txt

HB 401: "An Act relating to insurance; relating to credit for reinsurance; insurance standard valuation; and providing for an effective date."

00                             HOUSE BILL NO. 401                                                                          
01 "An Act relating to insurance; relating to credit for reinsurance; insurance standard                                   
02 valuation; and providing for an effective date."                                                                        
03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
04    * Section 1. AS 21.12.020 is repealed and reenacted to read:                                                       
05 (a)  Credit for reinsurance transactions shall be allowed a domestic ceding                                             
06 insurer as either an asset or a deduction from liability on account of reinsurance ceded                                
07 only when the reinsurer meets the requirements of (b), (c), (d), (e), (f), or (g) of this                               
08 section, provided further, that the director may adopt by regulation, under (n)(2) of                                   
09 this section, specific additional requirements relating to, or setting forth, the valuation                             
10 of assets or reserve credits, the amount and forms of security supporting reinsurance                                   
11 arrangements described under (n)(2) of this section, and the circumstances under                                        
12 which credit will be reduced or eliminated. Credit shall be allowed under (b), (c), or                                  
13 (d) of this section only with respect to cessions of a kind or class of business that the                               
14 assuming insurer is licensed or permitted to write or assume in its state of domicile or,                               
01 in the case of a United States branch of an alien assuming insurer, in the state through                                
02 which it is entered and licensed to transact insurance or reinsurance. Credit shall be                                  
03 allowed under (d) or (e) of this section only if the applicable requirements in (h) of                                  
04       this section have been satisfied.                                                                                 
05            (b)  Credit is allowed when the reinsurance is ceded to an assuming insurer that                             
06       is licensed to transact insurance or reinsurance in this state.                                                   
07            (c)  Credit is allowed when the reinsurance is ceded to an assuming insurer that                             
08       is accredited by the director as a reinsurer in this state. An accredited reinsurer is one                        
09       that                                                                                                              
10 (1)  files with the director evidence of submission to this state's                                                     
11       jurisdiction;                                                                                                     
12                 (2)  submits to this state's authority to examine its books and records;                                
13 (3)  is licensed to transact insurance or reinsurance in at least one state                                             
14 that is accredited by the National Association of Insurance Commissioners, or, in the                                   
15 case of a United States branch of an alien admitted insurer, be entered through and                                     
16 licensed to transact insurance or reinsurance in at least one state that is accredited by                               
17       the National Association of Insurance Commissioners;                                                              
18 (4)  files annually with the director a copy of its annual statement filed                                              
19 with the insurance supervisory official of its state of domicile and a copy of its most                                 
20       recent audited financial statement; and                                                                           
21 (5)  demonstrates to the satisfaction of the director that it has adequate                                              
22 financial capacity to meet its reinsurance obligations and is otherwise qualified to                                    
23 assume reinsurance from domestic insurers; an assuming insurer is deemed to meet the                                    
24 requirement at the time of application if the assuming insurer maintains at least                                       
25 $20,000,000 in policyholder surplus and whose accreditation has not been denied by                                      
26       the director within 90 days after application to the director.                                                    
27 (d)  Credit is allowed when the reinsurance is ceded to an assuming insurer that                                        
28 is domiciled in a state, or, in the case of a United States branch of an alien assuming                                 
29 insurer, is entered through a state accredited by the National Association of Insurance                                 
30 Commissioners that employs standards regarding credit for reinsurance ceded                                             
31 substantially similar to those applicable under (b) and (c) of this section, the assuming                               
01 insurer maintains a policyholder surplus of at least $20,000,000, and the assuming                                      
02 insurer submits to the authority of this state to examine its books and records. The                                    
03 surplus requirements in this subsection do not apply to reinsurance ceded and assumed                                   
04       under a pooling arrangement among insurers in the same holding company system.                                    
05 (e)  Credit is allowed when the reinsurance is ceded to an assuming insurer that                                        
06 maintains a trust fund in a qualified United States financial institution for the payment                               
07 of the valid claims of the assuming insurer's United States domiciled ceding insurers,                                  
08 and their assigns and successors. The assuming insurer shall report annually to the                                     
09 director information substantially the same as that required to be reported on the                                      
10 National Association of Insurance Commissioners Annual Statement form by licensed                                       
11 insurers. The assuming insurer shall submit to examination of its books and records by                                  
12       the director and bear the expense of the examination. In addition,                                                
13 (1)  credit for reinsurance under this subsection shall be granted only if                                              
14       the following requirements are met:                                                                               
15 (A)  the trust and each amendment to the trust is established in a                                                      
16 form approved by the insurance supervisory official of the state where the trust                                        
17 is domiciled or the insurance supervisory official of another state who, under                                          
18 the terms of the trust instrument, has accepted responsibility for regulatory                                           
19            oversight of the trust;                                                                                      
20 (B)  the form of the trust and each trust amendment is filed with                                                       
21 the insurance supervisory official of every state in which the beneficiaries of                                         
22            the trust are domiciled;                                                                                     
23 (C)  the trust instrument provides that contested claims are valid                                                      
24 and enforceable upon the final order of any court of competent jurisdiction in                                          
25            the United States;                                                                                           
26 (D)  the trust vests legal title to its assets in the trustees of the                                                   
27 trust for its United States domiciled ceding insurers, their assigns, and                                               
28            successors in interest;                                                                                      
29 (E)  the trust and the assuming insurer are subject to                                                                  
30            examination as determined by the director;                                                                   
31 (F)  the trust remains in effect for so long as the assuming                                                            
01 insurer has outstanding liabilities due under the reinsurance agreements subject                                        
02            to the trust;                                                                                                
03 (G)  on or before March 1 of each year, the trustees report in                                                          
04 writing to the director on the balance of the trust and list the trust's investments                                    
05 at the end of the preceding year, and certify the date of termination of the trust,                                     
06 if so planned, or certify that the trust does not expire before the following                                           
07            December 31;                                                                                                 
08 (2)  in the case of a single assuming insurer, the trust shall consist of                                               
09 trust assets not less than the assuming insurer's liabilities attributable to reinsurance                               
10 ceded by the United States domiciled ceding insurers and, in addition, unless excepted                                  
11 under (4) of this subsection, the assuming insurer shall maintain a trust surplus of not                                
12 less than $20,000,000 for the benefit of the United States domiciled ceding insurers as                                 
13 additional security for the liabilities covered by the trust; the single assuming insurer                               
14 shall make available to the director an annual certification of the insurer's solvency by                               
15 an independent certified public accountant or an accountant holding a substantially                                     
16       equivalent designation as determined by the director;                                                             
17 (3)  at any time after the assuming insurer permanently discontinues                                                    
18 underwriting new business secured by a trust for not less than three years, the                                         
19 insurance supervisory official with principal regulatory oversight of the trust may                                     
20 authorize a reduction in the required trusteed surplus if, based on an assessment of the                                
21 risk, the insurance supervisory official finds that the new required surplus level is                                   
22 adequate for the protection of United States domiciled ceding insurers, policyholders,                                  
23 and claimants in light of reasonably foreseeable adverse loss development; the risk                                     
24 assessment may involve an actuarial review, including an independent analysis of                                        
25 reserves and cash flows, and must consider all material risk factors, including, when                                   
26 applicable, the lines of business involved, the stability of the incurred loss estimates,                               
27 and the effect of the surplus requirements on the assuming insurer's liquidity or                                       
28 solvency; the minimum required trusteed surplus may not be reduced to an amount                                         
29 less than 30 percent of the assuming insurer's liabilities attributable to reinsurance                                  
30       ceded by United States domiciled ceding insurers covered by the trust;                                            
31 (4)  in the case of a group, including incorporated and individual                                                      
01       unincorporated insurers, the trust shall consist of                                                               
02 (A)  for reinsurance ceded under the reinsurance agreements                                                             
03 with an inception, amendment, or renewal date on or after January 1, 1993, a                                            
04 trusteed account in an amount not less than the respective insurers' several                                            
05 liabilities attributable to business ceded by United States domiciled ceding                                            
06            insurers to any insurer of the group;                                                                        
07 (B)  for reinsurance ceded under reinsurance agreements with                                                            
08 an inception date on or before December 31, 1992, and not amended or                                                    
09 renewed after that date, notwithstanding the other provisions of this section, a                                        
10 trusteed account not less than the respective insurers' several insurance and                                           
11            reinsurance liabilities attributable to business written in the United States; and                           
12 (C)  in addition to the applicable trust described in (A) or (B) of                                                     
13 this paragraph, trust assets representing the group's liabilities attributable to                                       
14 business ceded by United States domiciled ceding insurers and, in addition,                                             
15 shall include a trust with a surplus not less than $100,000,000 held jointly for                                        
16 the benefit of the United States domiciled ceding insurers of any member of                                             
17 the group for all years of account as additional security for the group's                                               
18            liabilities covered by the trust;                                                                            
19 (5)  the incorporated members of the group described in (4) of this                                                     
20 subsection may not be engaged in any business other than underwriting as a member                                       
21 of the group and are subject to the same level of solvency regulation and control by                                    
22 the group's domiciliary regulator as are the unincorporated members; within 90 days                                     
23 after its financial statements are due to be filed with the group's domiciliary regulator,                              
24 the group shall make available to the director an annual certification of the solvency of                               
25 each insurer by the group's domiciliary regulator or, if the certification is unavailable,                              
26 financial statements, prepared by an independent certified public accountant, or an                                     
27 accountant holding a substantially equivalent designation as determined by the                                          
28       director, for each underwriter member of the group;                                                               
29 (6)  in the case of a group of incorporated insurers under common                                                       
30 administration that has continuously transacted an insurance business outside the                                       
31 United States for at least three years immediately before making application for                                        
01 accreditation and that has aggregate policyholders' surplus of $10,000,000,000 or                                       
02 more, the trust shall consist of trust assets in an amount not less than the group's                                    
03 several liabilities attributable to business ceded by United States domiciled ceding                                    
04 insurers to a member of the group under reinsurance contracts issued in the name of                                     
05 the group, and the group shall maintain a joint trustee surplus, of which $100,000,000                                  
06 shall be held jointly for the benefit of United States domiciled ceding insurers of a                                   
07 member of the group as additional security for the group's liabilities covered by the                                   
08 trust, and, not later than 90 days after its financial statements are due to be filed with                              
09 the group's domiciliary regulator, each member of the group shall make available to                                     
10 the director an annual certification of the underwriter member's solvency by the                                        
11 member's domiciliary regulator and financial statement of each underwriter member                                       
12 prepared by its independent certified public accountant, or an accountant holding a                                     
13       substantially equivalent designation as determined by the director.                                               
14 (f)  Credit is allowed when reinsurance is ceded to an assuming insurer that is                                         
15 certified by the director as a reinsurer in this state and secures its obligations in                                   
16       accordance with the following requirements:                                                                       
17                 (1)  to be eligible for certification, an assuming insurer shall                                        
18 (A)  be domiciled and licensed to transact insurance or                                                                 
19            reinsurance in a qualified jurisdiction;                                                                     
20 (B)  maintain minimum capital and surplus, or its equivalent, in                                                        
21            an amount set out in regulations adopted by the director;                                                    
22 (C)  maintain financial strength ratings from two or more rating                                                        
23            agencies deemed acceptable under regulations adopted by the director;                                        
24 (D)  agree to submit to the jurisdiction of this state and agree to                                                     
25 provide security for 100 percent of the assuming insurer's liabilities attributable                                     
26 to reinsurance ceded by United States domiciled ceding insurers if the                                                  
27            assuming insurer resists enforcement of a final United States judgment;                                      
28 (E)  agree to meet applicable information filing requirements as                                                        
29 determined by the director, both with respect to an initial application for                                             
30            certification and on an ongoing basis; and                                                                   
31 (F)  satisfy other requirements for certification deemed relevant                                                       
01            by the director;                                                                                             
02 (2)  an association, including an incorporated underwriter and an                                                       
03 individual unincorporated underwriter, may be a certified reinsurer; to be eligible for                                 
04 certification, in addition to satisfying the requirements under (1) of this subsection, an                              
05       association shall                                                                                                 
06 (A)  satisfy the association's minimum capital and surplus                                                              
07 requirements through the capital and surplus equivalents, net of liabilities, of                                        
08 the association and the association's members, which must include a joint                                               
09 central fund that may be applied to any unsatisfied obligation of the association                                       
10 or a member of the association, in an amount determined by the director to                                              
11            provide adequate protection;                                                                                 
12 (B)  not engage in any business other than underwriting as a                                                            
13 member of the association and be subject to the same level of regulation and                                            
14 solvency control by the association's domiciliary regulator as are the                                                  
15            unincorporated members; and                                                                                  
16 (C)  not later than 90 days after the association's financial                                                           
17 statements are filed with the association's domiciliary regulator, provide to the                                       
18 director an annual certification by the association's domiciliary regulator of the                                      
19 solvency of each underwriter member, or, if a certification is unavailable,                                             
20 financial statements prepared by independent public accountants of each                                                 
21            underwriter member of the association;                                                                       
22 (3)  the director shall create and publish a list of qualified jurisdictions,                                           
23 under which an assuming insurer licensed and domiciled in a qualifying jurisdiction is                                  
24 eligible to be considered for certification by the director as a certified reinsurer, and                               
25       subject to the following:                                                                                         
26 (A)  in order to determine whether the domiciliary jurisdiction                                                         
27 of a non-United States assuming insurer is eligible to be recognized as a                                               
28 qualified jurisdiction, the director shall evaluate the appropriateness and                                             
29 effectiveness of the reinsurance supervisory system of the jurisdiction, both                                           
30 initially, and on an ongoing basis, and consider the rights, benefits, and the                                          
31 extent of reciprocal recognition afforded by the non-United States jurisdiction                                         
01 to reinsurers licensed and domiciled in the United States; a qualified                                                  
02 jurisdiction shall agree to share information and cooperate with the director                                           
03 with respect to all certified reinsurers domiciled within that jurisdiction; the                                        
04 director shall not recognize a jurisdiction as a qualified jurisdiction if the                                          
05 director determines that the jurisdiction does not adequately and promptly                                              
06 enforce final United States judgments and arbitration awards; the director may                                          
07 consider additional factors when making an eligibility determination under this                                         
08            paragraph;                                                                                                   
09 (B)  the director shall consider the list of qualified jurisdictions                                                    
10 published through the committee process of the National Association of                                                  
11 Insurance Commissioners; if the director approves a jurisdiction as qualified                                           
12 that does not appear on the list of qualified jurisdictions, the director shall                                         
13 provide a thoroughly documented justification in accordance with criteria set                                           
14            out in regulations adopted by the director;                                                                  
15 (C)  the director shall recognize a United States jurisdiction that                                                     
16 meets the requirement for accreditation under the National Association of                                               
17 Insurance Commissioners financial standards and accreditation program as a                                              
18            qualified jurisdiction;                                                                                      
19 (D)  the director, in lieu of revocation, may suspend a                                                                 
20 reinsurer's certification indefinitely if the certified reinsurer's domiciliary                                         
21            jurisdiction ceases to be a qualified jurisdiction;                                                          
22 (4)  the director shall assign a rating to each certified reinsurer giving                                              
23 due consideration to the financial strength ratings that have been assigned by rating                                   
24       agencies deemed acceptable under regulations adopted by the director;                                             
25 (5)  a certified reinsurer shall secure obligations assumed from United                                                 
26 States domiciled ceding insurers under this subsection at a level consistent with the                                   
27 reinsurer's rating, as specified under regulations adopted by the director and by the                                   
28       following:                                                                                                        
29 (A)  in order for a domestic ceding insurer to qualify for full                                                         
30 financial statement credit for reinsurance ceded to a certified reinsurer, the                                          
31 certified reinsurer shall maintain security in a form acceptable to the director                                        
01 and consistent with the provisions in (l) of this section, or in a multibeneficiary                                     
02 trust, in accordance with (e) of this section, except as otherwise provided in                                          
03            this subsection;                                                                                             
04 (B)  if a certified reinsurer maintains a trust to fully secure the                                                     
05 reinsurer's obligations subject to (e) of this section, and chooses to secure its                                       
06 obligations incurred as a certified reinsurer in the form of a multibeneficiary                                         
07 trust, the certified reinsurer shall maintain separate trust accounts for its                                           
08 obligations incurred under reinsurance agreements issued or renewed as a                                                
09 certified reinsurer with reduced security as permitted under this subsection or                                         
10 comparable laws of other United States jurisdictions and for its obligations                                            
11 subject to (e) of this section; a certified reinsurer, as a condition to the grant of                                   
12 certification under (f) of this section shall bind itself, by the language of the                                       
13 trust and agreement with the insurance supervisory official with principal                                              
14 regulatory oversight of each trust account, to fund, upon termination of any                                            
15 trust account, out of the remaining surplus of the trust any deficiency of any                                          
16            other trust account;                                                                                         
17 (C)  the minimum trusteed surplus requirements under (e) of                                                             
18 this section are not applicable with respect to a multibeneficiary trust                                                
19 maintained by a certified reinsurer for the purpose of securing obligations                                             
20 incurred under this subsection, except that the multibeneficiary trust shall                                            
21            maintain a minimum trusteed surplus of $10,000,000;                                                          
22 (D)  if the obligations incurred by a certified reinsurer under this                                                    
23 subsection are insufficiently secured, the director shall reduce the allowable                                          
24 credit by an amount proportionate to the deficiency and may impose further                                              
25 reductions in allowable credit if the director finds there is a material risk that                                      
26            the certified reinsurer's obligations will not be paid in full when due;                                     
27 (E)  for purposes of this subparagraph, a certified reinsurer                                                           
28 whose certification is terminated for any reason shall be treated as a certified                                        
29 reinsurer required to secure 100 percent of the reinsurer's obligations,                                                
30 provided, however, that if the director continues to assign a higher rating as                                          
31 permitted under other provisions of this section, the requirement to secure 100                                         
01 percent of the reinsurer's obligations shall not apply to a certified reinsurer in                                      
02 inactive status or to a reinsurer whose certification has been suspended; in this                                       
03 subparagraph, "terminated" means revocation, suspension, voluntary surrender,                                           
04            or inactive status;                                                                                          
05 (6)  if an applicant for certification is certified as a reinsurer in a                                                 
06 jurisdiction accredited by the National Association of Insurance Commissioners, the                                     
07 director may defer to that jurisdiction's certification and to the rating assigned to the                               
08 applicant by the jurisdiction; the assuming insurer shall be considered to be a certified                               
09       reinsurer in this state;                                                                                          
10 (7)  a certified reinsurer that ceases to assume new business in this state                                             
11 may request to maintain its certification in inactive status in order to continue to                                    
12 qualify for a reduction in security for its in-force business; an inactive certified                                    
13 reinsurer shall continue to comply with all applicable requirements of this subsection,                                 
14 and the director shall assign a rating that takes into account, if relevant, the reasons                                
15       why the reinsurer is not assuming new business.                                                                   
16 (g)  Credit is allowed when reinsurance is ceded to an assuming insurer that                                            
17 does not meet the requirements of (b), (c), (d), (e), or (f) of this section, but only to the                           
18 insurance of risks located in jurisdictions where the reinsurance is required by                                        
19       applicable law or regulation of that jurisdiction.                                                                
20 (h)  If the assuming insurer is not licensed, accredited, or certified to transact                                      
21 insurance or reinsurance in this state, the credit permitted by (d) and (e) of this section                             
22       is not allowed unless the assuming insurer agrees in the reinsurance agreements                                   
23 (1)  that in the event of the failure of the assuming insurer to perform its                                            
24 obligations under the terms of the reinsurance agreement, the assuming insurer, at the                                  
25 request of the ceding insurer, shall submit to the jurisdiction of a court of competent                                 
26 jurisdiction in a state of the United States, will comply with all requirements necessary                               
27 to give the court jurisdiction and will abide by the final decision of the court or of an                               
28       appellate court in the event of an appeal; and                                                                    
29 (2)  to designate the director or an attorney resident in the United States                                             
30 as its true and lawful attorney upon whom may be served lawful process in an action,                                    
31 suit, or proceeding instituted by or on behalf of the ceding insurer; nothing in this                                   
01 subsection shall be construed to conflict with or override the obligation of the parties                                
02 to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the                            
03       agreement.                                                                                                        
04 (i)  If the assuming insurer does not meet the requirements of (b), (c), or (d) of                                      
05 this section, the credit permitted under (e) or (f) of this section is not allowed unless                               
06       the assuming insurer agrees in the trust agreements to the following conditions:                                  
07 (1)  notwithstanding any other provision in the trust instrument, if the                                                
08 trust fund is inadequate because it contains an amount less than the amount required                                    
09 under (e)(2) - (5) of this section, or if the grantor of the trust is declared insolvent or is                          
10 placed into receivership, rehabilitation, liquidation, or similar proceedings under the                                 
11 laws of the state or country of domicile, the trustee shall comply with an order of the                                 
12 insurance supervisory official with regulatory oversight over the trust or with an order                                
13 of a court of competent jurisdiction directing the trustee to transfer to the insurance                                 
14       supervisory official with regulatory oversight all of the assets of the trust fund;                               
15 (2)  the assets shall be distributed by, and all claims shall be filed with                                             
16 and valued by, the insurance supervisory official with regulatory oversight in                                          
17 accordance with the laws of the state in which the trust is domiciled that are applicable                               
18       to the liquidation of a domestic insurer;                                                                         
19 (3)  if the insurance supervisory official regulatory oversight                                                         
20 determines that the assets of the trust fund or any part thereof are not necessary to                                   
21 satisfy the claims of the United States domestic ceding insurers of the grantor of the                                  
22 trust, the assets or part thereof shall be returned by the insurance supervisory official                               
23 with regulatory oversight to the trustee for distribution in accordance with the trust                                  
24       agreement;                                                                                                        
25 (4)  the grantor shall waive any right otherwise available to it under                                                  
26       United States law that is inconsistent with this subsection.                                                      
27 (j)  The director, under the following procedures, may suspend or revoke a                                              
28 reinsurer's accreditation or certification if the accredited or certified reinsurer ceases to                           
29       meet the requirements for accreditation or certification:                                                         
30 (1)  the director shall give the reinsurer notice and opportunity for a                                                 
31 hearing under AS 21.06.170 - 21.06.230; the suspension or revocation may not take                                       
01       effect until after the director's order on the hearing unless                                                     
02                      (A)  the reinsurer waives its right to a hearing;                                                  
03 (B)  the director's order is based on a regulatory action by the                                                        
04 reinsurer's domiciliary jurisdiction or the voluntary surrender or termination of                                       
05 the reinsurer's eligibility to transact insurance or reinsurance business in its                                        
06 domiciliary jurisdiction or in the primary certifying state of the reinsurer under                                      
07            (f)(6) of this section; or                                                                                   
08                      (C)  the director finds that an emergency requires immediate                                       
09            action and a court of competent jurisdiction has not stayed the director's action;                           
10 (2)  while a reinsurer's accreditation or certification is suspended, no                                                
11 reinsurance contract issued or renewed by the reinsurer after the effective date of the                                 
12 suspension qualifies for credit except to the extent that the reinsurer's obligations                                   
13 under the contract are secured in accordance with (l) of this section; if a reinsurer's                                 
14 accreditation or certification is revoked, no credit for reinsurance may be granted after                               
15 the effective date of the revocation except to the extent that the reinsurer's obligations                              
16       under the contract are secured in accordance with (f)(5) or (l) of this section.                                  
17            (k)  A ceding insurer shall take steps to                                                                    
18 (1)  manage its reinsurance recoverables proportionate to its own book                                                  
19 of business; a domestic ceding insurer shall notify the director not later than 30 days                                 
20 after the reinsurance recoverables from any single assuming insurer, or group of                                        
21 affiliated assuming insurers, exceeds 50 percent of the domestic ceding insurer's last                                  
22 reported surplus to policyholders, or after it is determined that reinsurance                                           
23 recoverables from any single assuming insurer, or group of affiliated assuming                                          
24 insurers, is likely to exceed this limit; the notification must demonstrate that the                                    
25       exposure is safely managed by the domestic ceding insurer; and                                                    
26 (2)  diversify its reinsurance program; a domestic ceding insurer shall                                                 
27 notify the director not later than 30 days after ceding to any single assuming insurer,                                 
28 or group of affiliated assuming insurers, more than 20 percent of the ceding insurer's                                  
29 gross written premium in the prior calendar year, or after it has determined that the                                   
30 reinsurance ceded to any single assuming insurer, or group of affiliated assuming                                       
31 insurers, is likely to exceed this limit; the notification must demonstrate that the                                    
01       exposure is safely managed by the domestic ceding insurer.                                                        
02 (l)  An asset or a reduction from liability, for reinsurance ceded by a domestic                                        
03 insurer to an assuming insurer not meeting the requirements of (a) - (k) of this section,                               
04 shall be allowed in an amount not exceeding the liabilities carried by the ceding                                       
05 insurer. In addition, the director may adopt by regulation under (n)(2) of this section                                 
06 specific additional requirements relating to the valuation of assets or reserve credits,                                
07 the amount and forms of security supporting reinsurance arrangements described in                                       
08 (n)(2) of this section, and the circumstances under which credit will be reduced or                                     
09 eliminated. The reduction shall be equal to the amount of money held by or on behalf                                    
10 of the ceding insurer, including money held in trust for the ceding insurer, under a                                    
11 reinsurance contract with the assuming insurer as security for the payment of                                           
12 obligations under it, if the security is held in the United States subject to withdrawal                                
13 solely by and under the exclusive control of the ceding insurer or, in the case of a trust,                             
14 held in a qualified United States financial institution. The security must be in the form                               
15       of                                                                                                                
16                 (1)  cash;                                                                                              
17 (2)  securities listed by the Securities Valuation Office of the National                                               
18 Association of Insurance Commissioners, including those deemed exempt from filing                                       
19 as defined by the purposes and procedures manual of the Securities Valuation Office,                                    
20       and that qualify as admitted assets under AS 21.21;                                                               
21 (3)  clean, irrevocable, unconditional letters of credit that contain an                                                
22 evergreen clause issued or confirmed by a qualified United States financial institution                                 
23 not later than December 31 in the year for which filing is made, and in the possession                                  
24 of, or in trust for, the ceding insurer on or before the filing date of the ceding insurer's                            
25       annual statement;                                                                                                 
26 (4)  letters of credit meeting applicable standards of issuer acceptability                                             
27 as of the dates of their issuance or confirmation shall, notwithstanding the issuing or                                 
28 confirming institution's subsequent failure to meet applicable standards of issuer                                      
29 acceptability, continue to be acceptable as security until their expiration, extension,                                 
30       renewal, modification, or amendment, whichever occurs first; or                                                   
31 (5)  other security acceptable to and approved in advance by the                                                        
01       director.                                                                                                         
02            (m)  In this section, "qualified United States financial institution" means an                               
03       institution that,                                                                                                 
04                 (1)  for the purposes of (l)(3) of this section,                                                        
05                      (A)  is organized or, in the case of a United States office of a                                   
06            foreign banking organization, is licensed under the laws of the United States or                             
07            a state of the United States;                                                                                
08                      (B)  is regulated, supervised, and examined by United States                                       
09            federal or state authorities having regulatory authority over banks and trust                                
10            companies; and                                                                                               
11 (C)  has been determined by either the director or the Securities                                                       
12 Valuation Office of the National Association of Insurance Commissioners to                                              
13 meet the standards of financial condition and standing that are considered                                              
14 necessary and appropriate to regulate the quality of financial institutions whose                                       
15            letters of credit are acceptable to the director;                                                            
16 (2)  for the purposes of the provisions of this section, other than (l)(3)                                              
17       of this section, an institution that                                                                              
18 (A)  is organized or, in the case of a United States branch or                                                          
19 agency office of a foreign banking organization, licensed under the laws of the                                         
20 United States or a state of the United States, and has been granted authority to                                        
21            operate with fiduciary powers; and                                                                           
22 (B)  is regulated, supervised, and examined by United States                                                            
23 federal or state authorities having regulatory authority over banks and trust                                           
24            companies.                                                                                                   
25            (n)  The director may adopt regulations                                                                      
26                 (1)  to implement this section; and                                                                     
27                 (2)  relating to reinsurance arrangements as follows:                                                   
28 (A)  a regulation adopted under this paragraph may apply only                                                           
29            to reinsurance relating to                                                                                   
30 (i)  a life insurance policy with guaranteed nonlevel                                                                   
31                 gross benefits;                                                                                         
01                           (ii)  a universal life insurance policy with provisions                                       
02                 resulting in the ability of a policyholder to keep a policy in force over a                             
03                 secondary guaranteed period;                                                                            
04                           (iii)  a variable annuity with guaranteed death or living                                     
05                 benefits;                                                                                               
06                           (iv)  a long-term care insurance policy; or                                                   
07 (v)  other life insurance, health insurance, and annuity                                                                
08 products of which the National Association of Insurance                                                                 
09 Commissioners adopts model regulatory requirements with respect to                                                      
10                 credit for reinsurance;                                                                                 
11 (B)  a regulation adopted under (A)(i) or (ii) of this paragraph                                                        
12            applies to a treaty containing a policy issued                                                               
13                           (i)  on or after January 1, 2015; and                                                         
14 (ii)  before January 1, 2015, if the risk pertaining to the                                                             
15 policy is ceded in connection with the treaty, in whole or in part, on or                                               
16 after January 1, 2015; in this subparagraph, "treaty" means a contract in                                               
17 which a reinsurance company agrees to accept and an insurance                                                           
18 company agrees to cede, all of a particular type of risk within a specific                                              
19                 class of insurance policies;                                                                            
20 (C)  the director may adopt a regulation under this paragraph to                                                        
21 require a ceding insurer, in calculating the amounts or forms of security                                               
22 required to be held under regulations adopted under the authority of this                                               
23 paragraph, to use the edition of the valuation manual adopted by the National                                           
24 Association of Insurance Commissioners in effect on the date of which the                                               
25            calculation is made, to the extent applicable;                                                               
26 (D)  a regulation adopted under this paragraph is not applicable                                                        
27 to cessions to an assuming insurer that is certified in this state or meets the                                         
28            following criteria:                                                                                          
29 (i)  maintains at least $250,000,000 in capital and                                                                     
30 surplus when determined in accordance with the most recent edition of                                                   
31 the National Association of Insurance Commissioner's Accounting                                                         
01                 Practices and Procedures Manual, including the impact of any                                            
02                 permitted or prescribed practices; and                                                                  
03                           (ii)  is licensed in not less than 26 states, or licensed in                                  
04                 not less than 10 states and licensed or accredited in a total of not less                               
05                 than 35 states;                                                                                         
06                      (E)  nothing in this paragraph limits the director's authority to                                  
07            adopt regulations under (1) of this subsection.                                                              
08    * Sec. 2. AS 21.18.110(a) is amended to read:                                                                      
09            (a)  The director shall annually value, or cause to be valued, the reserve                                   
10 liabilities (hereinafter called reserves) for all outstanding life insurance policies,                              
11 [AND] annuity and pure endowment contracts, and deposit-type contracts of every                                     
12 life insurer doing business in this state issued before the operative date of the                                   
13 valuation manual described in AS 21.18.112 [, AND MAY CERTIFY THE                                                   
14 AMOUNT OF THE RESERVES, SPECIFYING THE MORTALITY TABLE OR                                                               
15 TABLES, RATE OR RATES OF INTEREST, AND METHODS (NET LEVEL                                                               
16 PREMIUM METHOD OR OTHER) USED IN THE CALCULATION OF THE                                                                 
17 RESERVES]. In calculating the reserves for policies and contracts issued before the                                 
18 operative date of the valuation manual described in AS 21.18.112, the director may                                  
19 use group methods and approximate averages for fractions of a year or otherwise. For                                    
20 an alien insurer, the valuation shall be limited to the alien insurer's [ITS] insurance                             
21 transactions in the United States. For the purpose of making the valuation the director                                 
22 may employ a qualified [COMPETENT] actuary who shall be paid by the insurer for                                     
23 which the service is rendered. For a foreign or alien insurer, the director may accept,                                 
24 in lieu of the valuation of the reserves required of a foreign or alien insurer, a                                      
25 valuation made, or caused to be made, by the insurance supervisory official of a state                                  
26 or other jurisdiction if the valuation complies with the minimum standard provided in                                   
27 this section. The provisions in this section provide for the minimum standard for                                   
28 the valuation of reserves for policies and contracts subject to this section and are                                
29 applicable to a policy and contract issued before the operative date of the                                         
30 valuation manual described in AS 21.18.112 [AND IF THE OFFICIAL OF THE                                              
31 STATE OR JURISDICTION ACCEPTS AS SUFFICIENT AND VALID FOR ALL                                                           
01 LEGAL PURPOSES THE CERTIFICATE OF VALUATION OF THE DIRECTOR                                                             
02 WHEN THE CERTIFICATE STATES THE VALUATION WAS MADE IN A                                                                 
03 SPECIFIED MANNER IN WHICH THE AGGREGATE RESERVES WOULD BE                                                               
04 AT LEAST AS LARGE AS IF THEY HAD BEEN COMPUTED IN THE MANNER                                                            
05 PRESCRIBED BY THE LAW OF THAT STATE OR JURISDICTION]. An insurer                                                        
06 that has [AT ANY TIME] adopted a standard of valuation producing greater                                            
07 aggregate reserves than those calculated according to the minimum standard provided                                     
08 in this section may, with the approval of the director, adopt a lower standard of                                       
09       valuation, but not lower than the minimum provided in this section.                                               
10    * Sec. 3. AS 21.18.110(b) is amended to read:                                                                      
11 (b)  This subsection applies to only those policies and contracts issued on or                                          
12 after the operative date of AS 21.45.300 except as [OTHERWISE] provided in (c) -                                    
13 (k) [(c)] of this section, [AND] (5) and (6) of this subsection for group annuity and                       
14       pure endowment contracts issued before that operative date, and AS 21.18.112(b):                              
15 (1)  Except as [OTHERWISE] provided in (c) - (k) [(c)] of this section,                                         
16 [AND] (5) and (6) of this subsection, and AS 21.18.112(b), the minimum standard                                 
17 for the valuation of all these policies and contracts shall be the commissioner's reserve                               
18 evaluation methods defined in (2)(A) and (B) [(2)], (4), and (7) of this subsection, and                    
19 AS 21.18.112(b), three and one-half percent interest, or in the case of policies and                                
20 contracts, other than annuity and pure endowment contracts, issued on or after July 1,                                  
21 1978, five and one-half percent interest for single premium life insurance policies and                                 
22       four and one-half percent interest for all other policies, and the following tables:                              
23 (A)  for all ordinary policies of life insurance issued on the                                                          
24 standard basis, excluding disability and accidental death benefits in the policies                                      
25 - the Commissioner's 1958 Standard Ordinary Mortality Table, for policies                                               
26 issued before the operative date of AS 21.45.300(w), of the Standard                                                    
27 Nonforfeiture Law for Life Insurance as amended, except that for a category of                                          
28 policies issued on female risks, all modified net premiums and present values,                                          
29 referred to in (2) of this subsection may be calculated according to an age not                                         
30 more than six years younger than the actual age of the insured; and for policies                                        
31 issued on or after the operative date of AS 21.45.300(w) of the Standard                                                
01            Nonforfeiture Law for Life Insurance as amended                                                              
02                           (i)  the Commissioner's 1980 Standard Ordinary                                                
03                 Mortality Table, or                                                                                     
04                           (ii)  at the election of the insurer for any one or more                                      
05                 specified plans of life insurance, the Commissioner's 1980 Standard                                     
06                 Ordinary Mortality Table with 10-year Select Mortality Factors, or                                      
07 (iii)  any ordinary mortality table, adopted after 1980 by                                                              
08 the National Association of Insurance Commissioners, that is approved                                                   
09 by regulation promulgated by the director for use in determining the                                                    
10                 minimum standard of valuation for the policies;                                                         
11 (B)  for all industrial life insurance policies issued on the                                                           
12 standard basis, excluding disability and accidental death benefits in the policies                                      
13 - the 1941 Standard Industrial Mortality Table for the policies issued before the                                       
14 operative date of AS 21.45.300(l), of the Standard Nonforfeiture Law for Life                                           
15 Insurance as amended, and for the policies issued on or after April 7, 1984, the                                        
16 Commissioner's 1961 Standard Industrial Mortality Table or any industrial                                               
17 mortality table, adopted after 1980 by the National Association of Insurance                                            
18 Commissioners that is approved by regulation promulgated by the director for                                            
19            use in determining the minimum standard of valuation for such policies;                                      
20 (C)  for individual annuity and pure endowment contracts,                                                               
21 excluding disability and accidental death benefits in the policies - the 1937                                           
22 Standard Annuity Mortality Table, or, at the option of the insurer, the Annuity                                         
23 Mortality Table for 1949, ultimate, or any modification of either of these tables                                       
24            approved by the director;                                                                                    
25 (D)  for group annuity and pure endowment contracts,                                                                    
26 excluding disability and accidental death benefits in the policies - the Group                                          
27 Annuity Mortality Table for 1951, any modification of the table approved by                                             
28 the director, or, at the option of the insurer, any of the tables or modification of                                    
29            tables specified for individual annuity and pure endowment contracts;                                        
30 (E)  for total and permanent disability benefits in or                                                                  
31 supplementary to ordinary policies or contracts - the tables of period 2                                                
01 disablement rates and the 1930 to 1950 termination rates of the 1952 disability                                         
02 study of the society of actuaries, with due regard to the type of benefit or any                                        
03 table of disablement and termination rates adopted after 1980 by the National                                           
04 Association of Insurance Commissioners that are approved by regulation                                                  
05 adopted by the director for use in determining the minimum standard of                                                  
06 valuation for the policies; the table shall, for active lives, be combined with a                                       
07            mortality table permitted for calculating the reserves for life insurance policies;                          
08 (F)  for accidental death benefits in or supplementary to policies                                                      
09 - the 1959 Accidental Death Benefits Table or any accidental death benefits                                             
10 table adopted after 1980 by the National Association of Insurance                                                       
11 Commissioners that is approved by regulation adopted by the director for use                                            
12 in determining the minimum standard of valuation for the policies combined                                              
13 with a mortality table permitted for calculating the reserves for life insurance                                        
14            policies;                                                                                                    
15 (G)  for group life insurance, life insurance issued on the                                                             
16            substandard basis and other special benefits - tables approved by the director.                              
17 (2)  Except as otherwise provided in (4) and (7) of this subsection,                                                    
18 reserves according to the commissioner's reserve valuation method, for the life                                         
19 insurance and endowment benefits of policies providing for a uniform amount of                                          
20 insurance and requiring the payment of uniform premiums, shall be the excess, if any,                                   
21 of the present value, at the date of valuation, of the future guaranteed benefits                                       
22 provided for by the policies, over the then present value of any future modified net                                    
23 premiums; the modified net premiums for the policy shall be the uniform percentage                                      
24 of the respective contract premiums for the benefits that the present value, at the date                                
25 of issue of the policy, of all the modified net premiums shall be equal to the sum of the                               
26 then present value of the benefits provided for by the policy and the excess of (A) over                                
27       (B), as follows:                                                                                                  
28 (A)  a net level annual premium equal to the present value, at                                                          
29 the date of issue, of the benefits provided for after the first policy year, divided                                    
30 by the present value, at the date of issue of an annuity of one a year payable on                                       
31 the first and each subsequent anniversary of the policy on which a premium                                              
01 falls due; however, the net level annual premium may not exceed the net level                                           
02 annual premium on the 19-year premium whole life plan for insurance of the                                              
03            same amount at an age one year higher than the age at issue of the policy;                                   
04 (B)  a net one-year term premium for the benefits provided for                                                          
05 in the first policy year; notwithstanding this paragraph, for a life insurance                                          
06 policy issued on or after January 1, 1987 for which the contract premium in the                                         
07 first policy year exceeds that of the second year and for which no comparable                                           
08 additional benefit is provided in the first year for the excess premium and that                                        
09 provides an endowment benefit or a cash surrender value or a combination of                                             
10 these in an amount greater than the excess premium, the reserve according to                                            
11 the commissioner's reserve valuation method as of a policy anniversary                                                  
12 occurring on or before the assumed ending date, except as otherwise provided                                            
13 in (4) of this subsection, shall be the greater of the reserve as of the policy                                         
14 anniversary calculated as described in (2)(A) of this subsection and the reserve                                        
15 as of the policy anniversary; the reserve shall be calculated as described in                                           
16            (2)(A) of this subsection, except                                                                            
17 (i)  the present value shall be reduced by 15 percent of                                                                
18                 the amount of the excess first year premium,                                                            
19 (ii)  all present values of benefits and premiums shall be                                                              
20 determined without reference to premiums or benefits provided for by                                                    
21                 the policy after the assumed ending date,                                                               
22 (iii)  the policy shall be assumed to mature on the                                                                     
23                 assumed ending date as an endowment, and                                                                
24 (iv)  the cash surrender value provided on the assumed                                                                  
25 date shall be considered as an endowment benefit; in making the                                                         
26 comparison in this subparagraph the mortality and interest bases stated                                                 
27 in paragraphs (4) and (6) of this subsection and subsection (c) shall be                                                
28 used; in this subparagraph the assumed ending date is the first policy                                                  
29 anniversary on which the sum of the endowment benefit and cash                                                          
30                 surrender value then available is greater than the excess premium;                                      
31 (C)  reserves according to the commissioner's reserve valuation                                                         
01            method for                                                                                                   
02 (i)  life insurance policies providing for a varying                                                                    
03                 amount of insurance or requiring the payment of varying premiums,                                       
04 (ii)  group annuity and pure endowment contracts                                                                        
05 purchased under a retirement plan or plan of deferred compensation,                                                     
06 established or maintained by an employer (including a partnership or                                                    
07 sole proprietorship) or by an employee organization, or by both, other                                                  
08 than a plan providing individual retirement accounts or individual                                                      
09 retirement annuities under 26 U.S.C. 408 (Internal Revenue Code), as                                                    
10                 amended,                                                                                                
11 (iii)  disability and accidental death benefits in all                                                                  
12                 policies and contracts,                                                                                 
13 (iv)  all other benefits, except life insurance and                                                                     
14 endowment benefits in life insurance policies and benefits provided by                                                  
15 all other annuity and pure endowment contracts, shall be calculated by                                                  
16 a method consistent with the principles of (2) of this subsection, except                                               
17 that any extra premiums charged because of impairments or special                                                       
18 hazards shall be disregarded in the determination of modified net                                                       
19                 premiums;                                                                                               
20 (3)  Reserves for any category of policies, contracts or benefits as                                                    
21 established by the director, may be calculated at the option of the insurer according to                                
22 standards which produce greater aggregate reserves for the category than those                                          
23 calculated according to the minimum standard provided in this section, but the rate or                                  
24 rates of interest used for policies and contracts, other than annuity and pure                                          
25 endowment contracts, may not be higher than the corresponding rate or rates of                                          
26 interest used in calculating nonforfeiture benefits provided for in the policy or                                       
27       contract.                                                                                                         
28 (4)  If in any contract year the gross premium charged by a life insurer                                                
29 on a policy or contract is less than the valuation net premium for the policy or contract                               
30 calculated by the method used in calculating the reserve on the policy or contract but                                  
31 using the minimum valuation standards of mortality and rate of interest, the minimum                                    
01 reserve required for that policy or contract shall be the greater of either the reserve                                 
02 calculated according to the mortality table, rate of interest, and method actually used                                 
03 for the policy or contract, or the reserve calculated by the method actually used for the                               
04 policy or contract but using the minimum valuation standards of mortality and rate of                                   
05 interest and replacing the valuation net premium by the actual gross premium in each                                    
06 contract year for which the valuation net premium exceeds the actual gross premium.                                     
07 In this paragraph, the minimum valuation standards of mortality and rate of interest                                    
08 are those standards referred to in (b) and (c) of this section. Notwithstanding this                                    
09 paragraph, for a life insurance policy issued on or after January 1, 1987, for which the                                
10 gross premium in the first policy year exceeds that of the second year and for which                                    
11 no comparable additional benefit is provided in the first year for the excess premium                                   
12 and that provides an endowment benefit or a cash surrender value or a combination of                                    
13 these in an amount greater than the excess premium, the provisions of this paragraph                                    
14 shall be applied as if the method used in calculating the reserve for such a policy were                                
15 based on a net one-year term premium for the benefits provided for in the first policy                                  
16 year. The minimum reserve at each policy anniversary of such a policy shall be the                                      
17 greater of the minimum reserve calculated under (2)(B) of this subsection, and the                                      
18       minimum reserve calculated under this paragraph.                                                                  
19 (5)  Except as provided in (c) - (k) of this section [(C) OF THIS                                                   
20 PARAGRAPH], the minimum standard for the valuation of all individual annuity and                                        
21 pure endowment contracts issued on or after the operative date of this paragraph as set                                 
22 out in (6) of this subsection and for all annuities and pure endowments purchased on                                    
23 or after that date under group annuity and pure endowment contracts, shall be the                                       
24 commissioner's reserve valuation methods defined in (2) and (7) of this subsection and                                  
25       the following tables and interest rates:                                                                          
26 (A)  for individual single premium immediate annuity contracts,                                                         
27 excluding any disability and accidental death benefits in such contracts - the                                          
28 1971 individual annuity mortality table or an individual annuity mortality                                              
29 table, adopted after 1980 by the National Association of Insurance                                                      
30 Commissioners, that is approved by regulation adopted by the director for use                                           
31 in determining the minimum standard of valuation for the contracts, or any                                              
01 modification of these tables approved by the director and seven and one-half                                            
02            percent interest;                                                                                            
03 (B)  for individual annuity and pure endowment contracts, other                                                         
04 than single premium immediate annuity contracts, excluding any disability and                                           
05 accidental death benefits in such contracts - the 1971 individual annuity                                               
06 mortality table or an individual annuity mortality table, adopted after 1980 by                                         
07 the National Association of Insurance Commissioners, that is approved by                                                
08 regulation adopted by the director for use in determining the minimum                                                   
09 standard of valuation for the contracts, or any modification of these tables                                            
10 approved by the director and five and one-half percent interest for single                                              
11 premium deferred annuity and pure endowment contracts and four and one-                                                 
12 half percent interest for all other such individual annuity and pure endowment                                          
13            contracts;                                                                                                   
14 (C)  for all annuities and pure endowments purchased under                                                              
15 group annuity and pure endowment contracts, excluding any disability and                                                
16 accidental death benefits purchased under such contracts - 1971 group annuity                                           
17 mortality table or a group annuity mortality table, adopted after 1980 by the                                           
18 National Association of Insurance Commissioners, that is approved by                                                    
19 regulation adopted by the director for use in determining the minimum                                                   
20 standard of valuation for the annuities and pure endowments, or any                                                     
21 modification of these tables approved by the director, and seven and one-half                                           
22            percent interest.                                                                                            
23 (6)  After July 1, 1978, an insurer may file with the director a written                                                
24 notice of its election to comply with the provisions of (5) of this subsection after a                                  
25 specified date before January 1, 1979, which shall be the operative date of that                                        
26 requirement for the insurer; however, an insurer may elect a different operative date                                   
27 for individual annuity and pure endowment contracts from that elected for group                                         
28 annuity and pure endowment contracts. If an insurer makes no election, the operative                                    
29       date of (5) of this subsection for the insurer is January 1, 1979.                                                
30 (7)  This paragraph applies to all annuity and pure endowment contracts                                                 
31 other than group annuity and pure endowment contracts purchased under a retirement                                      
01 plan or plan of deferred compensation, established or maintained by an employer                                         
02 (including a partnership or sole proprietorship) or by an employee organization, or by                                  
03 both, other than a plan providing individual retirement annuities under 26 U.S.C. 408                                   
04 (Internal Revenue Code), as amended. Reserves according to the commissioner's                                           
05 annuity reserve method for benefits under annuity or pure endowment contracts,                                          
06 excluding any disability and accidental death benefits in those contracts, shall be the                                 
07 greatest of the respective excesses of the present values, at the date of valuation, of the                             
08 future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for                                   
09 by those contracts at the end of each respective contract year, over the present value, at                              
10 the date of valuation, of any future valuation considerations derived from future gross                                 
11 considerations, required by the terms of such contract, that become payable before the                                  
12 end of that respective contract year. The future guaranteed benefits shall be                                           
13 determined by using the mortality table, if any, and the interest rate, or rates, specified                             
14 in such contracts for determining guaranteed benefits. The valuation considerations are                                 
15 the portions of the respective gross considerations applied under the terms of those                                    
16       contracts to determine nonforfeiture values.                                                                      
17    * Sec. 4. AS 21.18.110(f) is amended to read:                                                                      
18            (f)  The weighting factors referred to in (c) of this section are as follows:                                
19                 (1)  Weighting factors for Life Insurance:                                                              
20       Guarantee                                                                                                         
21  Duration: Weighting                                                                                                    
22  Years Factors                                                                                                          
23  10 or less .50                                                                                                         
24  more than 10, but not more than 20; .45                                                                                
25  more than 20; .35                                                                                                      
26       for life insurance, the guarantee duration is the maximum number of years the life                                
27       insurance can remain in force on a basis guarantee in the policy or under an option to                            
28       convert to a plan of life insurance with a premium rate or nonforfeiture value or both                            
29       which are guaranteed in the original policy;                                                                      
30 (2)  notwithstanding (3) of this subsection the weighting factor for a                                                  
31 single premium immediate annuity and for an annuity benefit involving a [IN] life                                   
01       contingency arising from another annuity with a cash settlement option and a                                      
02       guaranteed interest contract with a cash settlement option - .80;                                                 
03                 (3)  for annuities and guaranteed interest contracts valued on an issue                                 
04       year basis:                                                                                                       
05  Guarantee Weighting Factor                                                                                             
06  Duration: for Plan Type                                                                                                
07  Years                                                                                                                  
08    A B C                                                                                                                
09  5 or less; .80 .60 .50                                                                                                 
10       more than 5, but not                                                                                              
11        more than 10;                         .75   .60 .50                                                              
12       more than 10, but not                                                                                             
13        more than 20;                         .65   .50 .45                                                              
14       more than 20;                          .45   .35 .35                                                              
15 (4)  for annuities and guaranteed interest contracts valued on a change                                                 
16 in fund basis, the weighting factors shown in (3) of this subsection are increased by                                   
17       .15 for plan type A, .25 for plan type B, and .05 for plan type C;                                                
18 (5)  for annuities and guaranteed interest contracts valued on an issue                                                 
19 year basis, other than those with no cash settlement options, which do not guarantee                                    
20 interest on considerations received more than one year after issue or purchase and for                                  
21 annuities and guaranteed interest contracts valued on a change in fund basis which do                                   
22 not guarantee interest rates on considerations received more than 12 months beyond                                      
23 the valuation date, the weighting factors shown in (3) of this subsection or derived in                                 
24       of this subsection are increased by .05.                                                                          
25    * Sec. 5. AS 21.18.110(j) is amended to read:                                                                      
26 (j)  The reference interest rates referred to in (d) and (e) [(c)] of this section                                  
27       are as follows:                                                                                                   
28 (1)  for life insurance, the lesser of the average interest rate for a period                                           
29 of 36 months and the average interest rate for a period of 12 months, ending on                                         
30 June 30 of the calendar year next preceding the year of issue, of Moody's Corporate                                     
31 Bond Yield Average - Monthly Average Corporates, as published by Moody's                                                
01       Investors Service, Inc.;                                                                                          
02 (2)  for a single premium immediate annuity and for an annuity benefit                                                  
03 involving a life contingency arising from another annuity with a cash settlement                                        
04 option and a guaranteed interest contract with a cash settlement option, the average                                    
05 interest rate for a period of 12 months, ending on June 30 of the calendar year of issue                                
06 or year of purchase, of Moody's Corporate Bond Yield Average - Monthly Average                                          
07       Corporates, as published by Moody's Investors Service, Inc.;                                                      
08 (3)  for other annuities with cash settlement options and guaranteed                                                    
09 interest contracts with cash settlement options, valued on a year of issue basis, except                                
10 as provided in (2) of this subsection, with a guarantee duration in excess of 10 years,                                 
11 the lesser of the average interest rate for a period of 36 months and the average interest                              
12 rate for a period of 12 months, ending on June 30 of the calendar year of issue or                                      
13 purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates,                                         
14       as published by Moody's Investors Service, Inc.;                                                                  
15 (4)  for other annuities with cash settlement options and guaranteed                                                    
16 interest contracts with cash settlement options, valued on a year of issue basis, except                                
17 as provided in (2) of this subsection, with a guarantee duration of 10 years or less, the                               
18 average interest rate for a period of 12 months, ending on June 30 of the calendar year                                 
19 of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average                                         
20       Corporates, as published by Moody's Investors Service, Inc.;                                                      
21 (5)  for other annuities with no cash settlement options and for                                                        
22 guaranteed interest contracts with no cash settlement options, the average interest rate                                
23 for a period of 12 months, ending on June 30 of the calendar year of issue or purchase,                                 
24 of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as                                                
25       published by Moody's Investors Service, Inc.;                                                                     
26 (6)  for other annuities with cash settlement options and guaranteed                                                    
27 interest contracts with cash settlement options, valued on a change in fund basis,                                      
28 except as provided in (2) of this subsection, the average interest rate for a period of 12                              
29 months, ending on June 30 of the calendar year of the change in the fund, of Moody's                                    
30 Corporate Bond Yield Average - Monthly Average Corporates, as published by                                              
31       Moody's Investors Service, Inc.                                                                                   
01    * Sec. 6. AS 21.18.110(q) us amended to read:                                                                      
02            (q)  A qualified actuary who submits an opinion under (m) of this section                                    
03 (1)  is not liable for damages to a person, other than the insurer                                                  
04 [INSURANCE COMPANY] and the director, for an act, error, omission, decision, or                                         
05 conduct with respect to the actuary's opinion except in a case of fraud or wilful                                       
06       misconduct;                                                                                                       
07                 (2)  is subject to disciplinary action by the director; and                                             
08                 (3)  shall prepare a memorandum, in form and substance acceptable to                                    
09       the director, to support the actuarial opinion.                                                                   
10    * Sec. 7. AS 21.18.110(s) is amended to read:                                                                      
11 (s)  A memorandum in support of an actuarial opinion and other supporting                                               
12 material provided by an insurer to the director is confidential and may not be made                                     
13 public by the director or another person and is not subject to a civil subpoena, except                                 
14 for the purpose of defending an action seeking damages from a person by reason of an                                    
15 action required by this section. The memorandum or other material may be released by                                    
16 the director with the written consent of the insurer or to the American Academy of                                      
17 Actuaries upon a request stating that the memorandum or other material is required for                                  
18 the purpose of a disciplinary proceeding and setting out procedures satisfactory to the                                 
19 director for preserving the confidentiality of the memorandum or other material. Once                                   
20 a portion of the memorandum or other material is cited by the insurer in its marketing,                                 
21 is cited before a governmental agency other than a state insurance department, or is                                    
22 released by the insurer [COMPANY] to the news media, the remainder of the                                           
23       confidential memorandum or other material is no longer confidential.                                              
24    * Sec. 8. AS 21.18.110(t) is amended to read:                                                                      
25            (t)  An insurer's aggregate reserves for                                                                     
26 (1)  all life insurance policies, excluding disability and accidental death                                             
27 benefits, issued on or after July 1, 1992, may not be less than the aggregate reserves                                  
28 calculated under (b)(2), (4), (7), and (l) of this section, and the mortality table and                                 
29       rates of interest used in calculating nonforfeiture benefits for the policies; and                                
30 (2)  all policies, contracts, and benefits may not be less than the                                                     
31 aggregate reserves determined by an appointed [A QUALIFIED] actuary to be                                           
01       necessary to render the opinion required under (m) of this section.                                               
02    * Sec. 9. AS 21.18.110 is amended by adding a new subsection to read:                                              
03            (v)  In this section unless the context requires otherwise, the term "insurer"                               
04       means an entity that                                                                                              
05                 (1)  has written, issued, or reinsured life insurance contracts, accident                               
06       and health insurance contracts, or deposit-type contracts in this state and has at least                          
07       one of those policies in force or claim; or                                                                       
08                 (2)  has written, issued, or reinsured life insurance contracts in any state                            
09       and is required to hold a certificate of authority to write life insurance, accident and                          
10       health insurance, or deposit-type contracts in this state.                                                        
11    * Sec. 10. AS 21.18 is amended by adding a new section to read:                                                    
12 Sec. 21.18.112. Standard valuation for policies and contracts issued on or                                            
13 after the operative date of the valuation manual. (a) The director shall annually                                     
14 value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all                             
15 outstanding life insurance contracts, annuity and pure endowment contracts, accident                                    
16 and health contracts, and deposit-type contracts of every insurer issued on or after the                                
17 operative date of the valuation manual. In lieu of the valuation of the reserves required                               
18 of a foreign or alien insurer, the director may accept a valuation made, or caused to be                                
19 made, by the insurance supervisory official of any state or other jurisdiction when the                                 
20       valuation complies with the minimum standard provided in this section.                                          
21 (b)  For accident and health insurance contracts issued on or after the operative                                       
22 date of the valuation manual, the standard described in the valuation manual is the                                     
23 minimum standard of valuation required under (a) of this section. For accident and                                      
24 health insurance contracts issued before the operative date of the valuation manual, the                                
25 minimum standard of valuation is the standard required under AS 21.18.080 -                                             
26       21.18.086.                                                                                                        
27 (c)  Every insurer with outstanding life insurance contracts, accident and health                                       
28 insurance contracts, or deposit-type contracts in the state and subject to regulation by                                
29 the director shall annually submit to the director an opinion of the appointed actuary as                               
30 to whether the reserves and related actuarial items held in support of a policy or                                      
31 contract are computed appropriately, are based on assumptions that satisfy contractual                                  
01       provisions, are consistent with prior reported amounts, and comply with the applicable                            
02       laws of the state. The valuation manual must prescribe the specifics of this opinion,                             
03       including any items deemed to be necessary to its scope, as follows:                                              
04                 (1)  the actuarial opinion must                                                                         
05                      (A)  be in form and substance as specified in the valuation                                        
06            manual and acceptable to the director;                                                                       
07                      (B)  be submitted with the annual statement reflecting the                                         
08            valuation of the reserve liabilities on or after the operative date of the valuation                         
09            manual;                                                                                                      
10 (C)  apply to policies and contracts subject to this section, plus                                                      
11            other actuarial liabilities specified in the valuation manual;                                               
12 (D)  be based on standards adopted by the Actuarial Standards                                                           
13 Board or its successor and on additional standards prescribed in the valuation                                          
14            manual; and                                                                                                  
15 (E)  include, unless exempted in the valuation manual, an                                                               
16 assessment of whether the reserves and related actuarial items held in support                                          
17 of the policies and contracts specified in the valuation manual, when                                                   
18 considered in light of the assets held by an insurer with respect to the reserves                                       
19 and related actuarial items, including investment earnings on the assets and                                            
20 considerations anticipated to be received and retained under policies and                                               
21 contracts, adequately provide for an insurer's obligations under policies or                                            
22 contracts, including the benefits under and expenses associated with the                                                
23            policies or contracts;                                                                                       
24 (2)  in the case of an actuarial opinion submitted by a foreign or alien                                                
25 insurer, the director may accept an opinion filed by the insurer with the insurance                                     
26 supervisory official of another state that is accredited by the National Association of                                 
27 Insurance Commissioners if the director determines that the opinion meets the                                           
28       requirements applicable to an insurer domiciled in the state;                                                     
29                 (3)  an appointed actuary who submits an opinion under this subsection                                  
30 (A)  is not liable for damages to a person, other than the insurer                                                      
31 and the director, for an act, an error, an omission, a decision, or conduct with                                        
01            respect to the appointed actuary's opinion, except in the case of fraud or wilful                            
02            misconduct;                                                                                                  
03                      (B)  is subject to disciplinary action by the director against the                                 
04            appointed actuary or the insurer; and                                                                        
05                      (C)  shall prepare a memorandum, in form and substance                                             
06            acceptable to the director, to support the actuarial opinion;                                                
07 (4)  if an insurer fails to provide a supporting memorandum as                                                          
08 requested by the director within a period specified in the valuation manual or the                                      
09 director determines that the supporting memorandum fails to meet the standards                                          
10 adopted by the valuation manual or is otherwise unacceptable to the director, the                                       
11 director may engage a qualified actuary, at the expense of the insurer, to review the                                   
12 opinion and the basis for the opinion and to prepare a supporting memorandum as                                         
13       required under (c)(3)(C) of this subsection.                                                                      
14 (d)  Except as provided under (4) or (6) of this subsection, for policies and                                           
15 contracts issued on or after the operative date of the valuation manual, the standard                                   
16 prescribed in the valuation manual is the minimum standard of valuation required                                        
17       under (a) of this section, as follows:                                                                            
18 (1)  the operative date of the valuation manual is January 1 following                                                  
19       the effective date of this section;                                                                               
20 (2)  unless a change in the valuation manual specifies a later effective                                                
21 date, changes to the valuation manual are effective on January 1 following the date                                     
22 when the change to the valuation manual has been adopted by the National                                                
23       Association of Insurance Commissioners by an affirmative vote representing                                        
24 (A)  at least three-fourths of the members of the National                                                              
25 Association of Insurance Commissioners voting, but not less than a majority of                                          
26            the total membership; and                                                                                    
27 (B)  members of the National Association of Insurance                                                                   
28 Commissioners representing jurisdictions totaling greater than 75 percent of                                            
29 the direct premiums written as reported in the following annual statements                                              
30 most recently available before the vote in this paragraph: life, accident and                                           
31 health annual statements, health annual statements, or fraternal annual                                                 
01            statements;                                                                                                  
02                 (3)  the valuation manual must specify all of the following:                                            
03                      (A)  minimum valuation standards for and definitions of the                                        
04            policies or contracts subject to (a) of this section; the minimum valuation                                  
05            standards shall be                                                                                           
06                           (i)  the commissioner's reserve valuation method for life                                     
07                 insurance policies and contracts, other than annuity contracts, subject to                              
08                 (a) of this section;                                                                                    
09                           (ii)  the commissioner's annuity reserve valuation                                            
10                 method for annuity contracts subject to this section; and                                               
11 (iii)  minimum reserves for all other policies or contracts                                                             
12                 subject to this section;                                                                                
13 (B)  which policies or contracts or types of policies or contracts                                                      
14 that are subject to the requirements of a principle-based valuation in (e) of this                                      
15 section and the minimum valuation standards consistent with those                                                       
16            requirements;                                                                                                
17 (C)  for policies and contracts subject to a principle-based                                                            
18            valuation under (e) of this section:                                                                         
19 (i)  requirements for the format of reports to the director                                                             
20 under (e)(5)(C) of this section that include information necessary to                                                   
21 determine whether the valuation is appropriate and in compliance with                                                   
22                 this section;                                                                                           
23 (ii)  assumptions for risks over which the insurer does                                                                 
24                 not have significant control or influence;                                                              
25 (iii)  procedures for corporate governance and oversight                                                                
26 of the actuarial function and a process for appropriate waiver or                                                       
27                 modification of the procedures;                                                                         
28 (D)  for policies and contracts not subject to a principle-based                                                        
29            valuation under (e) of this section, the minimum valuation standard shall                                    
30 (i)  be consistent with the minimum standard of                                                                         
31                 valuation in AS 21.18.110; or                                                                           
01 (ii)  develop reserves, if there is no applicable minimum                                                               
02 standard in AS 21.18.110, that quantify the benefits, guarantees, and                                                   
03 funding associated with the contracts and their risks at a level of                                                     
04 conservatism that reflects conditions that include unfavorable events                                                   
05                 that have a reasonable probability of occurring;                                                        
06 (E)  other requirements, including those relating to reserve                                                            
07 methods, models for measuring risk, generation of economic scenarios,                                                   
08 assumptions, margins, use of insurer experience, risk measurement, disclosure,                                          
09 certifications, reports, actuarial opinions and memorandums, transition rules                                           
10            and internal controls; and                                                                                   
11 (F)  the data and form of the data required under (f) of this                                                           
12 section, directions for submitting the data, and other requirements, including                                          
13            data analyses and reporting of analyses;                                                                     
14 (4)  in the absence of a specific valuation requirement or if the director                                              
15 determines that a specific valuation requirement in the valuation manual is not in                                      
16 compliance with this section, the insurer shall, with respect to those requirements,                                    
17       comply with minimum valuation standards in AS 21.18.110;                                                          
18 (5)  the director may engage a qualified actuary, at the expense of the                                                 
19 insurer, to perform an actuarial examination of the insurer, to determine the                                           
20 appropriateness of a reserve assumption or method used by the insurer, or to review                                     
21 and determine an insurer's compliance with a requirement of this section; the director                                  
22 may rely on the opinion of a qualified actuary engaged by the director of another state,                                
23 district, or territory of the United States regarding provisions contained in this section;                             
24       in this paragraph, "engage" includes employ and contract;                                                         
25 (6)  the director may require an insurer to change an assumption or                                                     
26 method if the director determines the change is necessary to comply with the                                            
27 requirements of the valuation manual or this section, and the insurer shall adjust the                                  
28       reserves as required by the director.                                                                             
29 (e)  An insurer shall establish reserves using a principle based valuation that                                         
30 meets the following conditions for policies or contracts as specified in the valuation                                  
31       manual:                                                                                                           
01 (1)  quantify the benefits, guarantees, and funding associated with the                                                 
02 contracts and their risks at a level of conservatism that reflects conditions that include                              
03 unfavorable events that have a reasonable probability of occurring during the lifetime                                  
04 of the contracts and for policies or contracts with significant tail risk, that reflect                                 
05       conditions appropriately adverse to quantify the tail risk;                                                       
06 (2)  incorporate assumptions, risk analysis methods, and financial                                                      
07 models and management techniques that are consistent with, but not necessarily                                          
08 identical to, those used in the insurer's overall risk assessment process while                                         
09 recognizing potential differences in financial reporting structures and prescribed                                      
10       assumptions or methods;                                                                                           
11 (3)  incorporate assumptions that are derived in one of the following                                                   
12       manners:                                                                                                          
13                      (A)  the assumptions are prescribed in the valuation manual;                                       
14 (B)  for assumptions that are not prescribed, the assumptions                                                           
15 shall be established using the insurer's available experience, to the extent it is                                      
16 relevant and statistically credible; to the extent that data is not available,                                          
17 relevant, or statistically credible, the assumptions shall be established using                                         
18            other relevant or statistically credible experience;                                                         
19 (4)  provide margins for uncertainty, including adverse deviation and                                                   
20 estimation error, so that the greater the uncertainty the larger the margin and resulting                               
21       reserve;                                                                                                          
22 (5)  for an insurer using a principle-based valuation for one or more                                                   
23       policies or contracts subject to this subsection as specified in the valuation manual,                            
24 (A)  establish procedures for corporate governance and                                                                  
25 oversight of the actuarial valuation function consistent with those described in                                        
26            the valuation manual;                                                                                        
27 (B)  provide to the director and the board of directors an annual                                                       
28 certification of the effectiveness of the internal controls with respect to the                                         
29 principle-based valuation; the controls shall be designed to ensure that all                                            
30 material risks inherent in the liabilities and associated assets subject to the                                         
31 valuation are included in the valuation and that valuations are made in                                                 
01            accordance with the valuation manual; the certification shall be based on the                                
02            controls in place as of the end of the preceding calendar year;                                              
03                      (C)  develop and file with the director upon request a principle-                                  
04            based valuation report that complies with standards prescribed in the valuation                              
05            manual;                                                                                                      
06                 (6)  a principle-based valuation may include a prescribed formulaic                                     
07       reserve component.                                                                                                
08            (f)  An insurer shall submit mortality, morbidity, policyholder behavior, or                                 
09       expense experience and other data as prescribed in the valuation manual.                                          
10            (g)  In this section,                                                                                        
11 (1)  except as provided in this subsection, an insurer's confidential                                                   
12 information is not a public record under AS 40.25.100 - 40.25.295, except that, the                                     
13 director may use the confidential information in any regulatory or legal action brought                                 
14       against the insurer as a part of the director's official duties;                                                  
15 (2)  the director or another person who received confidential                                                           
16 information while acting under the authority of the director is not permitted or                                        
17       required to testify in any private civil action concerning the confidential information;                          
18 (3)  in order to assist in the performance of the director's duties, the                                                
19       director may share confidential information                                                                       
20 (A)  with other state, federal, and international regulatory                                                            
21 agencies and with the National Association of Insurance Commissioners and                                               
22            its affiliates and subsidiaries; and                                                                         
23 (B)  in the case of confidential information specified in (i)(1)(A)                                                     
24 and (4) of this section, with the Actuarial Board for Counseling and Discipline                                         
25 or its successor upon request stating that the confidential information is                                              
26 required for the purpose of professional disciplinary proceedings and with                                              
27            state, federal, and international law enforcement officials;                                                 
28 (C)  under (A) and (B) of this paragraph only if the recipient                                                          
29 agrees and has the legal authority to agree to maintain the confidentiality and                                         
30 privileged status of the documents, materials, data, and other information in the                                       
31            same manner and to the same extent required for the director;                                                
01 (4)  the director may receive documents, materials, data, and other                                                     
02 information, including otherwise confidential and privileged documents, materials,                                      
03 data, or information from the National Association of Insurance Commissioners and                                       
04 its affiliates and subsidiaries, from regulatory or law enforcement officials of other                                  
05 foreign or domestic jurisdictions, and from the Actuarial Board for Counseling and                                      
06 Discipline or its successor and shall maintain as confidential or privileged any                                        
07 document, material, data, or other information received with notice or the                                              
08 understanding that the document material, data, or information is confidential or                                       
09 privileged under the laws of the jurisdiction that is the source of the document,                                       
10       material, data, or other information;                                                                             
11 (5)  the director may enter into agreements governing the sharing and                                                   
12       use of information consistent with this section;                                                                  
13 (6)  a disclosure to the director under this section or sharing                                                         
14 confidential information as authorized in (3) of this subsection does not constitute a                                  
15       waiver of a claim of confidentiality.                                                                             
16 (h)  Notwithstanding (g) of this section, confidential information specified in                                         
17       (i)(1)(A) and (D) of this section                                                                                 
18 (1)  may be subject to subpoena for the purpose of defending an action                                                  
19 seeking damages from the appointed actuary submitting the related memorandum in                                         
20 support of an opinion submitted under (c) of this section or principle-based valuation                                  
21 report developed under (e)(5)(C) of this section because of an action required by this                                  
22       section or by regulations adopted under this section;                                                             
23 (2)  may otherwise be released by the director with the written consent                                                 
24       of the insurer; and                                                                                               
25 (3)  shall no longer be confidential once any portion of a memorandum                                                   
26 in support of an opinion submitted under (c) of this section or a principle-based                                       
27 valuation report developed under (e)(5)(C) of this section is cited by the insurer in its                               
28 marketing or is publicly volunteered to or before a governmental agency other than a                                    
29 state insurance department or is released by the insurer to the news media, all portions                                
30       of such memorandum or report shall no longer be confidential.                                                     
31            (i)  In this section,                                                                                        
01                 (1)  "confidential information" means                                                                   
02 (A)  a memorandum in support of an opinion submitted under                                                              
03 (c) of this section and documents, materials, and other information, including                                          
04 working papers and copies of them, created, produced, or obtained by or                                                 
05 disclosed to the director or another person in connection with the                                                      
06            memorandum;                                                                                                  
07 (B)  documents, materials, and other information, including                                                             
08 working papers and copies of them, created, produced, or obtained by or                                                 
09 disclosed to the director or another person in the course of an examination                                             
10 made under (d)(5) of this section; however, if an examination report or other                                           
11 material prepared in connection with an examination made under                                                          
12 AS 21.06.120 - 21.06.150 is not held as private and confidential information                                            
13 under AS 21.06.120 - 21.06.150, an examination report or other material                                                 
14 prepared in connection with an examination made under (d)(5) of this section                                            
15 is not confidential information to the same extent as if the examination report                                         
16            or other material had been prepared under AS 21.06.120 - 21.06.150;                                          
17 (C)  reports, documents, materials, and other information                                                               
18 developed by an insurer in support of or in connection with an annual                                                   
19 certification by the insurer under (e)(5)(B) of this section evaluating the                                             
20 effectiveness of the insurer's internal controls with respect to a principle-based                                      
21 valuation and other documents, materials, and other information, including                                              
22 working papers and copies of them, created, produced, or obtained by or                                                 
23 disclosed to the director or another person in connection with the reports,                                             
24            documents, materials, and other information;                                                                 
25 (D)  a principle-based valuation report developed under                                                                 
26 (e)(5)(C) of this section and other documents, materials, and other information,                                        
27 including working papers and copies of them, created, produced, or obtained                                             
28 by or disclosed to the director or another person in connection with the report;                                        
29            and                                                                                                          
30 (E)  documents, materials, data, and other information                                                                  
31 submitted by an insurer under (f) of this section, known as experience data and                                         
01 experience material, other documents, materials, data, and other information,                                           
02 including working papers and copies of them, created or produced in                                                     
03 connection with the experience data, or documents, materials, data, or other                                            
04 information that includes any potentially insurer-identifying or personally                                             
05 identifiable information that is provided to or obtained by the director together                                       
06 with experience data, experience materials, and other documents, materials,                                             
07 data, and other information, including working papers and copies of them,                                               
08 created, produced, or obtained by or disclosed to the director or another person                                        
09            in connection with the experience materials;                                                                 
10 (2)  "National Association of Insurance Commissioners," "law                                                            
11 enforcement agency," and "regulatory agency," include an employee, agent,                                               
12 consultant, contractor of the regulatory agency, law enforcement agency, or National                                    
13       Association of Insurance Commissioners.                                                                           
14    * Sec. 11. AS 21.18.900 is amended by adding new paragraphs to read:                                               
15 (8)  "accident and health insurance" means a contract that incorporates                                                 
16 morbidity risk and provides protection against economic loss resulting from accident,                                   
17 sickness, or a medical condition or a contract as may be specified in the valuation                                     
18       manual;                                                                                                           
19 (9)  "appointed actuary" means a qualified actuary who is appointed in                                                  
20 accordance with the valuation manual to prepare the actuarial opinion required in                                       
21       AS 21.18.112;                                                                                                     
22 (10)  "deposit-type contract" means a contract that does not incorporate                                                
23       mortality or morbidity risks or a contract specified in the valuation manual;                                     
24 (11)  "insurer" means an entity that has written, issued, or reinsured life                                             
25 insurance contracts, accident and health insurance contracts, or deposit-type contracts                                 
26       in                                                                                                                
27 (A)  this state and has at least one of those policies in force or                                                      
28            on claim; or                                                                                                 
29 (B)  another state and is required to hold a certificate of                                                             
30 authority to write life insurance, accident and health insurance, or deposit type                                       
31            contracts in this state;                                                                                     
01                 (12)  "life insurance" means contracts that incorporate mortality risk,                                 
02       including an annuity and pure endowment contract, or a contract specified in the                                  
03       valuation manual;                                                                                                 
04                 (13)  "policyholder behavior" means an action of a policyholder,                                        
05       contract holder, or another person with the right to elect options;                                               
06                 (14)  "principle-based valuation" means a reserve valuation that uses                                   
07       one or more methods or one or more assumptions determined by the insurer under                                    
08       AS 21.18.112(e), as specified in the valuation manual;                                                            
09                 (15)  "qualified actuary" means an individual who is qualified to sign                                  
10 the applicable statement of actuarial opinion in accordance with the qualification                                      
11 standards of the American Academy of Actuaries and who meets the requirements                                           
12       specified in the valuation manual;                                                                                
13 (16)  "tail risk" means a risk that occurs either where the frequency of                                                
14 low probability events is higher than expected under a normal probability distribution                                  
15       or when there are observed events of very significant size or magnitude;                                          
16 (17)  "valuation manual" means the manual of valuation instructions                                                     
17 adopted by the National Association of Insurance Commissioners as specified in                                          
18       AS 21.18.112(d)(1)(A).                                                                                            
19    * Sec. 12. AS 21.45.300(a) is amended to read:                                                                   
20 (a)  This section shall be known as the standard nonforfeiture law for life                                             
21 insurance. For purposes of this section, "operative date of the valuation manual"                                   
22 means January 1 of the first calendar year that the valuation manual as defined                                     
23       in AS 21.18.112 is effective.                                                                                 
24    * Sec. 13. AS 21.45.300(t) is amended to read:                                                                   
25 (t)  The adjusted premiums and present values for a policy of ordinary                                                  
26 insurance referred to in this section shall be calculated on the basis of the                                           
27 Commissioner's 1980 Standard Ordinary Mortality Table or, at the election of the                                        
28 insurer for any one or more specified plans of life insurance, the Commissioners 1980                                   
29 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors. The                                           
30 adjusted premiums and present values for a policy of industrial insurance shall be                                      
31 calculated on the basis of the Commissioner's 1961 Standard Industrial Mortality                                        
01 Table. The adjusted premiums and present values for a policy issued in a particular                                     
02 calendar year shall be calculated on the basis of a rate of interest not exceeding the                                  
03 nonforfeiture interest rate as defined in this subsection for policies issued in that                                   
04       calendar year. However, [PROVIDED, HOWEVER, THAT]                                                             
05 (1)  at the option of the insurer, calculations for all policies issued in a                                            
06 particular calendar year may be made on the basis of a rate of interest not exceeding                                   
07 the nonforfeiture interest rate, as defined in this subsection, for policies issued in the                              
08       immediately preceding calendar year;                                                                              
09 (2)  under a paid-up nonforfeiture benefit, including a paid-up dividend                                                
10 addition, a cash surrender value available, shall be calculated on the basis of the                                     
11 mortality table and rate of interest used in determining the amount of the paid-up                                      
12       nonforfeiture benefit and paid-up dividend additions, if any;                                                     
13 (3)  an insurer may calculate the amount of a guaranteed paid-up                                                        
14 nonforfeiture benefit including any paid-up addition under the policy on the basis of                                   
15 an interest rate not [NO] less than that specified in the policy for calculating cash                               
16       surrender values;                                                                                                 
17 (4)  in calculating the present value of paid-up term insurance with                                                    
18 accompanying pure endowment, if any, offered as nonforfeiture benefit, the rates of                                     
19 mortality assumed may be not more than those shown in the Commissioner's Extended                                       
20 Term Insurance Table for policies of ordinary insurance and not more than the                                           
21 Commissioner's 1961 Industrial Extended Term Insurance Table for policies of                                            
22       industrial insurance;                                                                                             
23 (5)  for insurance issued on a substandard basis, the calculations of                                                   
24 adjusted premiums and present values may be based on appropriate modifications                                          
25       mentioned above;                                                                                                  
26 (6)  for policies issued before the operative date of the valuation                                                 
27 manual, a Commissioner's Standard Ordinary Mortality Table [AN ORDINARY                                             
28 MORTALITY TABLE], adopted after 1980 by the National Association of Insurance                                           
29 Commissioners, that is approved by regulation adopted by the director for use in                                        
30 determining the minimum nonforfeiture standard may be substituted for the                                               
31 Commissioner's 1980 Standard Ordinary Mortality Table with or without Ten-Year                                          
01 Select Mortality Factors or for the Commissioner's 1980 Extended Term Insurance                                         
02 Table; for policies issued on or after the operative date of the valuation manual,                                  
03 the valuation manual shall provide the Commissioner's Standard Ordinary                                             
04 Mortality Table for use in determining the minimum nonforfeiture standard that                                      
05 may be substituted for the Commissioner's 1980 Standard Ordinary Mortality                                          
06 Table with or without the Ten-Year Select Mortality Factors or for the                                              
07 Commissioner's 1980 Extended Term Insurance Table; if the director approves                                         
08 by regulation a Commissioner's Standard Ordinary Mortality Table adopted by                                         
09 the National Association of Insurance Commissioners for use in determining the                                      
10 minimum nonforfeiture standard for policies issued on or after the operative date                                   
11 of the valuation manual, that minimum nonforfeiture standard supersedes the                                         
12       minimum nonforfeiture provided by the valuation manual;                                                       
13 (7)  for policies issued prior to the operative date of the valuation                                               
14 manual, a Commissioner's Standard Industrial Mortality Table [AN                                                    
15 INDUSTRIAL MORTALITY TABLE], adopted after 1980 by the National                                                         
16 Association of Insurance Commissioners, that is approved by regulation adopted by                                       
17 the director for use in determining the minimum nonforfeiture standard may be                                           
18 substituted for the Commissioner's 1961 Standard Industrial Mortality Table or the                                      
19 Commissioner's 1961 Industrial Extended Term Insurance Table; for policies issued                                   
20 on or after the operative date of the valuation manual, the valuation manual shall                                  
21 provide the Commissioner's Standard Ordinary Mortality Table for use in                                             
22 determining the minimum nonforfeiture standard that may be substituted for the                                      
23 Commissioner's 1961 Standard Industrial Mortality Table or the Commissioner's                                       
24 1961 Extended Term Insurance Table; if the director approves by regulation a                                        
25 Commissioner's Standard Industrial Mortality Table adopted by the National                                          
26 Association of Insurance Commissioners for use in determining the minimum                                           
27 nonforfeiture standard for policies issued on or after the operative date of the                                    
28 valuation manual, that minimum nonforfeiture standard supersedes the                                                
29 minimum nonforfeiture provided by the valuation manual; this [. THIS]                                               
30       subsection applies to all policies issued after the operative date of (w) of this section.                        
31    * Sec. 14. AS 21.45.300(u) is amended to read:                                                                   
01 (u)  The nonforfeiture interest rate for policies issued before the operative                                       
02 date of the valuation manual, the nonforfeiture interest rate a year for a policy                                   
03 issued in a particular calendar year shall be equal to 125 percent of the calendar year                                 
04 statutory valuation interest rate for the policy as defined in the Standard Valuation                                   
05 Law, rounded to the nearer one quarter of one percent, if the nonforfeiture interest                                
06 rate is not less than four percent; for policies issued on or after the operative date                              
07 of the valuation manual, the nonforfeiture interest rate a year for a policy issued                                 
08 in a particular calendar year is provided by the valuation manual. This subsection                                  
09       applies to all policies issued after the operative date of (w) of this section.                                   
10    * Sec. 15. AS 21.45.300 is amended by adding a new subsection to read:                                             
11            (dd)  In this section, "operative date of the valuation manual" means the                                    
12       January 1 of the first calendar year that the valuation manual described in                                       
13       AS 21.18.112 is effective.                                                                                        
14    * Sec. 16. The uncodified law of the State of Alaska is amended by adding a new section to                         
15 read:                                                                                                                   
16 TRANSITION: REGULATIONS. The director of the division of insurance may adopt                                            
17 regulations necessary to implement the changes made by this Act. The regulations take effect                            
18 under AS 44.62 (Administrative Procedure Act), but not before the effective date of the law                             
19 implemented by the regulation.                                                                                          
20    * Sec. 17. This Act takes effect immediately under AS 01.10.070(c).