H*4138 Session 109 (1991-1992)
H*4138(Rat #0298, Act #0281 of 1992) General Bill, By J.J. Bailey,
R.S. Corning, J.T. McElveen, Quinn and Scott
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.
01/14/92 House Introduced and read first time HJ-193
01/14/92 House Referred to Committee on Labor, Commerce and
Industry HJ-193
02/19/92 House Committee report: Favorable Labor, Commerce and
Industry HJ-3
02/20/92 House Read second time HJ-17
02/20/92 House Unanimous consent for third reading on next
legislative day HJ-20
02/21/92 House Read third time and sent to Senate HJ-2
02/25/92 Senate Introduced, read first time, placed on calendar
without reference SJ-13
02/26/92 Senate Read second time SJ-8
02/26/92 Senate Unanimous consent for third reading on next
legislative day SJ-9
02/27/92 Senate Read third time and enrolled SJ-14
03/04/92 Ratified R 298
03/10/92 Signed By Governor
03/10/92 Effective date 03/10/92
03/10/92 Act No. 281
03/10/92 See act for exception to or explanation of
effective date
04/07/92 Copies available
(A281, R298, H4138)
AN ACT 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:
Additional requirements regarding opinions of qualified
actuaries; required amount of aggregate reserves
SECTION 1. Section 38-9-180 of the 1976 Code is amended to
read:
"Section 38-9-180. (A) The commissioner annually
shall value, or cause to be valued, the reserve liabilities, 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, for an alien insurer the valuation
is limited to the United States business and may certify the
amount of the reserves, specifying the mortality table or tables,
rate or rates of interest, and methods, net level premium method
or other, used in the calculation of the reserves. In calculating 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 a foreign or an alien insurer, he
may accept any valuation made, or caused to be made, by the
insurance supervisory official of a state or another jurisdiction
when the valuation complies with the minimum standard provided
in this section and if the official of the state or jurisdiction accepts
as sufficient and valid for all legal purposes the certificate of
valuation of the commissioner when the certificate states the
valuation to have been made in a specified manner according to
which the aggregate reserves would be at least as large as if they
had been computed in the manner prescribed by the law of that
state or jurisdiction.
(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 item (3) of this
subsection and subsection (D), the minimum standard for the
valuation of policies and contracts issued before March 24, 1960,
is that provided by the laws in effect immediately before that date
except the minimum standards for the valuation of annuities and
pure endowments purchased under group annuity and pure
endowment contracts issued before the effective date is that
provided for by the laws in effect immediately before that date
but replacing the interest rates as specified in the laws by an
interest rate of five percent a year.
(2) Except as otherwise provided in item (3) of this
subsection and subsection (D), the minimum standard for the
valuation of policies and contracts issued after March 23, 1960, is
the commissioner's reserve valuation methods defined in
subsections (E), (F), and (I), five percent interest for group
annuity and pure endowment contracts and three and one-half
percent interest for all other policies and contracts, or for policies
and contracts other than annuity and pure endowment contracts
issued after May 25, 1975, four percent interest for policies issued
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 policies issued after December 31,
1978, and the following tables:
(a) for all ordinary policies of life insurance issued on the
standard basis, excluding disability and accidental death benefits
in the policies, the commissioner's 1941 Standard Ordinary
Mortality Table for the policies issued before the operative date
stated in Section 38-63-650, the commissioner's 1958 Standard
Ordinary Mortality Table for the policies issued on or after the
operative date of Section 38-63-590 of the Standard Nonforfeiture
Law for Life Insurance, and before the operative date of Section
38-63-590 of the Standard Nonforfeiture Law for Life Insurance,
if for any category of 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 before
January 1, 1979, and not more than six years younger than the
actual age of the insured for policies issued after December 31,
1978, and before the operative date of Section 38-63-600; and for
policies issued on or after the operative date of Section 38-63-600
of the Standard Nonforfeiture Law for Life Insurance the
commissioner's 1980 Standard Ordinary Mortality Table, at the
election of the company for one or more specified plans of life
insurance, the commissioner's 1980 Standard Ordinary Mortality
Table with Ten-Year Select Mortality Factors, or any ordinary
mortality table, adopted after 1980 by the National Association of
Insurance Commissioners, that is approved by regulation
promulgated by the commissioner for use in determining the
minimum standard of valuation for the policies;
(b) for all industrial life insurance policies issued on the
standard basis, excluding disability and accidental death benefits
in the policies, the 1941 Standard Industrial Mortality Table for
policies issued before the operative date stated in Section
38-63-650; for all policies issued on or after operative date, 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 policies, according to which of
these tables is used to calculate adjusted premiums and present
values as specified in Section 38-63-580;
(c) for individual annuity and pure endowment contracts,
excluding disability and accidental death benefits in the policies,
the 1937 Standard Annuity Mortality Table or, at the option of the
company, the Annuity Mortality Table for 1949, Ultimate, or a
modification of either of these tables approved by the
commissioner;
(d) for group annuity and pure endowment contracts,
excluding disability and accidental death benefits in the policies,
the Group Annuity Mortality Table for 1951, a modification of the
table approved by the commissioner or, at the option of the
insurer, any of the tables or modifications of tables specified for
individual annuity and pure endowment contracts;
(e) for total and permanent disability benefits in or
supplementary to ordinary policies or contracts, for policies or
contracts issued after December 31, 1965, the tables of Period 2
disablement rates and the 1930 to 1950 termination rates of the
1952 Disability Study of the Society of Actuaries, with due regard
to the type of benefit or tables of disablement rates and
termination rates, adopted after 1980 by the National Association
of Insurance Commissioners, approved by regulation promulgated
by the commissioner for use in determining the minimum standard
of valuation for the policies; for policies or contracts issued after
December 31, 1960, and before January 1, 1966, either the tables
or, at the option of the company, the Class (3) Disability Table
(1926) and for policies issued before January 1, 1961, the Class
(3) Disability Table (1926) or other table approved by the
Commissioner. The table, for active lives, must be combined with
a mortality table permitted for calculating the reserves for life
insurance policies;
(f) for accidental death benefits in or supplementary to
policies, for policies issued after December 31, 1965, the 1959
Accidental Death Benefits Table, or any accidental death benefits
table, adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by regulation promulgated by
the commissioner for use in determining the minimum standard of
valuation for the policies; for policies issued after December 31,
1960, and before January 1, 1966, either the table or, at the option
of the company, the Inter-Company Double Indemnity Mortality
Table; and for policies issued before January 1, 1961, the
Inter-Company Double Indemnity Mortality Table, or other table
approved by the commissioner. The table must be combined with
a mortality table permitted for calculating the reserves for life
insurance policies;
(g) for 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, the table or basis of
reserves approved by the commissioner;
(h) for group life insurance, life insurance issued on the
substandard basis and other special benefits, the tables approved
by the commissioner;
(3) Except as provided in 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, as defined in this section, and for all annuities and pure
endowments purchased on or after the operative date under group
annuity and pure endowment contracts, is the commissioner's
reserve valuation methods defined in subsections (E) and (F) and
the following tables and interest rates:
(a) for individual annuity and pure endowment contracts
issued before January 1, 1979, excluding disability and
accidental death benefits in the contracts, the 1971 Individual
Annuity Mortality Table, or 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;
(b) for individual single premium immediate annuity
contracts issued after December 31, 1978, excluding disability and
accidental death benefits in the contracts, the 1971 Individual
Annuity Mortality Table or any individual annuity mortality table,
adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by regulation promulgated by
the commissioner for use in determining the minimum standard of
valuation for the contracts, or a modification of these tables
approved by the commissioner, and seven and one-half percent
interest;
(c) for individual annuity and pure endowment contracts
issued after December 31, 1978, other than single premium
immediate annuity contracts, excluding disability and accidental
death benefits in the contracts, the 1971 Individual Annuity
Mortality Table or any individual annuity mortality table, adopted
after 1980 by the National Association of Insurance
Commissioners, that is approved by regulation promulgated by
the commissioner for use in determining the minimum standard of
valuation for the contracts, or 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
individual annuity and pure endowment contracts;
(d) for all annuities and pure endowments purchased
before January 1, 1979, under group annuity and pure endowment
contracts, excluding disability and accidental death benefits
purchased under the contracts, the 1971 Group Annuity Mortality
Table, or a modification of this table approved by the
commissioner, and six percent interest;
(e) for all annuities and pure endowments purchased after
December 31, 1978, under group annuity and pure endowment
contracts, excluding disability and accidental death benefits
purchased under the contracts, the 1971 Group Annuity Mortality
Table or 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 the
annuities and pure endowments, or a modification of these tables
approved by the commissioner, and seven and one-half percent
interest.
After May 26, 1975, an insurer may file with the
commissioner a written notice of its election to comply with this
item after a specified date before January 1, 1979, which is the
operative date of this item for the insurer. However, 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 election, the
effective date of this item for the insurer is January 1, 1979.
(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:
(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;
(b) all individual annuity and pure endowment contracts
issued in a particular calendar year after December 31, 1982;
(c) all annuities and pure endowments purchased in a
particular calendar year after December 31, 1982, under group
annuity and pure endowment contracts;
(d) the net increase, if any, in a particular calendar year
after January 1, 1983, in amounts held under guaranteed interest
contracts.
(2) The calendar year statutory valuation interest rates, I,
must be determined as follows and the results rounded to the
nearer one-quarter of one percent:
(a) for life insurance,
W
I= .03 + W (R1 - .03) + 2 (R2 - .09);
(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, and
W is the weighting factor defined in this subsection;
(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 subitem (b) of this item,
the formula for life insurance stated in 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 subitem (b) applies
to annuities and guaranteed interest contracts with guarantee
duration of ten years or less;
(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 subitem (b) applies;
(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 subitem (b) applies.
However, if the calendar year statutory valuation interest rate
for life insurance policies issued in 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 the life insurance policies
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 must be determined for 1980, using the reference
interest rate defined for 1979, and 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.
(3) The weighting factors referred to in the formulas
stated in this subsection are given 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 years the life insurance 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;
(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
(c) weighting factors for other annuities and for
guaranteed interest contracts, except as stated in subitem (b) of
this item are as specified sub-subitem (i), (ii), and (iii) according
to the rules and definitions in sub-subitems (iv), (v), and (vi):
(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;
(ii) For annuities and guaranteed interest contracts valued
on a change in fund basis, the factors shown in sub-subitem (i) of
this subitem increased by:
Plan Type
A B C
.15 .25 .05;
(iii) for annuities and guaranteed interest contracts valued
on an issue year basis other than those with no cash settlement
options, which do not guarantee interest on considerations
received more than one year after issue or purchase and for
annuities and guaranteed interest contracts valued on a change in
fund basis which do not guarantee interest rates on considerations
received more than twelve months beyond the valuation date, the
factors shown in sub-subitem (i) of this subitem or derived in
sub-subitem (ii) increased by:
Plan Type
A B C
.05 .05 .05;
(iv) for other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, the
guarantee duration is the number of years for which the contract
guarantees interest rates in excess of the calendar year statutory
valuation interest rate for life insurance policies with guarantee
duration in excess of 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.
(d) Plan type as used in the above tables is defined as:
(i) Plan Type A: At any time policyholder may
withdraw funds only:
a. with an adjustment to reflect changes in interest
rates or asset values since receipt of the funds by the insurer;
b. without the adjustment but in installments over
five years or more;
c. as an immediate life annuity; or
d. no withdrawal permitted;
(ii) Plan Type B: Before expiration of the interest rate
guarantee, policyholder may withdraw funds only:
a. with an adjustment to reflect changes in interest
rates or asset values since receipt of the funds by the insurer;
b. without the adjustment but in installments over five
years or more; or
c. no withdrawal permitted. At the end of interest rate
guarantee, funds may be withdrawn without the adjustment in a
single sum or installments over less than five years;
(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:
a. without adjustment to reflect changes in interest
rates or asset values since receipt of the funds by the insurer;
or
b. subject only to a fixed surrender charge stipulated
in the contract as a percentage of the fund.
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 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.
(4) The Reference Interest Rate referred to in item (2) of
this subsection is defined as:
(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.;
(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 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.;
(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 subitem (b) with
guarantee duration in excess of ten years, the lesser of the average
over thirty-six months and the average over 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.;
(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 subitem (b), with
guarantee duration of ten years or less, the average over 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.;
(e) for other annuities with no cash settlement options
and for guaranteed interest contracts with no cash settlement
options, the average over 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.;
(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 subitem (b), the
average over 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.;
(5) If Moody's Corporate Bond Yield Average--Monthly
Average Corporates is no longer published by Moody's Investors
Service, Inc., or 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.
(E) Except as otherwise provided in subsections (F) and (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, are the excess, if any, of the
present value, at the date of valuation, of future guaranteed
benefits provided for by the policies, over the then present value
of future modified net premiums. The modified net premiums for
the policy are the uniform percentage of the respective contract
premiums for the benefits that the present value, at the date of
issue of the policy, of the modified net premiums is equal to the
sum of the then present value of the benefits provided for by the
policy and the excess of item (1) over item (2), as follows:
(1) A net level annual premium equal to the present
value, at the date of issue, of the benefits provided for after the
first policy year, divided by the present value, at the date of issue,
of an annuity of one per annum payable on the first and each
subsequent anniversary of the policy on which a premium falls
due. However, the net level annual premium 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 the policy.
(2) A net one year term premium for the benefits
provided for in the first policy year. For a life insurance policy
issued after 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 the excess and which provides an endowment benefit or a
cash surrender value or a combination of them in an amount
greater than the excess premium, the reserve according to the
commissioner's reserve valuation method as of a policy
anniversary occurring on or before the assumed ending date
defined in this section as the first policy anniversary on which the
sum of an endowment benefit and cash surrender value then
available is greater than the excess premium, except as otherwise
provided in subsection (I), is the greater of the reserve as of the
policy anniversary calculated as described in the preceding
paragraph and the reserve as of the policy anniversary calculated
as described in that paragraph, but with the value defined in item
(1) being reduced by fifteen percent of the amount of the excess
first year premium, 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, the
policy being assumed to mature on the date as an endowment, and
the cash surrender value provided on the date being considered as
an endowment benefit. In making the above comparison the
mortality and interest bases stated in subsection (C)(1) and (D)
shall be used.
Reserves according to the commissioner's reserve valuation
method for: life insurance policies providing for a varying
amount of insurance or requiring the payment of varying
premiums, 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 both, other than a plan providing individual
retirement accounts or individual retirement annuities under
Section 408 of the Internal Revenue Code, as amended, disability
and accidental death benefits in all policies and contracts, and all
other benefits, except life insurance and endowment benefits in
life insurance policies and benefits provided by all other annuity
and pure endowment contracts, must be calculated by a method
consistent with the principles of subsection (D), except extra
premiums charged because of impairments or special hazards
must be disregarded in the determination of modified net
premiums.
(F) This subsection 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 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
disability and accidental death benefits in the contracts, 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 the contracts at
the end of each respective contract year, over the present value, at
the date of valuation, of future valuation considerations derived
from future gross considerations, required by the terms of the
contract, that become payable before the end of the respective
contract year. The future guaranteed benefits must be determined
by using the mortality table, if any, and the interest rate, or rates,
specified in the contracts for determining guaranteed benefits. The
valuation considerations are the portions of the respective gross
considerations applied under the terms of the contracts to
determine nonforfeiture values.
(G)(1) An insurer's aggregate reserves for all life insurance
policies, excluding disability and accidental death benefits, issued
after March 23, 1960, must not be less than the aggregate reserves
calculated in accordance with the methods set forth in subsections
(E), (F), (I), and (J) and the mortality table or tables and rate or
rates of interest used in calculating nonforfeiture benefits for 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 (B).
(H) Reserves for all policies and contracts issued before March
24, 1960, may be calculated, at the option of the insurer,
according to the standards which produce greater aggregate
reserves for all the policies and contracts than the minimum
reserves required by the laws in effect immediately before the
date.
Reserves for a category of policies, contracts, or benefits
established by the commissioner, after March 23, 1960, may be
calculated, at the option of the insurer, according to the standards
which produce greater aggregate reserves for the category than
those calculated according to the minimum standard provided in
this section, but the rate or rates of interest used for policies and
contracts, other than annuity and pure endowment contracts, must
not be higher than the corresponding rate or rates of interest used
in calculating nonforfeiture benefits.
An insurer which adopts a standard of valuation producing
greater aggregate reserves than those calculated according to the
minimum standard provided in this section, with the approval of
the commissioner, may adopt 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 (B) must not be deemed
to be the adoption of a higher standard of valuation.
(I) If in a contract year the gross premium charged by a life
insurer on 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 but using the minimum valuation
standards of mortality and rate of interest, the minimum reserve
required for the policy or contract is the greater of either the
reserve calculated according to the mortality table, rate of interest,
and method actually used for the policy or contract, or the reserve
calculated by the method actually used for the policy or contract
but using the minimum valuation standards of mortality and rate
of interest and replacing the valuation net premium by the actual
gross premium in each contract year for which the valuation net
premium exceeds the actual gross premium. The minimum
valuation standards of mortality and rate of interest referred to in
this subsection are those standards stated in subsections (C)(1)
and (D).
For a life insurance policy issued after 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 the excess and which provides an
endowment benefit or a cash surrender value or a combination of
them in an amount greater than the excess premium, this
subsection must be applied as if the method actually used in
calculating the reserve for the policy were the method described
in subsection (E), ignoring the second paragraph of subsection
(E). The minimum reserve at each policy anniversary of the
policy is the greater of the minimum reserve calculated in
accordance with subsection (E), including the second paragraph of
that subsection, and the minimum reserve calculated in
accordance with this subsection.
(J) 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 for a plan of life insurance or annuity which is of a
nature so that the minimum reserves cannot be determined by the
methods described in subsections (E), (F), and (I), the reserves
which are held under the plan must be:
(1) appropriate in relation to the benefits and the pattern
of premiums for that plan;
(2) computed by a method which is consistent with the
principles of this Standard Valuation Law, as determined by
regulations promulgated by the commissioner.
(K) This section is known as the `Standard Valuation
Law'."
Time effective
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.
Approved the 10th day of March, 1992. |