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HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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| AN ACT concerning insurance.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Illinois Insurance Code is amended by |
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| changing Sections 223 and 531.09 as follows:
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| (215 ILCS 5/223) (from Ch. 73, par. 835)
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| Sec. 223. Director to value policies - Legal standard of |
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| valuation.
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| (1) The Director shall annually value, or cause to be |
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| valued, the
reserve liabilities (hereinafter called reserves) |
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| for all outstanding
life insurance policies and annuity and |
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| pure endowment contracts of
every life insurance company doing |
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| business in this State, except that
in the case of an alien |
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| company, such valuation shall be limited to its
United States |
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| business, and may certify the amount of any such reserves,
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| specifying the mortality table or tables, rate or rates of |
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| interest, and
methods (net level premium method or other) used |
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| in the calculation of
such reserves. Other assumptions may be |
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| incorporated into the reserve calculation to the extent |
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| permitted by the National Association of Insurance |
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| Commissioners' Accounting Practices and Procedures Manual. In |
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| calculating such reserves, he may use group methods
and |
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| approximate averages for fractions of a year or otherwise. In |
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HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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| lieu
of the valuation of the reserves herein required of any |
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| foreign or alien
company, he may accept any valuation made, or |
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| caused to be made, by the
insurance supervisory official of any |
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| state or other jurisdiction when
such valuation complies with |
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| the minimum standard herein provided and if
the official of |
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| such state or jurisdiction accepts as sufficient and
valid for |
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| all legal purposes the certificate of valuation of the
Director |
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| when such certificate states the valuation to have been made in
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| a specified manner according to which the aggregate reserves |
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| would be at
least as large as if they had been computed in the |
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| manner prescribed by
the law of that state or jurisdiction.
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| Any such company which at any time has adopted any standard |
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| of
valuation producing greater aggregate reserves than those |
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| calculated
according to the minimum standard herein provided |
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| may, with the approval
of the Director, adopt any lower |
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| standard of valuation, but not lower
than the minimum herein |
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| provided, however, that, for the purposes of this
subsection, |
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| the holding of additional reserves previously determined by a
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| qualified actuary to be necessary to render the opinion |
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| required by
subsection (1a) shall not be deemed to be the |
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| adoption of a higher standard
of valuation. In the valuation of |
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| policies the
Director shall give no consideration to, nor make |
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| any deduction because
of, the existence or the possession by |
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| the company of
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| (a) policy liens created by any agreement given or |
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| assented to by
any assured subsequent to July 1, 1937, for |
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HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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| which liens such assured has
not received cash or other |
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| consideration equal in value to the amount of
such liens, |
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| or
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| (b) policy liens created by any agreement entered into |
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| in violation
of section 232 unless the agreement imposing |
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| or creating such liens has
been approved by a Court in a |
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| proceeding under Article XIII, or in the
case of a foreign |
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| or alien company has been approved by a court in a
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| rehabilitation or liquidation proceeding or by the |
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| insurance official of
its domiciliary state or country, in |
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| accordance with the laws thereof.
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| (1a) This subsection shall become operative at the end of |
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| the first
full calendar year following the effective date of |
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| this amendatory Act of 1991.
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| (A) General.
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| (1) Every life insurance company doing business in |
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| this State shall
annually submit the opinion of a |
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| qualified actuary as to whether the
reserves and |
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| related actuarial items held in support of the policies |
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| and
contracts specified by the Director by regulation |
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| are computed
appropriately, are based on assumptions |
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| that satisfy contractual
provisions, are consistent |
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| with prior reported amounts and comply with
applicable |
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| laws of this State. The Director by regulation shall |
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| define the
specifics of this opinion and add any other |
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| items deemed to be necessary to
its scope.
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LRB095 07026 KBJ 27148 b |
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| (2) The opinion shall be submitted with the annual |
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| statement reflecting
the valuation of reserve |
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| liabilities for each year ending on or after December |
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| 31, 1992.
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| (3) The opinion shall apply to all business in |
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| force including
individual and group health insurance |
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| plans, in form and substance
acceptable to the Director |
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| as specified by regulation.
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| (4) The opinion shall be based on standards adopted |
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| from time to time by
the Actuarial Standards Board and |
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| on additional standards as the Director
may by |
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| regulation prescribe.
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| (5) In the case of an opinion required to be |
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| submitted by a foreign or
alien company, the Director |
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| may accept the opinion filed by that company
with the |
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| insurance supervisory official of another state if the |
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| Director
determines that the opinion reasonably meets |
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| the requirements applicable to
a company domiciled in |
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| this State.
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| (6) For the purpose of this Section, "qualified |
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| actuary" means a member
in good standing of the |
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| American Academy of Actuaries who meets the
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| requirements set forth in its regulations.
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| (7) Except in cases of fraud or willful misconduct, |
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| the qualified
actuary shall not be liable for damages |
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| to any person (other than the
insurance company and the |
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HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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| Director) for any act, error, omission, decision
or |
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| conduct with respect to the actuary's opinion.
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| (8) Disciplinary action by the Director against |
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| the company or the
qualified actuary shall be defined |
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| in regulations by the Director.
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| (9) A memorandum, in form and substance acceptable |
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| to the Director as
specified by regulation, shall be |
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| prepared to support each actuarial opinion.
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| (10) If the insurance company fails to provide a |
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| supporting memorandum
at the request of the Director |
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| within a period specified by regulation or
the Director |
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| determines that the supporting memorandum provided by |
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| the
insurance company fails to meet the standards |
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| prescribed by the regulations
or is otherwise |
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| unacceptable to the Director, the Director may engage a
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| qualified actuary at the expense of the company to |
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| review the opinion and
the basis for the opinion and |
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| prepare the supporting memorandum as is
required by the |
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| Director.
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| (11) Any memorandum in support of the opinion, and |
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| any other material
provided by the company to the |
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| Director in connection therewith, shall be
kept |
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| confidential by the Director and shall not be made |
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| public and shall
not be subject to subpoena, other than |
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| for the purpose of defending an
action seeking damages |
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| from any person by reason of any action required by
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HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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| this Section or by regulations promulgated hereunder; |
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| provided, however,
that the memorandum or other |
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| material may otherwise be released by the
Director (a) |
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| with the written consent of the company or (b) to the |
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| American
Academy of Actuaries upon request stating |
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| that the memorandum or other
material is required for |
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| the purpose of professional disciplinary
proceedings |
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| and setting forth procedures satisfactory to the |
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| Director for
preserving the confidentiality of the |
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| memorandum or other material. Once
any portion of the |
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| confidential memorandum is cited by the company in its
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| marketing or is cited before any governmental agency |
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| other than a state
insurance department or is released |
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| by the company to the news media, all
portions of the |
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| confidential memorandum shall be no longer |
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| confidential.
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| (B) Actuarial analysis of reserves and assets |
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| supporting those reserves.
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| (1) Every life insurance company, except as |
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| exempted by or under
regulation, shall also annually |
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| include in the opinion required by
paragraph (A)(1) of |
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| this subsection (1a), an opinion of the same qualified
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| actuary as to whether the reserves and related |
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| actuarial items held in
support of the policies and |
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| contracts specified by the Director by
regulation, |
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| when considered in light of the assets held by the |
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HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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| company with
respect to the reserves and related |
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| actuarial items including, but not
limited to, the |
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| investment earnings on the assets and the |
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| considerations
anticipated to be received and retained |
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| under the policies and contracts,
make adequate |
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| provision for the company's obligations under the |
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| policies
and contracts including, but not limited to, |
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| the benefits under and
expenses associated with the |
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| policies and contracts.
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| (2) The Director may provide by regulation for a |
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| transition period for
establishing any higher reserves |
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| which the qualified actuary may deem
necessary in order |
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| to render the opinion required by this Section.
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| (2) This subsection shall apply to only those policies and |
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| contracts
issued prior to the operative date of section 229.2 |
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| (the Standard
Non-forfeiture Law).
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| (a) Except as otherwise in this Article provided, the |
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| legal minimum
standard for valuation of contracts issued |
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| before January 1, 1908, shall
be the Actuaries or Combined |
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| Experience Table of Mortality with interest
at 4% per annum |
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| and for valuation of contracts issued on or after that
date |
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| shall be the American Experience Table of Mortality with |
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| either
Craig's or Buttolph's Extension for ages under 10 |
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| and with interest at 3
1/2% per annum. The legal minimum |
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| standard for the valuation of group
insurance policies |
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| under which premium rates are not guaranteed for a
period |
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LRB095 07026 KBJ 27148 b |
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| in excess of 5 years shall be the American Men Ultimate |
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| Table of
Mortality with interest at 3 1/2% per annum. Any |
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| life company may, at
its option, value its insurance |
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| contracts issued on or after January 1,
1938, in accordance |
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| with their terms on the basis of the American Men
Ultimate |
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| Table of Mortality with interest not higher than 3 1/2% per |
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| annum.
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| (b) Policies issued prior to January 1, 1908, may |
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| continue to be
valued according to a method producing |
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| reserves not less than those
produced by the full |
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| preliminary term method. Policies issued on and
after |
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| January 1, 1908, may be valued according to a method |
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| producing
reserves not less than those produced by the |
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| modified preliminary term
method hereinafter described in |
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| paragraph (c). Policies issued on and
after January 1, |
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| 1938, may be valued either according to a method
producing |
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| reserves not less than those produced by such modified
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| preliminary term method or by the select and ultimate |
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| method on the
basis that the rate of mortality during the |
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| first 5 years after the
issuance of such contracts |
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| respectively shall be calculated according to
the |
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| following percentages of rates shown by the American |
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| Experience
Table of Mortality:
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| (i) first insurance year 50% thereof;
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| (ii) second insurance year 65% thereof;
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| (iii) third insurance year 75% thereof;
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LRB095 07026 KBJ 27148 b |
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| (iv) fourth insurance year 85% thereof;
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| (v) fifth insurance year 95% thereof;
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| (c) If the premium charged for the first policy year |
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| under a limited
payment life preliminary term policy |
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| providing for the payment of all
premiums thereon in less |
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| than 20 years from the date of the policy or
under an |
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| endowment preliminary term policy, exceeds that charged |
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| for the
first policy year under 20 payment life preliminary |
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| term policies of the
same company, the reserve thereon at |
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| the end of any year, including the
first, shall not be less |
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| than the reserve on a 20 payment life
preliminary term |
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| policy issued in the same year at the same age,
together |
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| with an amount which shall be equivalent to the |
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| accumulation of
a net level premium sufficient to provide |
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| for a pure endowment at the
end of the premium payment |
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| period, equal to the difference between the
value at the |
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| end of such period of such a 20 payment life preliminary
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| term policy and the full net level premium reserve at such |
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| time of such
a limited payment life or endowment policy. |
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| The premium payment period
is the period during which |
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| premiums are concurrently payable under such
20 payment |
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| life preliminary term policy and such limited payment life |
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| or
endowment policy.
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| (d) The legal minimum standard for the valuations of |
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| annuities
issued on and after January 1, 1938, shall be the |
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| American Annuitant's
Table with interest not higher than 3 |
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LRB095 07026 KBJ 27148 b |
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| 3/4% per annum, and all annuities
issued before that date |
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| shall be valued on a basis not lower than that
used for the |
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| annual statement of the year 1937; but annuities deferred
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| 10 or more years and written in connection with life |
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| insurance shall be
valued on the same basis as that used in |
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| computing the consideration or
premiums therefor, or upon |
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| any higher standard at the option of the company.
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| (e) The Director may vary the standards of interest and |
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| mortality as
to contracts issued in countries other than |
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| the United States and may
vary standards of mortality in |
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| particular cases of invalid lives and
other extra hazards.
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| (f) The legal minimum standard for valuation of waiver |
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| of premium
disability benefits or waiver of premium and |
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| income disability benefits
issued on and after January 1, |
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| 1938, shall be the Class (3) Disability
Table (1926) |
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| modified to conform to the contractual waiting period, with
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| interest at not more than 3 1/2% per annum; but in no event |
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| shall the
values be less than those produced by the basis |
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| used in computing
premiums for such benefits. The legal |
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| minimum standard for the valuation
of such benefits issued |
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| prior to January 1, 1938, shall be such as to
place an |
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| adequate value, as determined by sound insurance |
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| practices, on
the liabilities thereunder and shall be such |
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| that the value of the
benefits under each and every policy |
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| shall in no case be less than the
value placed upon the |
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| future premiums.
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LRB095 07026 KBJ 27148 b |
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| (g) The legal minimum standard for the valuation of |
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| industrial
policies issued on or after January 1, 1938, |
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| shall be the American
Experience Table of Mortality or the |
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| Standard Industrial Mortality Table
or the Substandard |
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| Industrial Mortality Table with interest at 3 1/2%
per |
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| annum by the net level premium method, or in accordance |
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| with their
terms by the modified preliminary term method |
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| hereinabove described.
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| (h) Reserves for all such policies and contracts may be |
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| calculated,
at the option of the company, according to any |
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| standards which produce
greater aggregate reserves for all |
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| such policies and contracts than the
minimum reserves |
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| required by this subsection.
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| (3) This subsection shall apply to only those policies and |
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| contracts
issued on or after January 1, 1948 or such earlier |
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| operative date of
Section 229.2 (the Standard Non-forfeiture |
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| Law) as shall have been
elected by the insurance company |
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| issuing such policies or contracts.
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| (a) Except as otherwise provided in subsections (4), |
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| (6), and (7),
the minimum standard for the valuation of all |
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| such policies
and contracts shall be the Commissioners |
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| Reserve valuation method defined
in paragraphs (b) and (f) |
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| of this subsection and in subsection 5, 3 1/2%
interest for |
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| such policies issued prior to September 8, 1977, 5 1/2%
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| interest for single premium life insurance policies and 4 |
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| 1/2% interest for
all other such policies issued on or |
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LRB095 07026 KBJ 27148 b |
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| after September 8, 1977, and the following
tables:
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| (i) The Commissioners 1941 Standard Ordinary |
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| Mortality Table for all
Ordinary policies of life |
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| insurance issued on the standard basis,
excluding any |
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| disability and accidental death benefits in such |
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| policies,
for such policies issued prior to the |
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| operative date of subsection (4a)
of Section 229.2 |
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| (Standard Non-forfeiture Law); and the Commissioners
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| 1958 Standard Ordinary Mortality Table for such |
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| policies issued on or
after such operative date but |
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| prior to the operative date of subsection
(4c) of |
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| Section 229.2 provided that for any category of such
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| policies issued on female risks all modified net |
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| premiums and present
values referred to in this Act |
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| may, prior to September 8, 1977, be
calculated |
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| according to an age not more than 3 years younger than
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| the actual age of the insured and, after September 8, |
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| 1977,
calculated according to an age not more than 6 |
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| years younger than the actual
age of the insured; and |
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| for such policies issued on or after the operative
date |
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| of subsection (4c) of Section 229.2, (i)
the |
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| Commissioners 1980 Standard Ordinary Mortality Table, |
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| or (ii) at the
election of the company for any one or |
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| more specified plans of life insurance,
the |
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| Commissioners 1980 Standard Ordinary Mortality Table |
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| with Ten-Year
Select Mortality Factors, or (iii) any |
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LRB095 07026 KBJ 27148 b |
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| ordinary mortality table adopted
after 1980 by the |
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| National Association of Insurance Commissioners and
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| approved by regulations promulgated by the Director |
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| for use in determining
the minimum standard of |
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| valuation for such policies.
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| (ii) For all Industrial Life Insurance policies |
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| issued on the
standard basis, excluding any disability |
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| and accidental death benefits
in such policies--the |
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| 1941 Standard Industrial Mortality Table for such
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| policies issued prior to the operative date of |
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| subsection 4 (b) of
Section 229.2 (Standard |
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| Non-forfeiture Law); and for such policies issued
on or |
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| after such operative date the Commissioners 1961
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| Standard Industrial Mortality Table or any industrial |
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| mortality table
adopted after 1980 by the National |
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| Association of Insurance Commissioners
and approved by |
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| regulations promulgated by the Director for use in |
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| determining
the minimum standard of valuation for such |
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| policies.
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| (iii) For Individual Annuity and Pure Endowment |
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| contracts, excluding
any disability and accidental |
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| death benefits in such policies--the 1937
Standard |
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| Annuity Mortality Table--or, at the option of the |
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| company, the
Annuity Mortality Table for 1949, |
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| Ultimate, or any modification of
either of these tables |
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| approved by the Director.
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LRB095 07026 KBJ 27148 b |
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| (iv) For Group Annuity and Pure Endowment |
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| contracts, excluding any
disability and accidental |
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| death benefits in such policies--the Group
Annuity |
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| Mortality Table for 1951, any modification of such |
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| table
approved by the Director, or, at the option of |
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| the company, any of the
tables or modifications of |
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| tables specified for Individual Annuity and
Pure |
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| Endowment contracts.
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| (v) For Total and Permanent Disability Benefits in |
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| or supplementary
to Ordinary policies or contracts for |
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| policies or contracts issued on or
after January 1, |
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| 1966, the tables of Period 2 disablement rates and the
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| 1930 to 1950 termination rates of the 1952 Disability |
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| Study of the
Society of Actuaries, with due regard to |
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| the type of benefit, or any tables
of disablement rates |
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| and termination rates adopted after 1980 by the |
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| National
Association of Insurance Commissioners and |
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| approved by regulations promulgated
by the Director |
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| for use in determining the minimum standard of |
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| valuation
for such policies; for policies or contracts |
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| issued on or after January 1,
1961, and prior to |
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| January 1, 1966, either such tables or, at the option |
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| of
the company, the Class (3) Disability Table (1926); |
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| and for policies issued
prior to January 1, 1961, the |
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| Class (3) Disability Table (1926). Any such
table |
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| shall, for active lives, be combined with a mortality |
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LRB095 07026 KBJ 27148 b |
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| table permitted
for calculating the reserves for life |
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| insurance policies.
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| (vi) For Accidental Death benefits in or |
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| supplementary to
policies--for policies issued on or |
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| after January 1, 1966, the 1959
Accidental Death |
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| Benefits Table or any accidental death benefits table
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| adopted after 1980 by the National Association of |
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| Insurance Commissioners
and approved by regulations |
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| promulgated by the Director for use in
determining the |
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| minimum standard of valuation for such policies;
for |
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| policies issued on or after January 1, 1961, and prior |
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| to January 1,
1966, any of such tables or, at the |
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| option of the company, the
Inter-Company Double |
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| Indemnity Mortality Table; and for policies issued
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| prior to January 1, 1961, the Inter-Company Double |
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| Indemnity Mortality
Table. Either table shall be |
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| combined with a mortality table permitted for
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| calculating the reserves for life insurance policies.
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| (vii) For Group Life Insurance, life insurance |
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| issued on the
substandard basis and other special |
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| benefits--such tables as may be
approved by the |
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| Director.
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| (b) Except as otherwise provided in paragraph (f) of |
24 |
| subsection (3),
subsection (5), and subsection (7) |
25 |
| reserves according to the Commissioners
reserve valuation |
26 |
| method, for the life insurance and endowment benefits of
|
|
|
|
HB0938 Engrossed |
- 16 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| policies providing for a uniform amount of insurance and |
2 |
| requiring the
payment of uniform premiums shall be the |
3 |
| excess, if any, of the present
value, at the date of |
4 |
| valuation, of such future guaranteed benefits
provided for |
5 |
| by such policies, over the then present value of any future
|
6 |
| modified net premiums therefor. The modified net premiums |
7 |
| for any such
policy shall be such uniform percentage of the |
8 |
| respective contract premiums
for such benefits that the |
9 |
| present value, at the date of issue of the
policy, of all |
10 |
| such modified net premiums shall be equal to the sum of the
|
11 |
| then present value of such benefits provided for by the |
12 |
| policy and the
excess of (A) over (B), as follows:
|
13 |
| (A) A net level annual premium equal to the present |
14 |
| value, at the
date of issue, of such benefits provided |
15 |
| for after the first policy
year, divided by the present |
16 |
| value, at the date of issue, of an annuity
of one per |
17 |
| annum payable on the first and each subsequent |
18 |
| anniversary of
such policy on which a premium falls |
19 |
| due; provided, however, that such
net level annual |
20 |
| premium shall not exceed the net level annual premium
|
21 |
| on the 19 year premium whole life plan for insurance of |
22 |
| the same amount
at an age one year higher than the age |
23 |
| at issue of such policy.
|
24 |
| (B) A net one year term premium for such benefits |
25 |
| provided for in
the first policy year.
|
26 |
| For any life insurance policy issued on or after |
|
|
|
HB0938 Engrossed |
- 17 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| January 1, 1987, for
which the contract premium in the |
2 |
| first policy year exceeds that of the
second year with no |
3 |
| comparable additional benefit being provided in that
first |
4 |
| year, which policy provides an endowment benefit or a cash |
5 |
| surrender
value or a combination thereof in an amount |
6 |
| greater than such excess
premium, the reserve according to |
7 |
| the Commissioners reserve
valuation method as of any policy |
8 |
| anniversary occurring on or before the
assumed ending date, |
9 |
| defined herein as the first policy anniversary on which
the |
10 |
| sum of any endowment benefit and any cash surrender value |
11 |
| then available
is greater than such excess premium, shall, |
12 |
| except as otherwise provided
in paragraph (f) of subsection |
13 |
| (3), be the greater of the reserve as of
such policy |
14 |
| anniversary calculated as described in the preceding part |
15 |
| of
this paragraph (b) and the reserve as of such policy |
16 |
| anniversary calculated
as described in the preceding part |
17 |
| of this paragraph (b) with (i) the value
defined in subpart |
18 |
| A of the preceding part of this paragraph (b) being reduced
|
19 |
| by 15% of the amount of such excess first year premium, |
20 |
| (ii) all present
values of benefits and premiums being |
21 |
| determined without reference to
premiums or benefits |
22 |
| provided for by the policy after the assumed ending
date, |
23 |
| (iii) the policy being assumed to mature on such date as an
|
24 |
| endowment, and (iv) the cash surrender value provided on |
25 |
| such date being
considered as an endowment benefit. In |
26 |
| making the above comparison, the
mortality and interest |
|
|
|
HB0938 Engrossed |
- 18 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| bases stated in paragraph (a) of subsection (3) and
in |
2 |
| subsection 6 shall be used.
|
3 |
| Reserves according to the Commissioners reserve |
4 |
| valuation method for
(i) life insurance policies providing |
5 |
| for a varying amount of insurance
or requiring the payment |
6 |
| of varying premiums, (ii) group annuity and pure
endowment |
7 |
| contracts purchased under a retirement plan or plan of |
8 |
| deferred
compensation, established or maintained by an |
9 |
| employer (including a partnership
or sole proprietorship) |
10 |
| or by an employee organization, or by both, other
than a |
11 |
| plan providing individual retirement accounts or |
12 |
| individual retirement
annuities under Section 408 of the |
13 |
| Internal Revenue Code, as now or hereafter
amended, (iii) |
14 |
| disability and accidental death benefits in all policies
|
15 |
| and contracts, and (iv) all other benefits, except life
|
16 |
| insurance and endowment benefits in life insurance |
17 |
| policies and benefits
provided by all other annuity and |
18 |
| pure endowment contracts, shall be
calculated by a method |
19 |
| consistent with the principles of this paragraph
(b), |
20 |
| except that any extra premiums charged because of |
21 |
| impairments or
special hazards shall be disregarded in the |
22 |
| determination of modified
net premiums.
|
23 |
| (c) In no event shall a company's aggregate reserves |
24 |
| for all life
insurance policies, excluding disability and |
25 |
| accidental death benefits be
less than the aggregate |
26 |
| reserves calculated in accordance with the methods
set |
|
|
|
HB0938 Engrossed |
- 19 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| forth in paragraphs (b), (f), and (g) of subsection (3) and |
2 |
| in
subsection (5) and the mortality table or tables and |
3 |
| rate or rates of
interest used in calculating |
4 |
| non-forfeiture benefits for such policies.
|
5 |
| (d) In no event shall the aggregate reserves for all |
6 |
| policies,
contracts, and benefits be less than the |
7 |
| aggregate reserves determined by
the qualified actuary to |
8 |
| be necessary to render the opinion required by
subsection |
9 |
| (1a).
|
10 |
| (e) Reserves for any category of policies, contracts or |
11 |
| benefits as
established by the Director, may be calculated, |
12 |
| at the option of the
company, according to any standards |
13 |
| which produce greater aggregate
reserves for such category |
14 |
| than those calculated according to the
minimum standard |
15 |
| herein provided, but the rate or rates of interest used
for |
16 |
| policies and contracts, other than annuity and pure |
17 |
| endowment contracts,
shall not be higher than the |
18 |
| corresponding rate or rates of interest
used in calculating |
19 |
| any nonforfeiture benefits provided for therein.
|
20 |
| (f) If in any contract year the gross premium charged |
21 |
| by any life
insurance company on any policy or contract is |
22 |
| less than the valuation net
premium for the policy or |
23 |
| contract calculated by the method used in
calculating the |
24 |
| reserve thereon but using the minimum valuation standards
|
25 |
| of mortality and rate of interest, the minimum reserve |
26 |
| required for such
policy or contract shall be the greater |
|
|
|
HB0938 Engrossed |
- 20 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| of either the reserve calculated
according to the mortality |
2 |
| table, rate of interest, and method actually
used for such |
3 |
| policy or contract, or the reserve calculated by the method
|
4 |
| actually used for such policy or contract but using the |
5 |
| minimum standards
of mortality and rate of interest and |
6 |
| replacing the valuation net premium
by the actual gross |
7 |
| premium in each contract year for which the valuation
net |
8 |
| premium exceeds the actual gross premium. The minimum |
9 |
| valuation
standards of mortality and rate of interest |
10 |
| referred to in this paragraph
(f) are those standards |
11 |
| stated in subsection (6) and paragraph (a) of
subsection |
12 |
| (3).
|
13 |
| For any life insurance policy issued on or after |
14 |
| January 1, 1987, for which
the gross premium in the first |
15 |
| policy year exceeds that of the second year
with no |
16 |
| comparable additional benefit provided in that first year, |
17 |
| which
policy provides an endowment benefit or a cash |
18 |
| surrender value or a combination
thereof in an amount |
19 |
| greater than such excess premium, the foregoing provisions
|
20 |
| of this paragraph (f) shall be applied as if the method |
21 |
| actually used in
calculating the reserve for such policy |
22 |
| were the method described in paragraph
(b) of subsection |
23 |
| (3), ignoring the second paragraph of said paragraph (b).
|
24 |
| The minimum reserve at each policy anniversary of such a |
25 |
| policy shall be
the greater of the minimum reserve |
26 |
| calculated in accordance with paragraph
(b) of subsection |
|
|
|
HB0938 Engrossed |
- 21 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| (3), including the second paragraph of said paragraph
(b), |
2 |
| and the minimum reserve calculated in accordance with this |
3 |
| paragraph (f).
|
4 |
| (g) In the case of any plan of life insurance which |
5 |
| provides for future
premium determination, the amounts of |
6 |
| which are to be determined by the
insurance company based |
7 |
| on then estimates of future experience, or in the
case of |
8 |
| any plan of life insurance or annuity which is of such a |
9 |
| nature that
the minimum reserves cannot be determined by |
10 |
| the methods described in
paragraphs (b) and (f) of |
11 |
| subsection (3) and subsection (5), the reserves
which are |
12 |
| held under any such plan shall:
|
13 |
| (i) be appropriate in relation to the benefits and |
14 |
| the pattern of
premiums for that plan, and
|
15 |
| (ii) be computed by a method which is consistent |
16 |
| with the principles
of this Standard Valuation Law, as |
17 |
| determined by regulations promulgated by
the Director.
|
18 |
| (4) Except as provided in subsection (6), the minimum |
19 |
| standard for
the valuation of all individual annuity and pure |
20 |
| endowment contracts issued
on or after the operative date of |
21 |
| this subsection, as defined herein, and
for all annuities and |
22 |
| pure endowments purchased on or after such operative
date under |
23 |
| group annuity and pure endowment contracts shall be the
|
24 |
| Commissioners Reserve valuation methods defined in paragraph |
25 |
| (b) of
subsection (3) and subsection (5) and the following |
26 |
| tables and interest rates:
|
|
|
|
HB0938 Engrossed |
- 22 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| (a) For individual single premium immediate annuity |
2 |
| contracts, excluding
any disability and accidental death |
3 |
| benefits in such contracts, the 1971
Individual Annuity |
4 |
| Mortality Table, any individual annuity mortality table
|
5 |
| adopted after 1980 by the National Association of Insurance |
6 |
| Commissioners
and approved by regulations promulgated by |
7 |
| the Director for use in determining
the minimum standard of |
8 |
| valuation for such contracts, or any modification
of those |
9 |
| tables approved by the Director, and 7 1/2% interest.
|
10 |
| (b) For individual and pure endowment contracts other |
11 |
| than single premium
annuity contracts, excluding any |
12 |
| disability and accidental death benefits
in such |
13 |
| contracts, the 1971 Individual Annuity Mortality Table, |
14 |
| any
individual annuity mortality table adopted after 1980 |
15 |
| by the National
Association of Insurance Commissioners and |
16 |
| approved by regulations
promulgated by the Director for use |
17 |
| in determining the minimum standard of
valuation for such |
18 |
| contracts, or any modification of those tables
approved by |
19 |
| the Director, and 5 1/2% interest for single premium |
20 |
| deferred
annuity and pure endowment contracts and 4 1/2% |
21 |
| interest for all other such
individual annuity and pure |
22 |
| endowment contracts.
|
23 |
| (c) For all annuities and pure endowments purchased |
24 |
| under group annuity
and pure endowment contracts, |
25 |
| excluding any disability and accidental death
benefits |
26 |
| purchased under such contracts, the 1971 Group Annuity |
|
|
|
HB0938 Engrossed |
- 23 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| Mortality
Table, any group annuity mortality table adopted |
2 |
| after 1980 by the National
Association of Insurance |
3 |
| Commissioners and approved by regulations promulgated
by |
4 |
| the Director for use in determining the minimum standard of |
5 |
| valuation
for such annuities and pure endowments, or any |
6 |
| modification of those
tables approved by the Director, and |
7 |
| 7 1/2% interest.
|
8 |
| After September 8, 1977, any company may file with the |
9 |
| Director a written
notice of its election to comply with the |
10 |
| provisions of this subsection
after a specified date before |
11 |
| January 1, 1979, which shall be the operative
date of this |
12 |
| subsection for such company; provided, a company may elect a
|
13 |
| different operative date for individual annuity and pure |
14 |
| endowment
contracts from that elected for group annuity and |
15 |
| pure endowment contracts.
If a company makes no election, the |
16 |
| operative date of this subsection for
such company shall be |
17 |
| January 1, 1979.
|
18 |
| (5) This subsection shall apply to all annuity and pure |
19 |
| endowment contracts
other than group annuity and pure endowment |
20 |
| contracts purchased under a
retirement plan or plan of deferred |
21 |
| compensation, established or maintained
by an employer |
22 |
| (including a partnership or sole proprietorship) or by an
|
23 |
| employee organization, or by both, other than a plan providing |
24 |
| individual
retirement accounts or individual retirement |
25 |
| annuities under Section 408
of the Internal Revenue Code, as |
26 |
| now or hereafter amended.
|
|
|
|
HB0938 Engrossed |
- 24 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| Reserves according to the Commissioners annuity reserve |
2 |
| method for
benefits under annuity or pure endowment contracts, |
3 |
| excluding any
disability and accidental death benefits in such |
4 |
| contracts, shall be the
greatest of the respective excesses of |
5 |
| the present values, at the date of
valuation, of the future |
6 |
| guaranteed benefits, including guaranteed
nonforfeiture |
7 |
| benefits, provided for by such contracts at the end of each
|
8 |
| respective contract year, over the present value, at the date |
9 |
| of valuation,
of any future valuation considerations derived |
10 |
| from future gross
considerations, required by the terms of such |
11 |
| contract, that become payable
prior to the end of such |
12 |
| respective contract year. The future guaranteed
benefits shall |
13 |
| be determined by using the mortality table, if any, and the
|
14 |
| interest rate, or rates, specified in such contracts for |
15 |
| determining
guaranteed benefits. The valuation considerations |
16 |
| are the portions of the
respective gross considerations applied |
17 |
| under the terms of such contracts
to determine nonforfeiture |
18 |
| values.
|
19 |
| (6) (a) Applicability of this subsection. (i) The interest |
20 |
| rates used
in determining the minimum standard for the |
21 |
| valuation of
|
22 |
| (A) all life insurance policies issued in a |
23 |
| particular calendar year,
on or after the operative |
24 |
| date of subsection (4c) of Section 229.2 (Standard
|
25 |
| Nonforfeiture Law),
|
26 |
| (B) all individual annuity and pure endowment |
|
|
|
HB0938 Engrossed |
- 25 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| contracts issued in a
particular calendar year ending |
2 |
| on or after December 31, 1983,
|
3 |
| (C) all annuities and pure endowments purchased in |
4 |
| a particular calendar
year ending on or after December |
5 |
| 31, 1983, under group annuity and pure
endowment |
6 |
| contracts, and
|
7 |
| (D) the net increase in a particular calendar year |
8 |
| ending after December
31, 1983, in amounts held under |
9 |
| guaranteed interest contracts
|
10 |
| shall be the calendar year statutory valuation interest |
11 |
| rates, as defined
in this subsection.
|
12 |
| (b) Calendar Year Statutory Valuation Interest Rates.
|
13 |
| (i) The calendar year statutory valuation interest |
14 |
| rates shall be determined
according to the following |
15 |
| formulae, rounding "I" to the nearest .25%.
|
16 |
| (A) For life insurance,
|
17 |
| I = .03 + W (R1 - .03) + W/2 (R2 - .09).
|
18 |
| (B) For single premium immediate annuities and |
19 |
| annuity benefits
involving life contingencies |
20 |
| arising from other annuities with cash
settlement |
21 |
| options and from guaranteed interest contracts |
22 |
| with cash settlement options,
|
23 |
| I = .03 + W (R - .03) or with prior approval of |
24 |
| the Director I = .03 + W (Rq - .03).
|
25 |
| For the purposes of this subparagraph (i), "I" |
26 |
| equals the calendar year
statutory valuation interest |
|
|
|
HB0938 Engrossed |
- 26 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| rate, "R" is the reference interest rate defined
in |
2 |
| this subsection, "R1" is the lesser of R and .09, "R2" |
3 |
| is the greater
of R and .09, "Rq" is the quarterly |
4 |
| reference interest rate defined in
this subsection, |
5 |
| and "W" is the weighting factor defined in this |
6 |
| subsection.
|
7 |
| (C) For other annuities with cash settlement |
8 |
| options and guaranteed interest
contracts with |
9 |
| cash settlement options, valued on an issue year |
10 |
| basis, except
as stated in (B), the formula for |
11 |
| life insurance stated in (A) applies to
annuities |
12 |
| and guaranteed interest contracts with guarantee |
13 |
| durations in
excess of 10 years, and the formula |
14 |
| for single premium immediate annuities
stated in |
15 |
| (B) above applies to annuities and guaranteed |
16 |
| interest contracts
with guarantee durations of 10 |
17 |
| years or less.
|
18 |
| (D) For other annuities with no cash |
19 |
| settlement options and for
guaranteed interest |
20 |
| contracts with no cash settlement options, the |
21 |
| formula
for single premium immediate annuities |
22 |
| stated in (B) applies.
|
23 |
| (E) For other annuities with cash settlement |
24 |
| options and
guaranteed interest contracts with |
25 |
| cash settlement options, valued on a
change in fund |
26 |
| basis, the formula for single premium immediate |
|
|
|
HB0938 Engrossed |
- 27 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| annuities
stated in (B) applies.
|
2 |
| (ii) If the calendar year statutory valuation |
3 |
| interest rate for
any life insurance policy issued in |
4 |
| any calendar year determined without
reference to this |
5 |
| subparagraph differs from the corresponding actual |
6 |
| rate
for similar policies issued in the immediately |
7 |
| preceding calendar year by
less than .5%, the calendar |
8 |
| year statutory valuation interest rate for such
life |
9 |
| insurance policy shall be the corresponding actual |
10 |
| rate for the
immediately preceding calendar year. For |
11 |
| purposes of applying this
subparagraph, the calendar |
12 |
| year statutory valuation interest rate for life
|
13 |
| insurance policies issued in a calendar year shall be |
14 |
| determined for 1980,
using the reference interest rate |
15 |
| defined for 1979, and shall be determined
for each |
16 |
| subsequent calendar year regardless of when subsection |
17 |
| (4c) of
Section 229.2 (Standard Nonforfeiture Law) |
18 |
| becomes operative.
|
19 |
| (c) Weighting Factors.
|
20 |
| (i) The weighting factors referred to in the |
21 |
| formulae stated in
paragraph (b) are given in the |
22 |
| following tables.
|
23 |
| (A) Weighting Factors for Life Insurance.
|
|
24 | | Guarantee |
Weighting |
|
25 | | Duration |
Factors |
|
26 | | (Years) |
|
|
|
|
|
|
HB0938 Engrossed |
- 28 - |
LRB095 07026 KBJ 27148 b |
|
|
1 | | 10 or less |
.50 |
|
2 | | More than 10, but not more than 20 |
.45 |
|
3 | | More than 20 |
.35 |
|
4 |
| For life insurance, the guarantee duration is |
5 |
| the maximum number of
years the life insurance can |
6 |
| remain in force on a basis guaranteed in the
policy |
7 |
| or under options to convert to plans of life |
8 |
| insurance with premium
rates or nonforfeiture |
9 |
| values or both which are guaranteed in the original
|
10 |
| policy.
|
11 |
| (B) The weighting factor for single premium |
12 |
| immediate annuities
and for annuity benefits |
13 |
| involving life contingencies arising from other
|
14 |
| annuities with cash settlement options and |
15 |
| guaranteed interest contracts
with cash settlement |
16 |
| options is .80.
|
17 |
| (C) The weighting factors for other annuities |
18 |
| and for guaranteed
interest contracts, except as |
19 |
| stated in (B) of this subparagraph (i), shall
be as |
20 |
| specified in tables (1), (2), and (3) of this |
21 |
| subpart (C), according to
the rules and |
22 |
| definitions in (4), (5) and (6) of this subpart |
23 |
| (C).
|
24 |
| (1) For annuities and guaranteed interest |
25 |
| contracts valued on
an issue year basis.
|
|
26 | | Guarantee |
Weighting Factor |
|
|
|
|
|
HB0938 Engrossed |
- 29 - |
LRB095 07026 KBJ 27148 b |
|
|
1 | | Duration |
for Plan Type |
|
2 | | (Years) |
A B C |
|
3 | | 5 or less ..................................... |
.80 .60 .50 |
|
4 | | More than 5, but not |
|
|
5 | | more than 10 .................................. |
.75 .60 .50 |
|
6 | | More than 10, but not |
|
|
7 | | more than 20 .................................. |
.65 .50 .45 |
|
8 | | More than 20 .................................. |
.45 .35 .35 |
|
9 |
| (2) For annuities and guaranteed interest |
10 |
| contracts valued on a change
in fund basis, the |
11 |
| factors shown in (1) for Plan Types A, B and C are
|
12 |
| increased by .15, .25 and .05, respectively.
|
13 |
| (3) For annuities and guaranteed interest |
14 |
| contracts valued on an issue
year basis, other than |
15 |
| those with no cash settlement options, which do not
|
16 |
| guarantee interest on considerations received more |
17 |
| than one year after
issue or purchase, and for |
18 |
| annuities and guaranteed interest contracts
valued |
19 |
| on a change in fund basis which do not guarantee |
20 |
| interest rates on
considerations received more |
21 |
| than 12 months beyond the valuation date, the
|
22 |
| factors shown in (1), or derived in (2), for Plan |
23 |
| Types A, B and C are
increased by .05.
|
24 |
| (4) For other annuities with cash settlement |
25 |
| options and guaranteed
interest contracts with |
26 |
| cash settlement options, the guarantee duration
is |
|
|
|
HB0938 Engrossed |
- 30 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| the number of years for which the contract |
2 |
| guarantees interest rates
in excess of the |
3 |
| calendar year statutory valuation interest rate |
4 |
| for life
insurance policies with guarantee |
5 |
| durations in excess of 20 years. For
other |
6 |
| annuities with no cash settlement options, and for |
7 |
| guaranteed
interest contracts with no cash |
8 |
| settlement options, the guarantee duration
is the |
9 |
| number of years from the date of issue or date of |
10 |
| purchase to the
date annuity benefits are |
11 |
| scheduled to commence.
|
12 |
| (5) The plan types used in the above tables are |
13 |
| defined as follows.
|
14 |
| Plan Type A is a plan under which the |
15 |
| policyholder may not withdraw
funds, or may |
16 |
| withdraw funds at any time but only (a) with an |
17 |
| adjustment to
reflect changes in interest rates or |
18 |
| asset values since receipt of the
funds by the |
19 |
| insurance company, (b) without such an adjustment |
20 |
| but in
installments over 5 years or more, or (c) as |
21 |
| an immediate life annuity.
|
22 |
| Plan Type B is a plan under which the |
23 |
| policyholder may not withdraw
funds before |
24 |
| expiration of the interest rate guarantee, or may |
25 |
| withdraw
funds before such expiration but only (a) |
26 |
| with an adjustment to reflect
changes in interest |
|
|
|
HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
|
|
1 |
| rates or asset values since receipt of the funds by |
2 |
| the
insurance company, or (b) without such |
3 |
| adjustment but in installments over
5 years or |
4 |
| more. At the end of the interest rate guarantee, |
5 |
| funds may be
withdrawn without such adjustment in a |
6 |
| single sum or installments over less
than 5 years.
|
7 |
| Plan Type C is a plan under which the |
8 |
| policyholder may withdraw funds
before expiration |
9 |
| of the interest rate guarantee in a single sum or
|
10 |
| installments over less than 5 years either (a) |
11 |
| without adjustment to
reflect changes in interest |
12 |
| rates or asset values since receipt of the
funds by |
13 |
| the insurance company, or (b) subject only to a |
14 |
| fixed surrender
charge stipulated in the contract |
15 |
| as a percentage of the fund.
|
16 |
| (6) A company may elect to value guaranteed |
17 |
| interest contracts
with cash settlement options |
18 |
| and annuities with cash settlement options on
|
19 |
| either an issue year basis or on a change in fund |
20 |
| basis. Guaranteed
interest contracts with no cash |
21 |
| settlement options and other annuities with
no |
22 |
| cash settlement options shall be valued on an issue |
23 |
| year basis. As used
in this Section, "issue year |
24 |
| basis of valuation" refers to a valuation
basis |
25 |
| under which the interest rate used to determine the |
26 |
| minimum valuation
standard for the entire duration |
|
|
|
HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
|
|
1 |
| of the annuity or guaranteed interest
contract is |
2 |
| the calendar year valuation interest rate for the |
3 |
| year of issue
or year of purchase of the annuity or |
4 |
| guaranteed interest contract.
"Change in fund |
5 |
| basis of valuation", as used in this Section, |
6 |
| refers to a
valuation basis under which the |
7 |
| interest rate used to determine the minimum
|
8 |
| valuation standard applicable to each change in |
9 |
| the fund held under the
annuity or guaranteed |
10 |
| interest contract is the calendar year valuation
|
11 |
| interest rate for the year of the change in the |
12 |
| fund.
|
13 |
| (d) Reference Interest Rate. (i) The reference |
14 |
| interest rate referred to
in paragraph (b) of this |
15 |
| subsection is defined as follows.
|
16 |
| (A) For all life insurance, the reference interest |
17 |
| rate is the lesser
of the average over a period of 36 |
18 |
| months, and the average over a period
of 12 months, |
19 |
| with both periods ending on June 30, or with prior |
20 |
| approval
of the Director ending on December 31, of the |
21 |
| calendar year next
preceding the year of issue, of |
22 |
| Moody's Corporate Bond Yield Average - Monthly
Average |
23 |
| Corporates, as published by Moody's Investors Service, |
24 |
| Inc.
|
25 |
| (B) For single premium immediate annuities and for |
26 |
| annuity benefits
involving life contingencies arising |
|
|
|
HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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|
1 |
| from other annuities with cash
settlement options and |
2 |
| guaranteed interest contracts with cash settlement
|
3 |
| options, the reference interest rate is the average |
4 |
| over a period of 12
months, ending on June 30, or with |
5 |
| prior approval of the Director ending on
December 31, |
6 |
| of the calendar year of issue or year of purchase, of |
7 |
| Moody's
Corporate Bond Yield Average - Monthly Average |
8 |
| Corporates, as published by
Moody's Investors Service, |
9 |
| Inc.
|
10 |
| (C) For annuities with cash settlement options and |
11 |
| guaranteed interest
contracts with cash settlement |
12 |
| options, valued on a year of issue basis,
except those |
13 |
| described in (B), with guarantee durations in excess of |
14 |
| 10
years, the reference interest rate is the lesser of |
15 |
| the average over a period
of 36 months and the average |
16 |
| over a period of 12 months, ending on June
30, or with |
17 |
| prior approval of the Director ending on December 31, |
18 |
| of
the calendar year of issue or purchase, of Moody's |
19 |
| Corporate Bond
Yield Average-Monthly Average |
20 |
| Corporates, as published by Moody's Investors
Service, |
21 |
| Inc.
|
22 |
| (D) For other annuities with cash settlement |
23 |
| options and guaranteed
interest contracts with cash |
24 |
| settlement options, valued on a year of issue
basis, |
25 |
| except those described in (B), with guarantee |
26 |
| durations of 10 years
or less, the reference interest |
|
|
|
HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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|
1 |
| rate is the average over a period of 12
months, ending |
2 |
| on June 30, or with prior approval of the Director |
3 |
| ending on
December 31, of the calendar year of issue or |
4 |
| purchase, of Moody's
Corporate Bond Yield |
5 |
| Average-Monthly Average Corporates, as published by
|
6 |
| Moody's Investors Service, Inc.
|
7 |
| (E) For annuities with no cash settlement options |
8 |
| and for guaranteed
interest contracts with no cash |
9 |
| settlement options, the reference interest
rate is the |
10 |
| average over a period of 12 months, ending on June 30, |
11 |
| or with
prior approval of the Director ending on |
12 |
| December 31, of the calendar year
of issue or purchase, |
13 |
| of Moody's Corporate Bond Yield Average-Monthly
|
14 |
| Average Corporates, as published by Moody's Investors |
15 |
| Service, Inc.
|
16 |
| (F) For annuities with cash settlement options and |
17 |
| guaranteed interest
contracts with cash settlement |
18 |
| options, valued on a change in fund basis,
except those |
19 |
| described in (B), the reference interest rate is the |
20 |
| average
over a period of 12 months, ending on June 30, |
21 |
| or with prior approval of
the Director ending on |
22 |
| December 31, of the calendar year of the
change in the |
23 |
| fund, of Moody's Corporate Bond Yield Average-Monthly |
24 |
| Average
Corporates, as published by Moody's Investors |
25 |
| Service, Inc.
|
26 |
| (G) For annuities valued by a formula based on Rq, |
|
|
|
HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
|
|
1 |
| the quarterly
reference interest rate is, with the |
2 |
| prior approval of the Director, the
average within each |
3 |
| of the 4 consecutive calendar year quarters
ending on |
4 |
| March 31, June 30, September 30 and December 31 of the |
5 |
| calendar
year of issue or year of purchase of Moody's |
6 |
| Corporate Bond Yield
Average-Monthly Average |
7 |
| Corporates, as published by Moody's Investors
Service, |
8 |
| Inc.
|
9 |
| (e) Alternative Method for Determining Reference |
10 |
| Interest Rates.
In the event that the Moody's Corporate |
11 |
| Bond Yield Average-Monthly Average
Corporates is no longer |
12 |
| published by Moody's Investors Services, Inc., or
in the |
13 |
| event that the National Association of Insurance |
14 |
| Commissioners
determines that Moody's Corporate Bond Yield |
15 |
| Average-Monthly Average
Corporates as published by Moody's |
16 |
| Investors Service, Inc. is no longer
appropriate for the |
17 |
| determination of the reference interest rate, then an
|
18 |
| alternative method for determination of the reference |
19 |
| interest rate, which
is adopted by the National Association |
20 |
| of Insurance Commissioners and
approved by regulations |
21 |
| promulgated by the Director, may be substituted.
|
22 |
| (7) Minimum Standards for Health (Disability, Accident and |
23 |
| Sickness)
Plans. The Director shall promulgate a regulation |
24 |
| containing the minimum
standards applicable to the valuation of |
25 |
| health (disability, sickness and
accident) plans.
|
26 |
| (Source: P.A. 91-357, eff. 7-29-99 .)
|
|
|
|
HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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|
1 |
| (215 ILCS 5/531.09) (from Ch. 73, par. 1065.80-9)
|
2 |
| Sec. 531.09. Assessments. |
3 |
| (1) For the purpose of providing the funds
necessary to |
4 |
| carry out the powers and duties of the Association, the board
|
5 |
| of directors shall assess the member insurers, separately for |
6 |
| each account, at such
times and for such amounts as the board |
7 |
| finds necessary. Assessments shall
be due not less than 30 days |
8 |
| after written notice to the member insurers
and shall accrue |
9 |
| interest from the due date at such adjusted rate as is
|
10 |
| established under Section 6621 of Chapter 26 of the United |
11 |
| States Code and
such interest shall be compounded daily.
|
12 |
| (2) There shall be 2 classes of assessments, as follows:
|
13 |
| (a) Class A assessments shall be made for the purpose |
14 |
| of meeting administrative
costs and other general expenses |
15 |
| and examinations conducted under the authority
of the |
16 |
| Director under subsection (5) of Section 531.12.
|
17 |
| (b) Class B assessments shall be made to the extent |
18 |
| necessary to carry
out the powers and duties of the |
19 |
| Association under Section 531.08 with regard
to an impaired |
20 |
| or insolvent domestic insurer or insolvent foreign or alien |
21 |
| insurers.
|
22 |
| (3) (a) The amount of any Class A assessment shall be |
23 |
| determined at the discretion of the board of directors
by the
|
24 |
| Board and such assessments shall
may be authorized and called
|
25 |
| made on a non-pro rata basis. Such assessments shall not exceed |
|
|
|
HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
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|
1 |
| $200
per company in any one calendar year. The amount of any |
2 |
| Class B
assessment shall be allocated for assessment
purposes |
3 |
| among the accounts
and subaccounts pursuant to an allocation |
4 |
| formula which may be based on
the premiums or reserves of the |
5 |
| impaired or insolvent insurer or any other
standard deemed by |
6 |
| the board in its sole discretion as being fair and
reasonable |
7 |
| under the circumstances.
|
8 |
| (b) Class B assessments against member insurers for |
9 |
| each account and
subaccount shall
be in the proportion that |
10 |
| the premiums received on business in this State
by each |
11 |
| assessed member insurer on policies or contracts covered by
|
12 |
| each account or subaccount for the three most recent |
13 |
| calendar years
for which information is available |
14 |
| preceding the year in which the insurer
became impaired or |
15 |
| insolvent, as the case may be, bears to such premiums
|
16 |
| received on business in this State for such calendar years |
17 |
| by all assessed
member insurers.
|
18 |
| (c) Assessments for funds to meet the requirements of |
19 |
| the Association
with respect to an impaired or insolvent |
20 |
| insurer shall not be made until
necessary to implement the |
21 |
| purposes of this Article. Classification
of assessments
|
22 |
| under subsection (2) and computations of assessments under |
23 |
| this subsection
shall be made with a reasonable degree of |
24 |
| accuracy, recognizing that exact
determinations may not |
25 |
| always be possible.
|
26 |
| (4) The Association may abate or defer, in whole or in |
|
|
|
HB0938 Engrossed |
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LRB095 07026 KBJ 27148 b |
|
|
1 |
| part, the assessment
of a member insurer if, in the opinion of |
2 |
| the board, payment of the assessment
would endanger the ability |
3 |
| of the member insurer to fulfill its contractual
obligations. |
4 |
| The total of all assessments upon a member insurer for the
life |
5 |
| and annuity
account and for each subaccount thereunder may not |
6 |
| in any one calendar
year exceed 2% and for the health account |
7 |
| may not in any one calendar
year exceed 2% of such insurer's
|
8 |
| average premiums received in this State on the policies and |
9 |
| contracts
covered by the account or subaccount during the three |
10 |
| calendar years
preceding the year in which the insurer became |
11 |
| an impaired or insolvent
insurer. If a one percent assessment |
12 |
| for any subaccount of the life and
annuity account in any one |
13 |
| year does not provide an amount sufficient to
carry out the |
14 |
| responsibilities of the Association, then pursuant to
|
15 |
| subsection 3(b), the board shall access all subaccounts of the |
16 |
| life and
annuity account for the necessary additional amount, |
17 |
| subject to the maximum
stated in this subsection.
|
18 |
| (5) In the event an assessment against a member insurer is |
19 |
| abated, or deferred,
in whole or in part, because of the |
20 |
| limitations set forth in subsection (4) of this
Section the |
21 |
| amount by which such assessment is abated or deferred, may be
|
22 |
| assessed against the other member insurers in a manner |
23 |
| consistent with the
basis for assessments set forth in this |
24 |
| Section. If the maximum assessment,
together with the other |
25 |
| assets of the Association in either account, does
not provide |
26 |
| in any
one year in either account an amount sufficient to carry |
|
|
|
HB0938 Engrossed |
- 39 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| out the
responsibilities
of the Association, the necessary |
2 |
| additional funds may be assessed as soon
thereafter
as |
3 |
| permitted by this Article.
The board may provide in the plan of |
4 |
| operation a method of allocating
funds among claims, whether |
5 |
| relating to one or more impaired or insolvent
insurers, when |
6 |
| the maximum assessment will be insufficient to cover |
7 |
| anticipated
claims.
|
8 |
| (6) The board may, by an equitable method as established in |
9 |
| the
plan of operation, refund to member insurers, in proportion |
10 |
| to the contribution
of each insurer to that account, the amount |
11 |
| by which the assets of the account
exceed the amount the board |
12 |
| finds is necessary to carry out during the coming
year the |
13 |
| obligations of the Association with regard to that account, |
14 |
| including
assets accruing from net realized gains and income |
15 |
| from investments. A
reasonable amount may be retained in any |
16 |
| account to provide funds for the
continuing expenses of the |
17 |
| Association and for future losses if refunds are
impractical.
|
18 |
| (7) An assessment is deemed to occur on the date upon which |
19 |
| the board
votes such assessment. The board may defer calling |
20 |
| the payment of the
assessment or may call for payment in one or |
21 |
| more installments.
|
22 |
| (8) It is proper for any member insurer, in determining its |
23 |
| premium
rates and policyowner dividends as to any kind of |
24 |
| insurance within the scope of
this Article, to consider the |
25 |
| amount reasonably necessary to meet its assessment
obligations |
26 |
| under this Article.
|
|
|
|
HB0938 Engrossed |
- 40 - |
LRB095 07026 KBJ 27148 b |
|
|
1 |
| (9) The Association must issue to each insurer paying a
|
2 |
| Class B assessment
under this Article a certificate of |
3 |
| contribution,
in a form acceptable to the
Director, for the |
4 |
| amount of the assessment so paid. All outstanding certificates
|
5 |
| are of equal
dignity and priority without reference to amounts |
6 |
| or dates of issue. A certificate
of contribution may be shown |
7 |
| by the insurer in its financial statement as an asset
in such |
8 |
| form and for such amount, if any, and period of time as the |
9 |
| Director
may approve, provided the insurer shall in any event |
10 |
| at its option have
the right to show a certificate of |
11 |
| contribution as an admitted asset at
percentages of the |
12 |
| original face amount for calendar years as follows:
|
13 |
| 100% for the calendar year after the year of issuance;
|
14 |
| 80% for the second calendar year after the year of |
15 |
| issuance;
|
16 |
| 60% for the third calendar year after the year of issuance;
|
17 |
| 40% for the fourth calendar year after the year of |
18 |
| issuance;
|
19 |
| 20% for the fifth calendar year after the year of issuance.
|
20 |
| (Source: P.A. 86-753.)
|