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ENROLLED
Senate Bill No. 517
(By Senator Minard)
____________
[Passed March 12, 2004; in effect ninety days from passage.]
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AN ACT to amend and reenact §33-7-9 of the code of West Virginia,
1931, as amended,
; and to amend and reenact §33-13-30a of said
code, all relating to the valuation of annuities; establishing
minimum standards for the valuation of life insurance
policies
; and modifying the standard nonforfeiture law for
individual deferred annuities.
Be it enacted by the Legislature of West Virginia:
That §33-7-9 of the code of West Virginia, 1931, as amended,
be amended and reenacted
; and §33-13-30a of said code be amended
and reenacted, all to read as follows:
ARTICLE 7. ASSETS AND LIABILITIES.
§33-7-9. Standard valuation law.
(a) Title. -- This section shall be known as the standard
valuation law.
(b) Reserve valuation. -- The commissioner shall annually
value, or cause to be valued, the reserve liabilities (hereinafter
called reserves) for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance
company doing business in this state and may certify the amount of
the reserves specifying the mortality table or tables, rate or
rates of interest and methods (net level premium method or other)
used in the calculation of the reserves. In calculating the
reserves, he or she may use group methods and approximate averages
for fractions of a year or otherwise. In lieu of the valuation of
the reserves herein required of any foreign or alien company, he or
she may accept any valuation made, or caused to be made, by the
insurance supervisory official of any state or other jurisdiction
when the valuation complies with the minimum standard herein
provided and if the official of the state or jurisdiction accepts
as sufficient and for all valid legal purposes the certificate of
valuation of the commissioner when the certificate states the
valuation to have been made in a specified manner according to
which the aggregate reserves would be at least as large as if they
had been computed in the manner prescribed by the law of that state
or jurisdiction.
(c) Actuarial opinion of reserves. -- This subsection shall
become operative on the first day of January, one thousand nine
hundred ninety-six.
(1) General. -- Every life insurance company doing business in
this state shall annually submit the opinion of a qualified actuary
as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner
by regulation are computed appropriately, are based on assumptions
which satisfy contractual provisions, are consistent with prior
reported amounts and comply with applicable laws of this state.
The commissioner, by regulation, shall define the specifics of this
opinion and add any other item considered to be necessary to its
scope.
(2) Actuarial analysis of reserves and assets supporting the
reserves. --
(A) Every life insurance company, except as exempted by or
pursuant to regulation, shall also annually include in the opinion
required by subdivision (1) of this subsection an opinion of the
same qualified actuary as to whether the reserves and related
actuarial items held in support of the policies and contracts
specified by the commissioner by regulation, when considered in
light of the assets held by the company with respect to the
reserves and related actuarial items, including, but not limited
to, the investment earnings on the assets and the considerations
anticipated to be received and retained under the policies and
contracts, make adequate provision for the company's obligations
under the policies and contracts, including, but not limited to,
the benefits under and expenses associated with the policies and
contracts.
(B) The commissioner may provide, by regulation, for a transition period for establishing any higher reserves which the
qualified actuary may consider necessary in order to render the
opinion required by this subsection.
(3) Requirement for opinion under subdivision (2). -- Each
opinion required by subdivision (2) of this subsection shall be
governed by the following provisions:
(A) A memorandum in form and substance acceptable to the
commissioner as specified by regulation shall be prepared to
support each actuarial opinion.
(B) If the insurance company fails to provide a supporting
memorandum at the request of the commissioner within a period
specified by regulation or the commissioner determines that the
supporting memorandum provided by the insurance company fails to
meet the standards prescribed by the regulations or is otherwise
unacceptable to the commissioner, the commissioner may engage a
qualified actuary at the expense of the company to review the
opinion and the basis for the opinion and prepare such supporting
memorandum as is required by the commissioner.
(4) Requirement for all opinions. -- Every opinion shall be
governed by the following provisions:
(A) The opinion shall be submitted with the annual statement
reflecting the valuation of such reserve liabilities for each year
ending on or after the thirty-first day of December, one thousand
nine hundred ninety-five.
(B) The opinion shall apply to all business in force,
including individual and group health insurance plans, in form and
substance acceptable to the commissioner as specified by
regulation.
(C) The opinion shall be based on standards adopted, from time
to time, by the actuarial standards board and on such additional
standards as the commissioner may by regulation prescribe.
(D) In the case of an opinion required to be submitted by a
foreign or alien company, the commissioner may accept the opinion
filed by that company with the insurance supervisory official of
another state if the commissioner determines that the opinion
reasonably meets the requirements applicable to a company domiciled
in this state.
(E) For the purposes of this section, "qualified actuary"
means a member in good standing of the American academy of
actuaries who meets the requirements set forth in such regulations.
(F) Except in cases of fraud or willful misconduct, the
qualified actuary is not liable for damages to any person (other
than the insurance company and the commissioner) for any act,
error, omission, decision or conduct with respect to the actuary's
opinion.
(G) Disciplinary action by the commissioner against the
company or the qualified actuary shall be defined in regulations by
the commissioner.
(H) Any memorandum in support of the opinion and any other
material provided by the company to the commissioner in connection
therewith shall be kept confidential by the commissioner and shall
not be made public and shall not be subject to subpoena, other than
for the purpose of defending an action seeking damages from any
person by reason of any action required by this section or by
regulations promulgated hereunder: Provided, That the memorandum or
other material may otherwise be released by the commissioner: (i)
With the written consent of the company; (ii) to the American
academy of actuaries upon request stating that the memorandum or
other material is required for the purpose of professional
disciplinary proceedings and setting forth procedures satisfactory
to the commissioner for preserving the confidentiality of the
memorandum or other material; or (iii) in accordance with section
nineteen, article two of this chapter. Once any portion of the
confidential memorandum is cited by the company in its marketing or
is cited by the company before any governmental agency other than
a state insurance department or is released by the company to the
news media, all portions of the confidential memorandum shall be no
longer confidential.
(d) Computation of minimum standards. -- Except as otherwise
provided in subsections (e), (f) and (m) of this section, the
minimum standard for the valuation of all policies and contracts
issued prior to the effective date of this section shall be that provided by the laws in effect immediately prior to the effective
date. Except as otherwise provided in subsections (e), (f) and (m)
of this section, the minimum standard for the valuation of all
policies and contracts issued on or after the effective date of
this section shall be the commissioners reserve valuation methods
defined in subsections (g), (h), (k) and (m) of this section, three
and one-half percent interest or in the case of life insurance
policies and contracts, other than annuity and pure endowment
contracts, issued on or after the first day of June, one thousand
nine hundred seventy-four, four percent interest for policies
issued prior to the sixth day of April, one thousand nine hundred
seventy-seven, five and one-half percent interest for single
premium life insurance policies and four and one-half percent
interest for all other policies issued on and after the sixth day
of April, one thousand nine hundred seventy-seven, and the
following tables:
(1) For all ordinary policies of life insurance issued on the
standard basis, excluding any disability and accidental death
benefits in such policies:
(A) The commissioner's 1941 standard ordinary mortality table
for policies issued prior to the operative date of subsection (4a),
section thirty, article thirteen of this chapter;
(B) The commissioner's 1958 standard ordinary mortality table
for policies issued on or after the operative date of subsection (4a), section thirty, article thirteen of this chapter and prior to
the operative date of subsection (4c) of said section: Provided,
That for any category of 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
(C) For policies issued on or after the operative date of
subsection (4c), section thirty, article thirteen of this chapter:
(i) The commissioner's 1980 standard ordinary mortality table;
or
(ii) At the election of the company for any one or more
specified plans of life insurance, the commissioner's 1980 standard
ordinary mortality table with ten-year select mortality factors; or
(iii) Any ordinary mortality table adopted after the year one
thousand nine hundred eighty by the national association of
insurance commissioners that is approved by rule promulgated by the
commissioner for use in determining the minimum standard of
valuation for the policies.
(2) For all industrial life insurance policies issued on the
standard basis, excluding any disability and accidental death
benefits in the policies: The 1941 standard industrial mortality
table for policies issued prior to the operative date of
subdivision (4), subsection (b), section thirty, article thirteen
of this chapter and for policies issued on or after the operative date, the commissioner's 1961 standard industrial mortality table
or any industrial mortality table adopted after the year one
thousand nine hundred eighty by the national association of
insurance commissioners that is approved by rule promulgated by the
commissioner for use in determining the minimum standard of
valuation for the policies.
(3) For individual annuity and pure endowment contracts,
excluding any disability and accidental death benefits in policies:
The 1937 standard annuity mortality table or, at the option of the
company, the annuity mortality table for 1949, ultimate, or any
modification of either of these tables approved by the
commissioner.
(4) For group annuity and pure endowment contracts, excluding
any disability and accidental death benefits in the policies: The
group annuity mortality table for 1951, any modification of the
table approved by the commissioner or, at the option of the
company, any of the tables or modifications of tables specified for
individual annuity and pure endowment contracts.
(5) For total and permanent disability benefits in or
supplementary to ordinary policies or contracts: For policies or
contracts issued on or after the first day of January, one thousand
nine hundred sixty-six, the tables of period two 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
after the year one thousand nine hundred eighty by the national
association of insurance commissioners that are approved by rule
promulgated by the commissioner for use in determining the minimum
standard of valuation for the policies; for policies or contracts
issued on or after the first day of January, one thousand nine
hundred sixty-one, and prior to the first day of January, one
thousand nine hundred sixty-six, either such tables or, at the
option of the company, the Class (3) disability table (1926); and
for policies issued prior to the first day of January, one thousand
nine hundred sixty-one, the Class (3) disability table (1926).
Any table shall, for active lives, be combined with a
mortality table permitted for calculating the reserves for life
insurance policies.
(6) For accidental death benefits in or supplementary to
policies issued on or after the first day of January, one thousand
nine hundred sixty-six, the 1959 accidental death benefits table or
any accidental death benefits table adopted after the year one
thousand nine hundred eighty by the national association of
insurance commissioners, that is approved by rules promulgated by
the commissioner for use in determining the minimum standard of
valuation for such policies, for policies issued on or after the
first day of January, one thousand nine hundred sixty-one, and
prior to the first day of January, one thousand nine hundred sixty-six, either such table or, at the option of the company, the
intercompany double indemnity mortality table; and for policies
issued prior to the first day of January, one thousand nine hundred
sixty-one, the intercompany double indemnity mortality table.
Either table shall be combined with a mortality table for
calculating the reserves for life insurance policies.
(7) For group life insurance, life insurance issued on the
substandard basis and other special benefits: Tables as may be
approved by the commissioner.
(e) Computation of minimum standard for annuities. -- Except
as provided in subsection (f) of this section, the minimum standard
for the valuation of all individual annuity and pure endowment
contracts issued on or after the operative date of this subsection,
as defined herein, and for all annuities and pure endowments
purchased on or after the operative date under group annuity and
pure endowment contracts shall be the commissioner's reserve
valuation methods defined in subsections (g) and (h) of this
section and the following tables and interest rates:
(1) For individual annuity and pure endowment contracts issued
prior to the sixth day of April, one thousand nine hundred
seventy-seven, excluding any disability and accidental death
benefits in the 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;
(2) For individual single premium immediate annuity contracts
issued on or after the sixth day of April, one thousand nine
hundred seventy-seven, excluding any disability and accidental
death benefits in such contracts: The 1971 individual annuity
mortality table or any individual annuity mortality table adopted
after the year one thousand nine hundred eighty by the national
association of insurance commissioners that is approved by rule
promulgated by the commissioner for use in determining the minimum
standard of valuation for the contracts or any modification of
these tables approved by the commissioner and seven and one-half
percent interest;
(3) For individual annuity and pure endowment contracts issued
on or after the sixth day of April, one thousand nine hundred
seventy-seven, other than single premium immediate annuity
contracts, excluding any disability and accidental death benefits
in the contracts: The 1971 individual annuity mortality table or
any individual annuity mortality table adopted after the year one
thousand nine hundred eighty by the national association of
insurance commissioners that is approved by regulation promulgated
by the commissioner for use in determining the minimum standard of
valuation for the contracts 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 individual
annuity and pure endowment contracts;
(4) For all annuities and pure endowments purchased prior to
the sixth day of April, one thousand nine hundred seventy-seven,
under group annuity and pure endowment contracts, excluding any
disability and accidental death benefits purchased under the
contracts: The 1971 group annuity mortality table or any
modification of this table approved by the commissioner and six
percent interest;
(5) For all annuities and pure endowments purchased on or
after the sixth day of April, one thousand nine hundred
seventy-seven, under group annuity and pure endowment contracts,
excluding any disability and accidental death benefits purchased
under the contracts: The 1971 group annuity mortality table or any
group annuity mortality table adopted after the year one thousand
nine hundred eighty by the national association of insurance
commissioners that is approved by regulation promulgated by the
commissioner for use in determining the minimum standard of
valuation for annuities and pure endowments or any modification of
these tables approved by the commissioner and seven and one-half
percent interest.
After the third day of June, one thousand nine hundred
seventy-four, any company may file with the commissioner a written notice of its election to comply with the provisions of this
subsection after a specified date before the first day of January,
one thousand nine hundred seventy-nine, which shall be the
operative date of this subsection for the company provided, if a
company makes no election, the operative date of this section for
the company shall be the first day of January, one thousand nine
hundred seventy-nine.
(f) Computation of minimum standard by calendar year of issue.
--
(1) Applicability of this section. -- The interest rates used
in determining the minimum standard for the valuation of:
(A) All life insurance policies issued in a particular
calendar year, on or after the operative date of subdivision (4),
subsection (c), section thirty, article thirteen of this chapter,
as amended;
(B) All individual annuity and pure endowment contracts issued
in a particular calendar year on or after the first day of January,
one thousand nine hundred eighty-two;
(C) All annuities and pure endowments purchased in a
particular calendar year on or after the first day of January, one
thousand nine hundred eighty-two, under group annuity and pure
endowment contracts; and
(D) The net increase, if any, in a particular calendar year
after the first day of January, one thousand nine hundred eighty-two, in amounts held under guaranteed interest contracts
shall be the calendar year statutory valuation interest rates as
defined in this subsection.
(2) Calendar year statutory valuation interest rates. --
(A) The calendar year statutory valuation interest rates, I,
shall be determined as follows and the results rounded to the
nearer one quarter of one percent:
(i) For life insurance, I =.03 + W(R1 -.03) + W/2(R2 -.09);
(ii) 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® -.03) where R1 is the
lesser of R and .09, R2 is the greater of R and .09, R is the
reference interest rate defined in this subsection and W is the
weighting factor defined in this section;
(iii) 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 subparagraph (ii) of
this paragraph, the formula for life insurance stated in
subparagraph (i) of this paragraph 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 subparagraph (ii) of this paragraph shall apply to
annuities and guaranteed interest contracts with guarantee duration of ten years or less;
(iv) 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
subparagraph (ii) of this paragraph shall apply;
(v) 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 subparagraph (ii) of this paragraph shall
apply.
(B) However, if the calendar year statutory valuation interest
rate for any life insurance policies issued in any calendar year
determined without reference to this sentence 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 be equal to the corresponding
actual rate for the immediately preceding calendar year. For
purposes of applying the immediately preceding sentence, the
calendar year statutory valuation interest rate for life insurance
policies issued in a calendar year shall be determined for the year
one thousand nine hundred eighty (using the reference interest rate
defined for the year one thousand nine hundred seventy-nine) and
shall be determined for each subsequent calendar year regardless of when subdivision (4), subsection (c), section thirty, article
thirteen of this chapter, as amended, becomes operative.
(3) Weighting factors. --
(A) The weighting factors referred to in the formulas stated
above are given in the following tables:
(i) Weighting Factors for Life Insurance:
Guarantee
DurationWeighting
(Years)Factors
10 or less.50
More than 10, but not more than 20 .45
More than 20 .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) 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: .80;
(iii) Weighting factors for other annuities and for guaranteed
interest contracts, except as stated in subparagraph (ii) of this
paragraph, shall be as specified in clauses (I), (II) and (III) of this subparagraph, according to the rules and definitions in
clauses (IV), (V) and (VI) of this subparagraph:
(I) For annuities and guaranteed interest contracts valued on
an issue year basis:
GuaranteeWeighting Factor
Durationfor Plan Type
(Years)ABC
5 or less:.80.60.50
More than 5, but not more than 10:.75.60.50
More than 10, but not more than 20:.65.50.45
More than 20:.45.35.35
(II) For annuities and guaranteed interest contracts valued
on a change in fund basis, the factors shown in subparagraph (i) of
this paragraph increased by:
Weighting Factor
for Plan Type
ABC1
.15.25.05
(III) 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 clause (I) of this subparagraph or derived in clause (II)
of this subparagraph increased by:
Weighting Factor
for Plan Type
ABC1
.05.05.05
(IV) 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 guaranteed duration is the number
of years from the date of issue or date of purchase to the date
annuity benefits are scheduled to commence.
(V) Plan type as used in the above tables is defined as
follows:
Plan Type A:
At any time policyholder may withdraw funds only: (1) With an
adjustment to reflect changes in interest rates or asset values
since receipt of the funds by the insurance company; or (2) without
such adjustment but in installments over five years or more; or (3) as an immediate life annuity; or (4) no withdrawal permitted;
Plan Type B:
Before expiration of the interest rate guarantee, policyholder
may withdraw funds only: (1) With an adjustment to reflect changes
in interest rates or asset values since receipt of the funds by the
insurance company; or (2) without such adjustment but in
installments over five years or more; or (3) no withdrawal
permitted. At the end of interest rate guarantee, funds may be
withdrawn without such adjustment in a single sum or installments
over less than five years;
Plan Type C:
Policyholder may withdraw funds before expiration of interest
rate guarantee in a single sum or installments over less than five
years either: (1) Without adjustment to reflect changes in interest
rates or asset values since receipt of the funds by the insurance
company; or (2) subject only to a fixed surrender charge stipulated
in the contract as a percentage of the fund.
(VI) A company 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 must be
valued on an issue-year basis. As used in this section, 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.
(4) Reference interest rate. --
(A) Reference interest rate referred to in subparagraph (ii),
paragraph (A), subdivision (2) of this subsection 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 the thirtieth day of June 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 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, the average over a period of twelve
months, ending on the thirtieth day of June 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 subparagraph (ii) of
this paragraph, with guarantee duration in excess of ten years, the
lesser of the average over a period of thirty-six months and the
average over a period of twelve months, ending on the thirtieth day
of June 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 subparagraph (ii) of
this paragraph, with guarantee duration of ten years or less, the
average over a period of twelve months, ending on the thirtieth day
of June 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 the thirtieth
day of June 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 subparagraph (ii) of
this paragraph, the average over a period of twelve months, ending
on the thirtieth day of June 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.
(5) Alternative method for determining reference interest
rates. --
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 regulation promulgated by
the commissioner, may be substituted.
(g) Reserve valuation method. -- Life insurance and endowment
benefits.
Except as otherwise provided in subsections (h), (k) and (m)
of this section, reserves according to the commissioners 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 the future guaranteed
benefits provided for by the 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 for the benefits that the present
value, at the date of issue of the policy, of all the modified net
premiums shall be equal to the sum of the then present value of the
benefits provided for by the policy and the excess of subdivision
(1) of this subsection over subdivision (2) of this subsection, as
follows:
(1) 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, 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.
(2) A net one-year term premium for such benefits provided for
in the first policy year: Provided, That for any life insurance
policy issued on or after the first day of January, one thousand
nine hundred eighty-five, 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 commissioners'
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 subsection (k) of
this section, be the greater of the reserve as of such policy
anniversary calculated as described in the preceding paragraph and
the reserve as of the policy anniversary calculated as described in
that paragraph, but with: (i) The value defined in subdivision (1)
of that paragraph being reduced by fifteen percent of the amount of
such excess first-year premium; (ii) 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;
(iii) the policy being assumed to mature on the date as an
endowment; and (iv) 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 subsections
(d) and (f) of this section shall be used.
Reserves according to the commissioners' reserve valuation
method for: (i) Life insurance policies providing for a varying
amount of insurance or requiring the payment of varying premiums;
(ii) 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
(26 U. S. C. §408) as now or hereafter amended; (iii) disability
and accidental death benefits in all policies and contracts; and
(iv) 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 principles of the preceding paragraphs
of this section.
(h) Reserve valuation method. -- Annuity and pure endowment
benefits. This subsection 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 (26 U. S. C. §408) as now or hereafter
amended.
Reserves according to the commissioners' 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 the 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.
(i) Minimum reserves. --
(1) In no event shall a company's aggregate reserves for all life insurance policies, excluding disability and accidental death
benefits, issued on or after the effective date of this section be
less than the aggregate reserves calculated in accordance with the
methods set forth in subsections (g), (h), (k) and (l) of this
section and the mortality table or tables and rate or rates of
interest used in calculating nonforfeiture benefits for such
policies.
(2) In no event shall the aggregate reserves for all policies,
contracts and benefits be less than the aggregate reserves
determined by the qualified actuary to be necessary to render the
opinion required by subsection (c) of this section.
(j) Optional reserve calculation. --
Reserves for all policies and contracts issued prior to the
effective date of this section may be calculated, at the option of
the company, according to any standards which produce greater
aggregate reserves for all policies and contracts than the minimum
reserves required by the laws in effect immediately prior to such
date.
Reserves for any category of policies, contracts or benefits
as established by the commissioner issued on or after the effective
date of this section may be calculated, at the option of the
company, 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 than the corresponding
rate or rates of interest used in calculating any nonforfeiture
benefits provided therein.
Any such company which at any time shall have adopted any
standard of valuation producing greater aggregate reserves than
those calculated according to the minimum standard herein provided
may, with the approval of the commissioner, adopt any lower
standard of valuation, but not lower than the minimum herein
provided: Provided, That for the purposes of this section, the
holding of additional reserves previously determined by a qualified
actuary to be necessary to render the opinion required by
subsection (c) of this section shall not be considered to be the
adoption of a higher standard of valuation.
(k) Reserve calculation. -- Valuation net premium exceeding
the gross premium charged.
If in any contract year the gross premium charged by any life
insurance company 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 section are those standards stated in
subsections (d) and (f) of this section: Provided, That for any
life insurance policy issued on or after the first day of January,
one thousand nine hundred eighty-five, 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
subsection shall be applied as if the method actually used in
calculating the reserve for such policy were the method described
in subsection (g) of this section, ignoring the second paragraph of
said subsection.
The minimum reserve at each policy anniversary of such a
policy shall be the greater of the minimum reserve calculated in
accordance with subsection (g) of this section, including the
second paragraph of said section, and the minimum reserve
calculated in accordance with this subsection.
(l) Reserve calculation. -- Indeterminate premium plans.
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 insurance company 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 subsections (g), (h) and
(k) of this section, the reserves which are held under any such
plan must:
(1) Be appropriate in relation to the benefits and the pattern
of premiums for that plan; and
(2) Be computed by a method which is consistent with the
principles of this standard valuation law as determined by
regulations promulgated by the commissioner.
(m) Minimum standards for health (disability, accident and
sickness) plans. --
The commissioner shall promulgate a rule containing the
minimum standards applicable to the valuation of health
(disability, sickness and accident) plans.
(n) The commissioner shall promulgate a rule on or before the
first day of November, one thousand nine hundred ninety-five,
prescribing the guidelines and standards for statements of
actuarial opinion which are to be submitted in accordance with
subsection (c) of this section and for memoranda in support thereof; guidelines and standards for statements of actuarial
opinion which are to be submitted when a company is exempt from
subdivision (2) of said subsection of the standard valuation law;
and rules applicable to the appointment of an appointed actuary.
(o) Effective date. -- All acts and parts of acts inconsistent
with the provision of this section are hereby repealed as of the
effective date of this section. This section shall take effect the
first day of January, one thousand nine hundred ninety-six.
(p) Modification of the standard valuation law for certain
types of contracts. --
(1) The commissioner may, by rule, establish alternative
methods of calculating reserve liabilities, which methods shall be
used to calculate reserve liabilities for the types of policies,
annuities or other contracts identified in the rule: Provided, That
the method specified in the rule shall be one which, in the opinion
of the commissioner and in light of the methods applied to the
contracts by the insurance regulators of other states, is
appropriate to the contracts. This power shall be in addition to,
and in no way diminish, rule-making power granted to the
commissioner elsewhere in this code.
(2) The legislative rule filed in the state register on the
twentieth day of August, one thousand nine hundred ninety-six,
(valuation of life insurance policies, 114 CSR 49) is hereby
disapproved and is not authorized for promulgation: Provided, That for purposes of determining the legal effects of the aforementioned
rule, this provision shall be considered to have taken effect on
the thirty-first day of December, one thousand nine hundred
ninety-seven. This disapproval shall in no way limit the
commissioner's power to promulgate in the future a rule similar or
identical to the rule here disapproved.
ARTICLE 13. LIFE INSURANCE.
§33-13-30a. Standard nonforfeiture law for individual deferred
annuities.
(a) This section shall be known as the "Standard Nonforfeiture
Law for Individual Deferred Annuities".
(b) This section may not apply to any reinsurance, group
annuity 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, premium
deposit fund, variable annuity, investment annuity, immediate
annuity, any deferred annuity contract after annuity payments have
commenced or reversionary annuity, nor to any contract which shall
be delivered outside this state through an agent or other
representative of the company issuing the contract.
(c) In the case of contracts issued on or after the operative date of this section, no contract of annuity, except as stated in
subsection (b) of this section, shall be delivered or issued for
delivery in this state unless it contains in substance the
following provisions or corresponding provisions which, in the
opinion of the commissioner, are at least as favorable to the
contract holder, upon cessation of payment of considerations under
the contract:
(1) That upon cessation of payment of considerations under a
contract, the company will grant a paid-up annuity benefit on a
plan stipulated in the contract of the value as is specified in
subsections (e), (f), (g), (h) and (j) of this section;
(2) If a contract provides for a lump sum settlement at
maturity or at any other time that, upon surrender of the contract
at or prior to the commencement of any annuity payments, the
company will pay in lieu of any paid-up annuity benefit a cash
surrender benefit of the amount as is specified in subsections (e),
(f), (h) and (j) of this section. The company shall reserve the
right to defer the payment of the cash surrender benefit for a
period of six months after demand therefor with surrender of the
contract;
(3) A statement of the mortality table, if any, and interest
rates used in calculating any minimum paid-up annuity, cash
surrender or death benefits that are guaranteed under the contract,
together with sufficient information to determine the amounts of the benefits; and
(4) A statement that any paid-up annuity, cash surrender or
death benefits that may be available under the contract are not
less than the minimum benefits required by any statute of the state
in which the contract is delivered and an explanation of the manner
in which the benefits are altered by the existence of any
additional amounts credited by the company to the contract, any
indebtedness to the company on the contract or any prior
withdrawals from or partial surrenders of the contract.
Notwithstanding the requirements of this subsection, any
deferred annuity contract may provide that if no considerations
have been received under a contract for a period of two full years
and the portion of the paid-up annuity benefit at maturity on the
plan stipulated in the contract arising from considerations paid
prior to the period would be less than twenty dollars monthly, the
company may at its option terminate the contract by payment in cash
of the then present value of the portion of the paid-up annuity
benefit, calculated on the basis of the mortality table, if any,
and interest rate specified in the contract for determining the
paid-up annuity benefit and by the payment shall be relieved of any
further obligation under the contract.
(d) (1) The minimum values as specified in subsections (e),
(f), (g), (h) and (j) of this section of any paid-up annuity, cash
surrender or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in
this subdivision:
(A) With respect to contracts providing for flexible
considerations, the minimum nonforfeiture amount at any time at or
prior to the commencement of any annuity payments shall be equal to
an accumulation up to the time at a rate of interest of three
percent per annum of percentages of the net considerations (as
hereinafter defined) paid prior to the time, decreased by the sum
of:
(i) Any prior withdrawals from or partial surrenders of the
contract accumulated at a rate of interest of three percent per
annum; and
(ii) The amount of any indebtedness to the company on the
contract, including interest due and accrued; and increased by any
existing additional amounts credited by the company to the
contract;
The net considerations for a given contract year used to
define the minimum nonforfeiture amount shall be an amount not less
than zero and shall be equal to the corresponding gross
considerations credited to the contract during that contract year
less than an annual contract charge of thirty dollars and less a
collection charge of one dollar and twenty-five cents per
consideration credited to the contract during that contract year.
The percentages of net considerations shall be sixty-five percent of the net consideration for the first contract year and
eighty-seven and one-half percent of the net considerations for the
second and later contract years. Notwithstanding the provisions of
the preceding sentence, the percentage shall be sixty-five percent
of the portion of the total net consideration for any renewal
contract year which exceeds by not more than two times the sum of
those portions of the net considerations in all prior contract
years for which the percentage was sixty-five percent;
Notwithstanding any other provision of this section, any
contract issued on or after the first day of July, two thousand
three, and before the first day of July, two thousand six, the
interest rate at which net considerations, prior withdrawals and
partial surrenders shall be accumulated for the purpose of
determining nonforfeiture amounts may not be less than one and
one-half percent per annum;
(B) With respect to contracts providing for fixed scheduled
considerations, minimum nonforfeiture amounts shall be calculated
on the assumption that considerations are paid annually in advance
and shall be defined as for contracts with flexible considerations
which are paid annually with two exceptions:
(i) The portion of the net consideration for the first
contract year to be accumulated shall be the sum of sixty-five
percent of the net consideration for the first contract year plus
twenty-two and one-half percent of the excess of the net consideration for the first contract year over the lesser of the
net considerations for the second and third contract years;
(ii) The annual contract charge shall be the lesser of: (1)
Thirty dollars; or (2) ten percent of the gross annual
consideration;
(C) With respect to contracts providing for a single
consideration, minimum nonforfeiture amounts shall be defined as
for contracts with flexible considerations except that the
percentage of net consideration used to determine the minimum
nonforfeiture amount shall be equal to ninety percent and the net
consideration shall be the gross consideration less a contract
charge of seventy-five dollars;
(D) This subdivision applies to contracts issued before the
first day of July, two thousand four, and may be applied by a
company on a contract-by-contract basis to contracts issued on or
after the first day of July, two thousand four, and before the
first day of July, two thousand six;
(2) The minimum values as specified in subsections (e), (f),
(g), (h) and (j) of any paid-up annuity, cash surrender or death
benefits available under an annuity contract shall be based upon
minimum nonforfeiture amounts as defined in this subdivision;
(A) (i) The minimum nonforfeiture amount at any time at or
prior to the commencement of any annuity payments shall be equal to
an accumulation up to such time at rates of interest as indicated in paragraph (B) of this subdivision of the net considerations (as
hereinafter defined) paid prior to such time, decreased by the sum
of subparagraphs (I) through (IV) below:
(I) Any prior withdrawals from or partial surrenders of the
contract accumulated at rates of interest as indicated in paragraph
(B) of this subdivision;
(II) An annual contract charge of fifty dollars, accumulated
at rates of interest as indicated in paragraph (B) of this
subdivision;
(III) Any premium tax paid by the company for the contract,
accumulated at rates of interest as indicated in subparagraph (ii),
paragraph (B) of this subdivision; and
(IV) The amount of any indebtedness to the company on the
contract, including interest due and accrued;
(ii) The net considerations for a given contract year used to
define the minimum nonforfeiture amount shall be an amount equal to
eighty-seven and one-half percent of the gross considerations
credited to the contract during that contract year;
(B) The interest rate used in determining minimum
nonforfeiture amounts shall be an annual rate of interest
determined as the lesser of three percent per annum and the
following, which shall be specified in the contract if the interest
rate will be reset:
(i) The five-year constant maturity treasury rate reported by the federal reserve as of a date, or average over a period, rounded
to the nearest 1/20th of one percent, specified in the contract no
longer than fifteen months prior to the contract issue date or
redetermination date under subparagraph (iv) of this paragraph;
(ii) Reduced by one hundred twenty-five basis points;
(iii) Where the resulting interest rate is not less than one
percent; and
(iv) The interest rate shall apply for an initial period and
may be redetermined for additional periods. The redetermination
date, basis and period, if any, shall be stated in the contract.
The basis is the date or average over a specified period that
produces the value of the five-year constant maturity treasury rate
to be used at each redetermination date;
(C) During the period or term that a contract provides
substantive participation in an equity indexed benefit, it may
increase the reduction described in subparagraph (ii), paragraph
(B) of this subdivision by up to an additional one hundred basis
points to reflect the value of the equity index benefit. The
present value at the contract issue date, and at each
redetermination date thereafter, of the additional reduction may
not exceed the market value of the benefit. The commissioner may
require a demonstration that the present value of the additional
reduction does not exceed the market value of the benefit. Lacking
a determination that is acceptable to the commissioner, the commissioner may disallow or limit the additional reduction;
(D) The commissioner may adopt rules to implement the
provisions of this subsection and to provide for further
adjustments to the calculation of minimum nonforfeiture amounts for
contracts that provide substantive participation in an equity index
benefit and for other contracts that the commissioner determines
their adjustments are justified;
(E) This subdivision shall apply to contracts outstanding on
the first day of July, two thousand four, and may be applied by a
company on a contract-by-contract basis to any contract issued
after the first day of July, two thousand four, and before the
first day of July, two thousand six.
(e) Any paid-up annuity benefit available under a contract
shall be such that its present value on the date annuity payments
are to commence is at least equal to the minimum nonforfeiture
amount on that date. The present value shall be computed using the
mortality table, if any, and the interest rate specified in the
contract for determining the minimum paid-up annuity benefits
guaranteed in the contract.
(f) For contracts which provide cash surrender benefits, the
cash surrender benefits available prior to maturity may not be less
than the present value as of the date of surrender of that portion
of the maturity value of the paid-up annuity benefit which would be
provided under the contract at maturity arising from consideration paid prior to the time of cash surrender reduced by the amount
appropriate to reflect any prior withdrawals from or partial
surrenders of the contract, the present value being calculated on
the basis of an interest rate not more than one percent higher than
the interest rate specified in the contract for accumulating the
net considerations to determine the maturity value, decreased by
the amount of any indebtedness to the company on the contract,
including interest due and accrued, and increased by any existing
additional amounts credited by the company to the contract. In no
event shall any cash surrender benefit be less than the minimum
nonforfeiture amount at that time. The death benefit under
the contracts shall be at least equal to the cash surrender
benefit.
(g) For contracts which do not provide cash surrender
benefits, the present value of any paid-up annuity benefit
available as a nonforfeiture option at any time prior to maturity
may not be less than the present value of that portion of the
maturity value of the paid-up annuity benefit provided under the
contract arising from considerations paid prior to the time the
contract is surrendered in exchange for, or changed to, a deferred
paid-up annuity, the present value being calculated for the period
prior to the maturity date on the basis of the interest rate
specified in the contract for accumulating the net considerations
to determine the maturity value and increased by any existing additional amounts credited by the company to the contract. For
contracts which do not provide any death benefits prior to the
commencement of any annuity payments, the present values shall be
calculated on a basis of the interest rate and the mortality table
specified in the contract for determining the maturity value of the
paid-up annuity benefit. However, in no event shall the present
value of a paid-up annuity benefit be less than the minimum
nonforfeiture amount at that time.
(h) For the purpose of determining the benefits calculated
under subsections (f) and (g) of this section, in the case of
annuity contracts under which an election may be made to have
annuity payments commence at optional maturity dates, the maturity
date is considered to be the latest date for which election is
permitted by the contract, but is not considered to be later than
the anniversary of the contract next following the annuitant's
seventieth birthday or the tenth anniversary of the contract,
whichever is later.
(i) Any contract which does not provide cash surrender
benefits or does not provide death benefits at least equal to the
minimum nonforfeiture amount prior to the commencement of any
annuity payments shall include a statement in a prominent place in
the contract that the benefits are not provided.
(j) Any paid-up annuity, cash surrender or death benefits
available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be
calculated with allowance for the lapse of time and the payment of
any scheduled considerations beyond the beginning of the contract
year in which cessation of payment of considerations under the
contract occurs.
(k) For any contract which provides, within the same contract
by rider or supplemental contract provision, both annuity benefits
and life insurance benefits that are in excess of the greater of
cash surrender benefits or a return of the gross considerations
with interest, the minimum nonforfeiture benefits shall be equal to
the sum of the minimum nonforfeiture benefits for the annuity
portion and the minimum nonforfeiture benefits, if any, for the
life insurance portion computed as if each portion were a separate
contract. Notwithstanding the provisions of subsections (e), (f),
(g), (h) and (j) of this section, additional benefits payable: (1)
In the event of total and permanent disability; (2) as reversionary
annuity or deferred reversionary annuity benefits; or (3) as other
policy benefits additional to life insurance, endowment and annuity
benefits and considerations for all the additional benefits shall
be disregarded in ascertaining the minimum nonforfeiture amounts,
paid-up annuity, cash surrender and death benefits that may be
required by this section. The inclusion of the additional benefits
may not be required in any paid-up benefits unless the additional
benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits.
(l) After the effective date of this section, any company may
file with the commissioner a written notice of its election to
comply with the provisions of this section after a specified date
before the second anniversary of the effective date of this
section. After the filing of the notice, then upon the specified
date which shall be the operative date of this section for the
company, this section shall become operative with respect to
annuity contracts thereafter issued by the company. If a company
makes no election, the operative date of this section for the
company is the second anniversary of the effective date of this
section.
(m) (1) During the period from the first day of July, two
thousand four, through the first day of July, two thousand six, an
insurer may elect on a contract-by-contract basis to apply the
provisions of either subdivision (1) or (2), subsection (d) of this
section to any annuity contract issued during that period of time;
(2) The provisions of subdivision (1), subsection (d) of this
section expires the first day of July, two thousand six.