Current through Register Vol. 49, No. 2, February 2024
Section
1.
Authority
This Rule is promulgated and adopted by the Insurance
Commissioner for the State of Arkansas ("Commissioner") pursuant to Arkansas
Code Annotated §
23-84-113 and
Arkansas Code Annotated §§
23-40-108(d),
23-61-108 and
25-15-201, et
seq.
Section 2.
Scope
This Rule applies to preneed insurance as defined in Section 4(C)
in this Rule.
Section 3.
Purpose
The purpose of this regulation is to establish for prepaid
funeral contracts funded by life insurance minimum mortality standards for
reserves and nonforfeiture values, and to require the use of the 1980
Commissioners Standard Ordinary (CSO) Life Valuation Mortality Table for use in
determining the minimum standard of valuation of reserves and the minimum
standard nonforfeiture values for prepaid funeral contracts funded by life
insurance.
Section 4.
Definitions
A. The term "2001
CSO Mortality Table" means that mortality table, consisting of separate rates
of mortality for male and female lives, developed by the American Academy of
Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by
the Society of Actuaries Individual Life Insurance Valuation Mortality Task
Force, and adopted by the NAIC in December 2002. The 2001 CSO Mortality Table
is included in the Proceedings of the NAIC (2nd Quarter 2002).
Unless the context indicates otherwise, the "2001 CSO Mortality Table" includes
both the ultimate form of that table and the select and ultimate form of that
table and includes both the smoker and nonsmoker mortality tables and the
composite mortality tables. It also includes both the age-nearest-birthday and
age-last-birthday bases of the mortality tables.
B. The term "Ultimate 1980 CSO" means the
Commissioners' 1980 Standard Ordinary Life Valuation Mortality Tables (1980
CSO) without ten-year (10-year) selection factors, incorporated into the 1980
amendments to the NAIC Standard Valuation Law approved in December
1983.
C. For the purposes of this
Rule, preneed insurance is any life insurance policy or certificate that is
issued to fund a prepaid funeral contract as defined in Section 4(D) of this
Rule or any similar policy or contract written through or in connection with a
funeral home with the purpose of providing funds for final expenses and having
similar underwriting characteristics as preneed funeral contracts.
D. For the purposes of this Rule, a prepaid
funeral contract is a contract as defined in Ark. Code Ann. §
23-40-103(10).
Section 5.
Minimum Valuation Mortality
Standards
For preneed insurance contracts, as defined in section 4C, and
similar policies and contracts, the minimum mortality standard for determining
reserve liabilities and nonforfeiture values for both male and female insureds
shall be the Ultimate 1980 CSO.
Section
6.
Minimum Valuation Interest Rate Standards
A. The interest rates used in determining the
minimum standard for valuation of preneed insurance shall be the calendar year
statutory valuation interest rates as required under Ark. Code Ann. §
23-84-101 et
seq, in the "Standard Valuation Law For Life Insurance and
Annuities."
B. The interest rates
used in determining the minimum standard for nonforfeiture values for preneed
insurance shall be the calendar year statutory nonforfeiture interest rates as
required under Ark. Code Ann. §
23-81-207
et seq, in the "Standard Nonforfeiture Law For Life
Insurance."
Section 7.
Minimum Valuation Method Standards
A. The method used in determining the
standard for the minimum valuation of reserves of preneed insurance shall be
the method required under Ark. Code. Ann. §
23-84-101 et
seq, in the "Standard Valuation Law For Life Insurance and
Annuities."
B. The method used in
determining the standard for the minimum nonforfeiture values for preneed
insurance shall be the method required under Ark. Code Ann. §
23-81-207
et seq, in the "Standard Nonforfeiture Law For Life Insurance."
Section 8.
Transition
Rules
A. For preneed insurance
policies issued on or after the effective date of this regulation and before
January 1, 2012, the 2001 CSO may be used as the minimum standard for reserves
and minimum standard for nonforfeiture benefits for both male and female
insureds.
B. If an insurer elects
to use the 2001 CSO as a minimum standard for any policy issued on or after the
effective date of this regulation and before January 1, 2012, the insurer shall
provide, as a part of the actuarial opinion memorandum submitted in support of
the company's asset adequacy testing, an annual written notification to the
domiciliary commissioner. The notification shall include:
(1) A complete list of all preneed policy
forms that use the 2001 CSO as a minimum standard;
(2) A certification signed by the appointed
actuary stating that the reserve methodology employed by the company in
determining reserves for the preneed policies issued after the effective date
and using the 2001 CSO as a minimum standard, develops adequate reserves (For
the purposes of this certification, the preneed insurance policies using the
2001 CSO as a minimum standard cannot be aggregated with any other policies.);
and
(3) Supporting information
regarding the adequacy of reserves for preneed insurance policies issued after
the effective date of this regulation and using the 2001 CSO as a minimum
standard for reserves.
C.
Preneed insurance policies issued on or after January 1, 2012, must use the
Ultimate 1980 CSO in the calculation of minimum nonforfeiture values and
minimum reserves.
Section
9.
Effective Date
This Rule is applicable to all preneed insurance as specified in
Section 2 of this Rule, on or after January 1, 2009.
