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 AS 21.12.020 is repealed and reenacted to read: 05 (a) Credit for reinsurance transactions shall be allowed a domestic ceding 06 insurer as either an asset or a deduction from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).