§ 44-8909 — Reserves; company; duties

(1) A company must establish
reserves using a principle-based valuation that meets the following conditions
for policies or contracts as specified in the valuation manual:
(a) Quantify the benefits
and guarantees, and the funding, associated with the contracts and their risks
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. For policies or contracts with significant tail risk, the
valuation must reflect conditions appropriately adverse to quantify the tail
risk;
(b)
Incorporate assumptions, risk analysis methods, and 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 in one of the following manners:
(i) The assumption is prescribed
in the valuation manual; or
(ii)
For assumptions that are not prescribed, the assumptions shall:
(A) Be established utilizing
the company's available experience, to the extent it is relevant and statistically
credible; or
(B)
To the extent that company data is not available, relevant, or statistically
credible, be established utilizing other relevant, statistically credible
experience; and
(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)
A company using a principle-based valuation for one or more policies or contracts
subject to this section as specified in the valuation manual 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 director
and the board of directors an annual certification of the effectiveness of
the internal controls with respect to the principle-based valuation. Such
controls shall be designed to assure that all material risks inherent in the
liabilities and associated assets subject to such valuation are included in
the valuation and that valuations are made 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; and
(c) Develop, and file with the director upon request,
a principle-based valuation report that complies with standards prescribed
in the valuation manual.
(3)
A principle-based valuation may include a prescribed formulaic reserve component.

Legislative History

Source: Laws 2014, LB755, § 9.