§ 27-36A-20 — Small Company Alternative Valuation

(a) A company calculating reserves under this section shall calculate reserves for life insurance, accident and health insurance contracts, credit life contracts, group life contracts, annuities, or deposit-type contracts in this state as if the policies were issued before the operative date of the Valuation Manual. For policies issued on or after the operative date of the Valuation Manual, applicable actuarial assumptions defined by the Valuation Manual for reserves shall be used. A company calculating reserves under this section shall comply with Section 27-36A-4(b) and, if it meets at least one of the conditions set forth in subdivisions (1) or (2), may file a statement of exemption for individual life insurance policies and certificates, except those policies identified in subsection (c) issued directly or assumed during the current calendar year which would otherwise be subject to Chapter 20 of the Valuation Manual, do not require a statement of exemption.
(1) The company has less than three hundred million dollars ($300,000,000) of exemption premium and, if the company is a member of a group that includes other life insurance companies, the group has combined exemption premium of less than six hundred million dollars ($600,000,000).
(2) The only new policies that would otherwise be subject to Chapter 20 of the Valuation Manual being issued or assumed by the company are due to election of policy benefits or features from existing policies valued under Appendix A and Appendix C of the Valuation Manual and the company was exempted from, or otherwise not subject to, the requirements of Chapter 20 of the Valuation Manual in the policy year.
(b) The exemption premium is determined under the Valuation Manual as follows:
(1) The amount reported in the prior calendar year life/health annual statement, Exhibit 1, Part 1, Column 3 (Ordinary Life Insurance), line 20.1; plus
(2) The portion of the amount in the prior calendar year life/health annual statement, Exhibit 1, Part 1, Column 3 (Ordinary Life Insurance), line 20.2 assumed from unaffiliated companies; minus
(3) The amount included in either subdivision (1) or (2) that is associated with guaranteed issue insurance policies and/or preneed life insurance policies; minus
(4) The amount included in either subdivision (1) or (2) that represents transfers of reserves in force as of the effective date of a reinsurance assumed transaction; plus
(5) The amount of premium for individual life certificates issued under a group life certificate which meets the conditions defined in Chapter 20 of the Valuation Manual and that are not included in either subdivision (1) or (2).
(c) The following policies are excluded from the Life Principal Based Reserving (PBR) Exemption:
(1) Universal Life with Secondary Guarantee (ULSG) policies.
(2) Policies other than ULSG policies that contain a rider with a secondary guarantee, in which the secondary guarantee does not meet the Valuation Manual definition of a nonmaterial secondary guarantee.
(d) Each exemption or lack of exemption pursuant to this section applies to policies issued or assumed in the current year and to all future valuation dates for those policies.
(e) An Alabama-domiciled company intending to calculate reserves as described in this section must file a statement with the commissioner prior to July 1 of each year certifying that at least one of the conditions of subdivisions (a)(1) or (a)(2) is met. The commissioner may reject the statement prior to September 1 if the commissioner specifically identifies risk in the affected policies that requires a principle-based valuation and require the company to comply with the Valuation Manual requirements.
(f) If a filed statement of exemption is not rejected by the commissioner, the filing of subsequent statements of exemption is not required if the company continues to qualify for the exemption. Ongoing statements of exemption for each new calendar year shall not be deemed to be rejected, unless both of the following apply:
(1) The company does not meet at least one condition in subdivisions (a)(1) or (a)(2).
(2) The commissioner notifies the company prior to September 1 that the statement of exemption is rejected.
(g) If an ongoing statement of exemption is rejected, the statement of exemption for the current calendar year is deemed rejected and a new statement of exemption must be filed and not rejected in order for the company to exempt additional policies.
(h) The minimum reserve requirements for life insurance, accident and health insurance contracts, credit life contracts, group life contracts, annuities, or deposit-type contracts issued on or after the operative date of the Valuation Manual for a company calculating reserves under this section are those pursuant to applicable requirements in Appendix A and Appendix C of the Valuation Manual using the mortality as defined in Section 3.C.1 of Chapter 20 and Appendix M of the Valuation Manual.
(i) A company that reports reserves using the alternative valuation shall also be exempt from the principle-based reserves corporate governance requirements, certification of effectiveness of principle-based reserves internal controls, and a principle-based reserves valuation report.

Legislative History

(Act 2016-411, p. 1108, §2; Act 2021-397, §1; Act 2022-151, §3.)