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Public Act 095-0086 |
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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 | ||||
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 | ||||
valuation.
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(1) The Director shall annually value, or cause to be | ||||
valued, the
reserve liabilities (hereinafter called reserves) | ||||
for all outstanding
life insurance policies and annuity and | ||||
pure endowment contracts of
every life insurance company doing | ||||
business in this State, except that
in the case of an alien | ||||
company, such valuation shall be limited to its
United States | ||||
business, and may certify the amount of any such reserves,
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specifying the mortality table or tables, rate or rates of | ||||
interest, and
methods (net level premium method or other) used | ||||
in the calculation of
such reserves. Other assumptions may be | ||||
incorporated into the reserve calculation to the extent | ||||
permitted by the National Association of Insurance | ||||
Commissioners' Accounting Practices and Procedures Manual. In | ||||
calculating such reserves, he may use group methods
and | ||||
approximate averages for fractions of a year or otherwise. In |
lieu
of the valuation of the reserves herein required of any | ||
foreign or alien
company, he may accept any valuation made, or | ||
caused to be made, by the
insurance supervisory official of any | ||
state or other jurisdiction when
such valuation complies with | ||
the minimum standard herein provided and if
the official of | ||
such state or jurisdiction accepts as sufficient and
valid for | ||
all legal purposes the certificate of valuation of the
Director | ||
when such certificate states the valuation to have been made in
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a specified manner according to which the aggregate reserves | ||
would be at
least as large as if they had been computed in the | ||
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 | ||
of
valuation producing greater aggregate reserves than those | ||
calculated
according to the minimum standard herein provided | ||
may, with the approval
of the Director, adopt any lower | ||
standard of valuation, but not lower
than the minimum herein | ||
provided, however, that, for the purposes of this
subsection, | ||
the holding of additional reserves previously determined by a
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qualified actuary to be necessary to render the opinion | ||
required by
subsection (1a) shall not be deemed to be the | ||
adoption of a higher standard
of valuation. In the valuation of | ||
policies the
Director shall give no consideration to, nor make | ||
any deduction because
of, the existence or the possession by | ||
the company of
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(a) policy liens created by any agreement given or | ||
assented to by
any assured subsequent to July 1, 1937, for |
which liens such assured has
not received cash or other | ||
consideration equal in value to the amount of
such liens, | ||
or
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(b) policy liens created by any agreement entered into | ||
in violation
of section 232 unless the agreement imposing | ||
or creating such liens has
been approved by a Court in a | ||
proceeding under Article XIII, or in the
case of a foreign | ||
or alien company has been approved by a court in a
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rehabilitation or liquidation proceeding or by the | ||
insurance official of
its domiciliary state or country, in | ||
accordance with the laws thereof.
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(1a) This subsection shall become operative at the end of | ||
the first
full calendar year following the effective date of | ||
this amendatory Act of 1991.
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(A) General.
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(1) Every life insurance company doing business in | ||
this State shall
annually submit the opinion of a | ||
qualified actuary as to whether the
reserves and | ||
related actuarial items held in support of the policies | ||
and
contracts specified by the Director by regulation | ||
are computed
appropriately, are based on assumptions | ||
that satisfy contractual
provisions, are consistent | ||
with prior reported amounts and comply with
applicable | ||
laws of this State. The Director by regulation shall | ||
define the
specifics of this opinion and add any other | ||
items deemed to be necessary to
its scope.
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(2) The opinion shall be submitted with the annual | ||
statement reflecting
the valuation of reserve | ||
liabilities for each year ending on or after December | ||
31, 1992.
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(3) The opinion shall apply to all business in | ||
force including
individual and group health insurance | ||
plans, in form and substance
acceptable to the Director | ||
as specified by regulation.
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(4) The opinion shall be based on standards adopted | ||
from time to time by
the Actuarial Standards Board and | ||
on additional standards as the Director
may by | ||
regulation prescribe.
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(5) In the case of an opinion required to be | ||
submitted by a foreign or
alien company, the Director | ||
may accept the opinion filed by that company
with the | ||
insurance supervisory official of another state if the | ||
Director
determines that the opinion reasonably meets | ||
the requirements applicable to
a company domiciled in | ||
this State.
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(6) For the purpose of this Section, "qualified | ||
actuary" means a member
in good standing of the | ||
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, | ||
the qualified
actuary shall not be liable for damages | ||
to any person (other than the
insurance company and the |
Director) for any act, error, omission, decision
or | ||
conduct with respect to the actuary's opinion.
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(8) Disciplinary action by the Director against | ||
the company or the
qualified actuary shall be defined | ||
in regulations by the Director.
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(9) A memorandum, in form and substance acceptable | ||
to the Director as
specified by regulation, shall be | ||
prepared to support each actuarial opinion.
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(10) If the insurance company fails to provide a | ||
supporting memorandum
at the request of the Director | ||
within a period specified by regulation or
the Director | ||
determines that the supporting memorandum provided by | ||
the
insurance company fails to meet the standards | ||
prescribed by the regulations
or is otherwise | ||
unacceptable to the Director, the Director may engage a
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qualified actuary at the expense of the company to | ||
review the opinion and
the basis for the opinion and | ||
prepare the supporting memorandum as is
required by the | ||
Director.
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(11) Any memorandum in support of the opinion, and | ||
any other material
provided by the company to the | ||
Director in connection therewith, shall be
kept | ||
confidential by the Director and shall not be made | ||
public and shall
not be subject to subpoena, other than | ||
for the purpose of defending an
action seeking damages | ||
from any person by reason of any action required by
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this Section or by regulations promulgated hereunder; | ||
provided, however,
that the memorandum or other | ||
material may otherwise be released by the
Director (a) | ||
with the written consent of the company or (b) to the | ||
American
Academy of Actuaries upon request stating | ||
that the memorandum or other
material is required for | ||
the purpose of professional disciplinary
proceedings | ||
and setting forth procedures satisfactory to the | ||
Director for
preserving the confidentiality of the | ||
memorandum or other material. Once
any portion of the | ||
confidential memorandum is cited by the company in its
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marketing or is cited before any governmental agency | ||
other than a state
insurance department or is released | ||
by the company to the news media, all
portions of the | ||
confidential memorandum shall be no longer | ||
confidential.
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(B) Actuarial analysis of reserves and assets | ||
supporting those reserves.
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(1) Every life insurance company, except as | ||
exempted by or under
regulation, shall also annually | ||
include in the opinion required by
paragraph (A)(1) of | ||
this subsection (1a), an opinion of the same qualified
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actuary as to whether the reserves and related | ||
actuarial items held in
support of the policies and | ||
contracts specified by the Director by
regulation, | ||
when considered in light of the assets held by the |
company with
respect to the reserves and related | ||
actuarial items including, but not
limited to, the | ||
investment earnings on the assets and the | ||
considerations
anticipated to be received and retained | ||
under the policies and contracts,
make adequate | ||
provision for the company's obligations under the | ||
policies
and contracts including, but not limited to, | ||
the benefits under and
expenses associated with the | ||
policies and contracts.
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(2) The Director may provide by regulation for a | ||
transition period for
establishing any higher reserves | ||
which the qualified actuary may deem
necessary in order | ||
to render the opinion required by this Section.
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(2) This subsection shall apply to only those policies and | ||
contracts
issued prior to the operative date of section 229.2 | ||
(the Standard
Non-forfeiture Law).
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(a) Except as otherwise in this Article provided, the | ||
legal minimum
standard for valuation of contracts issued | ||
before January 1, 1908, shall
be the Actuaries or Combined | ||
Experience Table of Mortality with interest
at 4% per annum | ||
and for valuation of contracts issued on or after that
date | ||
shall be the American Experience Table of Mortality with | ||
either
Craig's or Buttolph's Extension for ages under 10 | ||
and with interest at 3
1/2% per annum. The legal minimum | ||
standard for the valuation of group
insurance policies | ||
under which premium rates are not guaranteed for a
period |
in excess of 5 years shall be the American Men Ultimate | ||
Table of
Mortality with interest at 3 1/2% per annum. Any | ||
life company may, at
its option, value its insurance | ||
contracts issued on or after January 1,
1938, in accordance | ||
with their terms on the basis of the American Men
Ultimate | ||
Table of Mortality with interest not higher than 3 1/2% per | ||
annum.
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(b) Policies issued prior to January 1, 1908, may | ||
continue to be
valued according to a method producing | ||
reserves not less than those
produced by the full | ||
preliminary term method. Policies issued on and
after | ||
January 1, 1908, may be valued according to a method | ||
producing
reserves not less than those produced by the | ||
modified preliminary term
method hereinafter described in | ||
paragraph (c). Policies issued on and
after January 1, | ||
1938, may be valued either according to a method
producing | ||
reserves not less than those produced by such modified
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preliminary term method or by the select and ultimate | ||
method on the
basis that the rate of mortality during the | ||
first 5 years after the
issuance of such contracts | ||
respectively shall be calculated according to
the | ||
following percentages of rates shown by the American | ||
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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(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 | ||
under a limited
payment life preliminary term policy | ||
providing for the payment of all
premiums thereon in less | ||
than 20 years from the date of the policy or
under an | ||
endowment preliminary term policy, exceeds that charged | ||
for the
first policy year under 20 payment life preliminary | ||
term policies of the
same company, the reserve thereon at | ||
the end of any year, including the
first, shall not be less | ||
than the reserve on a 20 payment life
preliminary term | ||
policy issued in the same year at the same age,
together | ||
with an amount which shall be equivalent to the | ||
accumulation of
a net level premium sufficient to provide | ||
for a pure endowment at the
end of the premium payment | ||
period, equal to the difference between the
value at the | ||
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 | ||
time of such
a limited payment life or endowment policy. | ||
The premium payment period
is the period during which | ||
premiums are concurrently payable under such
20 payment | ||
life preliminary term policy and such limited payment life | ||
or
endowment policy.
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(d) The legal minimum standard for the valuations of | ||
annuities
issued on and after January 1, 1938, shall be the | ||
American Annuitant's
Table with interest not higher than 3 |
3/4% per annum, and all annuities
issued before that date | ||
shall be valued on a basis not lower than that
used for the | ||
annual statement of the year 1937; but annuities deferred
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10 or more years and written in connection with life | ||
insurance shall be
valued on the same basis as that used in | ||
computing the consideration or
premiums therefor, or upon | ||
any higher standard at the option of the company.
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(e) The Director may vary the standards of interest and | ||
mortality as
to contracts issued in countries other than | ||
the United States and may
vary standards of mortality in | ||
particular cases of invalid lives and
other extra hazards.
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(f) The legal minimum standard for valuation of waiver | ||
of premium
disability benefits or waiver of premium and | ||
income disability benefits
issued on and after January 1, | ||
1938, shall be the Class (3) Disability
Table (1926) | ||
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 | ||
shall the
values be less than those produced by the basis | ||
used in computing
premiums for such benefits. The legal | ||
minimum standard for the valuation
of such benefits issued | ||
prior to January 1, 1938, shall be such as to
place an | ||
adequate value, as determined by sound insurance | ||
practices, on
the liabilities thereunder and shall be such | ||
that the value of the
benefits under each and every policy | ||
shall in no case be less than the
value placed upon the | ||
future premiums.
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(g) The legal minimum standard for the valuation of | ||
industrial
policies issued on or after January 1, 1938, | ||
shall be the American
Experience Table of Mortality or the | ||
Standard Industrial Mortality Table
or the Substandard | ||
Industrial Mortality Table with interest at 3 1/2%
per | ||
annum by the net level premium method, or in accordance | ||
with their
terms by the modified preliminary term method | ||
hereinabove described.
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(h) Reserves for all such policies and contracts may be | ||
calculated,
at the option of the company, according to any | ||
standards which produce
greater aggregate reserves for all | ||
such policies and contracts than the
minimum reserves | ||
required by this subsection.
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(3) This subsection shall apply to only those policies and | ||
contracts
issued on or after January 1, 1948 or such earlier | ||
operative date of
Section 229.2 (the Standard Non-forfeiture | ||
Law) as shall have been
elected by the insurance company | ||
issuing such policies or contracts.
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(a) Except as otherwise provided in subsections (4), | ||
(6), and (7),
the minimum standard for the valuation of all | ||
such policies
and contracts shall be the Commissioners | ||
Reserve valuation method defined
in paragraphs (b) and (f) | ||
of this subsection and in subsection 5, 3 1/2%
interest for | ||
such policies issued prior to September 8, 1977, 5 1/2%
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interest for single premium life insurance policies and 4 | ||
1/2% interest for
all other such policies issued on or |
after September 8, 1977, and the following
tables:
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(i) The Commissioners 1941 Standard Ordinary | ||
Mortality Table for all
Ordinary policies of life | ||
insurance issued on the standard basis,
excluding any | ||
disability and accidental death benefits in such | ||
policies,
for such policies issued prior to the | ||
operative date of subsection (4a)
of Section 229.2 | ||
(Standard Non-forfeiture Law); and the Commissioners
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1958 Standard Ordinary Mortality Table for such | ||
policies issued on or
after such operative date but | ||
prior to the operative date of subsection
(4c) of | ||
Section 229.2 provided that for any category of such
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policies issued on female risks all modified net | ||
premiums and present
values referred to in this Act | ||
may, prior to September 8, 1977, be
calculated | ||
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, | ||
1977,
calculated according to an age not more than 6 | ||
years younger than the actual
age of the insured; and | ||
for such policies issued on or after the operative
date | ||
of subsection (4c) of Section 229.2, (i)
the | ||
Commissioners 1980 Standard Ordinary Mortality Table, | ||
or (ii) at the
election of the company for any one or | ||
more specified plans of life insurance,
the | ||
Commissioners 1980 Standard Ordinary Mortality Table | ||
with Ten-Year
Select Mortality Factors, or (iii) any |
ordinary mortality table adopted
after 1980 by the | ||
National Association of Insurance Commissioners and
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approved by regulations promulgated by the Director | ||
for use in determining
the minimum standard of | ||
valuation for such policies.
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(ii) For all Industrial Life Insurance policies | ||
issued on the
standard basis, excluding any disability | ||
and accidental death benefits
in such policies--the | ||
1941 Standard Industrial Mortality Table for such
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policies issued prior to the operative date of | ||
subsection 4 (b) of
Section 229.2 (Standard | ||
Non-forfeiture Law); and for such policies issued
on or | ||
after such operative date the Commissioners 1961
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Standard Industrial Mortality Table or any industrial | ||
mortality table
adopted after 1980 by the National | ||
Association of Insurance Commissioners
and approved by | ||
regulations promulgated by the Director for use in | ||
determining
the minimum standard of valuation for such | ||
policies.
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(iii) For Individual Annuity and Pure Endowment | ||
contracts, excluding
any disability and accidental | ||
death benefits in such policies--the 1937
Standard | ||
Annuity Mortality Table--or, at the option of the | ||
company, the
Annuity Mortality Table for 1949, | ||
Ultimate, or any modification of
either of these tables | ||
approved by the Director.
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(iv) For Group Annuity and Pure Endowment | ||
contracts, excluding any
disability and accidental | ||
death benefits in such policies--the Group
Annuity | ||
Mortality Table for 1951, any modification of such | ||
table
approved by the Director, or, at the option of | ||
the company, any of the
tables or modifications of | ||
tables specified for Individual Annuity and
Pure | ||
Endowment contracts.
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(v) For Total and Permanent Disability Benefits in | ||
or supplementary
to Ordinary policies or contracts for | ||
policies or contracts issued on or
after January 1, | ||
1966, the tables of Period 2 disablement rates and the
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1930 to 1950 termination rates of the 1952 Disability | ||
Study of the
Society of Actuaries, with due regard to | ||
the type of benefit, or any tables
of disablement rates | ||
and termination rates adopted after 1980 by the | ||
National
Association of Insurance Commissioners and | ||
approved by regulations promulgated
by the Director | ||
for use in determining the minimum standard of | ||
valuation
for such policies; for policies or contracts | ||
issued on or after January 1,
1961, and prior to | ||
January 1, 1966, either such tables or, at the option | ||
of
the company, the Class (3) Disability Table (1926); | ||
and for policies issued
prior to January 1, 1961, the | ||
Class (3) Disability Table (1926). Any such
table | ||
shall, for active lives, be combined with a mortality |
table permitted
for calculating the reserves for life | ||
insurance policies.
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(vi) For Accidental Death benefits in or | ||
supplementary to
policies--for policies issued on or | ||
after January 1, 1966, the 1959
Accidental Death | ||
Benefits Table or any accidental death benefits table
| ||
adopted after 1980 by the National Association of | ||
Insurance Commissioners
and approved by regulations | ||
promulgated by the Director for use in
determining the | ||
minimum standard of valuation for such policies;
for | ||
policies issued on or after January 1, 1961, and prior | ||
to January 1,
1966, any of such tables or, at the | ||
option of the company, the
Inter-Company Double | ||
Indemnity Mortality Table; and for policies issued
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prior to January 1, 1961, the Inter-Company Double | ||
Indemnity Mortality
Table. Either table shall be | ||
combined with a mortality table permitted for
| ||
calculating the reserves for life insurance policies.
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(vii) For Group Life Insurance, life insurance | ||
issued on the
substandard basis and other special | ||
benefits--such tables as may be
approved by the | ||
Director.
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(b) Except as otherwise provided in paragraph (f) of | ||
subsection (3),
subsection (5), and subsection (7) | ||
reserves according to the Commissioners
reserve valuation | ||
method, for the life insurance and endowment benefits of
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policies providing for a uniform amount of insurance and | ||
requiring the
payment of uniform premiums shall be the | ||
excess, if any, of the present
value, at the date of | ||
valuation, of such future guaranteed benefits
provided for | ||
by such policies, over the then present value of any future
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modified net premiums therefor. The modified net premiums | ||
for any such
policy shall be such uniform percentage of the | ||
respective contract premiums
for such benefits that the | ||
present value, at the date of issue of the
policy, of all | ||
such modified net premiums shall be equal to the sum of the
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then present value of such benefits provided for by the | ||
policy and the
excess of (A) over (B), as follows:
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(A) A net level annual premium equal to the present | ||
value, at the
date of issue, of such benefits provided | ||
for after the first policy
year, divided by the present | ||
value, at the date of issue, of an annuity
of one per | ||
annum payable on the first and each subsequent | ||
anniversary of
such policy on which a premium falls | ||
due; provided, however, that such
net level annual | ||
premium shall not exceed the net level annual premium
| ||
on the 19 year premium whole life plan for insurance of | ||
the same amount
at an age one year higher than the age | ||
at issue of such policy.
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(B) A net one year term premium for such benefits | ||
provided for in
the first policy year.
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For any life insurance policy issued on or after |
January 1, 1987, for
which the contract premium in the | ||
first policy year exceeds that of the
second year with no | ||
comparable additional benefit being provided in that
first | ||
year, which policy provides an endowment benefit or a cash | ||
surrender
value or a combination thereof in an amount | ||
greater than such excess
premium, the reserve according to | ||
the Commissioners reserve
valuation method as of any policy | ||
anniversary occurring on or before the
assumed ending date, | ||
defined herein as the first policy anniversary on which
the | ||
sum of any endowment benefit and any cash surrender value | ||
then available
is greater than such excess premium, shall, | ||
except as otherwise provided
in paragraph (f) of subsection | ||
(3), be the greater of the reserve as of
such policy | ||
anniversary calculated as described in the preceding part | ||
of
this paragraph (b) and the reserve as of such policy | ||
anniversary calculated
as described in the preceding part | ||
of this paragraph (b) with (i) the value
defined in subpart | ||
A of the preceding part of this paragraph (b) being reduced
| ||
by 15% of the amount of such excess first year premium, | ||
(ii) all present
values of benefits and premiums being | ||
determined without reference to
premiums or benefits | ||
provided for by the policy after the assumed ending
date, | ||
(iii) the policy being assumed to mature on such date as an
| ||
endowment, and (iv) the cash surrender value provided on | ||
such date being
considered as an endowment benefit. In | ||
making the above comparison, the
mortality and interest |
bases stated in paragraph (a) of subsection (3) and
in | ||
subsection 6 shall be used.
| ||
Reserves according to the Commissioners reserve | ||
valuation method for
(i) life insurance policies providing | ||
for a varying amount of insurance
or requiring the payment | ||
of varying premiums, (ii) group annuity and pure
endowment | ||
contracts purchased under a retirement plan or plan of | ||
deferred
compensation, established or maintained by an | ||
employer (including a partnership
or sole proprietorship) | ||
or by an employee organization, or by both, other
than a | ||
plan providing individual retirement accounts or | ||
individual retirement
annuities under Section 408 of the | ||
Internal Revenue Code, as now or hereafter
amended, (iii) | ||
disability and accidental death benefits in all policies
| ||
and contracts, and (iv) all other benefits, except life
| ||
insurance and endowment benefits in life insurance | ||
policies and benefits
provided by all other annuity and | ||
pure endowment contracts, shall be
calculated by a method | ||
consistent with the principles of this paragraph
(b), | ||
except that any extra premiums charged because of | ||
impairments or
special hazards shall be disregarded in the | ||
determination of modified
net premiums.
| ||
(c) In no event shall a company's aggregate reserves | ||
for all life
insurance policies, excluding disability and | ||
accidental death benefits be
less than the aggregate | ||
reserves calculated in accordance with the methods
set |
forth in paragraphs (b), (f), and (g) of subsection (3) and | ||
in
subsection (5) and the mortality table or tables and | ||
rate or rates of
interest used in calculating | ||
non-forfeiture benefits for such policies.
| ||
(d) In no event shall the aggregate reserves for all | ||
policies,
contracts, and benefits be less than the | ||
aggregate reserves determined by
the qualified actuary to | ||
be necessary to render the opinion required by
subsection | ||
(1a).
| ||
(e) Reserves for any category of policies, contracts or | ||
benefits as
established by the Director, may be calculated, | ||
at the option of the
company, according to any standards | ||
which produce greater aggregate
reserves for such category | ||
than those calculated according to the
minimum standard | ||
herein provided, but the rate or rates of interest used
for | ||
policies and contracts, other than annuity and pure | ||
endowment contracts,
shall not be higher than the | ||
corresponding rate or rates of interest
used in calculating | ||
any nonforfeiture benefits provided for therein.
| ||
(f) If in any contract year the gross premium charged | ||
by any life
insurance company on any policy or contract is | ||
less than the valuation net
premium for the policy or | ||
contract calculated by the method used in
calculating the | ||
reserve thereon but using the minimum valuation standards
| ||
of mortality and rate of interest, the minimum reserve | ||
required for such
policy or contract shall be the greater |
of either the reserve calculated
according to the mortality | ||
table, rate of interest, and method actually
used for such | ||
policy or contract, or the reserve calculated by the method
| ||
actually used for such policy or contract but using the | ||
minimum standards
of mortality and rate of interest and | ||
replacing the valuation net premium
by the actual gross | ||
premium in each contract year for which the valuation
net | ||
premium exceeds the actual gross premium. The minimum | ||
valuation
standards of mortality and rate of interest | ||
referred to in this paragraph
(f) are those standards | ||
stated in subsection (6) and paragraph (a) of
subsection | ||
(3).
| ||
For any life insurance policy issued on or after | ||
January 1, 1987, for which
the gross premium in the first | ||
policy year exceeds that of the second year
with no | ||
comparable additional benefit provided in that first year, | ||
which
policy provides an endowment benefit or a cash | ||
surrender value or a combination
thereof in an amount | ||
greater than such excess premium, the foregoing provisions
| ||
of this paragraph (f) shall be applied as if the method | ||
actually used in
calculating the reserve for such policy | ||
were the method described in paragraph
(b) of subsection | ||
(3), ignoring the second paragraph of said paragraph (b).
| ||
The minimum reserve at each policy anniversary of such a | ||
policy shall be
the greater of the minimum reserve | ||
calculated in accordance with paragraph
(b) of subsection |
(3), including the second paragraph of said paragraph
(b), | ||
and the minimum reserve calculated in accordance with this | ||
paragraph (f).
| ||
(g) In the case of any plan of life insurance which | ||
provides for future
premium determination, the amounts of | ||
which are to be determined by the
insurance company based | ||
on then estimates of future experience, or in the
case of | ||
any plan of life insurance or annuity which is of such a | ||
nature that
the minimum reserves cannot be determined by | ||
the methods described in
paragraphs (b) and (f) of | ||
subsection (3) and subsection (5), the reserves
which are | ||
held under any such plan shall:
| ||
(i) be appropriate in relation to the benefits and | ||
the pattern of
premiums for that plan, and
| ||
(ii) be computed by a method which is consistent | ||
with the principles
of this Standard Valuation Law, as | ||
determined by regulations promulgated by
the Director.
| ||
(4) Except as provided in subsection (6), the minimum | ||
standard for
the valuation of all individual annuity and pure | ||
endowment contracts issued
on or after the operative date of | ||
this subsection, as defined herein, and
for all annuities and | ||
pure endowments purchased on or after such operative
date under | ||
group annuity and pure endowment contracts shall be the
| ||
Commissioners Reserve valuation methods defined in paragraph | ||
(b) of
subsection (3) and subsection (5) and the following | ||
tables and interest rates:
|
(a) For individual single premium immediate annuity | ||
contracts, excluding
any disability and accidental death | ||
benefits in such contracts, the 1971
Individual Annuity | ||
Mortality Table, any individual annuity mortality table
| ||
adopted after 1980 by the National Association of Insurance | ||
Commissioners
and approved by regulations promulgated by | ||
the Director for use in determining
the minimum standard of | ||
valuation for such contracts, or any modification
of those | ||
tables approved by the Director, and 7 1/2% interest.
| ||
(b) For individual and pure endowment contracts other | ||
than single premium
annuity contracts, excluding any | ||
disability and accidental death benefits
in such | ||
contracts, the 1971 Individual Annuity Mortality Table, | ||
any
individual annuity mortality table adopted after 1980 | ||
by the National
Association of Insurance Commissioners and | ||
approved by regulations
promulgated by the Director for use | ||
in determining the minimum standard of
valuation for such | ||
contracts, or any modification of those tables
approved by | ||
the Director, and 5 1/2% interest for single premium | ||
deferred
annuity and pure endowment contracts and 4 1/2% | ||
interest for all other such
individual annuity and pure | ||
endowment contracts.
| ||
(c) For all annuities and pure endowments purchased | ||
under group annuity
and pure endowment contracts, | ||
excluding any disability and accidental death
benefits | ||
purchased under such contracts, the 1971 Group Annuity |
Mortality
Table, any group annuity mortality table adopted | ||
after 1980 by the National
Association of Insurance | ||
Commissioners and approved by regulations promulgated
by | ||
the Director for use in determining the minimum standard of | ||
valuation
for such annuities and pure endowments, or any | ||
modification of those
tables approved by the Director, and | ||
7 1/2% interest.
| ||
After September 8, 1977, any company may file with the | ||
Director a written
notice of its election to comply with the | ||
provisions of this subsection
after a specified date before | ||
January 1, 1979, which shall be the operative
date of this | ||
subsection for such company; provided, a company may elect a
| ||
different operative date for individual annuity and pure | ||
endowment
contracts from that elected for group annuity and | ||
pure endowment contracts.
If a company makes no election, the | ||
operative date of this subsection for
such company shall be | ||
January 1, 1979.
| ||
(5) This subsection shall apply to all annuity and pure | ||
endowment contracts
other than group annuity and pure endowment | ||
contracts purchased under a
retirement plan or plan of deferred | ||
compensation, established or maintained
by an employer | ||
(including a partnership or sole proprietorship) or by an
| ||
employee organization, or by both, other than a plan providing | ||
individual
retirement accounts or individual retirement | ||
annuities under Section 408
of the Internal Revenue Code, as | ||
now or hereafter amended.
|
Reserves according to the Commissioners annuity reserve | ||
method for
benefits under annuity or pure endowment contracts, | ||
excluding any
disability and accidental death benefits in such | ||
contracts, shall be the
greatest of the respective excesses of | ||
the present values, at the date of
valuation, of the future | ||
guaranteed benefits, including guaranteed
nonforfeiture | ||
benefits, provided for by such contracts at the end of each
| ||
respective contract year, over the present value, at the date | ||
of valuation,
of any future valuation considerations derived | ||
from future gross
considerations, required by the terms of such | ||
contract, that become payable
prior to the end of such | ||
respective contract year. The future guaranteed
benefits shall | ||
be determined by using the mortality table, if any, and the
| ||
interest rate, or rates, specified in such contracts for | ||
determining
guaranteed benefits. The valuation considerations | ||
are the portions of the
respective gross considerations applied | ||
under the terms of such contracts
to determine nonforfeiture | ||
values.
| ||
(6) (a) Applicability of this subsection. (i) The interest | ||
rates used
in determining the minimum standard for the | ||
valuation of
| ||
(A) all life insurance policies issued in a | ||
particular calendar year,
on or after the operative | ||
date of subsection (4c) of Section 229.2 (Standard
| ||
Nonforfeiture Law),
| ||
(B) all individual annuity and pure endowment |
contracts issued in a
particular calendar year ending | ||
on or after December 31, 1983,
| ||
(C) all annuities and pure endowments purchased in | ||
a particular calendar
year ending on or after December | ||
31, 1983, under group annuity and pure
endowment | ||
contracts, and
| ||
(D) the net increase in a particular calendar year | ||
ending after December
31, 1983, in amounts held under | ||
guaranteed interest contracts
| ||
shall be the calendar year statutory valuation interest | ||
rates, as defined
in this subsection.
| ||
(b) Calendar Year Statutory Valuation Interest Rates.
| ||
(i) The calendar year statutory valuation interest | ||
rates shall be determined
according to the following | ||
formulae, rounding "I" to the nearest .25%.
| ||
(A) For life insurance,
| ||
I = .03 + W (R1 - .03) + W/2 (R2 - .09).
| ||
(B) For single premium immediate annuities and | ||
annuity benefits
involving life contingencies | ||
arising from other annuities with cash
settlement | ||
options and from guaranteed interest contracts | ||
with cash settlement options,
| ||
I = .03 + W (R - .03) or with prior approval of | ||
the Director I = .03 + W (Rq - .03).
| ||
For the purposes of this subparagraph (i), "I" | ||
equals the calendar year
statutory valuation interest |
rate, "R" is the reference interest rate defined
in | ||
this subsection, "R1" is the lesser of R and .09, "R2" | ||
is the greater
of R and .09, "Rq" is the quarterly | ||
reference interest rate defined in
this subsection, | ||
and "W" is the weighting factor defined in this | ||
subsection.
| ||
(C) For other annuities with cash settlement | ||
options and guaranteed interest
contracts with | ||
cash settlement options, valued on an issue year | ||
basis, except
as stated in (B), the formula for | ||
life insurance stated in (A) applies to
annuities | ||
and guaranteed interest contracts with guarantee | ||
durations in
excess of 10 years, and the formula | ||
for single premium immediate annuities
stated in | ||
(B) above applies to annuities and guaranteed | ||
interest contracts
with guarantee durations of 10 | ||
years or less.
| ||
(D) For other annuities with no cash | ||
settlement options and for
guaranteed interest | ||
contracts with no cash settlement options, the | ||
formula
for single premium immediate annuities | ||
stated in (B) applies.
| ||
(E) For other annuities with cash settlement | ||
options and
guaranteed interest contracts with | ||
cash settlement options, valued on a
change in fund | ||
basis, the formula for single premium immediate |
annuities
stated in (B) applies.
| ||||||||
(ii) If the calendar year statutory valuation | ||||||||
interest rate for
any life insurance policy issued in | ||||||||
any calendar year determined without
reference to this | ||||||||
subparagraph differs from the corresponding actual | ||||||||
rate
for similar policies issued in the immediately | ||||||||
preceding calendar year by
less than .5%, the calendar | ||||||||
year statutory valuation interest rate for such
life | ||||||||
insurance policy shall be the corresponding actual | ||||||||
rate for the
immediately preceding calendar year. For | ||||||||
purposes of applying this
subparagraph, the calendar | ||||||||
year statutory valuation interest rate for life
| ||||||||
insurance policies issued in a calendar year shall be | ||||||||
determined for 1980,
using the reference interest rate | ||||||||
defined for 1979, and shall be determined
for each | ||||||||
subsequent calendar year regardless of when subsection | ||||||||
(4c) of
Section 229.2 (Standard Nonforfeiture Law) | ||||||||
becomes operative.
| ||||||||
(c) Weighting Factors.
| ||||||||
(i) The weighting factors referred to in the | ||||||||
formulae stated in
paragraph (b) are given in the | ||||||||
following tables.
| ||||||||
(A) Weighting Factors for Life Insurance.
| ||||||||
|
| ||||||||
For life insurance, the guarantee duration is | ||||||||
the maximum number of
years the life insurance can | ||||||||
remain in force on a basis guaranteed in the
policy | ||||||||
or under options to convert to plans of life | ||||||||
insurance with premium
rates or nonforfeiture | ||||||||
values or both which are guaranteed in the original
| ||||||||
policy.
| ||||||||
(B) The weighting factor for single premium | ||||||||
immediate annuities
and for annuity benefits | ||||||||
involving life contingencies arising from other
| ||||||||
annuities with cash settlement options and | ||||||||
guaranteed interest contracts
with cash settlement | ||||||||
options is .80.
| ||||||||
(C) The weighting factors for other annuities | ||||||||
and for guaranteed
interest contracts, except as | ||||||||
stated in (B) of this subparagraph (i), shall
be as | ||||||||
specified in tables (1), (2), and (3) of this | ||||||||
subpart (C), according to
the rules and | ||||||||
definitions in (4), (5) and (6) of this subpart | ||||||||
(C).
| ||||||||
(1) For annuities and guaranteed interest | ||||||||
contracts valued on
an issue year basis.
| ||||||||
|
| ||||||||||||||||||
(2) For annuities and guaranteed interest | ||||||||||||||||||
contracts valued on a change
in fund basis, the | ||||||||||||||||||
factors shown in (1) for Plan Types A, B and C are
| ||||||||||||||||||
increased by .15, .25 and .05, respectively.
| ||||||||||||||||||
(3) For annuities and guaranteed interest | ||||||||||||||||||
contracts valued on an issue
year basis, other than | ||||||||||||||||||
those with no cash settlement options, which do not
| ||||||||||||||||||
guarantee interest on considerations received more | ||||||||||||||||||
than one year after
issue or purchase, and for | ||||||||||||||||||
annuities and guaranteed interest contracts
valued | ||||||||||||||||||
on a change in fund basis which do not guarantee | ||||||||||||||||||
interest rates on
considerations received more | ||||||||||||||||||
than 12 months beyond the valuation date, the
| ||||||||||||||||||
factors shown in (1), or derived in (2), for Plan | ||||||||||||||||||
Types A, B and C are
increased by .05.
| ||||||||||||||||||
(4) For other annuities with cash settlement | ||||||||||||||||||
options and guaranteed
interest contracts with | ||||||||||||||||||
cash settlement options, the guarantee duration
is |
the number of years for which the contract | ||
guarantees interest rates
in excess of the | ||
calendar year statutory valuation interest rate | ||
for life
insurance policies with guarantee | ||
durations in excess of 20 years. For
other | ||
annuities with no cash settlement options, and for | ||
guaranteed
interest contracts with no cash | ||
settlement options, the guarantee duration
is the | ||
number of years from the date of issue or date of | ||
purchase to the
date annuity benefits are | ||
scheduled to commence.
| ||
(5) The plan types used in the above tables are | ||
defined as follows.
| ||
Plan Type A is a plan under which the | ||
policyholder may not withdraw
funds, or may | ||
withdraw funds at any time but only (a) with an | ||
adjustment to
reflect changes in interest rates or | ||
asset values since receipt of the
funds by the | ||
insurance company, (b) without such an adjustment | ||
but in
installments over 5 years or more, or (c) as | ||
an immediate life annuity.
| ||
Plan Type B is a plan under which the | ||
policyholder may not withdraw
funds before | ||
expiration of the interest rate guarantee, or may | ||
withdraw
funds before such expiration but only (a) | ||
with an adjustment to reflect
changes in interest |
rates or asset values since receipt of the funds by | ||
the
insurance company, or (b) without such | ||
adjustment but in installments over
5 years or | ||
more. At the end of the interest rate guarantee, | ||
funds may be
withdrawn without such adjustment in a | ||
single sum or installments over less
than 5 years.
| ||
Plan Type C is a plan under which the | ||
policyholder may withdraw funds
before expiration | ||
of the interest rate guarantee in a single sum or
| ||
installments over less than 5 years either (a) | ||
without adjustment to
reflect changes in interest | ||
rates or asset values since receipt of the
funds by | ||
the insurance company, or (b) subject only to a | ||
fixed surrender
charge stipulated in the contract | ||
as a percentage of the fund.
| ||
(6) A company may elect to value guaranteed | ||
interest contracts
with cash settlement options | ||
and annuities with cash settlement options on
| ||
either an issue year basis or on a change in fund | ||
basis. Guaranteed
interest contracts with no cash | ||
settlement options and other annuities with
no | ||
cash settlement options shall be valued on an issue | ||
year basis. As used
in this Section, "issue year | ||
basis of valuation" refers to a valuation
basis | ||
under which the interest rate used to determine the | ||
minimum valuation
standard for the entire duration |
of the annuity or guaranteed interest
contract is | ||
the calendar year valuation interest rate for the | ||
year of issue
or year of purchase of the annuity or | ||
guaranteed interest contract.
"Change in fund | ||
basis of valuation", as used in this Section, | ||
refers to a
valuation basis under which the | ||
interest rate used to determine the minimum
| ||
valuation standard applicable to each change in | ||
the fund held under the
annuity or guaranteed | ||
interest contract is the calendar year valuation
| ||
interest rate for the year of the change in the | ||
fund.
| ||
(d) Reference Interest Rate. (i) The reference | ||
interest rate referred to
in paragraph (b) of this | ||
subsection is defined as follows.
| ||
(A) For all life insurance, the reference interest | ||
rate is the lesser
of the average over a period of 36 | ||
months, and the average over a period
of 12 months, | ||
with both periods ending on June 30, or with prior | ||
approval
of the Director ending on December 31, of the | ||
calendar year next
preceding the year of issue, of | ||
Moody's Corporate Bond Yield Average - Monthly
Average | ||
Corporates, as published by Moody's Investors Service, | ||
Inc.
| ||
(B) For single premium immediate annuities and for | ||
annuity benefits
involving life contingencies arising |
from other annuities with cash
settlement options and | ||
guaranteed interest contracts with cash settlement
| ||
options, the reference interest rate is the average | ||
over a period of 12
months, ending on June 30, or with | ||
prior approval of the Director ending on
December 31, | ||
of the calendar year of issue or year of purchase, of | ||
Moody's
Corporate Bond Yield Average - Monthly Average | ||
Corporates, as published by
Moody's Investors Service, | ||
Inc.
| ||
(C) For annuities with cash settlement options and | ||
guaranteed interest
contracts with cash settlement | ||
options, valued on a year of issue basis,
except those | ||
described in (B), with guarantee durations in excess of | ||
10
years, the reference interest rate is the lesser of | ||
the average over a period
of 36 months and the average | ||
over a period of 12 months, ending on June
30, or with | ||
prior approval of the Director ending on December 31, | ||
of
the calendar year of issue or purchase, of Moody's | ||
Corporate Bond
Yield Average-Monthly Average | ||
Corporates, as published by Moody's Investors
Service, | ||
Inc.
| ||
(D) For other annuities with cash settlement | ||
options and guaranteed
interest contracts with cash | ||
settlement options, valued on a year of issue
basis, | ||
except those described in (B), with guarantee | ||
durations of 10 years
or less, the reference interest |
rate is the average over a period of 12
months, ending | ||
on June 30, or with prior approval of the Director | ||
ending on
December 31, of the calendar year of issue or | ||
purchase, of Moody's
Corporate Bond Yield | ||
Average-Monthly Average Corporates, as published by
| ||
Moody's Investors Service, Inc.
| ||
(E) For annuities with no cash settlement options | ||
and for guaranteed
interest contracts with no cash | ||
settlement options, the reference interest
rate is the | ||
average over a period of 12 months, ending on June 30, | ||
or with
prior approval of the Director ending on | ||
December 31, of the calendar year
of issue or purchase, | ||
of Moody's Corporate Bond Yield Average-Monthly
| ||
Average Corporates, as published by Moody's Investors | ||
Service, Inc.
| ||
(F) For annuities with cash settlement options and | ||
guaranteed interest
contracts with cash settlement | ||
options, valued on a change in fund basis,
except those | ||
described in (B), the reference interest rate is the | ||
average
over a period of 12 months, ending on June 30, | ||
or with prior approval of
the Director ending on | ||
December 31, of the calendar year of the
change in the | ||
fund, of Moody's Corporate Bond Yield Average-Monthly | ||
Average
Corporates, as published by Moody's Investors | ||
Service, Inc.
| ||
(G) For annuities valued by a formula based on Rq, |
the quarterly
reference interest rate is, with the | ||
prior approval of the Director, the
average within each | ||
of the 4 consecutive calendar year quarters
ending on | ||
March 31, June 30, September 30 and December 31 of the | ||
calendar
year of issue or year of purchase of Moody's | ||
Corporate Bond Yield
Average-Monthly Average | ||
Corporates, as published by Moody's Investors
Service, | ||
Inc.
| ||
(e) Alternative Method for Determining Reference | ||
Interest Rates.
In the event that the Moody's Corporate | ||
Bond Yield Average-Monthly Average
Corporates is no longer | ||
published by Moody's Investors Services, Inc., or
in the | ||
event that the National Association of Insurance | ||
Commissioners
determines that Moody's Corporate Bond Yield | ||
Average-Monthly Average
Corporates as published by Moody's | ||
Investors Service, Inc. is no longer
appropriate for the | ||
determination of the reference interest rate, then an
| ||
alternative method for determination of the reference | ||
interest rate, which
is adopted by the National Association | ||
of Insurance Commissioners and
approved by regulations | ||
promulgated by the Director, may be substituted.
| ||
(7) Minimum Standards for Health (Disability, Accident and | ||
Sickness)
Plans. The Director shall promulgate a regulation | ||
containing the minimum
standards applicable to the valuation of | ||
health (disability, sickness and
accident) plans.
| ||
(Source: P.A. 91-357, eff. 7-29-99 .)
|
(215 ILCS 5/531.09) (from Ch. 73, par. 1065.80-9)
| ||
Sec. 531.09. Assessments. | ||
(1) For the purpose of providing the funds
necessary to | ||
carry out the powers and duties of the Association, the board
| ||
of directors shall assess the member insurers, separately for | ||
each account, at such
times and for such amounts as the board | ||
finds necessary. Assessments shall
be due not less than 30 days | ||
after written notice to the member insurers
and shall accrue | ||
interest from the due date at such adjusted rate as is
| ||
established under Section 6621 of Chapter 26 of the United | ||
States Code and
such interest shall be compounded daily.
| ||
(2) There shall be 2 classes of assessments, as follows:
| ||
(a) Class A assessments shall be made for the purpose | ||
of meeting administrative
costs and other general expenses | ||
and examinations conducted under the authority
of the | ||
Director under subsection (5) of Section 531.12.
| ||
(b) Class B assessments shall be made to the extent | ||
necessary to carry
out the powers and duties of the | ||
Association under Section 531.08 with regard
to an impaired | ||
or insolvent domestic insurer or insolvent foreign or alien | ||
insurers.
| ||
(3) (a) The amount of any Class A assessment shall be | ||
determined at the discretion of the board of directors
by the
| ||
Board and such assessments shall
may be authorized and called
| ||
made on a non-pro rata basis. Such assessments shall not exceed |
$200
per company in any one calendar year. The amount of any | ||
Class B
assessment shall be allocated for assessment
purposes | ||
among the accounts
and subaccounts pursuant to an allocation | ||
formula which may be based on
the premiums or reserves of the | ||
impaired or insolvent insurer or any other
standard deemed by | ||
the board in its sole discretion as being fair and
reasonable | ||
under the circumstances.
| ||
(b) Class B assessments against member insurers for | ||
each account and
subaccount shall
be in the proportion that | ||
the premiums received on business in this State
by each | ||
assessed member insurer on policies or contracts covered by
| ||
each account or subaccount for the three most recent | ||
calendar years
for which information is available | ||
preceding the year in which the insurer
became impaired or | ||
insolvent, as the case may be, bears to such premiums
| ||
received on business in this State for such calendar years | ||
by all assessed
member insurers.
| ||
(c) Assessments for funds to meet the requirements of | ||
the Association
with respect to an impaired or insolvent | ||
insurer shall not be made until
necessary to implement the | ||
purposes of this Article. Classification
of assessments
| ||
under subsection (2) and computations of assessments under | ||
this subsection
shall be made with a reasonable degree of | ||
accuracy, recognizing that exact
determinations may not | ||
always be possible.
| ||
(4) The Association may abate or defer, in whole or in |
part, the assessment
of a member insurer if, in the opinion of | ||
the board, payment of the assessment
would endanger the ability | ||
of the member insurer to fulfill its contractual
obligations. | ||
The total of all assessments upon a member insurer for the
life | ||
and annuity
account and for each subaccount thereunder may not | ||
in any one calendar
year exceed 2% and for the health account | ||
may not in any one calendar
year exceed 2% of such insurer's
| ||
average premiums received in this State on the policies and | ||
contracts
covered by the account or subaccount during the three | ||
calendar years
preceding the year in which the insurer became | ||
an impaired or insolvent
insurer. If a one percent assessment | ||
for any subaccount of the life and
annuity account in any one | ||
year does not provide an amount sufficient to
carry out the | ||
responsibilities of the Association, then pursuant to
| ||
subsection 3(b), the board shall access all subaccounts of the | ||
life and
annuity account for the necessary additional amount, | ||
subject to the maximum
stated in this subsection.
| ||
(5) In the event an assessment against a member insurer is | ||
abated, or deferred,
in whole or in part, because of the | ||
limitations set forth in subsection (4) of this
Section the | ||
amount by which such assessment is abated or deferred, may be
| ||
assessed against the other member insurers in a manner | ||
consistent with the
basis for assessments set forth in this | ||
Section. If the maximum assessment,
together with the other | ||
assets of the Association in either account, does
not provide | ||
in any
one year in either account an amount sufficient to carry |
out the
responsibilities
of the Association, the necessary | ||
additional funds may be assessed as soon
thereafter
as | ||
permitted by this Article.
The board may provide in the plan of | ||
operation a method of allocating
funds among claims, whether | ||
relating to one or more impaired or insolvent
insurers, when | ||
the maximum assessment will be insufficient to cover | ||
anticipated
claims.
| ||
(6) The board may, by an equitable method as established in | ||
the
plan of operation, refund to member insurers, in proportion | ||
to the contribution
of each insurer to that account, the amount | ||
by which the assets of the account
exceed the amount the board | ||
finds is necessary to carry out during the coming
year the | ||
obligations of the Association with regard to that account, | ||
including
assets accruing from net realized gains and income | ||
from investments. A
reasonable amount may be retained in any | ||
account to provide funds for the
continuing expenses of the | ||
Association and for future losses if refunds are
impractical.
| ||
(7) An assessment is deemed to occur on the date upon which | ||
the board
votes such assessment. The board may defer calling | ||
the payment of the
assessment or may call for payment in one or | ||
more installments.
| ||
(8) It is proper for any member insurer, in determining its | ||
premium
rates and policyowner dividends as to any kind of | ||
insurance within the scope of
this Article, to consider the | ||
amount reasonably necessary to meet its assessment
obligations | ||
under this Article.
|
(9) The Association must issue to each insurer paying a
| ||
Class B assessment
under this Article a certificate of | ||
contribution,
in a form acceptable to the
Director, for the | ||
amount of the assessment so paid. All outstanding certificates
| ||
are of equal
dignity and priority without reference to amounts | ||
or dates of issue. A certificate
of contribution may be shown | ||
by the insurer in its financial statement as an asset
in such | ||
form and for such amount, if any, and period of time as the | ||
Director
may approve, provided the insurer shall in any event | ||
at its option have
the right to show a certificate of | ||
contribution as an admitted asset at
percentages of the | ||
original face amount for calendar years as follows:
| ||
100% for the calendar year after the year of issuance;
| ||
80% for the second calendar year after the year of | ||
issuance;
| ||
60% for the third calendar year after the year of issuance;
| ||
40% for the fourth calendar year after the year of | ||
issuance;
| ||
20% for the fifth calendar year after the year of issuance.
| ||
(Source: P.A. 86-753.)
|