OR Rev Stat § 733.302 (2021)
2021 Oregon Revised Statutes|Volume : 18 - Financial Institutions, Insurance|Chapter 733 - Accounting and Investments|Section 733.302 - Reserve valuation method for life insurance policies and annuity and pure endowment contracts.

(1) The Director of the Department of Consumer and Business Services shall annually value, or cause to be valued, the reserve liabilities for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurer 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 calculations of such reserves. For purposes of ORS 733.300 to 733.340 and sections 14 to 17, chapter 547, Oregon Laws 2015, reserve liabilities shall be referred to as reserves. (2) In calculating reserves, the director may use group methods and approximate averages for fractions of a year or otherwise. (3) In lieu of the valuation of the reserves required of any foreign or alien insurer under the Standard Valuation Law, the director may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided under the Standard Valuation Law and if the official of the state or jurisdiction accepts as sufficient and for all valid legal purposes the certificate of valuation of the director when the certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction. [1991 c.401 §18; 2015 c.547 §22] Note: The amendments to 733.302 by section 22, chapter 547, Oregon Laws 2015, apply for a limited period. See section 28, chapter 547, Oregon Laws 2015 (first note below). The text that is applicable for the limited period is set forth for the user’s convenience. (1) The Director of the Department of Consumer and Business Services shall annually value, or cause to be valued, the reserve liabilities for all outstanding life insurance policies and annuity and pure endowment contracts that every life insurer doing business in this state issued on or after the operative date stated in ORS 743.204 for the Standard Nonforfeiture Law for Life Insurance and before the operative date of the valuation manual. (2) In calculating reserves, the director may use group methods and approximate averages for fractions of a year or otherwise. (3) In lieu of the valuation of the reserves required of any foreign or alien insurer under the Standard Valuation Law, the director may accept any valuation that the insurance supervisory official of any state or other jurisdiction makes or causes to be made if the valuation complies with the minimum standard provided under the Standard Valuation Law. Note: Section 28 (1) and (2), chapter 547, Oregon Laws 2015, provides: Sec. 28. (1) Section 14 of this 2015 Act and the amendments to ORS 732.586, 733.302, 733.304, 733.316, 733.318, 743.204 and 743.215 by sections 21 to 27 of this 2015 Act apply to all policies and contracts, as appropriate, that are issued on or after the operative date for the Standard Nonforfeiture Law for Life Insurance under ORS 743.204 and before the operative date of the valuation manual. (2) Sections 15 to 17 of this 2015 Act do not apply to policies and contracts described in subsection (1) of this section. [2015 c.547 §28(1),(2)] Note: Sections 14 to 17, chapter 547, Oregon Laws 2015, provide: Sec. 14. For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under section 12 of this 2015 Act [733.328]. The Director of the Department of Consumer and Business Services by rule shall adopt the minimum standard of valuation for disability, accident and sickness, accident and health insurance contracts issued on or after the operative date stated in ORS 743.204 (2) for the Standard Nonforfeiture Law for Life Insurance and before the operative date of the valuation manual. [2015 c.547 §14] Sec. 15. (1) Except as provided in subsection (2) or (4) of this section, for policies issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under section 12 of this 2015 Act [733.328]. (2) In the absence of a specific valuation requirement, or if a specific valuation requirement in the valuation manual does not, in the opinion of the Director of the Department of Consumer and Business Services, comply with the Standard Valuation Law, the insurer shall comply with minimum valuation standards the director adopts by rule. (3) The director may engage a qualified actuary at the insurer’s expense to perform an actuarial examination of the insurer and to issue an opinion as to the appropriateness of any reserve assumption or method the insurer uses, or to review and issue an opinion as to an insurer’s compliance with any requirement set forth in the Standard Valuation Law. With respect to provisions in the Standard Valuation Law, the director may rely on the opinion of a qualified actuary that the director of another state, district or territory of the United States employs, contracts with or otherwise engages. (4) The director may require an insurer to change any assumption or method that, in the director’s opinion, is necessary to comply with the requirements of the valuation manual or the Standard Valuation Law. The insurer shall adjust the reserves as the director requires. The director may take other disciplinary action in accordance with the requirements for a contested case proceeding under ORS 183. [2015 c.547 §15] Sec. 16. (1) The Director of the Department of Consumer and Business Services shall prescribe the form of the valuation manual. The director shall consider and may prescribe the valuation manual or other form that the National Association of Insurance Commissioners establishes, including instructions that the National Association of Insurance Commissioners prepares for complying with the valuation manual. If the director adopts the valuation manual and instructions that the National Association of Insurance Commissioners establishes, an insurer that submits the opinion required under section 13 of this 2015 Act [733.331] must complete the opinion according to the instructions. The director may require the insurer to file information in addition to the information required in the valuation manual. (2) The director shall adopt the valuation manual and specify the operative date of the valuation manual as January 1 of the first calendar year after the first July 1 in which the director determines that all of the following have occurred: (a) The National Association of Insurance Commissioners adopted the valuation manual with an affirmative vote of at least 42 members, or three-fourths of the members voting, whichever is greater. (b) States that represent 75 percent of the direct premiums written as reported in the annual statements submitted in 2008 for accident and health, fraternal, health or life insurance have enacted the Standard Valuation Law, as amended by the National Association of Insurance Commissioners in 2009, or legislation that includes substantially similar terms and provisions. (c) At least 42 jurisdictions out of the 50 states of the United States, American Samoa, the American Virgin Islands, the District of Columbia, Guam and Puerto Rico have enacted the Standard Valuation Law, as amended by the National Association of Insurance Commissioners in 2009, or legislation that includes substantially similar terms and provisions. (3) Unless a change in the valuation manual specifies a later effective date, changes to the valuation manual are effective on the date the director specifies in adopting the change. In determining the effective date of a change to the valuation manual, the director may specify the effective date as January 1 of the first calendar year after the National Association of Insurance Commissioners has adopted the change to the valuation manual with an affirmative vote that represents: (a) At least three-fourths of the members of the National Association of Insurance Commissioners voting, but not less than a majority of the total membership; and (b) Members of the National Association of Insurance Commissioners who represent jurisdictions totaling more than 75 percent of the direct premiums written as reported in the annual statements submitted for accident and health, fraternal, health or life insurance that were most recently available before the vote described in paragraph (a) of this subsection. (4) The valuation manual must specify all of the following: (a) Minimum valuation standards for, and definitions of, the policies or contracts that are subject to section 12 of this 2015 Act [733.328]. The minimum valuation standards must be: (A) The director’s reserve valuation method for life insurance contracts, other than annuity contracts, that are subject to section 12 of this 2015 Act; (B) The director’s annuity reserve valuation method for annuity contracts that are subject to section 12 of this 2015 Act; and (C) Minimum reserves for all other policies or contracts that are subject to section 12 of this 2015 Act. (b) Policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation under section 17 of this 2015 Act and the minimum valuation standards that are consistent with the requirements. (c) For policies and contracts that are subject to a principle-based valuation under section 17 of this 2015 Act: (A) Requirements for the format of reports to the director under section 17 (3)(c) of this 2015 Act and information that is necessary to determine if the valuation is appropriate and complies with the Standard Valuation Law; (B) Assumptions for risks over which the insurer does not have significant control or influence; and (C) Procedures for corporate governance and oversight of the actuarial function, and a process for waiving or modifying the procedures in appropriate cases. (d) For policies that are not subject to a principle-based valuation under section 17 of this 2015 Act, that the minimum valuation standard must: (A) Be consistent with the minimum standard of valuation before the operative date of the valuation manual; or (B) Specify reserves that quantify the benefits, guarantees and funding associated with the contracts and the contracts’ risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring. (e) The data and the form of the data required under section 18 of this 2015 Act [733.334], to whom the data must be submitted and any related items, including data analyses and reporting of analyses, that may be required. (f) Other requirements that include, but are not limited to, requirements that relate to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of insurer experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules and internal controls. [2015 c.547 §16] Sec. 17. (1) As used in this section, "tail risk" means a risk that occurs either when the frequency of low probability events is higher than expected under a normal probability distribution or when there are observed events of very significant size or magnitude. (2) An insurer must establish reserves using a principle-based valuation that requires for policies or contracts, as specified in the valuation manual: (a) A quantification of the benefits, guarantees and funding associated with the contracts and the contracts’ risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, the valuation must quantify the tail risk by including assumptions concerning appropriately adverse conditions. (b) Assumptions, risk analysis methods, financial models and management techniques that are consistent with, but not necessarily identical to, assumptions, risk analysis methods, financial models and management techniques that the insurer uses within the insurer’s overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods. (c) Assumptions that are derived from: (A) A prescription in the valuation manual; or (B) If the valuation manual does not have a prescription, from other methods that are established using: (i) The insurer’s available experience, to the extent that the insurer’s experience is relevant and statistically credible; or (ii) Other relevant, statistically credible experience if the insurer’s experience is not available, relevant or statistically credible. (d) Margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve. (3) An insurer that uses a principle-based valuation for one or more policies or contracts that are subject to this section, as specified in the valuation manual, shall: (a) Establish procedures for corporate governance and for overseeing the actuarial valuation function that are consistent with the procedures described in the valuation manual. (b) Provide to the Director of the Department of Consumer and Business Services and the insurer’s board of directors an annual certification of the effectiveness of internal controls with respect to the principle-based valuation. The controls must be designed to ensure that all material risks inherent in the liabilities and associated assets that are subject to the valuation are included in the valuation, and that the insurer makes valuations in accordance with the valuation manual. The insurer shall base the certification on the controls that are in place as of the end of the preceding calendar year. (c) Develop, and file with the director upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual. (4) A principle-based valuation may include a prescribed formulaic reserve component. [2015 c.547 §17]