H. B. 2505
(By Delegates Adkins, Gallagher and Nesbitt)
[Introduced February 15, 1995; referred to the
Committee on Banking and Insurance.]
A BILL to amend article two, chapter thirty-three of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended, by adding thereto a new section, designated section
nineteen; to amend and reenact section nine, article seven;
section two, article twenty-two; and to amend and reenact
article forty, all of said chapter, all relating to
insurance; insurance commissioner; confidentiality of
information; standard valuation for life insurance policies;
farmers' mutual fire insurance companies, applicability of
other provisions; risk based capital for insurers;
definitions; risk based capital reports; company action
level event; regulatory action level event; authorized control level event; mandatory control level event;
hearings; confidentiality, prohibition on announcements;
prohibition on ratemaking; supplemental provisions, rules,
exemptions; foreign insurers; immunity; severability clause;
and effective date.
Be it enacted by the Legislature of West Virginia:
That article two, chapter thirty-three of the code of West
Virginia, one thousand nine hundred thirty-one, as amended, be
amended by adding thereto a new section, designated section
nineteen; that section nine, article seven; section two, article
twenty-two of said chapter be amended and reenacted; and that
article forty of said chapter be amended and reenacted, all to
read as follows:
ARTICLE 2. INSURANCE COMMISSIONER.
§33-2-19. Confidentiality of information.
In order to assist the commissioner in the regulation of
insurers in this state, it is the duty of the commissioner to
maintain, as confidential, any document or information received
from the national association of insurance commissioners or
insurance departments of other states which is confidential in
such other jurisdictions. It is within the power of the commissioner to share information, including otherwise
confidential information, with the national association of
insurance commissioners or insurance departments of other states:
Provided, That such other jurisdictions agree to maintain the
same level of confidentiality as is available under this statute.
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 any such 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 such reserves. In
calculating such reserves, he 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 may accept any valuation made, or caused to be made, by the insurance supervisory official of any
state or other jurisdiction when such valuation complies with the
minimum standard herein provided and if the official of such
state or jurisdiction accepts as sufficient and for all valid
legal purposes the certificate of valuation of the commissioner
when such 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 January 1, 1996.
(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 items deemed to
be necessary to its scope.
(2) Actuarial analysis of reserves and assets supporting
such 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 deem necessary in order to render the
opinion required by this subsection.
(3) Requirement for opinion under (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 shall not be 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, however, That the memorandum or other material may
otherwise be released by the commissioner (a) with the written
consent of the company or (b) 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. Once any portion of the confidential
memorandum is cited by the company in its marketing or is cited
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 such policies and
contracts issued prior to the effective date of this section
shall be that provided by the laws in effect immediately prior to
such date. Except as otherwise provided in subsections (e), (f)
and (m) of this section, the minimum standard for the valuation
of all such 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 such 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 such 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: The Commissioners 1941 Standard
Ordinary Mortality Table for such policies issued prior to the
operative date of subsection (4a), section thirty, article
thirteen of this chapter, the Commissioners 1958 Standard
Ordinary Mortality Table for such 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), section thirty, article thirteen of this
chapter: Provided, That for any category of such policies issued
on female risks, all modified net premiums and present values
referred to in this section may be calculated according to an age
not more than six years younger than the actual age of the
insured; and for such policies issued on or after the operative
date of subsection (4c), section thirty, article thirteen of this
chapter (i) the Commissioners 1980 Standard Ordinary Mortality
Table, or (ii) at the election of the company for any one or more
specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality
Factors, or (iii) any ordinary mortality table, adopted after
1980 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 such
policies.
(2) For all industrial life insurance policies issued on the
standard basis, excluding any disability and accidental death
benefits in such policies: The 1941 Standard Industrial
Mortality Table for such policies issued prior to the operative
date of subsection (4b), section thirty, article thirteen of this
chapter, and for such policies issued on or after such operative
date, the Commissioners 1961 Standard Industrial Mortality Table
or any industrial mortality table, adopted after 1980 by the
National Association of Insurance Commissioners, that is approved
by regulation promulgated by the commissioner for use in
determining the minimum standard of valuation for such policies.
(3) For individual annuity and pure endowment contracts,
excluding any disability and accidental death benefits in such
policies: The 1937 Standard Annuity Mortality Table, or at the
option of the 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 such
policies: The Group Annuity Mortality Table for 1951, any
modification of such 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 2
disablement rates and the 1930 to 1950 termination rates of the
1952 Disability Study of the Society of Actuaries, with due
regard to the type of benefit or any tables of disablement rates
and termination rates adopted after one thousand nine hundred
eighty by the National Association of Insurance Commissioners,
that are approved by regulation promulgated by the commissioner
for use in determining the minimum standard of valuation for such
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 such 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 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 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 Inter-Company Double Indemnity
Mortality Table; and for policies issued prior to the first day of January, one thousand nine hundred sixty-one, the
Inter-Company 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: Such tables as may
be approved by the commissioner.
(e) Computation of minimum standard for annuities. --
Except as provided in subsection (f), 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 such operative date under group
annuity and pure endowment contracts, shall be the commissioner's
reserve valuation methods defined in subsections (g) and (h) 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 such contracts: The 1971 Individual Annuity
Mortality Table, or any modification of this table approved by the commissioner, and six percent interest for single premium
immediate annuity contracts, and four percent interest for all
other individual annuity and pure endowment contracts;
(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 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 such 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 such contracts: The 1971 Individual Annuity
Mortality Table or any individual annuity mortality table adopted
after 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 such 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 such 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 such
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-even under group annuity and pure endowment contracts,
excluding any disability and accidental death benefits purchased
under such contracts: The 1971 Group Annuity Mortality Table, or
any group annuity mortality table adopted after 1980 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 such 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 such company, provided,
if a company makes no such election, the operative date of this
section for such 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 subsection. 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 subsection (4c),
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(R - .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 (ii) above,
the formula for life insurance stated in (i) above 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 (ii) above 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 (ii) above 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 (ii) above 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 1980 (using the reference interest
rate defined for one thousand nine hundred seventy-nine) and
shall be determined for each subsequent calendar year regardless
of when subsection (4c), 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 subdivision
(ii) above, shall be as specified in Tables (a), (b) and (c)
below, according to the rules and definitions in (d), (e) and (f) below:
(I) For annuities and guaranteed interest contracts valued
on an issue year basis:
Guarantee Weighting Factor
Duration for Plan Type
Years A B C
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 (i)
above increased by:
Weighting Factor
for Plan Type
A B C
.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 (a) or derived in (b)
increased by:
Weighting Factor
for Plan Type
A B C
.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 (l) 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 Subdivision (ii),
subparagraph (A), paragraph (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 (ii) above,
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 (ii) above,
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 (ii) above, the average over a period of twelve months, ending on June 30 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 such
future guaranteed benefits provided for by such policies, over
the then present value of any future modified net premiums
therefor. The modified net premiums for any such policy shall be
such uniform percentage of the respective contract premiums for
such benefits that the present value, at the date of issue of the
policy, of all such modified net premiums shall be equal to the
sum of the then present value of such benefits provided for by
the policy and the excess of (1) over (2), 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 exeed 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), be
the greater of the reserve as of such policy anniversary
calculated as described in the preceding paragraph and the
reserve as of such policy anniversary calculated as described in
that paragraph, but with (i) the value defined in subsection (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 such
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 such contracts for determining guaranteed benefits.
The valuation considerations are the portions of the respective
gross considerations applied under the terms of such contracts to
determine nonforfeiture values.
(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 such 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 deemed 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 (k) shall be
applied as if the method actually used in calculating the reserve
for such policy were the method described in subsection (g),
ignoring the second paragraph of subsection (g) of this section.
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), including the second paragraph of
that 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 regulation 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), subsection (c) 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 and ninety-six.
ARTICLE 22. FARMERS' MUTUAL FIRE INSURANCE COMPANIES.
§33-22-2. Applicability of other provisions.
Each company to the same extent such provisions are
applicable to domestic mutual insurers shall be governed by and
be subject to the following articles of this chapter: Article
one (definitions); article two (insurance commissioner); article
four (general provisions) except that section sixteen of article
four shall not be applicable thereto; article seven (assets and
liabilities); article ten (rehabilitation and liquidation) except
that under the provisions of section thirty-two of said article ten assessments shall not be levied against any former member of
a farmers' mutual fire insurance company who is no longer a
member of the company at the time the order to show cause was
issued; article eleven (unfair trade practices); article twelve
(agents, brokers and solicitors) except that the agent's license
fee shall be five dollars; article twenty-six (West Virginia
Insurance Guaranty Association Act); article twenty-seven
(insurance holding company systems); article thirty (mine
subsidence insurance) except that under the provisions of section
six, article thirty, a farmers' mutual insurance company shall
have the option of offering mine subsidence coverage to all of
its policyholders but shall not be required to do so; article
thirty-three (annual audited financial report); article
thirty-four (administrative supervision); article thirty-four-a
(standards and commissioner's authority for companies deemed to
be in hazardous financial condition); article thirty-five
(criminal sanctions for failure to report impairment); article
thirty-six (business transacted with producer-controlled
property/casualty insurer); article thirty-seven (managing
general agents); and article thirty-nine (disclosure of material
transactions); and article forty (risk based capital for insurers); but only to the extent these provisions are not
inconsistent with the provisions of this article.
ARTICLE 40. RISK BASED CAPITAL (RBC) FOR INSURERS.
§ 33-40-1. Definitions.
As used in this article, these terms shall have the
following meanings:
(a) "Adjusted RBC Report" means an RBC report which has been
adjusted by the commissioner in accordance with subsection (e),
section two of this article.
(b) "Corrective Order" means an order issued by the
commissioner specifying corrective actions which the commissioner
has determined are required.
(c) "Commissioner" means the Insurance Commissioner of the
State of West Virginia.
(d) "Domestic insurer" means any insurance company or
farmers' mutual fire insurance company domiciled in this state.
(e) "Foreign insurer" means any insurance company which is
licensed to do business in this state under article three of this
chapter but is not domiciled in this state.
(f)"NAIC" means the National Association of Insurance
Commissioners.
(g) Life and/or health insurer means any insurance company
licensed under article three of this chapter, or a licensed
property and casualty insurer writing only accident and health
insurance.
(h) Property and casualty insurer means any insurance
company licensed under article three of this chapter, or any
farmers mutual fire insurance company licensed under article
twenty-two of this chapter, but shall not include monoline
mortgage guaranty insurers, financial guaranty insurers and title
insurers.
(i) "Negative Trend" means, with respect to a life and/or
health insurer, negative trend over a period of time, as
determined in accordance with the Trend Test Calculation included
in the RBC Instructions.
(j) "RBC Instructions" means the RBC Report including risk-
based capital instructions adopted by the NAIC, as such RBC
Instructions may be amended by the NAIC from time to time in
accordance with the procedures adopted by the NAIC.
(k) "RBC Level" means an insurer's Company Action Level RBC,
Regulatory Action Level RBC, Authorized Control Level RBC, or
Mandatory Control Level RBC where:
(1) "Company Action Level RBC" means, with respect to any
insurer, the product of two and its Authorized Control Level RBC;
(2) "Regulatory Action Level RBC" means the product of one
and one half and its Authorized Control Level RBC;
(3) "Authorized Control Level RBC" means the number
determined under the risk-based capital formula in accordance
with the RBC Instructions;
(4) "Mandatory Control Level RBC" means the product of seven
tenths and the Authorized Control Level RBC.
(l) "RBC Plan" means a comprehensive financial plan
containing the elements specified in subsection (b), section
three of this article. If the commissioner rejects the RBC Plan,
and it is revised by the insurer, with or without the
commissioners recommendation, the plan shall be called the
Revised RBC Plan.
(m) "RBC Report" means the report required in section two of
this article.
(n) "Total Adjusted Capital" means the sum of:
(1) An insurer's statutory capital and surplus as determined
in accordance with the statutory accounting applicable to the
financial statements required to be filed under section fourteen, article four of this chapter; and
(2) Such other items, if any, as the RBC Instructions may
provide.
§33-40-2. RBC Reports.
(a) Every domestic insurer shall, on or prior to each first
day of March (the "filing date"), prepare and submit to the
commissioner a report of its RBC Levels as of the end of the
calendar year just ended, in a form and containing such
information as is required by the RBC Instructions. In addition,
every domestic insurer shall file its RBC Report:
(1) With the NAIC in accordance with the RBC Instructions;
and
(2) With the insurance commissioner in any state in which
the insurer is authorized to do business, if the insurance
commissioner has notified the insurer of its request in writing,
in which case the insurer shall file its RBC Report not later
than the later of:
(A) Fifteen days from the receipt of notice to file its RBC
Report with that state; or
(B) The filing date.
(b) A life and health insurer's RBC shall be determined in accordance with the formula set forth in the RBC Instructions.
The formula shall take into account (and may adjust for the
covariance between):
(1) The risk with respect to the insurer's assets;
(2) The risk of adverse insurance experience with respect to
the insurer's liabilities and obligations;
(3) The interest rate risk with respect to the insurer's
business; and
(4) All other business risks and such other relevant risks
as are set forth in the RBC Instructions determined in each case
by applying the factors in the manner set forth in the RBC
Instructions.
(c) A property and casualty insurer's RBC shall be
determined in accordance with the formula set forth in the RBC
Instructions. The formula shall take into account (and may
adjust for the covariance between):
(1) Asset risk;
(2) Credit risk;
(3) Underwriting risk; and
(4) All other business risks and such other relevant risks
as are set forth in the RBC Instructions determined in each case by applying the factors in the manner set forth in the RBC
Instructions.
(d) An excess of capital over the amount produced by the
risk-based capital requirements contained in this article and the
formulas, schedules and instructions referenced in this article
is desirable in the business of insurance. Accordingly, insurers
should seek to maintain capital above the RBC levels required by
this article. Additional capital is used and useful in the
insurance business and helps to secure an insurer against various
risks inherent in, or affecting, the business of insurance and
not accounted for or only partially measured by the risk-based
capital requirements contained in this article.
(e) If a domestic insurer files an RBC Report which in the
judgment of the commissioner is inaccurate, then the commissioner
shall adjust the RBC Report to correct the inaccuracy and shall
notify the insurer of the adjustment. The notice shall contain
a statement of the reason for the adjustment. An RBC Report as
so adjusted is referred to as an "Adjusted RBC Report."
§33-40-3. Company Action Level Event.
(a) "Company Action Level Event" means any of the following
events:
(1) The filing of an RBC Report by an insurer which
indicates that:
(A) The insurer's Total Adjusted Capital is greater than or
equal to its Regulatory Action Level RBC but less than its
Company Action Level RBC; or
(B) If a life and/or health insurer, the insurer has Total
Adjusted Capital which is greater than or equal to its Company
Action Level RBC but less than the product of its Authorized
Control Level RBC and two and one half and has a negative trend;
(2) The notification by the commissioner to the insurer of
an Adjusted RBC Report that indicates an event in subdivision (1)
of this subsection, provided the insurer does not challenge the
Adjusted RBC Report under section seven of this article; or
(3) If, pursuant to section seven of this article, an
insurer challenges an Adjusted RBC Report that indicates the
event in subdivision (1) of this subsection, the notification by
the commissioner to the insurer that the commissioner has, after
a hearing, rejected the insurer's challenge.
(b) In the event of a Company Action Level Event, the
insurer shall prepare and submit to the commissioner an RBC Plan
which shall:
(1) Identify the conditions which contribute to the Company
Action Level Event;
(2) Contain proposals of corrective actions which the
insurer intends to take and would be expected to result in the
elimination of the Company Action Level Event;
(3) Provide projections of the insurer's financial results
in the current year and at least the four succeeding years, both
in the absence of proposed corrective actions and giving effect
to the proposed corrective actions, including projections of
statutory operating income, net income, capital and/or surplus.
(The projections for both new and renewal business may include
separate projections for each major line of business and
separately identify each significant income, expense and benefit
component);
(4) Identify the key assumptions impacting the insurer's
projections and the sensitivity of the projections to the
assumptions; and
(5) Identify the quality of, and problems associated with,
the insurer's business, including but not limited to its assets,
anticipated business growth and associated surplus strain,
extraordinary exposure to risk, mix of business and use of reinsurance, if any, in each case.
(c) The RBC Plan shall be submitted:
(1) Within forty-five days of the Company Action Level
Event; or
(2) If the insurer challenges an Adjusted RBC Report
pursuant to section seven of this article, within forty-five
days after notification to the insurer that the commissioner has,
after a hearing, rejected the insurer's challenge.
(d) Within sixty days after the submission by an insurer of
an RBC Plan to the commissioner, the commissioner shall notify
the insurer whether the RBC Plan shall be implemented or is, in
the judgment of the commissioner, unsatisfactory. If the
commissioner determines the RBC Plan is unsatisfactory, the
notification to the insurer shall set forth the reasons for the
determination, and may set forth proposed revisions which will
render the RBC Plan satisfactory, in the judgment of the
commissioner. Upon notification from the commissioner, the
insurer shall prepare a Revised RBC Plan, which may incorporate
by reference any revisions proposed by the commissioner, and
shall submit the Revised RBC Plan to the commissioner:
(1) Within forty-five days after the notification from the commissioner; or
(2) If the insurer challenges the notification from the
commissioner under section seven of this article, within
forty-five days after a notification to the insurer that the
commissioner has, after a hearing, rejected the insurer's
challenge.
(e) In the event of a notification by the commissioner to an
insurer that the insurer's RBC Plan or Revised RBC Plan is
unsatisfactory, the commissioner may at the commissioner's
discretion, subject to the insurer's right to a hearing under
section seven of this article, specify in the notification that
the notification constitutes a Regulatory Action Level Event.
(f) Every domestic insurer that files an RBC Plan or Revised
RBC Plan with the commissioner shall file a copy of the RBC Plan
or Revised RBC Plan with the insurance commissioner in any state
in which the insurer is authorized to do business if:
(1) Such state has an RBC provision substantially similar to
subsection (a), section eight of this article; and
(2) The insurance commissioner of that state has notified
the insurer of its request for the filing in writing, in which
case the insurer shall file a copy of the RBC Plan or Revised RBC Plan in that state no later than the later of:
(i) Fifteen days after the receipt of notice to file a copy
of its RBC Plan or Revised RBC Plan with the state; or
(ii) The date on which the RBC Plan or Revised RBC Plan is
filed under subsection (c) and (d) of this section.
§33-40-4. Regulatory action level event.
(a) "Regulatory Action Level Event" means, with respect to
any insurer, any of the following events:
(1) The filing of an RBC Report by the insurer which
indicates that the insurer's Total Adjusted Capital is greater
than or equal to its Authorized Control Level RBC but less than
its Regulatory Action Level RBC;
(2) The notification by the commissioner to an insurer of an
Adjusted RBC Report that indicates the event in subdivision (1)
of this subsection, provided the insurer does not challenge the
Adjusted RBC Report under section seven of this article;
(3) If, pursuant to section seven of this article, the
insurer challenges an Adjusted RBC Report that indicates the
event in subdivision (1) of this subsection, the notification by
the commissioner to the insurer that the commissioner has, after
a hearing, rejected the insurer's challenge;
(4) The failure of the insurer to file an RBC Report by the
filing date, unless the insurer has provided an explanation for
such failure which is satisfactory to the commissioner and has
cured the failure within ten days after the filing date;
(5) The failure of the insurer to submit an RBC Plan to the
commissioner within the time period set forth in subsection (c),
section three of this article;
(6) Notification by the commissioner to the insurer that
(A) The RBC Plan or revised RBC Plan submitted by the
insurer is, in the judgment of the commissioner, unsatisfactory;
and
(B) Such notification constitutes a Regulatory Action Level
Event with respect to the insurer, provided the insurer has not
challenged the determination under section seven of this article;
(7) If, pursuant to section seven of this article, the
insurer challenges a determination by the commissioner under
subdivision (6) of this subsection, the notification by the
commissioner to the insurer that the commissioner has, after a
hearing, rejected such challenge;
(8) Notification by the commissioner to the insurer that the
insurer has failed to adhere to its RBC Plan or Revised RBC Plan, but only if such failure has a substantial adverse effect on the
ability of the insurer to eliminate the Company Action Level
Event in accordance with its RBC Plan or Revised RBC Plan and the
commissioner has so stated in the notification, provided the
insurer has not challenged the determination under section seven
of this article; or
(9) If, pursuant to section seven of this article, the
insurer challenges a determination by the commissioner under
subdivision (8) of this subsection, the notification by the
commissioner to the insurer that the commissioner has, after a
hearing, rejected the challenge.
(b) In the event of a Regulatory Action Level Event the
commissioner shall:
(1) Require the insurer to prepare and submit an RBC Plan
or, if applicable, a Revised RBC Plan;
(2) Perform such examination or analysis as the commissioner
deems necessary of the assets, liabilities and operations of the
insurer including a review of its RBC Plan or Revised RBC Plan;
and
(3) Subsequent to the examination or analysis, issue an
order specifying such corrective actions as the commissioner shall determine are required (a "Corrective Order").
(c) In determining corrective actions, the commissioner may
take into account such factors as are deemed relevant with
respect to the insurer based upon the commissioner's examination
or analysis of the assets, liabilities and operations of the
insurer, including, but not limited to, the results of any
sensitivity tests undertaken pursuant to the RBC Instructions.
The RBC Plan or Revised RBC Plan shall be submitted:
(1) Within forty-five days after the occurrence of the
Regulatory Action Level Event;
(2) If the insurer challenges an Adjusted RBC Report
pursuant to section seven of this article and the challenge is
not frivolous in the judgment of the commissioner within
forty-five days after the notification to the insurer that the
commissioner has, after a hearing, rejected the insurer's
challenge; or
(3) If the insurer challenges a Revised RBC Plan pursuant to
section seven of this article and the challenge is not frivolous
in the judgment of the commissioner, within forty-five days after
the notification to the insurer that the commissioner has, after
a hearing, rejected the insurer's challenge.
(d) The commissioner may retain actuaries and investment
experts and other consultants as may be necessary in the judgment
of the commissioner to review the insurer's RBC Plan or Revised
RBC Plan, examine or analyze the assets, liabilities and
operations of the insurer and formulate the Corrective Order with
respect to the insurer. The fees, costs and expenses relating to
consultants shall be borne by the affected insurer or such other
party as directed by the commissioner.
§33-40-5. Authorized control level event.
(a) "Authorized Control Level Event" means any of the
following events:
(1) The filing of an RBC Report by the insurer which
indicates that the insurer's Total Adjusted Capital is greater
than or equal to its Mandatory Control Level RBC but less than
its Authorized Control Level RBC;
(2) The notification by the commissioner to the insurer of
an Adjusted RBC Report that indicates the event in
subdivision (1) of this subsection, provided the insurer does not
challenge the Adjusted RBC Report under section seven of this
article;
(3) If, pursuant to section seven of this article, the insurer challenges an Adjusted RBC Report that indicates the
event in subdivision (1) of this subsection, notification by the
commissioner to the insurer that the commissioner has, after a
hearing, rejected the insurer's challenge;
(4) The failure of the insurer to respond, in a manner
satisfactory to the commissioner, to a Corrective Order (provided
the insurer has not challenged the Corrective Order under section
seven of this article; or
(5) If the insurer has challenged a Corrective Order under
section seven of this article and the commissioner has, after a
hearing, rejected the challenge or modified the Corrective Order,
the failure of the insurer to respond, in a manner satisfactory
to the commissioner, to the Corrective Order subsequent to
rejection or modification by the commissioner.
(b) In the event of an Authorized Control Level Event with
respect to an insurer, the commissioner shall:
(1) Take such actions as are required under section four of
this article regarding an insurer with respect to which a
Regulatory Action Level Event has occurred; or
(2) If the commissioner deems it to be in the best interests
of the policyholders and creditors of the insurer and of the public, take such actions as are necessary to cause the insurer
to be placed under regulatory control under article ten of this
chapter. In the event the commissioner takes such actions, the
Authorized Control Level Event shall be deemed sufficient grounds
for the commissioner to take action under said article of this
chapter, and the commissioner shall have the rights, powers and
duties with respect to the insurer as are set forth in said
article. In the event the commissioner takes actions under this
paragraph pursuant to an Adjusted RBC Report, the insurer shall
be entitled to such protections as are afforded to insurers under
the provisions of article ten of this chapter pertaining to
summary proceedings.
§33-40-6. Mandatory control level events.
(a) "Mandatory Control Level Event" means any of the
following events:
(1) The filing of an RBC Report which indicates that the
insurer's Total Adjusted Capital is less than its Mandatory
Control Level RBC;
(2) Notification by the commissioner to the insurer of an
Adjusted RBC Report that indicates the event in subdivision (1)
of this subsection, provided the insurer does not challenge the Adjusted RBC Report under section seven of this article; or
(3) If, pursuant to section seven of this article, the
insurer challenges an Adjusted RBC Report that indicates the
event in subdivision (1) of this subsection, notification by the
commissioner to the insurer that the commissioner has, after a
hearing, rejected the insurer's challenge.
(b) In the event of a Mandatory Control Level Event:
(1) With respect to a life insurer, the commissioner shall
take such actions as are necessary to place the insurer under
regulatory control under article ten of this chapter. In that
event, the Mandatory Control Level Event shall be deemed
sufficient grounds for the commissioner to take action under said
article, and the commissioner shall have the rights, powers and
duties with respect to the insurer as are set forth in said
article. If the commissioner takes actions pursuant to an
Adjusted RBC Report, the insurer shall be entitled to the
protections of said article pertaining to summary proceedings.
Notwithstanding any of the foregoing, the commissioner may forego
action for up to ninety days after the Mandatory Control Level
Event if the commissioner finds there is a reasonable expectation
that the Mandatory Control Level Event may be eliminated within the ninety day period.
(2) With respect to a property and casualty insurer, the
commissioner shall take such actions as are necessary to place
the insurer under regulatory control under article ten of this
chapter, or, in the case of an insurer which is writing no
business and which is running-off its existing business, may
allow the insurer to continue its run-off under the supervision
of the commissioner. In either event, the Mandatory Control
Level Event shall be deemed sufficient grounds for the
commissioner to take action under said article and the
commissioner shall have the rights, powers and duties with
respect to the insurer as are set forth in said article. If the
commissioner takes actions pursuant to an Adjusted RBC Report,
the insurer shall be entitled to the protections of said article
pertaining to summary proceedings. Notwithstanding any of the
foregoing, the commissioner may forego action for up to ninety
days after the Mandatory Control Level Event if the commissioner
finds there is a reasonable expectation that the Mandatory
Control Level Event may be eliminated within the ninety day
period.
§33-40-7. Hearings.
Insurers shall have the right to a confidential departmental
hearing, on a record, at which the insurer may challenge any
determination or action by the commissioner made pursuant to the
provisions of this article. The insurer shall notify the
commissioner of its request for a hearing within five days after
receiving notification from the commissioner.
(a) Notification to an insurer by the commissioner of an
Adjusted RBC Report; or
(b) Notification to an insurer by the commissioner that:
(1) The insurer's RBC Plan or Revised RBC Plan is
unsatisfactory; and
(2) Such notification constitutes a Regulatory Action Level
Event with respect to such insurer; or
(c) Notification to any insurer by the commissioner that the
insurer has failed to adhere to its RBC Plan or Revised RBC Plan
and that such failure has a substantial adverse effect on the
ability of the insurer to eliminate the Company Action Level
Event with respect to the insurer in accordance with its RBC Plan
or Revised RBC Plan; or
(d) Notification to an insurer by the commissioner of a
Corrective Order with respect to the insurer,
Upon receipt of the insurer's request for a hearing, the
commissioner shall set a date for the hearing, which date shall
be no less than fifteen nor more than forty-five days after the
date of the insurer's request.
§33-40-8. Confidentiality; prohibition on announcements,
prohibition on use in ratemaking.
(a) ll RBC Reports (to the extent the information therein is
not required to be set forth in a publicly available annual
statement schedule) and RBC Plans (including the results or
report of any examination or analysis of an insurer performed
pursuant hereto and any Corrective Order issued by the
commissioner pursuant to examination or analysis) with respect to
any domestic insurer or foreign insurer which are filed with the
commissioner constitute information that might be damaging to the
insurer if made available to its competitors, and therefore shall
be kept confidential by the commissioner. This information shall
not be made public and/or be subject to subpoena, other than by
the commissioner and then only for the purpose of enforcement
actions taken by the commissioner pursuant to this article or any
other provision of the insurance laws of this state. The
information required by this article is specifically exempt from the requirements of chapter twenty-nine-b of this code.
(b) It is the judgment of the Legislature that the
comparison of an insurer's Total Adjusted Capital to any of its
RBC Levels is a regulatory tool which may indicate the need for
possible corrective action with respect to the insurer, and is
not intended as a means to rank insurers generally. Therefore,
except as otherwise required under the provisions of this
article, the making, publishing, disseminating, circulating or
placing before the public, or causing, directly or indirectly to
be made, published, disseminated, circulated or placed before the
public, in a newspaper, magazine or other publication, or in the
form of a notice, circular, pamphlet, letter or poster, or over
any radio or television station, or in any other way, an
advertisement, announcement or statement containing an assertion,
representation or statement with regard to the RBC Levels of any
insurer, or of any component derived in the calculation, by any
insurer, agent, broker or other person engaged in any manner in
the insurance business would be misleading and is therefore
prohibited: Provided, That if any materially false statement
with respect to the comparison regarding an insurer's Total
Adjusted Capital to its RBC Levels (or any of them) or an inappropriate comparison of any other amount to the insurers RBC
Levels is published in any written publication and the insurer is
able to demonstrate to the commissioner with substantial proof
the falsity of such statement, or the inappropriateness, as the
case may be, then the insurer may publish an announcement in a
written publication if the sole purpose of the announcement is to
rebut the materially false statement.
(c) It is the further judgment of the Legislature that the
RBC Instructions, RBC Reports, Adjusted RBC Reports, RBC Plans
and Revised RBC Plans are intended solely for use by the
commissioner in monitoring the solvency of insurers and the need
for possible corrective action with respect to insurers and shall
not be used by the commissioner for rate making nor considered or
introduced as evidence in any rate proceeding nor used by the
commissioner to calculate or derive any elements of an
appropriate premium level or rate of return for any line of
insurance which an insurer or any affiliate is authorized to
write.
§33-40-9. Supplemental provisions; rules; exemption.
(a) The provisions of this article are supplemental to any
other provisions of the laws of this state, and shall not preclude or limit any other powers or duties of the commissioner
under such laws, including, but not limited to, article ten of
this chapter.
(b) The commissioner may adopt reasonable rules necessary for
the implementation of this article.
(c) The commissioner may exempt from the application of this
article any domestic property and casualty insurer which;
(1) Writes direct business only in this state;
(2) Writes direct annual premiums of two million dollars or
less; and
(3) Assumes no reinsurance in excess of five percent of
direct premium written.
(d) A domestic farmers mutual fire insurance company is
exempt from the provisions of this article when:
(1) It writes direct business only in this state;
(2) It writes direct annual premiums of two million dollars
or less; and
(3) It assumes no reinsurance in excess of five percent of
direct premium written.
§33-40-10. Foreign insurers.
(a) Any foreign insurer shall, upon the written request of the commissioner, submit to the commissioner an RBC Report as of
the end of the calendar year just ended the later of:
(1) The date an RBC Report would be required to be filed by
a domestic insurer under this act; or
(2) Fifteen days after the request is received by the foreign
insurer.
Any foreign insurer shall, at the written request of the
commissioner, promptly submit to the commissioner a copy of any
RBC Plan that is filed with the insurance commissioner of any
other state.
(b) In the event of a Company Action Level Event, Regulatory
Action Level Event or Authorized Control Level Event with respect
to any foreign insurer as determined under the RBC statute
applicable in the state of domicile of the insurer (or, if no RBC
statute is in force in that state, under the provisions of this
article), if the insurance commissioner of the state of domicile
of the foreign insurer fails to require the foreign insurer to
file an RBC Plan in the manner specified under that state's RBC
statute (or, if no RBC statute is in force in that state, under
section three of this article), the commissioner may require the
foreign insurer to file an RBC Plan with the commissioner. In such event, the failure of the foreign insurer to file an RBC
Plan with the commissioner shall be grounds to order the insurer
to cease and desist from writing new insurance business in this
state.
(c) In the event of a Mandatory Control Level Event with
respect to any foreign insurer, if no domiciliary receiver has
been appointed with respect to the foreign insurer under the
rehabilitation and liquidation statute applicable in the state of
domicile of the foreign insurer, the commissioner may make
application to the Circuit Court of Kanawha County permitted
under article ten of this chapter with respect to the liquidation
of property of foreign insurers found in this state, and the
occurrence of the Mandatory Control Level Event shall be
considered adequate grounds for the application.
§33-40-11. Immunity.
There shall be no liability on the part of, and no cause of
action shall arise against, the commissioner or the agency of the
Insurance Commission or its employees or agents for any action
taken by them in the performance of their powers and duties under
this article.
§33-40-12. Notices.
All notices by the commissioner to an insurer which may
result in regulatory action hereunder shall be effective upon
dispatch if transmitted by registered or certified mail, or in
the case of any other transmission shall be effective upon the
insurer's receipt of such notice.
§33-40-13. Effective date.
This article shall become effective on the first day of
January, one thousand nine hundred ninety-six.
NOTE: The purpose of this bill is to strengthen the
authority of the state insurance commissioner (commissioner) to
regulate the insurance industry in this state and to protect and
safeguard the interests of policyholders and the general public.
The amendments in this bill are necessary for the commissioner to
maintain an accredited status with the national association of
insurance commissioners.
The bill establishes the confidentiality of information
forwarded to the commissioner from the national association of
insurance commissioners or other insurance departments. The
amendments also allow the commissioner to share confidential
information with these entities.
The bill amends the commissioner's authority to annually
value, or cause to be valued, the reserve liabilities for all
outstanding life insurance policies and annuity and pure
endowment contracts of life insurance companies doing business in
this State. The thrust of these amendments is to incorporate "the
valuation actuary concept" into the standard valuation law. The
amendments establish requirements for an annual actuarial opinion
by a qualified actuary and the basis for actuarial analysis of
reserve liabilities and the assets supporting the reserve
liabilities. They provide for asset evaluation when appropriate and allow the actuary to establish higher reserves if deemed
necessary to render an opinion. The amendments provide for a
memorandum, as prescribed by rule, to support the actuarial
opinion. The bill extends the commissioner's authority to include
annual valuation of reserve liabilities of health (disability and
accident and sickness)insurance policies.
The bill extends the new risk-based capital requirements to
be applicable to domestic farmers mutual fire insurance companies
that do business in other states, write more than two million
dollars of direct written premium, or assume premiums that exceed
more than five percent of direct written premium.
The bill amends the existing risk-based capital requirements
for life and/or health insurers to include property and casualty
insurers. The property and casualty provisions generally parallel
the original life provisions with some exceptions. The amendments
establish minimum capital requirements for insurers related to
the risks to which an individual insurer may be subject. The
amendments provide a uniform but flexible means of establishing
capital and surplus requirements tailored to the specific risks
of investment, operation and cash flow of the individual insurer.
The amendments provide the commissioner statutory authority to
react to an insurer's inadequate capital in an appropriate
manner. The amendments extend the risk-based capital requirements
to include farmers mutual fire insurance companies. The exemption
language of §33-40-9 allows the commissioner to avoid any
financial hardship these requirements may have on the small
farmers mutual fire insurance companies while extending the
requirements to such companies that operate in other states.