Senate Bill No. 456
(By Senators Manchin, By Request, and Helmick)
____________
[Introduced February 20, 1995;
referred to the Committee on Banking and Insurance.]
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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 of
said chapter; to amend and reenact section two, article
twenty-two of said chapter; and to amend and reenact article
forty 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 of said chapter be
amended and reenacted; that 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 documents 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 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 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 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-four.
(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,, That the memorandum
or other material may otherwise be released by the commissioner:
(i) With the written consent of the company; or (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. 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
said subsection and prior to the operative date of subsection (4c)
of said section:
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 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 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 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 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 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
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 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 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 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 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 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 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-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 group annuity mortality table adopted after the year one
thousand nine hundred eight, 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 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 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(R
1 - .03) + W/2(R
2 -.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 R
1 is the lesser of R and .09,
R
2 is the greater of R and .09,
R is the reference interest rate defined in 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 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 subparagraph (ii) of this
paragraph, shall be as specified in clauses (I), (II) and (III)
below, according to the rules and definitions in clauses (IV), (V)
and (VI) below:
(I) For annuities and guaranteed interest contracts valued on
an issue year basis:
GuaranteeWeighting Factor
Durationfor 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 subparagraph (i) of
this paragraph 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 (I) or derived in (II) 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: (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 (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 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 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
subdivision (1) over subdivision (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 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 such 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 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 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 said subsection, 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 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 said article 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 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 of said article, 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); 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 subsections (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, 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 subdivision 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) All 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 ratemaking 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.)
BANKING AND INSURANCE COMMITTEE AMENDMENT
On page ___, section nine, line ___, by striking out the word
"ninety-four" and inserting in lieu thereof the word "ninety-five".