§ 22:753 — Policies under standard valuation law
§753. Policies under standard valuation law A.
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§753. Policies under standard valuation law
A.(1) The mortality, interest, and other standards specified in R.S. 22:751 shall apply
to policies and contracts issued in the United States or its territories except those issued
subject to the standard non-forfeiture law as set forth in R.S. 22:936. Mortality, interest, and
other standards, consistent with prevailing generally accepted actuarial assumptions at the
time of issue, shall apply to policies and contracts issued outside of the United States and its
territories.
(2) Reserves for all such policies and contracts may be calculated, at the option of
the insurer, according to any standards which produce greater aggregate reserves for all such
policies and contracts than the minimum reserves required by R.S. 22:751.
B. For policies and contracts issued prior to the operative date of the valuation
manual:
(1) Except as otherwise provided in Paragraphs (2) and (3) of this Subsection, the
minimum standard for the valuation of all other policies and contracts shall be the
Commissioner's Reserve Valuation Methods defined in Paragraphs (4), (5), and (8) of this
Subsection, five percent interest for group annuity and pure endowment contracts, four
percent interest for all other such policies and contracts, and four and one-half percent
interest for policies and contracts, other than annuities and pure endowment contracts, issued
on or after September 7, 1979, and the following tables:
(a) For all ordinary policies of life insurance issued on the standard basis, excluding
any disability and accidental death benefits in such policies: the Commissioners 1941
Standard Ordinary Mortality Table for such policies issued prior to September 7, 1979, the
Commissioners 1958 Standard Ordinary Mortality Table for such policies issued on or after
September 7, 1979, and prior to January 1, 1989; provided that 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 six years younger than the
actual age of the insured; and for such policies issued on or after January 1, 1989, the
Commissioners 1980 Standard Ordinary Mortality Table, or, at the election of the insurer for
any one or more specified plans of life insurance, the Commissioners 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 the commissioner.
(b) For all new industrial life insurance policies issued on the standard basis,
excluding any disability and accidental death benefits in such policies: the 1941 Standard
Industrial Mortality Table for such policies issued prior to September 7, 1979, and for such
policies issued on or after such effective date the Commissioners 1961 Standard Industrial
Mortality Table or any industrial mortality table adopted after 1980, by the National
Association of Insurance Commissioners that is approved by the commissioner.
(c) For individual annuity and pure endowment contracts, excluding any disability
and accidental death benefits in such policies: the 1937 Standard Annuity Mortality Table
or, at the option of the insurer, the Annuity Mortality Table for 1949, Ultimate, or any
modification of either of these tables approved by the commissioner.
(d) For group annuity and pure endowment contracts, excluding any disability and
accidental death benefits in such policies: the Group Annuity Mortality Table for 1951, any
modification of such 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 on or after January 1, 1966, 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 on or after January 1, 1981, by the National
Association of Insurance Commissioners that are approved by the commissioner; for policies
or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such
tables or, at the option of the insurer, 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, be combined with a mortality table authorized by this Subpart for calculating
the reserves for life insurance policies.
(f) For accidental death benefits in or supplementary to policies: for policies issued
on or after January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental
death benefits table adopted on or after January 1, 1981, by the National Association of
Insurance Commissioners that is approved by the commissioner; for policies issued on or
after January 1, 1961, and prior to January 1, 1966, either such table or, at the option of the
insurer, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior
to January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table shall
be combined with a mortality table authorized by this Subpart for calculating the reserves for
life insurance policies.
(g) For group life insurance, life insurance issued on the substandard basis and other
special benefits: such tables as approved by the commissioner.
(2)(a) Except as provided in Paragraph (3) of this Subsection, the minimum standard
for the valuation of all individual annuity and pure endowment contracts issued on or after
September 7, 1979, and for all annuities and pure endowments purchased on or after such
effective date under group annuity and pure endowment contracts shall be the
Commissioner's Reserve Valuation Methods defined in Paragraphs (4) and (5) of this
Subsection and the following tables and interest rates:
(i) For individual annuity and pure endowment contracts issued prior to September
7, 1979, excluding any disability and accidental death benefits in such contracts: the 1971
Individual Annuity Mortality Table, or any 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) For individual single premium immediate annuity contracts issued on or after
September 7, 1979, excluding any disability and accidental death benefits in such contracts:
the 1971 Individual Annuity Mortality Table or any individual annuity mortality table
adopted on or after January 1, 1981, by the National Association of Insurance Commissioners
that is approved by the commissioner, or any modification of these tables approved by the
commissioner, and seven and one-half percent interest.
(iii) For individual annuity and pure endowment contracts issued on or after
September 7, 1979, other than single premium immediate annuity contracts, excluding any
disability and accidental death benefits in such contracts: the 1971 Individual Annuity
Mortality Table or any individual annuity mortality table adopted on or after January 1, 1981,
by the National Association of Insurance Commissioners that is approved by the
commissioner, or any 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) For all annuities and pure endowments purchased prior to September 7, 1979,
under group annuity and pure endowment contracts, excluding any disability and accidental
death benefits purchased under such contracts: the 1971 Group Annuity Mortality Table, or
any modification of this table approved by the commissioner, and six percent interest.
(v) For all annuities and pure endowments purchased on or after September 7, 1979,
under group annuity and pure endowment contracts, excluding any disability and accidental
death benefits purchased under such contracts: the 1971 Group Annuity Mortality Table or
any group annuity mortality table adopted on or after January 1, 1981, by the National
Association of Insurance Commissioners that is approved by the commissioner, or any
modification of these tables approved by the commissioner, and seven and one-half percent
interest.
(b) Any insurer may file with the commissioner a written notice of its election to
comply with the provisions of this Paragraph after a specified date before January 1, 1981,
which shall be the effective date of this Paragraph for such insurer; provided, 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 Paragraph for such insurer shall be January 1, 1981.
(3)(a) The interest rates used in determining minimum standard for the valuation of
the policies and contracts listed in Items (i), (ii), (iii), and (iv) of this Subparagraph shall be
the calendar year statutory valuation interest rates, as defined in this Paragraph, or, at the
option of the insurer, for any category of policies or contracts, the rate or rates of interest
provided in Paragraph (1) or (2) of this Subsection.
(i) All life insurance policies issued in a particular calendar year, on or after January
1, 1989.
(ii) All individual annuity and pure endowment contracts issued on or after January
1, 1983.
(iii) All group annuities and pure endowments on or after January 1, 1983.
(iv) The net increase, if any, in a particular calendar year after January 1, 1983, in
the amounts held under guaranteed interest contracts.
(b)(i) The calendar year statutory valuation interest rates shall be determined as
follows, with the results rounded to the nearer one-quarter of one percent:
(aa) For life insurance: I =.03 + W (R 1 -.03) + W (R 2 -.09).
2
(bb) 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 lesser of
R and.09; R 2 is the greater of R and.09; R is the reference interest rate defined in
Subparagraph (d) of this Paragraph; and W is the weighting factor defined in Subparagraph
(c) of this Paragraph.
(cc) 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 (bb) of this Item, the formula for life insurance stated in Subitem (aa) of this Item
shall apply 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 (bb)
of this Item shall apply to annuities and guaranteed interest contracts with guarantee duration
of ten years or less.
(dd) 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 (bb) of this Item shall apply.
(ee) 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 (bb) of this Item shall apply.
(ii) However, if the calendar year statutory valuation interest rate for any life
insurance policies issued in any calendar year determined without reference to this
Subparagraph 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 life insurance policies shall then be equal to the
corresponding actual rate for the immediately preceding calendar year. For purposes of
applying this Subparagraph, the calendar year statutory valuation interest rate for life
insurance policies issued in a calendar year shall be determined for 1980, by using the
reference interest rate defined for 1979, and shall be determined for each subsequent calendar
year.
(iii) At the option of the insurer, calculation for life insurance policies issued in a
particular calendar year may be made on the basis of a rate of interest not exceeding the
statutory interest rate, as defined in this Subsection, for life insurance policies issued in the
immediately preceding calendar year.
(c) The weighting factors referred to in the formulae stated in Subparagraph (b) of
this Paragraph shall be as provided in the following tables:
(i) Weighting factors for life insurance:
Guarantee Duration in years Weighting
Factors
10 years or less .50
More than 10, but not more than 20 years .45
More than 20 years .35
For life insurance, the guarantee duration is the maximum number of years the life
insurance can 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) The 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 is .80.
(iii) Weighting factors for other annuities and for guaranteed interest contracts,
except as stated in Item (ii) of this Subparagraph, shall be as specified in Subitems (aa), (bb),
and (cc) of this Item according to the provisions in Subitems (dd), (ee), and (ff) of this Item:
(aa) For annuities and guaranteed interest contracts valued on an issue year basis:
Weighting
Factor
Guarantee for Plan Type
Duration in Years A B C
5 years or less: .80 .60 .50
More than 5 years, but not more than 10 years: .75 .60 .50
More than 10 years, but not more than 20 years: .65 .50 .45
More than 20 years: .45 .35 .35
(bb) Plan Type
A B C
For annuities and guaranteed interest contracts
valued on a change in fund basis, the factors shown
in Subparagraph (a) of this Paragraph increased by: .15 .25 .05
(cc) Plan Type
A B C
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
Subitem (aa) or derived in Subitem (bb) increased
by: .05 .05 .05
(dd) 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.
(ee) The plan type as used in the above tables is defined as follows:
Plan Type A: At any time the policyholder may withdraw funds only with
an adjustment to reflect changes in interest rates or asset
values since receipt of the funds by the insurer, or without
such adjustment but in installments over five years or more,
or as an immediate life annuity, or no withdrawal as
permitted.
Plan Type B: Before expiration of the interest rate guarantee, the
policyholder may withdraw funds only with an adjustment to
reflect changes in interest rates or asset values since receipt of
the funds by the insurer, or without such adjustment but in
installments over five years or more, or no withdrawal is
permitted. At the end of the interest rate guarantee, funds may
be withdrawn without such adjustment in a single sum or
installments over less than five years.
Plan Type C: The policyholder may withdraw funds before expiration of the
interest rate guarantee in a single sum or installments over
less than five years either without adjustment to reflect
changes in the interest rates or asset values since receipt of the
funds by the insurer, or subject only to a fixed surrender
charge stipulated in the contract as a percentage of the fund.
(ff) 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 shall be valued on an issue year basis. As used in
this Paragraph, 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) The reference interest rate referred to in Subparagraph (b) of this Paragraph shall
be defined as follows:
(i) 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 the Monthly Average of the Composite Yield on
Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.
(ii) For a single premium immediate annuity 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 the Monthly
Average of the Composite Yield on Seasoned Corporate Bonds, as published by Moody's
Investors Service, Inc.
(iii) 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 (c)(iii)(bb) of this Paragraph with guarantee duration in excess of ten years, the
lesser of the average over a period of twelve months, ending on June thirtieth of the calendar
year of issue or purchase, of the Monthly Average of the Composite Yield on Seasoned
Corporate Bonds, as published by Moody's Investors Service, Inc.
(iv) 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
Item (ii) of this Subparagraph, 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 the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as published
by Moody's Investors Service, Inc.
(v) 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 the Monthly Average
of the Composite Yield on Seasoned Corporate Bonds as published by Moody's Investors
Service, Inc.
(vi) 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, the average over a period of twelve months, ending on June thirtieth of the
calendar year of the change in the fund, of the Monthly Average of the Composite Yield on
Seasoned Corporate Bonds as published by Moody's Investors Service, Inc.
(e) In the event that the Monthly Average of the Composite Yield on Seasoned
Corporate Bonds is no longer published by Moody's Investors Service, Inc., or in the event
that the National Association of Insurance Commissioners determines that the Monthly
Average of the Composite Yield on Seasoned Corporate Bonds 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 the
commissioner, shall be substituted.
(4)(a) Except as otherwise provided in Paragraphs (5), (6), and (8) of this Subsection,
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 the excess, if any, of the present value
at the date of valuation of such future guaranteed benefits provided for by such policies, over
the then present value of any future modified net premiums therefor. The modified net
premiums for any such policy shall be the uniform percentage of the respective contract
premiums, excluding extra premiums on substandard policies, for such benefits that, at the
date of issue of the policy, the present value of all modified net premiums shall be equal to
the sum of the then present value of such benefits provided for by the policy and the excess
of Item (i) of this Subparagraph over Item (ii) of this Subparagraph as follows:
(i) A net level annual premium equal to the present value at the date of issue of such
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 policy on which a premium falls due; provided however, that such net level annual
premium shall 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 at issue of
such policy.
(ii) A net one year term premium for such benefits provided for in the first policy
year.
(b) Any life insurance policy issued on or after January 1, 1986, 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 excess and which provides
an endowment benefit or a cash surrender value, or a combination thereof, in an amount
greater than such excess premium, the reserve according to the Commissioner's Reserve
Valuation Method as of any policy anniversary occurring on or before the assumed ending
date defined herein as the first policy anniversary on which the sum of any endowment
benefit and any cash surrender value then available is greater than such excess premium
shall, except as otherwise provided in Paragraph (8) of this Subsection be the greater of the
reserve as of such policy anniversary calculated as described in Subparagraph (a) of this
Paragraph and the reserve as of such policy anniversary calculated as described in that
Subparagraph, but with the value defined in that Subparagraph being reduced by fifteen
percent of the amount of such 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 such date as an
endowment, and the cash surrender value provided on such date being considered as an
endowment benefit. In making the above comparison the mortality and interest bases stated
in Paragraphs (1) and (3) of this Subsection shall be used.
(c) 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 shall be calculated by a method consistent with the principles of this
Paragraph. Reserves for 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 now or hereafter 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, shall be calculated by a method consistent with
the benefits granted and approved by the commissioner.
(5)(a) This Section shall apply 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 now or hereafter amended.
(b) 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 contracts shall be 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 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 contract, that become
payable prior to the end of such respective contract year. The future guaranteed benefits shall
be determined by using the mortality table, if any, and the interest rate, or rates, specified in
such contracts for determining guaranteed benefits. The valuation considerations are the
portions of the respective gross considerations applied under the terms of such contracts to
determine nonforfeiture values.
(6)(a) An insurer's aggregate reserves for all life insurance policies, excluding
disability and accidental death benefits, shall in no event be less than the aggregate reserves
calculated in accordance with the methods set forth in Paragraphs (4), (5), (8), and (10) of
this Subsection and the mortality table or tables, and rate or rates of interest used in
calculating nonforfeiture benefits for such policies.
(b) In no event shall the aggregate reserves for all policies, contracts, and benefits
be less than the aggregate reserves determined to be necessary to render the opinion required
in R.S. 22:752.
(c) The commissioner of insurance shall promulgate a regulation containing the
minimum standards applicable to the valuation of health and accident plans.
(7) Reserves for any category of policies, contracts, or benefits may be calculated at
the option of the insurer according to any standards which produce greater aggregate reserves
for such category than those calculated according to the minimum standard herein provided,
but the rate or rates of interest used for policies and contracts, other than annuity and pure
endowment contracts, shall not be higher but may be lower than the corresponding rate or
rates of interest used in calculating any nonforfeiture benefits provided for therein.
(8)(a) If in any contract year the gross premium charged by any life insurer on any
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 policy or
contract shall be the greater of either the reserve calculated according to the mortality table,
rate of interest, and method actually used for such policy or contract, or the reserve calculated
by the method actually used for such 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 Paragraph are those standards stated in Paragraphs (1) and (3) of this
Subsection.
(b) Any life insurance policy issued on or after January 1, 1986, 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 excess and which provides an
endowment benefit or a cash surrender value or a combination thereof in an amount greater
than such excess premium, the foregoing provisions of this Paragraph shall be applied as if
the method actually used in calculating the reserve for such policy were the method described
in Paragraph (4) of this Subsection, ignoring Subparagraph (b) of that Paragraph. The
minimum reserve at each policy anniversary of such a policy shall be the greater of the
minimum reserve calculated in accordance with Paragraph (4) of this Subsection, including
Subparagraph (b) of that Paragraph, and the minimum reserve calculated in accordance with
this Paragraph.
(9) Nothing in this Subsection shall apply to any policy issued by any insurer subject
to the provisions of Subparts D and E of Part I of this Chapter, R.S. 22:131 et seq. and R.S.
22:141 et seq., unless such insurer elects to comply with the standard non-forfeiture law.
(10) In the case of any 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 plan of life insurance or annuity which
is of such a nature that the minimum reserves cannot be determined by the methods described
in Paragraphs (4), (5), and (8) of this Subsection, the reserves which are held under any such
plan shall be appropriate in relation to the benefits and the pattern of premiums for that plan,
and shall be computed by a method which is consistent with the principles of this Section as
determined by the commissioner.
C. For policies issued on or after the operative date of the valuation manual:
(1) The standard prescribed in the valuation manual is the minimum standard of
valuation required under R.S. 22:751(A), except as provided for in Subsections D and F of
this Section.
(2) The operative date of the valuation manual is January first of the first calendar
year following the first July first as of which all of the following have occurred:
(a) The valuation manual has been adopted by the NAIC by an affirmative vote of
at least forty-two members, or three-fourths of the members voting, whichever is greater.
(b) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation
including substantially similar terms and provisions, has been enacted by states representing
greater than seventy-five percent of the direct premiums written as reported in the following
annual statements submitted for 2008: life, accident and health annual statements; health
annual statements; or fraternal annual statements.
(c) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation
including substantially similar terms and provisions, has been enacted by at least forty-two
of the fifty-five NAIC member jurisdictions.
(3) Unless a change in the valuation manual specifies a later effective date, changes
to the valuation manual shall be effective on January first following the date when the change
to the valuation manual has been adopted by the NAIC by an affirmative vote representing:
(a) At least three-fourths of the members of the NAIC voting, but not less than a
majority of the total membership.
(b) Members of the NAIC representing jurisdictions totaling greater than seventy-five percent of the direct premiums written as reported in the following annual statements
most recently available prior to the vote in Subparagraph (a) of this Paragraph: life, accident
and health annual statements, health annual statements, or fraternal annual statements.
(4) The valuation manual shall specify all of the following:
(a) Minimum valuation standards for and definitions of the policies or contracts
subject to R.S. 22:751(A). Such minimum valuation standards shall be:
(i) The commissioner's reserve valuation method for life insurance contracts, other
than annuity contracts, pursuant to R.S. 22:751(A).
(ii) The commissioner's annuity reserve valuation method for annuity contracts
pursuant to R.S. 22:751(A).
(iii) Minimum reserves for all other policies or contracts subject to R.S. 22:751(A).
(b) Which policies or contracts or types of policies or contracts that are subject to the
requirements of a principle-based valuation in Subsection G of this Section and the minimum
valuation standards consistent with those requirements.
(c) For policies and contracts subject to a principle-based valuation pursuant to
Subsection G of this Section:
(i) Requirements for the format of reports to the commissioner pursuant to
Subparagraph (G)(2)(c) of this Section and which shall include information necessary to
determine if the valuation is appropriate and in compliance with this Subpart.
(ii) Assumptions shall be prescribed for risks over which the company does not have
significant control or influence.
(iii) Procedures for corporate governance and oversight of the actuarial function, and
a process for appropriate waiver or modification of such procedures.
(d) For policies not subject to a principle-based valuation under Subsection G of this
Section, the minimum valuation standard shall use one of the following:
(i) The minimum valuation standard that was in effect prior to the operative date of
the valuation manual.
(ii) A reserve standard that quantifies the benefits, guarantees, and funding associated
with the contract risk and a level of conservatism that reflects all unfavorable events that
have a reasonable probability of occurring.
(5) The valuation manual shall specify other requirements, including but not limited
to those relating to reserve methods, models for measuring risk, generation of economic
scenarios, assumptions, margins, use of company experience, risk measurement, disclosure,
certifications, reports, actuarial opinions and memorandums, transition rules, and internal
controls.
(6) The valuation manual shall specify the data and form of the data required
pursuant to Subsection H of this Section, with whom the data shall be submitted, and may
specify other requirements including data analyses and reporting analyses.
D. In the absence of a specific valuation requirement, the company shall comply with
minimum valuation standards prescribed by the commissioner by rule or regulation.
E. The commissioner may engage a qualified actuary, at the expense of the company,
to perform an actuarial examination of the company and opine on the appropriateness of any
reserve assumption or method used by the company, or to review and opine on a company's
compliance with any valuation requirement. The commissioner may rely upon the opinion
of a qualified actuary engaged by the commissioner of another state, district, or territory of
the United States.
F. The commissioner may require a company to change any assumption or method
that in the opinion of the commissioner is necessary to comply with the requirements of the
valuation manual, and the company shall adjust the reserves as required by the
commissioner.
G.(1) For policies or contracts specified in the valuation manual as being subject to
principle-based valuation, a company shall establish reserves that:
(a) Quantify the benefits, guarantees, and funding associated with the contracts and
their risk at a level of conservatism that reflects conditions that include unfavorable events
that have a reasonable probability of occurring during the lifetime of the contracts, including
conditions appropriately adverse to quantify any significant tail risk.
(b) Incorporate assumptions, risk analysis methods, financial models, and
management techniques that are consistent with, but not necessarily identical to, those
utilized within the company's overall risk assessment process, while recognizing potential
differences in financial reporting structures and any prescribed assumptions or methods.
(c) Incorporate assumptions that are derived from one of the following:
(i) The valuation manual.
(ii) When not prescribed in the valuation manual, one of the following:
(aa) The company's available, relevant, and statistically credible experience.
(bb) To the extent that company data are not available, relevant, or statistically
credible, other available, relevant, and statistically credible experience.
(d) Provide margins for uncertainty including adverse deviation and estimation error,
such that the greater the uncertainty the larger the margin and resulting reserve.
(2) As specified in the valuation manual, a company using a principle-based
valuation for one or more policies or contracts shall:
(a) Establish procedures for corporate governance and oversight of the actuarial
valuation function consistent with those described in the valuation manual.
(b) Provide to the commissioner and the board of directors an annual certification
of the effectiveness of the principle-based valuation internal controls. The controls shall be
designed to assure that all material risks are included in the valuation in accordance with the
valuation manual. The certification shall be based on the controls in place as of the end of
the preceding calendar year.
(c) Develop a principle-based valuation report that complies with standards
prescribed in the valuation manual and file it with the commissioner when requested.
(3) A principle-based valuation may include a prescribed formulaic reserve
component.
H. For policies in force on or after the operative date of the valuation manual, a
company shall submit mortality, morbidity, policyholder behavior, or expense experience and
other data as prescribed in the valuation manual.
I. Any such insurer which at any time shall have adopted any 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 of insurance,
adopt any lower standard of valuation, but not lower than the minimum provided in this
Section. However, for purposes of this Section, the holding of additional reserves previously
determined by a qualified actuary to be necessary to render the opinion required by this
Subpart shall not be deemed to be the adoption of a higher standard of valuation.
J. For purposes of this Subpart, "confidential information" means:
(1) A memorandum in support of an opinion submitted under this Section and any
other documents, materials, and other information, including but not limited to all working
papers, and copies thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in connection with such memorandum.
(2) All documents, materials, and other information, including but not limited to all
working papers, and copies thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in the course of an examination made under this Section
provided, however, that if an examination report or other material prepared in connection
with an examination made under Chapter 8 of this Title is not held as private and
confidential information under Chapter 8 of this Title, an examination report or other
material prepared in connection with an examination made under this Section shall not be
confidential information to the same extent as if such examination report or other material
had been prepared under Chapter 8 of this Title.
(3) Any reports, documents, materials, and other information developed by a
company in support of, or in connection with, an annual certification by the company under
this Section evaluating the effectiveness of the company's internal controls with respect to
a principle-based valuation and any other documents, materials, and other information,
including but not limited to all working papers, and copies thereof, created, produced, or
obtained by or disclosed to the commissioner or any other person in connection with such
reports, documents, materials, and other information.
(4) Any principle-based valuation report developed under this Section and any other
documents, materials, and other information, including but not limited to all working papers,
and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any
other person in connection with such report.
(5) Any documents, materials, data, and other information submitted by a company
under this Section, to be known collectively as "experience data", and any other documents,
materials, data, and other information, including but not limited to all working papers, and
copies thereof, created or produced in connection with such experience data, in each case that
include any potentially company-identifying or personally identifiable information, that is
provided to or obtained by the commissioner together with any experience data, the
experience materials, and any other documents, materials, data, and other information,
including but not limited to all working papers, and copies thereof, created, produced, or
obtained by or disclosed to the commissioner or any other person in connection with such
experience materials.
K. Privilege for, and confidentiality of, confidential information.
(1) Except as provided in this Section, a company's confidential information is
confidential by law and privileged, and shall not be subject to the Public Records Law, R.S.
44:1.1 et seq., shall not be subject to subpoena, and shall not be subject to discovery or
admissible in evidence in any private civil action; however, the commissioner is authorized
to use the confidential information in the furtherance of any regulatory or legal action
brought against the company as a part of the commissioner's official duties.
(2) Neither the commissioner nor any person who received confidential information
while acting under the authority of the commissioner shall be permitted or required to testify
in any private civil action concerning any confidential information.
(3) In order to assist in the performance of the commissioner's duties, the
commissioner may share confidential information with other state, federal, and international
regulatory agencies and with the NAIC and its affiliates and subsidiaries; and in the case of
confidential information specified in Paragraphs (J)(1) and (4) of this Section only, with the
Actuarial Board for Counseling and Discipline, or its successor, upon request stating that the
confidential information is required for the purpose of professional disciplinary proceedings
and with state, federal, and international law enforcement officials. In the cases specified in
this Paragraph, provided that such recipient agrees, and has the legal authority to agree, to
maintain the confidentiality and privileged status of such documents, materials, data, and
other information in the same manner and to the same extent as required for the
commissioner.
(4)(a) The commissioner may receive documents, materials, data, and other
information, including otherwise confidential and privileged documents, materials, data, or
information from the NAIC and its affiliates and subsidiaries, from regulatory or law
enforcement officials of other foreign or domestic jurisdictions, and from the Actuarial Board
for Counseling and Discipline, or its successor, and shall maintain as confidential or
privileged any document, material, data, or other information received with notice or the
understanding that it is confidential or privileged under the laws of the jurisdiction that is the
source of the document, material, or other information.
(b) The commissioner may enter into agreements governing sharing and use of
information consistent with this Subsection.
(5) No waiver of any applicable privilege or claim of confidentiality in the
confidential information shall occur as a result of disclosure to the commissioner under this
Section or as a result of sharing as authorized in Paragraph (3) of this Subsection.
(6) A privilege established under the law of any state or jurisdiction that is
substantially similar to the privilege established under this Subsection shall be available and
enforced in any proceeding in, and in any court of, this state.
(7) In this Section "regulatory agency", "law enforcement agency", and the "NAIC"
include but are not limited to their employees, agents, consultants, and contractors.
L. Notwithstanding Subsection K of this Section, any confidential information
specified in Paragraphs (J)(1) and (4) of this Section:
(1) May be subject to subpoena for the purpose of defending an action seeking
damages from the appointed actuary submitting the related memorandum in support of an
opinion submitted under R.S. 22:752 or principle-based valuation report developed under
this Section by reason of an action required by this Subpart or by regulations promulgated
hereunder.
(2) May otherwise be released by the commissioner with the written consent of the
company.
(3) Once any portion of a memorandum in support of an opinion submitted under
R.S. 22:752 or a principle-based valuation report developed under this Section is cited by the
company in its marketing or is publicly volunteered to or before a governmental agency other
than a state insurance department or is released by the company to the news media, all
portions of such memorandum or report shall no longer be confidential.
M. For the purposes of this Subpart, the following definitions shall apply on and after
the operative date of the valuation manual:
(1) "Accident and health insurance" means contracts that incorporate morbidity risk
and provide protection against economic loss resulting from accident, sickness, or medical
conditions and as may be specified in the valuation manual.
(2) "Appointed actuary" means a qualified actuary who is appointed in accordance
with the valuation manual to prepare the actuarial opinion required by R.S. 22:752.
(3) "Company" means an entity that has written, issued, or reinsured life insurance
contracts, accident and health insurance contracts, or deposit-type contracts and one of the
following:
(a) Has at least one such policy or contract in force or on claim in this state.
(b) Meets the requirement to hold a certificate of authority to write such policies or
contracts in this state and has written, issued, or reinsured such policies or contracts in any
state.
(4) "Deposit-type contract" means a contract that does not incorporate mortality or
morbidity risks, and as may be specified in the valuation manual.
(5) "Life insurance" means contracts that incorporate mortality risk, including
annuity and pure endowment contracts, and as may be specified in the valuation manual.
(6) "Policyholder behavior" means any action a policyholder, contract holder, or any
other person with the right to elect options, such as a certificate holder, may take under a
policy or contract subject to this Subpart including but not limited to lapse, withdrawal,
transfer, deposit, premium payment, loan, annuitization, or benefit elections prescribed by
the policy or contract but excluding events of mortality or morbidity that result in benefits
prescribed in their essential aspects by the terms of the policy or contract.
(7) "Principle-based valuation" means a reserve valuation that uses one or more
methods or one or more assumptions determined by the insurer and is required to comply
with Subsection G of this Section as specified in the valuation manual.
(8) "Qualified actuary" means an individual qualified to sign the applicable statement
of actuarial opinion in accordance with the American Academy of Actuaries qualification
standards for actuaries signing such statements and meets the requirements specified in the
valuation manual.
(9) "Tail risk" means risk that occurs either when the frequency of low probability
events is higher than expected under a normal probability distribution or when there are
observed events of very significant size or magnitude.
(10) "Valuation manual" means the manual of valuation instructions adopted by the
NAIC as specified in this Subpart including any subsequent amendments.
NOTE: Former R.S. 22:753 redesignated as R.S. 22:2032 by Acts 2008, No.
415, §1, eff. Jan. 1, 2009.
Louisiana § 22:753 (Policies under standard valuation law) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.