Arkansas Administrative Code › Agency 054 - Arkansas Insurance Department › Rule 054.00.98-004 - Rule and Regulation 22 - Minimum Reserve Standards for Individual and Group Disability Insurance Contracts

Current through Register Vol. 49, No. 6, June, 2024
Section
		  1. Authority
This Rule is issued pursuant to the Authority vested in the
			 Comnnissioner by Ark. Code Ann. §§ 23-63-607.
			 23-61-108,
			 25-15-201 et
			 seq. and other applicable provisions of Arkansas law.
Section 2. Applicability and Scope
These standards apply to all individual and group disability
			 insurance coverages except credit insurance.
When an insurer determines that adequacy of its disability
			 insurance reserves requires reserves in excess of the minimum standards
			 specified herein, such increased reserves shall be held and shall be considered
			 the minimum reserves for that insurer.
With respect to any block of contracts, or with respect to an
			 insurer's disability business as a whole, a prospective gross premium valuation
			 is the ultimate test of reserve adequacy as of a given valuation date. Such a
			 gross premium valuation will take into account, for contracts in force, in a
			 claims status, or in a continuation of benefits status on the valuation date,
			 the present value as of the valuation date of; all expected benefits unpaid,
			 all expected expenses unpaid, and all unearned or expected premiums, adjusted
			 for future premium increases reasonably expected to be put Into effect.
Such a gross premium valuation is to be performed whenever a
			 significant doubt exists as to reserve adequacy with respect to any major block
			 of contracts, or with respect to the insurer's disability business as a whole.
			 In the event inadequacy is found to exist, immediate loss recognition shall be
			 made and the reserves restored to adequacy. Adequate reserves (inclusive of
			 claim, premium and contract reserves, if any) shall be held with respect to all
			 contracts, regardless of whether contract reserves are required for such
			 contracts under these standards.
Whenever minimum reserves, as defined in these standards, exceed
			 reserve requirements as determined by a prospective gross premium valuation,
			 such minimum reserves remain the minimum requirement under these
			 standards.
The following sections set forth minimum standards for these
			 categories of disability insurance reserves: Section 4. Claim Reserves; Section
			 5. Premium Reserves; and Section 6. Contract Reserves.
Adequacy of an insurer's disability Insurance reserves is to be
			 determined on the basis of all three categories combined. However, these
			 standards emphasize the importance of determining appropriate reserves for each
			 of the three categories separately.
These standards contain two appendices which are an integral part
			 of the standards, and one additional "supplementary" appendix which is not part
			 of the standards as such, but is Included for explanatory and illustrative
			 purposes only. These are:
Appendix A. Specific minimum standards with respect to morbidity,
			 mortality and interest, which apply to claim reserves according to year of
			 incurral and to contract reserves according to year of issue;
Appendix B. Glossary of Technical Terms used; and
Appendix C. (Supplementary) Waiver of Premium Reserves.
Section 3. Effective Date
The provisions of this rule shall become effective on January 1,
			 1999, upon statutory filing per Arkansas law.
Section 4. Claim Reserves
A. General
(1) Claim reserves are required for ail
		  Incurred but unpaid claims on all disability Insurance policies.
(2) Appropriate claim expenses reserves are
		  required with respect to the estimated expense of settlement of all incurred
		  but unpaid claims.
(3) All such
		  reserves for prior valuation years are to be tested for adequacy and
		  reasonableness along the lines of claim runoff schedules in accordance with the
		  statutory financial statement including consideration of any residual unpaid
		  liability.