitted.;
(ii) Plan Type B: Before expiration of the interest
rate guarantee, policyholder may withdraw funds only:
(1)a. with an adjustment to reflect
changes in interest rates or asset values since receipt of the funds by the
insurer, or;
(2)b. without such the
adjustment but in installments over five years or more,;
or
(3)c. no withdrawal permitted. At the end
of interest rate guarantee, funds may be withdrawn without such
the adjustment in a single sum or installments over less than
five years.;
(iii) Plan Type C: Policyholder may withdraw funds
before expiration of interest rate guarantee in a single sum or
installments over less than five years either:
(1)a. without adjustment to reflect changes
in interest rates or asset values since receipt of the funds by the
insurer,; or
(2)b. subject only to a fixed surrender
charge stipulated in the contract as a percentage of the fund.
f. An insurer may elect to value guaranteed interest contracts
with cash settlement options and annuities with cash settlement options
on either an issue year basis or on a change in fund basis. Guaranteed
interest contracts with no cash settlement options and other annuities
with no cash settlement options must be valued on an issue year basis.
As used in this subsection (3), an issue year basis of valuation
refers to a valuation basis under which the interest rate used to determine
the minimum valuation standard for the entire duration of the annuity or
guaranteed interest contract is the calendar year valuation interest rate
for the year of issue or year of purchase of the annuity or guaranteed
interest contract, and the change in fund basis of valuation refers to a
valuation basis under which the interest rate used to determine the
minimum valuation standard applicable to each change in the fund held
under the annuity or guaranteed interest contract is the calendar year
valuation interest rate for the year of the change in the fund.
(d)(4) The Reference Interest Rate referred to in
subitem (b) item (2) of this subsection (3) shall
be is defined as:
(i)(a) for all life insurance, the lesser of the
average over a period of thirty-six months and the average over a period
of twelve months, ending on June thirtieth of the calendar year next
preceding the year of issue, of Moody's Corporate Bond Yield
Average--Monthly Average Corporates, as published by Moody's
Investors Service, Inc.;
(ii)(b) for single premium immediate
annuities and for annuity benefits involving life contingencies arising
from other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, the average over a period
of twelve months, ending on June thirtieth of the calendar year of
issue or year of purchase, of Moody's Corporate Bond Yield
Average--Monthly Average Corporates, as published by Moody's
Investors Service, Inc.;
(iii)(c) for other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, valued on a year of issue basis, except as stated in (ii)
above, subitem (b) with guarantee duration in excess of ten
years, the lesser of the average over a period of thirty-six months
and the average over a period of twelve months, ending on June
thirtieth of the calendar year of issue or purchase, of Moody's Corporate
Bond Yield Average--Monthly Average Corporates, as published by
Moody's Investors Service, Inc.;
(iv)(d) for other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, valued on a year of issue basis, except as stated in (ii)
above subitem (b), with guarantee duration of ten years or
less, the average over a period of twelve months, ending on June
thirtieth of the calendar year of issue or purchase, of Moody's Corporate
Bond Yield Average--Monthly Average Corporates, as published by
Moody's Investors Service, Inc.;
(v)(e) for other annuities with no cash
settlement options and for guaranteed interest contracts with no cash
settlement options, the average over a period of twelve months,
ending on June thirtieth of the calendar year of issue or purchase, of
Moody's Corporate Bond Yield Average--Monthly Average Corporates,
as published by Moody's Investors Service, Inc.;
(vi)(f) for other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, valued on a change in fund basis, except as stated in (ii)
above subitem (b), the average over a period of
twelve months, ending on June thirtieth of the calendar year of the
change in the fund, of Moody's Corporate Bond Yield
Average--Monthly Average Corporates, as published by Moody's
Investors Service, Inc.;
(e)(5) In the event that If
Moody's Corporate Bond Yield Average--Monthly Average Corporates
is no longer published by Moody's Investors Service, Inc., or in the
event that if the National Association of Insurance
Commissioners determines that Moody's Corporate Bond Yield
Average--Monthly Average Corporates as published by Moody's
Investors Service, Inc., is no longer appropriate for the determination of
the reference interest rate, then an alternative method for determination
of the reference interest rate, which is adopted by the National
Association of Insurance Commissioners and approved by regulation
promulgated by the commissioner, may be substituted.
(4)(E) Except as otherwise provided in subsections
(5)(F) and (8)(I), reserves according to
the commissioner's reserve valuation method, for the life insurance and
endowment benefits of policies providing for a uniform amount of
insurance and requiring the payment of uniform premiums, shall
be are the excess, if any, of the present value, at the date of
valuation, of such future guaranteed benefits provided for by
such the policies, over the then present value of
any future modified net premiums therefor. The
modified net premiums for any such the policy shall
be such are the uniform percentage of the respective
contract premiums for such the benefits that the present
value, at the date of issue of the policy, of all such the
modified net premiums shall be is equal to the sum of
the then present value of such the benefits provided for
by the policy and the excess of item (a)(1) over item
(b)(2), as follows:
(a)(1) A net level annual premium equal to the
present value, at the date of issue, of such the benefits
provided for after the first policy year, divided by the present value, at
the date of issue, of an annuity of one per annum payable on the first and
each subsequent anniversary of such the policy on
which a premium falls due; provided,. However,
that such the net level annual premium shall
may not exceed the net level annual premium on the nineteen
year premium whole life plan for insurance of the same amount at an age
one year higher than the age of issue of such the policy.
(b)(2) A net one year term premium for
such the benefits provided for in the first policy year. For any a life insurance policy issued on or
after January 1, 1986 December 31, 1985, for which the
contract premium in the first policy year exceeds that of the second year
and for which no comparable additional benefit is provided in the first
year for such the excess and which provides an
endowment benefit or a cash surrender value or a combination
thereof of them in an amount greater than such
the excess premium, the reserve according to the
commissioner's reserve valuation method as of any a
policy anniversary occurring on or before the assumed ending date
defined herein in this section as the first policy
anniversary on which the sum of any an endowment
benefit and any cash surrender value then available is greater
than such the excess premium shall, except as
otherwise provided in subsection (8)(I), be
is the greater of the reserve as of such the
policy anniversary calculated as described in the preceding paragraph
and the reserve as of such the policy anniversary
calculated as described in that paragraph, but with (i) the value
defined in item (a) of that paragraph (1) being reduced
by fifteen percent of the amount of such the excess first
year premium, (ii) all present values of benefits and premiums
being determined without reference to premiums or benefits provided for
by the policy after the assumed ending date, (iii) the policy being
assumed to mature on such the date as an endowment,
and (iv) the cash surrender value provided on such
the date being considered as an endowment benefit. In making
the above comparison the mortality and interest bases stated in
subsection (2)(a)(C)(1) and (3)(D) shall
be used.
Reserves according to the commissioner's reserve valuation method
for: (i) life insurance policies providing for a varying amount of
insurance or requiring the payment of varying premiums, (ii)
group annuity and pure endowment contracts purchased under a
retirement plan or plan of deferred compensation, established or
maintained by an employer (including a partnership or sole
proprietorship) or by an employee organization, or by
both, other than a plan providing individual retirement accounts or
individual retirement annuities under Section 408 of the Internal
Revenue Code, as amended, (iii) disability and accidental death
benefits in all policies and contracts, and (iv) all other benefits,
except life insurance and endowment benefits in life insurance policies
and benefits provided by all other annuity and pure endowment
contracts, shall must be calculated by a method
consistent with the principles of subsection (3) of this section
(D), except that any extra premiums charged because of
impairments or special hazards shall must be
disregarded in the determination of modified net premiums.
(5)(F) This subsection shall apply
applies to all annuity and pure endowment contracts other than
group annuity and pure endowment contracts purchased under a
retirement plan or plan of deferred compensation, established or
maintained by an employer (including a partnership or sole
proprietorship), or by an employee organization, or
by both, other than a plan providing individual retirement
accounts or individual retirement annuities under Section 408 of the
Internal Revenue Code, as amended. Reserves according to the
commissioner's annuity reserve method for benefits under annuity or
pure endowment contracts, excluding any disability and
accidental death benefits in such the contracts, shall
be is the greatest of the respective excesses of the present
values, at the date of valuation, of the future guaranteed benefits,
including guaranteed nonforfeiture benefits, provided for by
such the contracts at the end of each respective contract
year, over the present value, at the date of valuation, of any
future valuation considerations derived from future gross considerations,
required by the terms of such the contract, that become
payable prior to before the end of such
the respective contract year. The future guaranteed benefits
shall must be determined by using the mortality table,
if any, and the interest rate, or rates, specified in such
the contracts for determining guaranteed benefits. The valuation
considerations are the portions of the respective gross considerations
applied under the terms of such the contracts to
determine nonforfeiture values.
(6)(G)(1) In no event shall An insurer's
aggregate reserves for all life insurance policies, excluding disability and
accidental death benefits, issued on or after March
2423, 1960, must not be less than the aggregate
reserves calculated in accordance with the methods set forth in
subsections (4)(E), (5)(F),
(8)(I), and (9)(J) and the mortality table
or tables and rate or rates of interest used in calculating nonforfeiture
benefits for such the policies.
(2) The aggregate reserves for all policies, contracts, and
benefits must not be less than the aggregate reserves determined by the
qualified actuary to be necessary to render the opinion required by
subsection (C).
(7)(H) Reserves for all policies and contracts issued
prior to before March 24, 1960, may be calculated, at
the option of the insurer, according to any the standards
which produce greater aggregate reserves for all such
the policies and contracts than the minimum reserves required
by the laws in effect immediately prior to such before
the date.
Reserves for any a category of policies, contracts, or
benefits as established by the commissioner, issued on or
after March 2423, 1960, may be calculated, at the
option of the insurer, according to any the standards
which produce greater aggregate reserves for such the
category than those calculated according to the minimum standard
provided in this section, but the rate or rates of interest used for policies
and contracts, other than annuity and pure endowment contracts,
shall must not be higher than the corresponding rate or
rates of interest used in calculating any nonforfeiture benefits
provided therein.
Any such An insurer which at any time shall
have adopted any adopts a standard of valuation producing
greater aggregate reserves than those calculated according to the
minimum standard provided in this section may, with the
approval of the commissioner, may adopt any a
lower standard of valuation, but not lower than the minimum provided
in this section. However, for purposes of this subsection, the
holding of additional reserves previously determined by a qualified
actuary to be necessary to render the opinion required by subsection (C)
must not be deemed to be the adoption of a higher standard of
valuation.
(8)(I) If in any a contract year the
gross premium charged by any a life insurer on
any a policy or contract is less than the valuation net
premium for the policy or contract calculated by the method used in
calculating the reserve thereon but using the minimum valuation
standards of mortality and rate of interest, the minimum reserve required
for such the policy or contract shall be
is the greater of either the reserve calculated according to the
mortality table, rate of interest, and method actually used for
such the policy or contract, or the reserve calculated by
the method actually used for such the policy or contract
but using the minimum valuation standards of mortality and rate of
interest and replacing the valuation net premium by the actual gross
premium in each contract year for which the valuation net premium
exceeds the actual gross premium. The minimum valuation standards of
mortality and rate of interest referred to in this subsection are those
standards stated in subsections (2)(a)(C)(1) and
(3)(D).
For any a life insurance policy issued on or
after January 1, 1986 December 31, 1985, for which the
gross premium in the first policy year exceeds that of the second year
and for which no comparable additional benefit is provided in the first
year for such the excess and which provides an
endowment benefit or a cash surrender value or a combination
thereof of them in an amount greater than such
the excess premium, the foregoing provisions of this
subsection (8) shall must be applied as if the method
actually used in calculating the reserve for such the
policy were the method described in subsection (4)(E),
ignoring the second paragraph of subsection (4)(E).
The minimum reserve at each policy anniversary of such a
the policy shall be is the greater of the
minimum reserve calculated in accordance with subsection
(4)(E), including the second paragraph of that
subsection, and the minimum reserve calculated in accordance with this
subsection (8).
(9)(J) In the case of any For a plan
of life insurance which provides for future premium determination, the
amounts of which are to be determined by the insurer based on then
estimates of future experience, or in the case of any for
a plan of life insurance or annuity which is of such a nature
so that the minimum reserves cannot be determined by the
methods described in subsections (4)(E),
(5)(F), and (8)(I), the reserves which
are held under any such the plan must be:
(a)(1) Be appropriate in relation to the
benefits and the pattern of premiums for that plan, and;
(b)(2) Be computed by a method
which is consistent with the principles of this Standard Valuation Law,
as determined by regulations promulgated by the commissioner.
(10)(K) This section is known as the `Standard
Valuation Law'."
SECTION 2. This act takes effect upon approval by the Governor
except Section 38-9-180(B) of the 1976 Code, added in Section 1 of this
act, takes effect one year after approval.
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