California Code of Regulations
Title 10 - Investment
Chapter 5 - Insurance Commissioner
Subchapter 3 - Insurers
Article 17 - Actuarial Opinion and Memorandum Regulation
Section 2580.5 - Statement of Actuarial Opinion Based on an Asset Adequacy Analysis

Universal Citation: 10 CA Code of Regs 2580.5

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) General Description.

The statement of Actuarial Opinion submitted in accordance with this section shall consist of:

(1) A paragraph identifying the Appointed Actuary and his or her qualifications (see Paragraph 2580.5(b)(1));

(2) A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the Appointed Actuary's work, including a tabulation delineating the reserves and related actuarial items that have been analyzed for asset adequacy and the method of analysis, (see Paragraph 2580.5(b)(2)) and identifying the reserves and related actuarial items covered by the opinion that have not been so analyzed;

(3) A reliance paragraph describing those areas, if any, where the Appointed Actuary has deferred to other experts in developing data, procedures or assumptions, (e.g., anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios (see Paragraph 2580.5(b)(3)), supported by a statement of each such expert in the form prescribed by Subsection 2580.5(e); and

(4) An opinion paragraph expressing the Appointed Actuary's opinion with respect to the adequacy of the supporting assets to mature the liabilities (see Paragraph 2580.5(b)(6)).

(5) One or more additional paragraphs will be needed in individual Company cases as follows:
(A) If the Appointed Actuary considers it necessary to state a qualification of his or her opinion.

(B) If the Appointed Actuary must disclose an inconsistency in the method of analysis or basis or asset allocation used at the prior opinion date with that used for this opinion.

(C) If the Appointed Actuary must disclose whether additional reserves as of the prior opinion date are released as of this opinion date, and the extent of the release.

(D) If the Appointed Actuary chooses to add a paragraph briefly describing the assumptions which form the basis for the Actuarial Opinion.

(b) Recommended Language.

The following paragraphs are to be included in the statement of Actuarial Opinion in accordance with this section. Language is that which in typical circumstances should be included in a statement of Actuarial Opinion. The language may be modified as needed to meet the circumstances of a particular case, but the Appointed Actuary should use language that clearly expresses his or her professional judgment. However, in any event the opinion shall retain all pertinent aspects of the language provided in this section.

(1) The opening paragraph should generally indicate the Appointed Actuary's relationship to the Company and his or her qualifications to sign the opinion. For a Company actuary, the opening paragraph of the Actuarial Opinion should include a statement such as:

"I, [name of actuary], am [title] of [insurance company name] and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the Commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies."

For a consulting actuary, the opening paragraph should include a statement such as:

"I, [name], a member of the American Academy of Actuaries, am associated with the firm of [name of consulting firm]. I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the Commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies."

(2) The scope paragraph should include a statement such as:

"I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the Annual Statement of the Company, as prepared for filing with state regulatory officials, as of December 31, 20[ ]. Tabulated below are those reserves and related items which have been subjected to Asset Adequacy Analysis.

Reserves and Liabilities

Asset Adequacy Formula Reserves

Tested Amounts Additional Actuarial Reserves (a)

Analysis Method (b)

Other Amount

Total Amount (1)+ (2) + (4)

Statement Item

(1)

(2)

(3)

(4)

(5)
___________________________
Exhibit 5
Life Insurance
Annuities
Supplementary
Contracts Involving
Life Contingencies
Accidental Death
Benefit
Disability - Active
Disability - Disabled
Miscellaneous
Total (Exhibit 5 Item 1, Page 3)________________________________________
Exhibit 6
Active Life Reserve
Claim Reserve
Total (Exhibit 6 Item 1, Page 3)________________________________________
Exhibit 7
Premiums and Other
Deposit Funds
(Column 5, Line 14)
Guaranteed Interest
Contracts
(Column 2, Line 14)
Other
(Column 6, Line 14)
Supplemental
Contracts and Annuities Certain
(Column 3, Line 14)
Dividends and Accumulations or Refunds
(Column 4, Line 14)
Total Exhibit 7 (Column 1, Line 14)________________________________________
Exhibit 8 Part 1
Life (Page 3, Line 4.1)
Health (Page 3, Line 4.2)
Total Exhibit 11, Part 1________________________________________
Other (Specify)________________________________________
________________________________________
Separate Accounts
(Page 3 of the Annual Statement of the Separate Accounts, Lines 1 and 2, Column 3)________________________________________
TOTAL RESERVES________________________________________
IMR (General Account, Page ___ Line ___)__________
(Separate Accounts, Page ___ Line ___)_______(c)
AVR (Page ___ Line ___)__________
Net Deferred and Uncollected Premium

Notes:

(a) The additional actuarial reserves are the reserves established under Section 2580.4(e)

(b) The Appointed Actuary should indicate the method of analysis, determined in accordance with the standards for asset analysis referred to in Section 2580.4(d) of this regulation, by means of symbols that should be defined in a footnote to the table.

(c) Allocated amount of Asset Valuation Reserve (AVR).

(3) If the Appointed Actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph should include a statement such as:

"I have relied on [name], [title] for [e.g., "anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios," or "certain critical aspects of the analysis performed in conjunction with forming my opinion"], as certified in the attached statement. I have reviewed the information relied upon for reasonableness."

A statement of reliance on other experts should be accompanied by a statement by each of such experts in the form prescribed by Subsection 2580.5(e).

(4) If the Appointed Actuary has examined the underlying asset and liability records, the reliance paragraph should also include the following:

"My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and such tests of the actuarial calculations as I considered necessary. I also reconciled the underlying basic asset and liability records to [exhibits and schedules listed as applicable] of the company's current annual statement."

(5) If the Appointed Actuary has not examined the underlying records, but has relied upon data (e.g., listings and summaries of policies in force and/or asset records) prepared by the Company, the reliance paragraph should include a statement such as:

"In forming my opinion on [specifying types of reserves] I relied upon data prepared by [name and title of company officer certifying in force records or other data] as certified in the attached statements. I evaluated that data for reasonableness and consistency. I also reconciled that data to [exhibits and schedules to be listed as applicable] of the company's current annual statement. In other respects, my examination included review of the actuarial assumptions and actuarial methods used, and included such tests of the calculations as I considered necessary."

The section must be accompanied by a statement by each person relied upon in the form prescribed by Subsection 2580.5(e).

(6) The opinion paragraph should include the following:

"In my opinion the reserves and related actuarial values concerning the statement items identified above:

(A) Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;

(B) Are based on actuarial assumptions that produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;

(C) Meet the requirements of the Insurance Law and regulation of the state of [state of domicile] and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;

(D) Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the Annual Statement of the preceding year-end (with any exceptions noted below); and

(E) Include provision for all actuarial reserves and related statement items which ought to be established.
1. The reserves and related items, when considered in light of the assets held by the Company with respect to such 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, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company. (At the discretion of the Commissioner, the preceding sentence may be omitted for an opinion filed on behalf of a domestic Company doing business only in this state and in no other state.)

2. The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion.

3.
(i) This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion.

OR

(ii) The following material change(s) which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: (Describe the change or changes.)

NOTE: Choose Subitem (i) or Subitem (ii) above, whichever is applicable.

4. The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company's future experience may not follow all the assumptions used in the analysis.

______________________________

Signature of Appointed Actuary

______________________________

Address of Appointed Actuary

______________________________

Telephone Number of Appointed Actuary

______________________________

E-mail Address of Appointed Actuary

______________________________

Date"

(c) Assumptions for New Issues.

The adoption for new issues or new claims or other new liabilities of an actuarial assumption that differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of this Section 2580.5.

(d) Adverse Opinions.

If the Appointed Actuary is unable to form an opinion, then he or she shall refuse to issue a statement of Actuarial Opinion. If the Appointed Actuary's opinion is adverse or qualified, then he or she shall issue an adverse or qualified Actuarial Opinion explicitly stating the reason(s) for the opinion.

This statement should follow the scope paragraph and precede the opinion paragraph.

(e) Reliance on Information Furnished by Other Persons.

If the Appointed Actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the Actuarial Opinion, or the appropriateness of any other information used by the Appointed Actuary in forming the Actuarial Opinion, the Actuarial Opinion should so indicate the persons the actuary is relying upon and a precise identification of the items subject to reliance. In addition, the persons on whom the Appointed Actuary relies shall provide a certification that precisely identifies the items on which the person is providing information and a statement as to the accuracy, completeness or reasonableness, as applicable, of the items. This certification shall include the signature, title, company, address, e-mail address and telephone number of the person rendering the certification, as well as the date on which it is signed.

1. New section filed 12-6-94; operative 1-5-95 (Register 94, No. 49).
2. Repealer of former section 2580.5 and renumbering and amendment of former section 2580.7 to section 2580.5 filed 12-27-2004; operative 1-1-2005 pursuant to Government Code section 11343.4 (Register 2004, No. 53).

Note: Authority cited: Section 10489.15, Insurance Code. Reference: Section 10489.15, Insurance Code.

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