§ 4217 — Valuation of insurance policies and contracts

§ 4217. Valuation of insurance policies and contracts. (a) (1) The\nsuperintendent shall annually value, or cause to be valued, the reserve\nliabilities (hereinafter called reserves) for all outstanding insurance\npolicies and contracts of every life insurance company doing business in\nthis state, except that, in the case of an alien company, such valuation\nshall be limited to its United States business, and may certify the\namount of any such reserves, specifying the mortality table or tables,\nrate or rates of interest and methods (net level premium method or\nother) used in the calculation of such reserves. In calculating such\nreserves, the superintendent may use group methods and approximate\naverages for fractions of a year or otherwise.\n (2) In lieu of the valuation of the reserves herein required of any\nforeign or alien company, the superintendent may accept any valuation\nmade, or caused to be made, by the insurance supervisory official of any\nstate or other jurisdiction when such valuation complies with the\nminimum standard herein provided and if the official of such state or\njurisdiction accepts as sufficient and valid for all legal purposes the\ncertificate of valuation of the superintendent when such certificate\nstates the valuation to have been made in a specified manner according\nto which the aggregate reserves would be at least as large as if they\nhad been computed in the manner prescribed by the law of that state or\njurisdiction.\n (3) (A) The superintendent may, in his discretion, vary the standards\nof mortality applicable to policies of insurance on substandard lives\nand other extra-hazardous lives issued by any life insurance company\ndoing business in this state.\n (B) He may also, in his discretion, vary the standards of interest and\nmortality applicable to contracts issued by an alien insurer in\ncountries other than the United States, if such alien insurer maintains\nthe trusteed surplus prescribed by section one thousand three hundred\ntwelve of this chapter.\n (4) (A) Any life insurance company doing business in this state which\nhas adopted as a basis for the valuation of its insurance policies and\ncontracts standards producing greater reserves in the aggregate than the\nminimum standards herein prescribed may continue to use such higher\nstandards as a basis of valuation.\n (B) After January first, nineteen hundred forty, any life insurance\ncompany doing business in this state may, subject to the provisions of\nparagraph eight of subsection (c) of this section, adopt as the basis\nfor the valuation of its insurance policies and contracts standards\nproducing greater reserves in the aggregate than the minimum standards\nherein prescribed; and any such company which shall have at any time\nadopted such higher standards of valuation may, with the approval of the\nsuperintendent, adopt lower standards of valuation, but in no case lower\nthan the minimum standards herein prescribed, provided, however, that,\nfor the purposes of this paragraph, the holding of additional reserves\ndetermined by a qualified actuary to be necessary to render the opinion\nrequired by subsection (e) of this section shall not be deemed to be the\nadoption of a higher standard of valuation.\n (C) The superintendent may approve any such change if he finds that\nthe proposed standards are for the best interests of the holders of the\npolicies and contracts and annuitants of such company.\n (D) Nothing contained herein shall be deemed to affect the contractual\nrights or obligations of the holder of any such policy or contract.\n (b) (1) This subsection shall apply only to those policies and\ncontracts issued prior to the operative date of section four thousand\ntwo hundred twenty-one of this article.\n (2) Except as provided in paragraph six hereof the legal minimum\nstandards for the valuation of life insurance contracts shall be as\nfollows:\n (A) For the valuation of all such contracts issued before the first\nday of January, nineteen hundred one, it shall be the Actuaries' or\nCombined Experience Table of Mortality with interest at four percent per\nannum.\n (B) For the valuation of such contracts issued on or after said day,\nexcept as provided in subparagraphs (C) and (D) hereof, it shall be the\nAmerican Experience Table of Mortality with Craig's extension for ages\nunder ten years and with interest at three and one-half percent per\nannum.\n (C) For the valuation of group term insurance policies under which\npremium rates are not guaranteed for a period in excess of five years,\nit shall be the American Men Ultimate Table of Mortality with interest\nat three and one-half percent per annum.\n (D) Any life insurance company may, at its option, value its life\ninsurance contracts issued on or after the first day of January,\nnineteen hundred thirty, in accordance with their terms on the basis of\nthe American Men Ultimate Table of Mortality, supplemented by such\nextension and modification for ages under twenty years, as may be\napproved by the superintendent, with interest at three and one-half\npercent per annum by the level net premium method or by the modified\npreliminary term method prescribed in paragraph four hereof.\n (3) Life insurance policies issued on or after the first day of\nJanuary, nineteen hundred seven, may, at the option of the insurer, be\nvalued in accordance with their terms by the modified preliminary term\nmethod prescribed in paragraph four hereof, or in accordance with the\nselect and ultimate method on the basis that the rate of mortality\nduring the first five years after the issuance of said contracts\nrespectively shall be calculated according to the following percentages\nof the rates shown by the American Experience Table of Mortality:\n For the first insurance year, fifty percent thereof; for the second\ninsurance year, sixty-five percent thereof; for the third insurance\nyear, seventy-five percent thereof; for the fourth insurance year,\neighty-five percent thereof; and for the fifth insurance year,\nninety-five percent thereof.\n (4) (A) Life insurance policies may provide for not more than one year\nof preliminary term insurance by incorporating in the provisions thereof\nspecifying the premium consideration to be received by the insurer, a\nclause plainly showing that the first year's insurance under such\npolicies is term insurance, purchased by the whole or a part of the\npremium to be received during the first policy year.\n (B) Such policies may, in accordance with their terms, be valued on\nthe basis of the mortality tables and interest rates prescribed in\nparagraph two hereof, by the modified preliminary term plan described as\nfollows: If the premium charged for term insurance under a limited\npayment life preliminary term policy providing for the payment of all\npremiums thereon in less than twenty years from the date of the policy,\nor under an endowment preliminary term policy, exceeds that charged for\nlike insurance under twenty payment life preliminary term policies of\nthe same company, the reserve thereon at the end of any year, including\nthe first, shall be not less than the reserve on a twenty payment life\npreliminary term policy issued in the same year and at the same age,\ntogether with an amount which shall be equivalent to the accumulation of\na level net premium sufficient to provide for a pure endowment at the\nend of the premium paying period equal to the difference between items\n(i) and (ii) hereof as follows: (i) the value at the end of such period\nof such a twenty payment life preliminary term policy and (ii) the full\nlevel net premium reserve at such time of such a limited payment life or\nendowment policy.\n (C) The premium paying period referred to above is the period during\nwhich premiums are concurrently payable under such twenty payment life\npreliminary term policy and such limited payment life or endowment\npolicy.\n (5) (A) The legal minimum standard for the valuation of all individual\nannuity contracts issued on or after January first, nineteen hundred\nforty (including life annuities provided or available under optional\nmodes of settlement in insurance contracts issued on or after such date)\nshall be the Combined Annuity Tables with age set back one year, with\ninterest at three and one-half percent per annum.\n (B) The legal minimum standard for the valuation of all individual\nannuity contracts issued prior to January first, nineteen hundred forty\n(including annuities provided or available under optional modes of\nsettlement in insurance contracts issued prior to such date) shall be in\naccordance with the provisions of law applicable thereto as of the date\nof issuance.\n (C) Except as otherwise provided in paragraphs three and four of\nsubsection (c) hereof for group annuity and pure endowment contracts,\nthe legal minimum standard for the valuation of all group annuity\ncontracts shall be the 1971 Group Annuity Mortality Table, or any\nmodification of this table approved by the superintendent, and five\npercent interest.\n (D) Annuities, annuity benefits and guaranteed interest contracts to\nwhich this subsection applies shall be subject to item (vi) of\nsubparagraph (B) of paragraph four of subsection (c) of this section.\n (6) (A) The legal minimum standard for the valuation of all industrial\nlife insurance policies issued on or after January first, nineteen\nhundred forty shall, at the option of the company, be either (i) the\n1941 Standard Industrial Mortality Table or the 1941 Substandard\nIndustrial Mortality Table, with interest at three and one-half percent\nper annum by the net level premium method, or (ii) either of the tables\nspecified in item (i) hereof, by the modified preliminary term method\nprescribed in paragraph four hereof, in accordance with the terms of the\npolicy, or (iii) in the case of policies issued on the monthly premium\nplan, the New York Standard Intermediate Table of Mortality (1907 Table)\nwith interest at three and one-half percent per annum. In lieu of such\ntables, at the option of the company, the Standard Industrial Mortality\nTable (1907) or the Substandard Industrial Mortality Table (1907) may be\nused with respect to such policies issued prior to January first,\nnineteen hundred forty-two.\n (B) The legal minimum standard for the valuation of all industrial\nlife insurance policies issued prior to January first, nineteen hundred\nforty shall be the minimum standard required by the law of this state in\nforce at the date of issuance.\n (7) The legal minimum standard for the valuation of all accidental\ndeath benefits and disability benefits, provided in connection with or\nsupplemental to life insurance policies or annuity contracts shall be\nsuch tables as the superintendent may prescribe.\n (c) (1) This subsection shall apply only to policies and contracts\nissued on or after the operative date of section four thousand two\nhundred twenty-one of this article, except as otherwise provided in\nparagraphs three and four of this subsection for group annuity and pure\nendowment contracts issued prior to such operative date.\n (2) Except as otherwise provided in paragraphs three, four and ten of\nthis subsection, the minimum standard for the valuation of all such\npolicies and contracts shall be the commissioners reserve valuation\nmethod defined in paragraph six of this subsection and in section four\nthousand two hundred eighteen of this article, three percent interest\nfor all life insurance policies issued prior to January first, nineteen\nhundred sixty-six and for all individual annuity and pure endowment\ncontracts issued prior to January first, nineteen hundred sixty, or\nthree and one-half percent interest for all life insurance policies\nissued on or after January first, nineteen hundred sixty-six and prior\nto June thirteenth, nineteen hundred seventy-four and for all individual\nannuity and pure endowment contracts issued on or after January first,\nnineteen hundred sixty, and prior to the operative date of paragraph\nthree of this subsection, or four percent interest for all life\ninsurance policies issued on or after June thirteenth, nineteen hundred\nseventy-four and prior to January first, nineteen hundred seventy-nine,\nor four and one-half percent interest for all life insurance policies,\nissued on or after January first, nineteen hundred seventy-nine, or five\npercent interest for all annuities purchased or to be purchased under\ngroup annuity contracts, and the following tables:\n (A) For all ordinary policies of life insurance issued on the standard\nbasis, excluding any disability and accidental death benefits in such\npolicies, the Commissioners 1941 Standard Ordinary Mortality Table for\nsuch policies issued prior to the operative date of subsection (h) of\nsection four thousand two hundred twenty-one of this article, the\nCommissioners 1958 Standard Ordinary Mortality Table for such policies\nissued on or after such operative date and prior to the operative date\nof subsection (k) of such section; provided that for any category of\nsuch policies issued on female risks all modified net premiums and\npresent values may be calculated according to an age not more than six\nyears younger than the actual age of the insured, and for such policies\nissued on or after the operative date of such subsection, and, at the\noption of the company, for such policies not providing for nonforfeiture\nbenefits which are issued on or after nineteen hundred eighty-one and\nprior to the operative date of such subsection, (i) the Commissioners\n1980 Standard Ordinary Mortality Table, or (ii) at the election of the\ncompany for any one or more specified plans of life insurance, the\nCommissioners 1980 Standard Ordinary Mortality Table with Ten-Year\nSelect Mortality Factors, or (iii) any ordinary mortality table, adopted\nafter nineteen hundred eighty by the National Association of Insurance\nCommissioners, that is approved by the superintendent for use in\ndetermining the minimum standard of valuation for such policies, or (iv)\nany other ordinary mortality table, or any modification of any of the\nforegoing tables, approved by the superintendent for any specified class\nor classes of risks.\n (B) For all industrial life insurance policies issued on the standard\nbasis, excluding any disability and accidental death benefits in such\npolicies, the 1941 Standard Industrial Mortality Table for such policies\nissued prior to the operative date of subsection (i) of section four\nthousand two hundred twenty-one of this article, and for such policies\nissued on or after such operative date (i) the Commissioners 1961\nStandard Industrial Mortality Table, or (ii) any industrial mortality\ntable, adopted after nineteen hundred eighty by the National Association\nof Insurance Commissioners, that is approved by the superintendent for\nuse in determining the minimum standard of valuation for such policies,\nor (iii) any other industrial mortality table, or any modification of\nany of the foregoing tables, approved by the superintendent for any\nspecified class or classes of risks.\n (C) For individual annuity and pure endowment contracts, excluding any\ndisability and accidental death benefits in such contracts,--the 1937\nStandard Annuity Mortality Table or, at the option of the company, the\nAnnuity Mortality Table for 1949, Ultimate, or any modification of\neither of these tables approved by the superintendent.\n (D) For group annuity and pure endowment contracts, excluding any\ndisability and accidental death benefits in such contracts,--the 1971\nGroup Annuity Mortality Table or any modification of this table approved\nby the superintendent.\n (E) For total and permanent disability benefits in or supplementary to\nordinary policies or contracts--for policies or contracts issued on or\nafter January first, nineteen hundred sixty-six, the tables of Period 2\ndisablement rates and the 1930 to 1950 termination rates of the 1952\nDisability Study of the Society of Actuaries, with due regard to the\ntype of benefits or any tables of disablement rates and termination\nrates, adopted after nineteen hundred eighty by the National Association\nof Insurance Commissioners, that are approved by the superintendent for\nuse in determining the minimum standard of valuation for such policies\nor any other tables of disablement rates and termination rates, or any\nmodification of any of the foregoing tables, approved by the\nsuperintendent for any specified class or classes of risks; for policies\nor contracts issued prior to January first, nineteen hundred sixty-six,\neither such tables or, at the option of the company, the Class (3)\nDisability Table (1926). Any such table shall, for active lives, be\ncombined with a mortality table permitted for calculating the reserves\nfor life insurance policies.\n (F) For accidental death benefits in or supplementary to policies--\nfor policies issued on or after January first, nineteen hundred\nsixty-six, the 1959 Accidental Death Benefits Table or any accidental\ndeath benefits table, adopted after nineteen hundred eighty by the\nNational Association of Insurance Commissioners, that is approved by the\nsuperintendent for use in determining the minimum standard of valuation\nfor such policies or any other accidental death benefits table, or any\nmodification of any of the foregoing tables, approved by the\nsuperintendent for any specified class or classes of risks; for policies\nissued prior to January first, nineteen hundred sixty-six, either such\ntable or, at the option of the company, the Inter-Company Double\nIndemnity Mortality Table. Any such table shall be combined with a\nmortality table permitted for calculating the reserves for life\ninsurance policies.\n (G) For group life insurance, life insurance issued on the substandard\nbasis, annuities involving life contingencies provided or available\nunder optional modes of settlement in life insurance policies or annuity\ncontracts and other special benefits--such tables as may be approved by\nthe superintendent.\n (3) Except as provided in paragraph four hereof, the minimum standard\nfor the valuation of all individual annuity and pure endowment contracts\nissued on or after the operative date of this paragraph, as defined\nherein, and for all annuities and pure endowments purchased or to be\npurchased on or after the operative date under group annuity and pure\nendowment contracts, shall be the commissioners reserve valuation method\ndefined in paragraph six hereof and the following tables and interest\nrates:\n (A) For individual annuity and pure endowment contracts issued prior\nto January first, nineteen hundred seventy-nine, excluding any\ndisability and accidental death benefits in such contracts and excluding\nany annuities, purchased under individual deferred annuity contracts, to\nwhich the company has elected to have subparagraph (B) hereof apply--the\n1971 Individual Annuity Mortality Table, or any modification of this\ntable approved by the superintendent, and six percent interest for\nsingle premium immediate annuity contracts, and four percent interest\nfor all other individual annuity and pure endowment contracts, or such\nhigher rate or rates of interest for any of such contracts as may be\napproved from time to time by the superintendent.\n (B) For individual annuity and pure endowment contracts issued on or\nafter January first, nineteen hundred seventy-nine, excluding any\ndisability and accidental death benefits in such contracts, and, at the\nelection of the company, for annuities purchased on or after such date\nunder individual deferred annuity contracts--the 1971 Individual Annuity\nMortality Table, or any individual annuity mortality table, adopted\nafter nineteen hundred eighty by the National Association of Insurance\nCommissioners, that is approved by the superintendent for use in\ndetermining the minimum standard of valuation for such contracts, or any\nother individual annuity mortality table, or any modification of any of\nthe foregoing tables, approved by the superintendent, and seven and\none-half percent interest for all single premium individual immediate\nannuity contracts and all annuities, purchased under individual deferred\nannuity contracts, to which the company has elected to have this\nsubparagraph apply and five and one-half percent interest for all other\nindividual annuity and pure endowment contracts, excluding any\nannuities, purchased under deferred annuity contracts, for which the\ninterest rate is seven and one-half percent or such higher rate or rates\nof interest for any of such contracts or annuities purchased under\ndeferred annuity contracts as may be approved from time to time by the\nsuperintendent.\n (C) For all annuities and pure endowments purchased or to be purchased\nprior to January first, nineteen hundred seventy-seven under group\nannuity and pure endowment contracts, excluding any disability and\naccidental death benefits purchased under such contracts,--the 1971\nGroup Annuity Mortality Table, or any modification of this table\napproved by the superintendent, and six percent interest, or such higher\nrate or rates of interest for any of such annuities and pure endowments\nas may be approved from time to time by the superintendent.\n (D) For all annuities and pure endowments purchased or to be purchased\non or after January first, nineteen hundred seventy-seven under group\nannuity and pure endowment contracts, excluding any disability and\naccidental death benefits purchased under such contracts--the 1971 Group\nAnnuity Mortality Table, or any group annuity mortality table, adopted\nafter nineteen hundred eighty by the National Association of Insurance\nCommissioners, that is approved by the superintendent for use in\ndetermining the minimum standard of valuation for such annuities and\npure endowments, or any other group annuity mortality table, or any\nmodification of any of the foregoing tables, approved by the\nsuperintendent, and seven and one-half percent interest, or such higher\nrate or rates of interest for any such annuities and pure endowments as\nmay be approved from time to time by the superintendent.\n (E) After June thirteenth, nineteen hundred seventy-four, any company\nmay file with the superintendent a written notice of its election to\ncomply with the provisions of this paragraph after a specified date\nbefore January first, nineteen hundred seventy-nine, which shall be the\noperative date of this paragraph for such company, provided that an\ninsurer may elect a different operative date for individual annuity and\npure endowment contracts from that elected for group annuity and pure\nendowment contracts. If a company makes no such election, the operative\ndate of this paragraph for such company shall be January first, nineteen\nhundred seventy-nine.\n (F) Annuities, annuity benefits and guaranteed interest contracts to\nwhich this subsection applies shall be subject to item (vi) of\nsubparagraph (B) of paragraph four of this subsection.\n (4) (A) The interest rates used in determining the minimum standard\nfor the valuation of:\n (i) all life insurance policies issued in a particular calendar year,\non or after January first, nineteen hundred eighty-two,\n (ii) all individual annuity and pure endowment contracts issued in a\nparticular calendar year on or after January first, nineteen hundred\neighty-two, and, at the option of the company, all annuities purchased\nin a particular calendar year on or after such date under individual\ndeferred annuity contracts issued prior thereto,\n (iii) all annuities and pure endowments purchased in a particular\ncalendar year on or after January first, nineteen hundred eighty-two\nunder group annuity and pure endowment contracts, and\n (iv) the net increase, if any, in a particular calendar year after\nJanuary first, nineteen hundred eighty-two, in amounts held under\nguaranteed interest contracts,\nshall be the calendar year statutory valuation interest rates as defined\nin this subsection, or such higher rate or rates of interest for any of\nsuch policies, contracts or annuities as may be approved from time to\ntime by the superintendent.\n (B) The calendar year statutory valuation interest rates ("I") shall\nbe determined in accordance with the following formulae (where R is the\nreference interest rate, and W is the weighting factor, defined in this\nparagraph) and the results rounded to the nearer one-quarter of one\npercent:\n (i) For life insurance, except as otherwise provided in this\nsubparagraph,\n I = .03 + W(R1 - .03) + W/2 (R2 - .09);\n where R1 is the lesser of R and .09,\n R2 is the greater of R and .09,\n (ii) For single premium immediate annuities and for annuity benefits\narising from life insurance policies and annuity and guaranteed interest\ncontracts with cash settlement options,\n I = .03 + W(R - .03)\n (iii) For other annuities with cash settlement options and guaranteed\ninterest contracts with cash settlement options, valued on an issue year\nbasis, except as stated in item (ii), the formula for life insurance\nstated in item (i) shall apply to annuities and guaranteed interest\ncontracts with guarantee durations in excess of ten years and the\nformula for single premium immediate annuities stated in item (ii) shall\napply to annuities and guaranteed interest contracts with guarantee\ndurations of ten years or less, and to single premium life insurance\npolicies of the kind referred to in item (vi) valued on a year of issue\nbasis with guarantee durations of ten years or less,\n (iv) For other annuities with no cash settlement options and for\nguaranteed interest contracts with no cash settlement options, the\nformula for single premium immediate annuities stated in item (ii) shall\napply,\n (v) For other annuities with cash settlement options and guaranteed\ninterest contracts with cash settlement options, and for single premium\nlife insurance policies of the kind referred to in item (vi), valued on\na change in fund basis, the formula for single premium immediate\nannuities stated in item (ii) shall apply,\n (vi) Single premium life insurance policies of the kind referred to in\nthis item are all single premium life insurance policies, issued on or\nafter January first, nineteen hundred eighty-two, which provide for the\ncrediting of additional amounts pursuant to subsection (b) of section\nfour thousand two hundred thirty-two of this article and under which\ninterest rates provided in, or declared pursuant to, the policy are, for\nsome period, guaranteed to exceed the greater of (I) six percent per\nannum and (II) the calendar year statutory valuation interest rate for\nother life insurance policies with guarantee durations in excess of\ntwenty years.\n (C) If the calendar year statutory valuation interest rate for any\nlife insurance policies, other than single premium life insurance\npolicies of the kind referred to in item (vi) of subparagraph (B) of\nthis paragraph, issued in any calendar year determined without reference\nto this sentence differs from the corresponding actual rate for similar\npolicies issued in the immediately preceding calendar year by less than\none-half of one percent the calendar year statutory valuation interest\nrate for such life insurance policies shall be equal to the\ncorresponding actual rate for the immediately preceding calendar year.\nFor purposes of applying the immediately preceding sentence, the\ncalendar year statutory valuation interest rate for life insurance\npolicies issued in a calendar year shall be determined for nineteen\nhundred eighty, (using the reference interest rate defined for nineteen\nhundred seventy-nine) and shall be determined for each subsequent\ncalendar year regardless of when subsection (k) of section four thousand\ntwo hundred twenty-one of this article becomes operative.\n (D) The weighting factors referred to in the formulas stated above are\ngiven in the following tables:\n (i) Weighting factors for life insurance:\n Guarantee Duration (Years) Weighting Factors\n 10 or less .50\n More than 10, but not more than 20 .45\n More than 20 .35\nexcept that the factors shown above shall be increased for single\npremium policies of the kind referred to in item (vi) of subparagraph\n(B) of this paragraph valued on an issue year basis by .05 and for\nsingle premium policies of such kind valued on a change in fund basis by\n..10.\n For life insurance, other than single premium policies of the kind\nreferred to in item (vi) of subparagraph (B) of this paragraph, the\nguarantee duration is the maximum number of years the life insurance can\nremain in force on a basis guaranteed in the policy or under options to\nconvert to plans of life insurance with premium rates or nonforfeiture\nvalues or both which are guaranteed in the original policy; for such\nsingle premium policies of the kind referred to in item (vi) of\nsubparagraph (B) of this paragraph, the guarantee duration is the number\nof years for which interest rates provided in, or declared pursuant to,\nthe policy are guaranteed to exceed the greater of (I) six percent per\nannum and (II) the calendar year statutory valuation interest rate for\nlife insurance policies, other than such single premium policies, with\nguarantee durations in excess of twenty years;\n (ii) Weighting factor for single premium immediate annuities, and for\nannuity benefits arising from life insurance policies and annuity and\nguaranteed interest contracts with cash settlement options: .80\n (iii) Weighting factors for other annuities and for guaranteed\ninterest contracts, except as stated in item (ii), shall be as specified\nin tables (I), (II), (III), according to the rules and definitions in\ntables (IV) and (V):\n Weighting Factor\n for Plan Type\n Guarantee Duration (Years) A B C\n (I) For annuities and guaranteed interest contracts valued on an issue\nyear basis:\n 5 or less: .80 .60 .50\n More than 5, but not more than 10: .75 .60 .50\n More than 10, but not more than 20: .65 .50 .45\n More than 20: .45 .35 .35\n (II) For annuities and guaranteed\ninterest contracts valued on a change in\nfund basis, the factor shown in table\n(I) above increased by: .15 .25 .05\n (III) For annuities and guaranteed\ninterest contracts valued on an issue\nyear basis (other than those with no\ncash settlement options) which do not\nguarantee interest on considerations\nreceived more than one year after issue\nor purchase and for annuities and\nguaranteed interest contracts valued on\na change in fund basis which do not\nguarantee interest rates on\nconsiderations received more than twelve\nmonths beyond the valuation date, the\nfactors shown in table (I) or derived in\ntable (II) increased by: .05 .05 .05\n (IV) For other annuities with cash settlement options and guaranteed\ninterest contracts with cash settlement options, the guarantee duration\nis the number of years for which the interest rates provided in, or\ndeclared pursuant to, the contract are guaranteed to exceed the calendar\nyear statutory valuation interest rate for life insurance policies other\nthan single premium policies of the kind referred to in item (vi) of\nsubparagraph (B) of this paragraph, with guarantee durations in excess\nof twenty years.\n For other annuities with no cash settlement options and for guaranteed\ninterest contracts with no cash settlement options, the guarantee\nduration is the number of years from the date of issue or date of\npurchase to the date annuity benefits are scheduled to commence.\n (V) Plan type as used in the above tables is defined as follows:\n Plan Type A: The policyholder may withdraw funds only (i) with an\nadjustment to reflect changes in interest rates or asset values since\nreceipt of the funds by the insurance company, or (ii) without such\nadjustment but in installments over five years or more, or (iii) as an\nimmediate life annuity.\n Plan Type B: The policyholder may not withdraw funds before the\nexpiration of the interest rate guarantee or, if withdrawals are\npermitted before the expiration of such guarantee, may withdraw funds\nonly (i) with an adjustment to reflect changes in interest rates or\nasset values since receipt of the funds by the insurance company, or\n(ii) without such adjustment but in installments over five years or\nmore. At the end of the interest rate guarantee, funds may be withdrawn\nwithout such adjustment in a single sum or installments over less than\nfive years.\n Plan Type C: The policyholder may withdraw funds before the expiration\nof the interest rate guarantee in a single sum or installments over less\nthan five years either (i) without adjustment to reflect changes in\ninterest rates or asset values since receipt of the funds by the\ninsurance company, or (ii) subject only to a fixed surrender charge\nstipulated in the contract as a percentage of the fund.\n (E) A company may elect to value single premium life insurance\npolicies of the kind referred to in item (vi) of subparagraph (B) of\nthis paragraph, guaranteed interest contracts with cash settlement\noptions or other annuities with cash settlement options on either an\nissue year basis or on a change in fund basis. Guaranteed interest\ncontracts with no cash settlement options and other annuities with no\ncash settlement options must be valued on an issue year basis. As used\nin this paragraph, and except as otherwise permitted by the\nsuperintendent, an issue year basis of valuation refers to a valuation\nbasis under which the interest rate used to determine the minimum\nvaluation standard for the entire duration of the life insurance policy,\nannuity contract or guaranteed interest contract is the calendar year\nvaluation interest rate for the year of issue or year of purchase of the\npolicy or contract, and the change in fund basis of valuation refers to\na valuation basis under which the interest rate used to determine the\nminimum valuation standard applicable to each change in the fund held\nunder the policy or contract is the calendar year valuation interest\nrate for the year of the change in the fund.\n (F) The reference interest rate referred to above shall be defined as\nfollows:\n (i) For all life insurance, except single premium policies of the kind\nreferred to in item (vi) of subparagraph (B) of this paragraph, the\nlesser of the average over a period of thirty-six months and the average\nover a period of twelve months, ending on June thirtieth of the calendar\nyear next preceding the year of issue, of Moody's Corporate Bond Yield\nAverage - Monthly Average Corporates, as published by Moody's Investors\nService, Inc.\n (ii) For single premium immediate annuities and for annuity benefits\narising from life insurance policies and annuity and guaranteed interest\ncontracts with cash settlement options, the average over a period of\ntwelve months, ending on June thirtieth of the calendar year of issue or\nyear of purchase, of Moody's Corporate Bond Yield Average - Monthly\nAverage Corporates, as published by Moody's Investors Service, Inc.\n (iii) For other annuities with cash settlement options and guaranteed\ninterest contracts with cash settlement options, and for single premium\nlife insurance policies of the kind referred to in item (vi) of\nsubparagraph (B) of this paragraph, valued on a year of issue basis,\nexcept as stated in item (ii) hereof, with guarantee durations in excess\nof ten years, the lesser of the average over a period of thirty-six\nmonths and the average over a period of twelve months ending on June\nthirtieth of the calendar year of issue or purchase, of Moody's\nCorporate Bond Yield Average - Monthly Corporates, as published by\nMoody's Investors Service, Inc.\n (iv) For other annuities with cash settlement options and guaranteed\ninterest contracts with cash settlement options, and for single premium\nlife insurance policies of the kind referred to in item (vi) of\nsubparagraph (B) of this paragraph, valued on a year of issue basis,\nexcept as stated in item (ii) hereof, with guarantee durations of ten\nyears or less, the average over a period of twelve months, ending on\nJune thirtieth of the calendar year of issue or purchase, of Moody's\nCorporate Bond Yield Average - Monthly Average Corporates, as published\nby Moody's Investors Service, Inc.\n (v) For other annuities with no cash settlement options and for\nguaranteed interest contracts with no cash settlement options, the\naverage over a period of twelve months, ending on June thirtieth of the\ncalendar year of issue or purchase, of Moody's Corporate Bond Yield\nAverage - Monthly Average Corporates, as published by Moody's Investors\nService, Inc.\n (vi) For other annuities with cash settlement options and guaranteed\ninterest contracts with cash settlement options, and for single premium\nlife insurance policies of the kind referred to in item (vi) of\nsubparagraph (B) of this paragraph, valued on a change in fund basis,\nexcept as stated in item (ii) hereof, the average over a period of\ntwelve months, ending on June thirtieth of the calendar year of the\nchange in the fund, of Moody's Corporate Bond Yield Average - Monthly\nAverage Corporates, as published by Moody's Investors Service, Inc.\n (G) In the event that Moody's Corporate Bond Yield Average - Monthly\nAverage Corporates is no longer published by Moody's Investors Service,\nInc., or in the event that the National Association of Insurance\nCommissioners determines that Moody's Corporate Bond Yield Average -\nMonthly Average Corporates as published by Moody's Investors Service,\nInc., is no longer appropriate for the determination of the reference\ninterest rate, then an alternative method for determination of the\nreference interest rate, which is adopted by the National Association of\nInsurance Commissioners and approved by the superintendent, may be\nsubstituted.\n (H) The provisions of this subparagraph shall apply to any life\ninsurance company which has life insurance policies or annuity or pure\nendowment contracts in effect which were issued in a foreign country and\nunder which premiums and benefits, and the assets supporting reserves in\nrespect thereof, are denominated in the currency of a foreign country\nwhich is rated in one of the two highest rating categories by an\nindependent, nationally recognized United States rating agency. For the\npurpose of determining the reference interest rate to be used in valuing\nsuch policies and contracts, the superintendent may permit any such\ncompany, or may by regulation require all such companies (except as\nexempted pursuant to such regulation), to adjust the yield average of\nthe applicable index published by Moody's Investors Service, Inc. (or\nthe yield average determined on the basis of any substitute method\napplicable to such policies or contracts and approved by the\nsuperintendent in accordance with subparagraph (G) of this paragraph) in\naccordance with a method approved by the superintendent, or to\nsubstitute an alternative method approved by the superintendent in place\nof the applicable index published by Moody's Investors Service, provided\nthat any such substitute or alternative method shall produce\nyear-to-year consistency in reserving methods and shall appropriately\nreflect the difference between the yield average on corporate bonds\nissued in the United States and the yield average on corporate bonds\nissued in such foreign country. Any company which adjusts yield averages\nin accordance with a method approved by the superintendent pursuant to\nthis subparagraph shall continue to use such method with respect to the\nvaluation of such policies and contracts until the superintendent\npermits or requires such company to cease using such method.\n (6) (A) Except as otherwise provided in section four thousand two\nhundred eighteen of this article, reserves according to the\ncommissioners reserve valuation method for the life insurance and\nendowment benefits of policies providing for a uniform amount of\ninsurance and requiring the payment of uniform premiums shall be the\nexcess, if any, of the present value, at the date of valuation, of such\nfuture guaranteed benefits provided for by such policies, over the then\npresent value of any future modified net premiums therefor. The modified\nnet premiums for any such policy shall be such uniform percentage of the\nrespective contract premiums for such benefits that the present value,\nat the date of issue of the policy, of all such modified net premiums\nshall be equal to the sum of the then present value of such benefits\nprovided for by the policy and the excess of item (i) over item (ii), as\nfollows:\n (i) A net level annual premium equal to the present value, at the date\nof issue, of such benefits provided for after the first policy year,\ndivided by the present value, at the date of issue, of an annuity of one\nper annum payable on the first and each subsequent anniversary of such\npolicy on which a premium falls due; provided, however, that such net\nlevel annual premium shall not exceed the net level annual premium on\nthe nineteen year premium whole life plan for insurance of the same\namount at an age one year higher than the age at issue of such policy.\n (ii) A net one year term premium for such benefits provided for in the\nfirst policy year.\n (B) Provided that for any life insurance policy issued on or after\nJanuary first, nineteen hundred eighty-six for which the contract\npremium in the first policy year exceeds that of the second year and for\nwhich no comparable additional benefit is provided in the first year for\nsuch excess and which provides an endowment benefit or a cash surrender\nvalue or a combination thereof in an amount greater than such excess\npremium, the reserve according to the commissioners reserve valuation\nmethod as of any policy anniversary occurring on or before the assumed\nending date defined herein as the first policy anniversary on which the\nsum of any endowment benefit and any cash surrender value then available\nis greater than such excess premium shall, except as otherwise provided\nin section four thousand two hundred eighteen of this article, be the\ngreater of the reserve as of such policy anniversary calculated as\ndescribed in the preceding paragraph and the reserve as of such policy\nanniversary calculated as described in that paragraph, but with (i) the\nvalue defined in item (i) of subparagraph (A) hereof being reduced by\nfifteen percent of the amount of such excess first year premium, (ii)\nall present values of benefits and premiums being determined without\nreference to premiums or benefits provided for by the policy after the\nassumed ending date, (iii) the policy being assumed to mature on such\ndate as an endowment, and (iv) the cash surrender value provided on such\ndate being considered as an endowment benefit. In making the above\ncomparison, the mortality and interest bases stated in paragraphs two\nand four shall be used.\n (C) Reserves according to the commissioners reserve valuation method\nfor (i) life insurance policies providing for a varying amount of\ninsurance or requiring the payment of varying premiums, (ii) disability\nand accidental death benefits in all policies and contracts, and (iii)\nall other benefits, except life insurance and endowment benefits in life\ninsurance policies and benefits in annuity, pure endowment and\nguaranteed interest contracts, shall be calculated by a method\nconsistent with the principles of this paragraph, except that any extra\npremiums charged because of impairments or special hazards shall be\ndisregarded in the determination of modified net premiums.\n (D) The superintendent may, by regulation, issue guidelines for the\napplication of the reserve valuation provisions of this section to such\npolicies and contracts as the superintendent deems appropriate. Such\nguidelines may provide that the minimum standard for the valuation of\nsingle premium life insurance policies of the kind referred to in item\n(vi) of subparagraph (B) of paragraph four of this subsection may be\nbased on interest rates determined in accordance with paragraph four of\nsubsection (c) of this section for the first ten years following the\ndate of valuation and thereafter on interest rates determined in\naccordance with the formula stated in item (i) of subparagraph (B) of\nparagraph four of this subsection. Such guidelines may permit\nrecognition of surrender charges in determining reserves to the extent\nand under the conditions specified in the regulation. With respect to\nannuity, pure endowment, or guaranteed interest contracts providing\nallocation of assets to a separate account which qualifies under item\n(iii) of paragraph five of subsection (a) of section four thousand two\nhundred forty of this article and in which the assets are valued at\ntheir market value in accordance with the terms of such contracts, such\nguidelines may provide for the valuation of the reserves for such\ncontracts in a consistent manner.\n (7) In no event shall a company's aggregate reserves for all life\ninsurance policies, excluding disability and accidental death benefits,\nbe less than the aggregate reserves calculated in accordance with the\nmethods set forth in paragraphs six and nine hereof and the mortality\ntable or tables and rate or rates of interest used in calculating\nnonforfeiture benefits for such policies, nor less than the aggregate\nreserves calculated in accordance with section four thousand two hundred\neighteen of this article. This paragraph shall not apply to single\npremium life insurance policies of the kind referred to in item (vi) of\nsubparagraph (B) of paragraph four of this subsection nor to life\ninsurance policies that provide for the crediting of additional amounts\npursuant to subsection (b) of section four thousand two hundred\nthirty-two of this article if the aggregate reserves for all such\npolicies are at least equal to the greatest of present values, at the\ndate of valuation, of the future guaranteed cash surrender values at any\ntime under all such policies, assuming no future premiums and the\nmortality tables and interest rates prescribed under paragraphs two and\nfour of this subsection.\n (8) Notwithstanding the provisions of subsection (a) hereof and\nnotwithstanding the provisions of subsection (g) of section four\nthousand two hundred twenty-one of this article, after a life insurance\ncompany has established reserves for participating life insurance\npolicies in accordance with a method consistent with the provisions of\nthis chapter, it may calculate such reserves according to a rate of\ninterest lower than the rate of interest previously used in calculating\nreserves for the same policies only with the consent of the\nsuperintendent, subject to such conditions, if any, as he may impose.\n (9) In the case of any plan of life insurance which provides for\nfuture premium determination, the amounts of which are to be determined\nby the insurance company based on then estimates of future experience,\nor in the case of any plan of life insurance or annuity which is of such\na nature that the minimum reserves cannot be determined by the methods\ndescribed in paragraph six hereof and section four thousand two hundred\neighteen of this article, the reserves which are held under any such\nplan must:\n (A) be appropriate in relation to the benefits and the pattern of\npremiums for that plan, and\n (B) be computed by a method which is consistent with the principles of\nsuch paragraph and such section as determined by the superintendent.\n (10) (A) The superintendent shall, by regulation, issue guidelines for\nthe determination of the minimum reserve value required by this section\nfor any plan or plans of life insurance policies under which cash\nsurrender values and policy loan values are adjusted in accordance with\na market-value adjustment formula.\n (B) The regulation may require any company issuing or delivering such\npolicies in this state to submit to the superintendent with each annual\nreport an opinion, in form and substance satisfactory to the\nsuperintendent, of a qualified actuary that the reserves for all such\npolicies in force at the end of the year, and the assets held by the\ncompany in support of such reserves, make adequate provision for the\nliabilities of the company with respect thereto, such opinion to be\naccompanied by a memorandum, also in form and substance satisfactory to\nthe superintendent, of the qualified actuary describing the calculations\nmade in support of such opinion and the assumptions used in the\ncalculations. The regulation may prescribe the calculations required to\nsupport such opinions and may provide that if the company has designated\nparticular assets primarily to support reserves for a class or classes\nof policies, including reserves for policies determined in accordance\nwith the regulation, the opinion of the company's qualified actuary may\napply to the policies whose reserves are supported by such assets. For\npurposes hereof, "qualified actuary" has the meaning ascribed to it by\nsubparagraph (E) of paragraph four of subsection (e) of this section.\n (C) With respect to any policies covered by the regulation that\nprovide for the allocation of assets to a separate account which\nqualifies under item (iii) of paragraph five of subsection (a) of\nsection four thousand two hundred forty of this article and in which\nassets are valued at their market value in accordance with the terms of\nsuch policies, the regulation may provide for the valuation of the\nreserves for such policies in a consistent manner.\n (d) The company shall maintain reserves for all individual and group\naccident and health insurance policies which reserves shall reflect a\nsound value placed on its liabilities under such policies and shall be\nnot less than the reserves required by regulations which the\nsuperintendent shall promulgate.\n (e) Actuarial opinion of reserves.\n (1) General. Every life insurance company doing business in this state\nshall annually submit the opinion of a qualified actuary as to whether\nthe reserves and related actuarial items held in support of the policies\nand contracts specified by the superintendent by regulation are computed\nappropriately, are based on assumptions which satisfy contractual\nprovisions, are consistent with prior reported amounts and comply with\napplicable laws of this state. The superintendent by regulation shall\ndefine the specifics of this opinion and add any other items deemed to\nbe necessary to its scope.\n (2) (A) Actuarial analysis of reserves and assets supporting such\nreserves. Every life insurance company, except as exempted by or\npursuant to regulation, shall also annually include in the opinion\nrequired by paragraph one of this subsection, an opinion of the same\nqualified actuary as to whether the reserves and related actuarial items\nheld in support of the policies and contracts specified by the\nsuperintendent by regulation, when considered in light of the assets\nheld by the company with respect to the reserves and related actuarial\nitems, including but not limited to the investment earnings on the\nassets and the considerations anticipated to be received and retained\nunder the policies and contracts, make adequate provision for the\ncompany's obligations under the policies and contracts, including but\nnot limited to the benefits under and expenses associated with the\npolicies and contracts.\n (B) The superintendent may provide by regulation for a transition\nperiod for establishing any additional reserves which the qualified\nactuary may deem necessary in order to render the opinion required by\nthis paragraph.\n (3) Requirement for actuarial memorandum. (A) Except as exempted by or\npursuant to regulation, a memorandum, in form and substance acceptable\nto the superintendent as specified by regulation, shall be prepared to\nsupport each actuarial opinion submitted pursuant to subparagraph (A) of\nparagraph two of this subsection. Each company required to prepare such\nmemorandum shall submit such memorandum to the superintendent as part of\nits submission of the opinion of the qualified actuary pursuant to such\nsubparagraph (A), except as otherwise provided in subparagraph (B) of\nthis paragraph and except that if a foreign or alien company has\nsubmitted a memorandum in support of an opinion of a qualified actuary\nfor the prior year to the commissioner of a state accredited by the\nNational Association of Insurance Commissioners and if that memorandum\nwas in form and substance acceptable to the commissioner and was in\nsupport of an opinion of a qualified actuary that was required by laws\nor regulations of that state to meet standards adopted from time to time\nby the Actuarial Standards Board and such additional standards as the\nsuperintendent has prescribed, the foreign or alien company need submit\nthe memorandum required by this subparagraph only at the request of the\nsuperintendent or as the superintendent may by regulation require.\n (B) In lieu of preparing a memorandum as required by subparagraph (A)\nof this paragraph, a company may increase its reserves in the manner\nprovided by the superintendent by regulation. If a company that has not\nso increased its reserves fails to file a supporting memorandum as\nrequired by subparagraph (A) of this paragraph or fails to provide a\nsupporting memorandum at the request of the superintendent within a\nperiod specified by regulation or the superintendent determines that the\nsupporting memorandum provided by the company fails to meet the\nstandards prescribed by the regulations or is otherwise unacceptable to\nthe superintendent, the superintendent may engage a qualified actuary at\nthe expense of the company to review the opinion and the basis for the\nopinion and prepare such supporting memorandum as is required by the\nsuperintendent.\n (4) Requirement for all opinions. Every opinion shall be governed by\nthe following provisions:\n (A) The opinion shall be submitted with the annual statement\nreflecting the valuation of such reserve liabilities for each year\nending on or after December thirty-first, nineteen hundred ninety-four.\n (B) The opinion shall apply to all business in force including\nindividual and group health insurance plans, in form and substance\nacceptable to the superintendent as specified by regulation.\n (C) The opinion shall be based on standards adopted from time to time\nby the Actuarial Standards Board and on such additional standards as the\nsuperintendent may by regulation prescribe.\n (D) In the case of an opinion required to be submitted by a foreign or\nalien company, the superintendent may accept the opinion submitted by\nthat company to the commissioner of a state accredited by the National\nAssociation of Insurance Commissioners if the superintendent determines\nthat the opinion reasonably meets the requirements applicable to a\ncompany domiciled in this state.\n (E) For the purposes of this subsection, "qualified actuary" means a\nmember in good standing of the American Academy of Actuaries who meets\nthe requirements prescribed by the superintendent by regulation.\n (F) Except in cases of fraud, willful misconduct or gross negligence,\nthe qualified actuary shall not be liable for damages to any person\n(other than the insurance company or the superintendent) for any act,\nerror, omission, decision or conduct with respect to the actuary's\nopinion and memorandum. The provisions of this subparagraph shall not\noperate to remove, condition or limit any rights, remedies or actions at\nlaw or equity which the insurance company or the superintendent may have\nor take against or with respect to the qualified actuary.\n (G) Disciplinary action by the superintendent against the company or\nthe qualified actuary shall be defined in regulations by the\nsuperintendent.\n (H) Non-public information (meaning information not otherwise\navailable from public documents or records) contained in any memorandum\nin support of the opinion, or in any other material provided by the\ncompany to the superintendent in connection therewith, shall at the\nwritten request of the company be kept confidential by the\nsuperintendent and shall not be made public, other than for the purpose\nof enabling any person to defend against an action seeking damages from\nsuch person by reason of any action required by this section or by\nregulations promulgated hereunder; provided, however, that such\nnon-public information may otherwise be released by the superintendent\n(i) with the written consent of the company or (ii) for the purpose of\nprofessional disciplinary proceedings conducted by the superintendent or\nby any professional body, provided that steps deemed appropriate by the\nsuperintendent are taken to preserve the confidentiality of such\nnon-public information. Notwithstanding the foregoing, the\nsuperintendent shall release the non-public information to persons\nmaking demand therefor in a criminal proceeding pursuant to lawful\nsubpoena, warrant or court order or in response to a subpoena from a\ngrand jury served upon the superintendent. Any such request by the\ncompany for confidentiality shall designate with reasonable specificity\nthe portion of such memorandum or other material with respect to which\nconfidentiality is requested pursuant to this subparagraph. Once such\nmemorandum or other material, or any portion thereof containing matters\nwith respect to which confidentiality has been requested, is cited by\nthe company in its marketing or is cited before any governmental agency\n(other than a state insurance department) or is released by the company\nto the news media, all portions of such memorandum or other material\nshall be no longer confidential.\n (f) (1) An insurer shall be deemed to meet the minimum standard for\nthe valuation of life insurance, if the amount of its aggregate reserves\nfor group life insurance, for ordinary life insurance and for industrial\nlife insurance, whether or not held in separate accounts pursuant to\nsection four thousand two hundred forty of this article, is in each case\nat least equal to the aggregate minimum standard required by this\nsection for the respective valuation thereof.\n (2) An insurer shall be deemed to meet the minimum standard for the\nvaluation of annuities and guaranteed interest contracts if the amount\nof its aggregate reserves therefor, whether or not held in separate\naccounts pursuant to such section forty-two hundred forty of this\narticle, is at least equal to the aggregate minimum standard required by\nthis section for the valuation thereof.\n (3) An insurer shall be deemed to meet the minimum standard for the\nvaluation of individual and group accident and health insurance policies\nif the amount of its aggregate reserves therefor is at least equal to\nthe aggregate minimum standard required by this section for the\nvaluation thereof.\n (4) Without the specific approval of the superintendent subject to\nsuch conditions as he may prescribe and as provided by regulation, an\ninsurer shall not aggregate the reserves referred to in two or more of\nparagraph one, two or three of this subsection. Such regulation may\nprescribe the conditions under which the valuation of two or more\nclasses of business of insurance or the valuation of all of its\ninsurance business to which this section applies may be combined.\n (5) For purposes of this subsection, the aggregate minimum standard\nrequired by this section for the valuation of any insurance policies or\ncontracts shall be deemed to include such additional reserves as the\nqualified actuary deems necessary, taking into account any transition\nrules provided by regulation pursuant to subparagraph (B) of paragraph\ntwo of subsection (e) of this section, in order to render the opinion\nrequired by subsection (e) of this section and such additional reserves\nas may be necessary to comply with regulations promulgated by the\nsuperintendent pursuant to this section.\n * (g)(1) This subsection shall apply only to individual and group life\ninsurance policies and annuity contracts issued on or after the\noperative date of the valuation manual as prescribed by the\nsuperintendent by regulation, provided that the operative date shall be\nno sooner than January first, two thousand nineteen.\n (2) For the purposes of this subsection, "NAIC" shall mean the\nNational Association of Insurance Commissioners.\n (3) For purposes of this subsection, "principle-based valuation" shall\nmean a reserve valuation that uses methods and assumptions required by\nparagraph eleven of this subsection as specified in the valuation\nmanual.\n (4) For purposes of this subsection, "qualified actuary" shall mean a\nmember in good standing of the American Academy of Actuaries who meets\nthe requirements prescribed by the superintendent by regulation.\n (5) For purposes of this subsection, "valuation manual" shall mean the\nvaluation manual adopted by the NAIC on December second, two thousand\ntwelve, as subsequently amended, and as approved by the superintendent\nupon a finding that such manual is for the best interests of the holders\nof policies and contracts and annuitants of this state and which meets\nthe requirements as set forth in this subsection.\n (6) Notwithstanding subsection (c) of this section and section four\nthousand two hundred eighteen of this article, the minimum standard for\nthe valuation of all such policies and contracts shall be the standard\nprescribed in the valuation manual.\n (7) The valuation manual shall not become operative in this state\nunless and until the superintendent has approved of such manual and has\nadopted all necessary regulations to effectuate this subsection.\n (8) (A) No amendment to the valuation manual shall take effect in this\nstate unless the superintendent finds that such amendment is for the\nbest interests of the holders of policies and contracts and annuitants\nof this state.\n (B) The superintendent may deviate, through regulations, from the\nreserve standards, valuation methods, assumptions, and related\nrequirements in the valuation manual, including for individual\ncompanies, provided, however, that such deviation shall not result in\nreserve valuations that are lower than the minimum standards prescribed\nin the valuation manual and may be based on a percentage of the reserves\nbeing held for the policies and contracts subject to this subsection\nprior to the operative date of such manual.\n (9) The valuation manual shall specify all of the following:\n (A) Minimum valuation standards for and definitions of the policies\nand contracts subject to this subsection as determined by the\nsuperintendent. Such minimum valuation standards shall be:\n (i) The commissioners reserve valuation method for life insurance\npolicies subject to this subsection; and\n (ii) The commissioners annuity reserve valuation method for annuity\ncontracts subject to this subsection.\n (B) Requirements for the format of reports to the superintendent under\nitem (iii) of subparagraph (B) of paragraph eleven of this subsection\nand which shall include information necessary to determine if the\nvaluation is appropriate and in compliance with this subsection;\n (C) Assumptions for risks over which a company does not have\nsignificant control or influence;\n (D) Procedures for corporate governance and oversight of the actuarial\nfunction, and a process for appropriate waiver or modification of such\nprocedures;\n (E) Other requirements, including, but not limited to, those relating\nto reserve methods, models for measuring risk, generation of economic\nscenarios, assumptions, margins, use of company experience, risk\nmeasurement, disclosure, certifications, reports, actuarial opinions and\nmemorandums, transition rules and internal controls; and\n (F) The data and form of the data required under paragraph twelve of\nthis subsection, with whom the data shall be submitted, and other\nrequirements including data analyses and reporting of analyses.\n (10) The superintendent may engage a qualified actuary, at the expense\nof a company, to perform an actuarial examination of such company and\nopine on the appropriateness of any reserve assumption or method used by\nsuch company, or to review and opine on such company's compliance with\nany requirement set forth in this subsection.\n (11) (A) A company that issues policies and contracts subject to this\nsubsection shall establish reserves using a principle-based valuation\nthat meets the following conditions for such policies and contracts as\nspecified in the valuation manual:\n (i) Quantify the benefits and guarantees, and the funding, associated\nwith the policies or contracts and their risks at a level of\nconservatism that reflects conditions that include unfavorable events\nthat have a reasonable probability of occurring during the lifetime of\nthe policies and contracts. For policies and contracts with significant\ntail risk, reflect conditions appropriately adverse to quantify the tail\nrisk.\n (ii) Incorporate assumptions, risk analysis methods and financial\nmodels and management techniques that are consistent with, but not\nnecessarily identical to, those utilized within the company's overall\nrisk assessment process, while recognizing potential differences in\nfinancial reporting structures and any prescribed assumptions or\nmethods.\n (iii) Incorporate assumptions that are derived in one of the following\nmanners:\n (I) The assumption is prescribed in the valuation manual.\n (II) For assumptions that are not prescribed, the assumptions shall:\n a. be established utilizing the company's available experience, to the\nextent it is relevant and statistically credible; or\n b. to the extent that company experience is not available, relevant,\nor statistically credible, be established utilizing other relevant,\nstatistically credible experience.\n (iv) Provide margins for uncertainty including adverse deviation and\nestimation error, such that the greater the uncertainty the larger the\nmargin and resulting reserve.\n (B) A company that issues policies and contracts subject to this\nsubsection shall:\n (i) Establish procedures for corporate governance and oversight of the\nactuarial valuation function consistent with those described in the\nvaluation manual.\n (ii) Provide to the superintendent, annually on or before a date as\ndetermined by the superintendent, and the board of directors of the\ncompany an annual certification of the effectiveness of the internal\ncontrols with respect to the principle-based valuation. Such controls\nshall be designed to assure that all material risks inherent in the\nliabilities and associated assets subject to such valuation are included\nin the valuation, and that valuations are made in accordance with the\nvaluation manual. The certification shall be based on the controls in\nplace as of the end of the preceding calendar year.\n (iii) Develop, and file with the superintendent upon request, a\nprinciple-based valuation report that complies with standards prescribed\nin the valuation manual.\n (C) A principle-based valuation shall include a prescribed formulaic\nreserve component.\n (12) A company that issues policies and contracts subject to this\nsubsection shall submit mortality, morbidity, policyholder behavior, or\nexpense experience and other data as prescribed in the valuation manual\nto the superintendent annually on or before a date as determined by the\nsuperintendent.\n (13) (A) The superintendent may exempt specific product forms or\nproduct lines of a domestic company that is licensed and doing business\nonly in this state from the requirements of this subsection provided:\n (i) The superintendent has issued an exemption in writing to the\ncompany and has not subsequently revoked the exemption in writing; and\n (ii) The company computes reserves using assumptions and methods used\nprior to the operative date of the valuation manual in addition to any\nrequirements established by the superintendent and promulgated by\nregulation.\n (B) For any company granted an exemption under this paragraph,\nsubsections (c), (d), (e) and (f) of this section and section four\nthousand two hundred eighteen of this article shall be applicable. With\nrespect to any company applying for this exemption, any reference to\nsubsection (g) found in subsections (c), (d), (e) and (f) of this\nsection and section four thousand two hundred eighteen of this article\nshall not be applicable.\n * NB Repealed December 7, 2028\n