2023 Louisiana Laws › Revised Statutes › Title 22 - Insurance › §22:753. Policies under standard valuation law

RS 22:753 - Policies under standard valuation law
A.(1) The mortality, interest, and other standards specified in R.S. 22:751 shall apply to policies and contracts issued in the United States or its territories except those issued subject to the standard non-forfeiture law as set forth in R.S. 22:936. Mortality, interest, and other standards, consistent with prevailing generally accepted actuarial assumptions at the time of issue, shall apply to policies and contracts issued outside of the United States and its territories.
(2) Reserves for all such policies and contracts may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by R.S. 22:751.
B. For policies and contracts issued prior to the operative date of the valuation manual:
(1) Except as otherwise provided in Paragraphs (2) and (3) of this Subsection, the minimum standard for the valuation of all other policies and contracts shall be the Commissioner's Reserve Valuation Methods defined in Paragraphs (4), (5), and (8) of this Subsection, five percent interest for group annuity and pure endowment contracts, four percent interest for all other such policies and contracts, and four and one-half percent interest for policies and contracts, other than annuities and pure endowment contracts, issued on or after September 7, 1979, and the following tables:
(a) 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 September 7, 1979, the Commissioners 1958 Standard Ordinary Mortality Table for such policies issued on or after September 7, 1979, and prior to January 1, 1989; 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 January 1, 1989, the Commissioners 1980 Standard Ordinary Mortality Table, or, at the election of the insurer for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors, or any ordinary mortality table adopted after 1980, by the National Association of Insurance Commissioners that is approved by the commissioner.
(b) For all new 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 September 7, 1979, and for such policies issued on or after such effective date the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table adopted after 1980, by the National Association of Insurance Commissioners that is approved by the commissioner.
(c) 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 insurer, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the commissioner.
(d) 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 insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts.
(e) For total and permanent disability benefits in or supplementary to ordinary policies or contracts: for policies or contracts issued on or after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates adopted on or after January 1, 1981, by the National Association of Insurance Commissioners that are approved by the commissioner; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such tables or, at the option of the insurer, the Class (3) Disability Table (1926); and for policies issued prior to January 1, 1961, the Class (3) Disability Table (1926). Any such table shall, for active lives, be combined with a mortality table authorized by this Subpart for calculating the reserves for life insurance policies.
(f) For accidental death benefits in or supplementary to policies: for policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted on or after January 1, 1981, by the National Association of Insurance Commissioners that is approved by the commissioner; for policies issued on or after January 1, 1961, and prior to January 1, 1966, either such table or, at the option of the insurer, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table shall be combined with a mortality table authorized by this Subpart for calculating the reserves for life insurance policies.
(g) For group life insurance, life insurance issued on the substandard basis and other special benefits: such tables as approved by the commissioner.
(2)(a) Except as provided in Paragraph (3) of this Subsection, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after September 7, 1979, and for all annuities and pure endowments purchased on or after such effective date under group annuity and pure endowment contracts shall be the Commissioner's Reserve Valuation Methods defined in Paragraphs (4) and (5) of this Subsection and the following tables and interest rates:
(i) For individual annuity and pure endowment contracts issued prior to September 7, 1979, 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.
(ii) For individual single premium immediate annuity contracts issued on or after September 7, 1979, excluding any disability and accidental death benefits in such contracts: the 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted on or after January 1, 1981, by the National Association of Insurance Commissioners that is approved by the commissioner, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.
(iii) For individual annuity and pure endowment contracts issued on or after September 7, 1979, 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 on or after January 1, 1981, by the National Association of Insurance Commissioners that is approved by the commissioner, 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.
(iv) For all annuities and pure endowments purchased prior to September 7, 1979, 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.
(v) For all annuities and pure endowments purchased on or after September 7, 1979, 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 on or after January 1, 1981, by the National Association of Insurance Commissioners that is approved by the commissioner, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.
(b) Any insurer may file with the commissioner a written notice of its election to comply with the provisions of this Paragraph after a specified date before January 1, 1981, which shall be the effective date of this Paragraph for such insurer; provided, an insurer may elect a different effective date for individual annuity and pure endowment contracts from that elected for group annuity and pure endowment contracts. If an insurer makes no such election, the effective date of this Paragraph for such insurer shall be January 1, 1981.
(3)(a) The interest rates used in determining minimum standard for the valuation of the policies and contracts listed in Items (i), (ii), (iii), and (iv) of this Subparagraph shall be the calendar year statutory valuation interest rates, as defined in this Paragraph, or, at the option of the insurer, for any category of policies or contracts, the rate or rates of interest provided in Paragraph (1) or (2) of this Subsection.
(i) All life insurance policies issued in a particular calendar year, on or after January 1, 1989.
(ii) All individual annuity and pure endowment contracts issued on or after January 1, 1983.
(iii) All group annuities and pure endowments on or after January 1, 1983.
(iv) The net increase, if any, in a particular calendar year after January 1, 1983, in the amounts held under guaranteed interest contracts.
(b)(i) The calendar year statutory valuation interest rates shall be determined as follows, with the results rounded to the nearer one-quarter of one percent:
(aa) For life insurance: I =.03 + W (R1 -.03) + W (R2 -.09).
2
(bb) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options: I=.03 + W (R-.03) where R1 is the lesser of R and.09; R2 is the greater of R and.09; R is the reference interest rate defined in Subparagraph (d) of this Paragraph; and W is the weighting factor defined in Subparagraph (c) of this Paragraph.
(cc) 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 Subitem (bb) of this Item, the formula for life insurance stated in Subitem (aa) of this Item 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 Subitem (bb) of this Item shall apply to annuities and guaranteed interest contracts with guarantee duration of ten years or less.
(dd) 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 Subitem (bb) of this Item shall apply.
(ee) 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 Subitem (bb) of this Item shall apply.
(ii) However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this Subparagraph 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 then be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying this Subparagraph, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980, by using the reference interest rate defined for 1979, and shall be determined for each subsequent calendar year.
(iii) At the option of the insurer, calculation for life insurance policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the statutory interest rate, as defined in this Subsection, for life insurance policies issued in the immediately preceding calendar year.
(c) The weighting factors referred to in the formulae stated in Subparagraph (b) of this Paragraph shall be as provided in the following tables:
(i) Weighting factors for life insurance:
Guarantee Duration in years Weighting
Factors
10 years or less .50
More than 10, but not more than 20 years .45
More than 20 years .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) The 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 is .80.
(iii) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in Item (ii) of this Subparagraph, shall be as specified in Subitems (aa), (bb), and (cc) of this Item according to the provisions in Subitems (dd), (ee), and (ff) of this Item:
(aa) For annuities and guaranteed interest contracts valued on an issue year basis:
Weighting
Factor
Guarantee for Plan Type
Duration in Years A B C
5 years or less: .80 .60 .50
More than 5 years, but not more than 10 years: .75 .60 .50
More than 10 years, but not more than 20 years: .65 .50 .45
More than 20 years: .45 .35 .35
(bb) Plan Type
A B C
For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown
in Subparagraph (a) of this Paragraph increased by: .15 .25 .05
(cc) Plan Type
A B C
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 Subitem (aa) or derived in Subitem (bb) increased
by: .05 .05 .05
(dd) 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 guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.
(ee) The plan type as used in the above tables is defined as follows:
Plan Type A: At any time the policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or without such adjustment but in installments over five years or more, or as an immediate life annuity, or no withdrawal as permitted.
Plan Type B: Before expiration of the interest rate guarantee, the policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or without such adjustment but in installments over five years or more, or no withdrawal is permitted. At the end of the interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than five years.
Plan Type C: The policyholder may withdraw funds before expiration of the interest rate guarantee in a single sum or installments over less than five years either without adjustment to reflect changes in the interest rates or asset values since receipt of the funds by the insurer, or subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.
(ff) An insurer 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 shall be valued on an issue year basis. As used in this Paragraph, 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.
(d) The reference interest rate referred to in Subparagraph (b) of this Paragraph 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 June thirtieth 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 a single premium immediate annuity 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 June thirtieth 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 Subitem (c)(iii)(bb) of this Paragraph with guarantee duration in excess of ten years, the lesser of the average over a period of twelve months, ending on June thirtieth 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 Item (ii) of this Subparagraph, with guarantee duration of ten years or less, the average over a period of twelve months, ending on June thirtieth 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 June thirtieth of the calendar year of issue or purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds as published by Moody's Investors Service, Inc.
(vi) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in (ii) above, the average over a period of twelve months, ending on June thirtieth 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.
(e) 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 the commissioner, shall be substituted.
(4)(a) Except as otherwise provided in Paragraphs (5), (6), and (8) of this Subsection, reserves according to the Commissioner's 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 the uniform percentage of the respective contract premiums, excluding extra premiums on substandard policies, for such benefits that, at the date of issue of the policy, the present value of all 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 Item (i) of this Subparagraph over Item (ii) of this Subparagraph as follows:
(i) 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 however, 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.
(ii) A net one year term premium for such benefits provided for in the first policy year.
(b) Any life insurance policy issued on or after January 1, 1986, 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 Commissioner's 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 Paragraph (8) of this Subsection be the greater of the reserve as of such policy anniversary calculated as described in Subparagraph (a) of this Paragraph and the reserve as of such policy anniversary calculated as described in that Subparagraph, but with the value defined in that Subparagraph being reduced by fifteen percent of the amount of such excess first year premium, 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, the policy being assumed to mature on such date as an endowment, and 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 Paragraphs (1) and (3) of this Subsection shall be used.
(c) Reserves according to the Commissioner's Reserve Valuation Method for life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums shall be calculated by a method consistent with the principles of this Paragraph. Reserves for 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, as now or hereafter amended; disability and accidental death benefits in all policies and contracts; and 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 benefits granted and approved by the commissioner.
(5)(a) This Section 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, as now or hereafter amended.
(b) Reserves according to the commissioner's 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.
(6)(a) An insurer's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, shall in no event be less than the aggregate reserves calculated in accordance with the methods set forth in Paragraphs (4), (5), (8), and (10) of this Subsection and the mortality table or tables, and rate or rates of interest used in calculating nonforfeiture benefits for such policies.
(b) In no event shall the aggregate reserves for all policies, contracts, and benefits be less than the aggregate reserves determined to be necessary to render the opinion required in R.S. 22:752.
(c) The commissioner of insurance shall promulgate a regulation containing the minimum standards applicable to the valuation of health and accident plans.
(7) Reserves for any category of policies, contracts, or benefits may be calculated at the option of the insurer 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 but may be lower than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein.
(8)(a) If in any contract year the gross premium charged by any life insurer 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 Paragraph are those standards stated in Paragraphs (1) and (3) of this Subsection.
(b) Any life insurance policy issued on or after January 1, 1986, 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 Paragraph shall be applied as if the method actually used in calculating the reserve for such policy were the method described in Paragraph (4) of this Subsection, ignoring Subparagraph (b) of that Paragraph. The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with Paragraph (4) of this Subsection, including Subparagraph (b) of that Paragraph, and the minimum reserve calculated in accordance with this Paragraph.
(9) Nothing in this Subsection shall apply to any policy issued by any insurer subject to the provisions of Subparts D and E of Part I of this Chapter, R.S. 22:131 et seq. and R.S. 22:141 et seq., unless such insurer elects to comply with the standard non-forfeiture law.
(10) 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 insurer 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 Paragraphs (4), (5), and (8) of this Subsection, the reserves which are held under any such plan shall be appropriate in relation to the benefits and the pattern of premiums for that plan, and shall be computed by a method which is consistent with the principles of this Section as determined by the commissioner.
C. For policies issued on or after the operative date of the valuation manual:
(1) The standard prescribed in the valuation manual is the minimum standard of valuation required under R.S. 22:751(A), except as provided for in Subsections D and F of this Section.
(2) The operative date of the valuation manual is January first of the first calendar year following the first July first as of which all of the following have occurred:
(a) The valuation manual has been adopted by the NAIC by an affirmative vote of at least forty-two members, or three-fourths of the members voting, whichever is greater.
(b) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing greater than seventy-five percent of the direct premiums written as reported in the following annual statements submitted for 2008: life, accident and health annual statements; health annual statements; or fraternal annual statements.
(c) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least forty-two of the fifty-five NAIC member jurisdictions.
(3) Unless a change in the valuation manual specifies a later effective date, changes to the valuation manual shall be effective on January first following the date when the change to the valuation manual has been adopted by the NAIC by an affirmative vote representing:
(a) At least three-fourths of the members of the NAIC voting, but not less than a majority of the total membership.
(b) Members of the NAIC representing jurisdictions totaling greater than seventy-five percent of the direct premiums written as reported in the following annual statements most recently available prior to the vote in Subparagraph (a) of this Paragraph: life, accident and health annual statements, health annual statements, or fraternal annual statements.
(4) The valuation manual shall specify all of the following:
(a) Minimum valuation standards for and definitions of the policies or contracts subject to R.S. 22:751(A). Such minimum valuation standards shall be:
(i) The commissioner's reserve valuation method for life insurance contracts, other than annuity contracts, pursuant to R.S. 22:751(A).
(ii) The commissioner's annuity reserve valuation method for annuity contracts pursuant to R.S. 22:751(A).
(iii) Minimum reserves for all other policies or contracts subject to R.S. 22:751(A).
(b) Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in Subsection G of this Section and the minimum valuation standards consistent with those requirements.
(c) For policies and contracts subject to a principle-based valuation pursuant to Subsection G of this Section:
(i) Requirements for the format of reports to the commissioner pursuant to Subparagraph (G)(2)(c) of this Section and which shall include information necessary to determine if the valuation is appropriate and in compliance with this Subpart.
(ii) Assumptions shall be prescribed for risks over which the company does not have significant control or influence.
(iii) Procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of such procedures.
(d) For policies not subject to a principle-based valuation under Subsection G of this Section, the minimum valuation standard shall use one of the following:
(i) The minimum valuation standard that was in effect prior to the operative date of the valuation manual.
(ii) A reserve standard that quantifies the benefits, guarantees, and funding associated with the contract risk and a level of conservatism that reflects all unfavorable events that have a reasonable probability of occurring.
(5) The valuation manual shall specify other requirements, including but not limited to those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules, and internal controls.
(6) The valuation manual shall specify the data and form of the data required pursuant to Subsection H of this Section, with whom the data shall be submitted, and may specify other requirements including data analyses and reporting analyses.
D. In the absence of a specific valuation requirement, the company shall comply with minimum valuation standards prescribed by the commissioner by rule or regulation.
E. The commissioner may engage a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and opine on the appropriateness of any reserve assumption or method used by the company, or to review and opine on a company's compliance with any valuation requirement. The commissioner may rely upon the opinion of a qualified actuary engaged by the commissioner of another state, district, or territory of the United States.
F. The commissioner may require a company to change any assumption or method that in the opinion of the commissioner is necessary to comply with the requirements of the valuation manual, and the company shall adjust the reserves as required by the commissioner.
G.(1) For policies or contracts specified in the valuation manual as being subject to principle-based valuation, a company shall establish reserves that:
(a) Quantify the benefits, guarantees, and funding associated with the contracts and their risk 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, including conditions appropriately adverse to quantify any significant tail risk.
(b) Incorporate assumptions, risk analysis methods, financial models, and management techniques that are consistent with, but not necessarily identical to, those utilized within the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods.
(c) Incorporate assumptions that are derived from one of the following:
(i) The valuation manual.
(ii) When not prescribed in the valuation manual, one of the following:
(aa) The company's available, relevant, and statistically credible experience.
(bb) To the extent that company data are not available, relevant, or statistically credible, other available, relevant, and statistically credible experience.
(d) Provide margins for uncertainty including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.
(2) As specified in the valuation manual, a company using a principle-based valuation for one or more policies or contracts shall:
(a) Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.
(b) Provide to the commissioner and the board of directors an annual certification of the effectiveness of the principle-based valuation internal controls. The controls shall be designed to assure that all material risks are included in the valuation in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year.
(c) Develop a principle-based valuation report that complies with standards prescribed in the valuation manual and file it with the commissioner when requested.
(3) A principle-based valuation may include a prescribed formulaic reserve component.
H. For policies in force on or after the operative date of the valuation manual, a company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the valuation manual.
I. Any such insurer which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this Section may, with the approval of the commissioner of insurance, adopt any lower standard of valuation, but not lower than the minimum provided in this Section. However, for purposes of this Section, the holding of additional reserves previously determined by a qualified actuary to be necessary to render the opinion required by this Subpart shall not be deemed to be the adoption of a higher standard of valuation.
J. For purposes of this Subpart, "confidential information" means:
(1) A memorandum in support of an opinion submitted under this Section and any other documents, materials, and other information, including but not limited to all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such memorandum.
(2) All documents, materials, and other information, including but not limited to all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in the course of an examination made under this Section provided, however, that if an examination report or other material prepared in connection with an examination made under Chapter 8 of this Title is not held as private and confidential information under Chapter 8 of this Title, an examination report or other material prepared in connection with an examination made under this Section shall not be confidential information to the same extent as if such examination report or other material had been prepared under Chapter 8 of this Title.
(3) Any reports, documents, materials, and other information developed by a company in support of, or in connection with, an annual certification by the company under this Section evaluating the effectiveness of the company's internal controls with respect to a principle-based valuation and any other documents, materials, and other information, including but not limited to all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such reports, documents, materials, and other information.
(4) Any principle-based valuation report developed under this Section and any other documents, materials, and other information, including but not limited to all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such report.
(5) Any documents, materials, data, and other information submitted by a company under this Section, to be known collectively as "experience data", and any other documents, materials, data, and other information, including but not limited to all working papers, and copies thereof, created or produced in connection with such experience data, in each case that include any potentially company-identifying or personally identifiable information, that is provided to or obtained by the commissioner together with any experience data, the experience materials, and any other documents, materials, data, and other information, including but not limited to all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such experience materials.
K. Privilege for, and confidentiality of, confidential information.
(1) Except as provided in this Section, a company's confidential information is confidential by law and privileged, and shall not be subject to the Public Records Law, R.S. 44:1.1 et seq., shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action; however, the commissioner is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the commissioner's official duties.
(2) Neither the commissioner nor any person who received confidential information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential information.
(3) In order to assist in the performance of the commissioner's duties, the commissioner may share confidential information with other state, federal, and international regulatory agencies and with the NAIC and its affiliates and subsidiaries; and in the case of confidential information specified in Paragraphs (J)(1) and (4) of this Section only, with the Actuarial Board for Counseling and Discipline, or its successor, upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal, and international law enforcement officials. In the cases specified in this Paragraph, provided that such recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of such documents, materials, data, and other information in the same manner and to the same extent as required for the commissioner.
(4)(a) The commissioner may receive documents, materials, data, and other information, including otherwise confidential and privileged documents, materials, data, or information from the NAIC and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions, and from the Actuarial Board for Counseling and Discipline, or its successor, and shall maintain as confidential or privileged any document, material, data, or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or other information.
(b) The commissioner may enter into agreements governing sharing and use of information consistent with this Subsection.
(5) No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure to the commissioner under this Section or as a result of sharing as authorized in Paragraph (3) of this Subsection.
(6) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this Subsection shall be available and enforced in any proceeding in, and in any court of, this state.
(7) In this Section "regulatory agency", "law enforcement agency", and the "NAIC" include but are not limited to their employees, agents, consultants, and contractors.
L. Notwithstanding Subsection K of this Section, any confidential information specified in Paragraphs (J)(1) and (4) of this Section:
(1) May be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under R.S. 22:752 or principle-based valuation report developed under this Section by reason of an action required by this Subpart or by regulations promulgated hereunder.
(2) May otherwise be released by the commissioner with the written consent of the company.
(3) Once any portion of a memorandum in support of an opinion submitted under R.S. 22:752 or a principle-based valuation report developed under this Section is cited by the company in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of such memorandum or report shall no longer be confidential.
M. For the purposes of this Subpart, the following definitions shall apply on and after the operative date of the valuation manual:
(1) "Accident and health insurance" means contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the valuation manual.
(2) "Appointed actuary" means a qualified actuary who is appointed in accordance with the valuation manual to prepare the actuarial opinion required by R.S. 22:752.
(3) "Company" means an entity that has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts and one of the following:
(a) Has at least one such policy or contract in force or on claim in this state.
(b) Meets the requirement to hold a certificate of authority to write such policies or contracts in this state and has written, issued, or reinsured such policies or contracts in any state.
(4) "Deposit-type contract" means a contract that does not incorporate mortality or morbidity risks, and as may be specified in the valuation manual.
(5) "Life insurance" means contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual.
(6) "Policyholder behavior" means any action a policyholder, contract holder, or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this Subpart including but not limited to lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization, or benefit elections prescribed by the policy or contract but excluding events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract.
(7) "Principle-based valuation" means a reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and is required to comply with Subsection G of this Section as specified in the valuation manual.
(8) "Qualified actuary" means an individual qualified to sign the applicable statement of actuarial opinion in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements and meets the requirements specified in the valuation manual.
(9) "Tail risk" means 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.
(10) "Valuation manual" means the manual of valuation instructions adopted by the NAIC as specified in this Subpart including any subsequent amendments.
Acts 1958, No. 125. Amended by Acts 1960, No. 285, §1; Acts 1964, No. 154, §1; Acts 1974, No. 4, §1; Acts 1975, No. 261, §1; Acts 1979, No. 370, §2; Acts 1982, No. 464, §1; Acts 1992, No. 704, §1; Acts 2003, No. 171, §1; Redesignated from R.S. 22:163 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009; Acts 2009, No. 503, §§1, 2; Acts 2013, No. 349, §1, eff. Jan. 1, 2014; Acts 2014, No. 635, §3, eff. June 12, 2014; Acts 2016, No. 316, §2, eff. June 2, 2016; Acts 2021, No. 370, §§1, 2.
NOTE: Former R.S. 22:753 redesignated as R.S. 22:2032 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009.