§ 27-1-12.8-35 — Principal based valuation for contracts on and after operative date of Valuation Manual

Indiana § 27-1-12.8-35

• Jurisdiction: Indiana
• Title 27: INSURANCE
• Art. 1: DEPARTMENT OF INSURANCE
• Ch. 12.8: Standard Valuation Law

Text

(a) This section applies on and after the
operative date of the Valuation Manual specified in section 34 of this
chapter.
(b) A company shall, using a principle based valuation, establish
reserves that meet the following conditions for contracts, as specified
in the Valuation Manual:
(1) The reserves quantify the benefits, guarantees, and funding
associated with the contracts and the contracts' risks at a level of
conservatism that:
(A) reflects conditions that include unfavorable events that
have a reasonable probability of occurring during the lifetime
of the contracts; and
(B) for polices or contracts with significant tail risk, reflects
conditions appropriately adverse to quantify the tail risk.
(2) The reserves incorporate assumptions, risk analysis methods,
and financial models and management techniques that are
consistent with the assumptions, risk analysis methods, and
financial models and management techniques used within the
company's overall risk assessment process, while recognizing
potential differences in financial reporting structures and
prescribed assumptions or methods.
(3) The reserves incorporate assumptions that are derived in one
(1) of the following manners:
(A) The assumption is prescribed in the Valuation Manual.
(B) For an assumption that is not prescribed in the Valuation
Manual, the assumption must:
(i) be established using the company's available experience
to the extent the experience is relevant and statistically
credible; or
(ii) to the extent that company data is not available, relevant,
or statistically credible, be established using other relevant,
statistically credible experience.
(4) The reserves provide margins for uncertainty, including
adverse deviation and estimation error, such that the greater the
uncertainty, the larger the margin and resulting reserve.
(c) A company using a principle based valuation for at least one (1)
contract that is subject to this section, as specified in the Valuation
Manual, shall do the following:
(1) Establish procedures for corporate governance and oversight
of the actuarial valuation function consistent with the procedures
described in the Valuation Manual.
(2) Provide to the commissioner and the board of directors an
annual certification of the effectiveness of the internal controls
with respect to the principle based valuation. The internal controls
must be designed to assure that:
(A) all material risks inherent in the liabilities and associated
assets that are subject to the valuation are included in the
valuation; and
(B) valuations are made in accordance with the Valuation
Manual.
The certification must be based on the controls in place as of the
end of the preceding calendar year.
(3) Develop, and file with the commissioner upon request, a
principle based valuation report that complies with standards
prescribed in the Valuation Manual.
(d) A principle based valuation may include a prescribed formulaic
reserve component.

Legislative History

As added by P.L.276-2013, SEC.10. Amended by P.L.124-2018, SEC.28.