Oregon Administrative Rules
Chapter 836 - DEPARTMENT OF CONSUMER AND BUSINESS SERVICES, INSURANCE REGULATION
Division 12 - CREDIT FOR REINSURANCE
Section 836-012-0250 - The Actuarial Method
Universal Citation: OR Admin Rules 836-012-0250
Current through Register Vol. 63, No. 9, September 1, 2024
(1) The Actuarial Method to establish the Required Level of Primary Security for each reinsurance treaty subject to this regulation shall be VM-20, applied on a treaty-by-treaty basis, including all relevant definitions, from the Valuation Manual applied as follows:
(a) For Covered
Policies described in OAR
836-012-0210
(2)(a), the Actuarial Method is the greater
of the deterministic reserve or the net premium reserve (as those terms are
defined in the Valuation Manual) regardless of whether the criteria for
exemption testing can be met. However, if the Covered Policies do not meet the
requirements of the stochastic reserve exclusion test in the Valuation Manual,
then the Actuarial Method is the greatest of the deterministic reserve, the
stochastic reserve, or the net premium reserve. In addition, if such Covered
Policies are reinsured in a reinsurance treaty that also contains Covered
Policies described in OAR
836-012-0210
(2)(b), the ceding insurer may elect to
instead use OAR 836-012-0250
(1)(b) below as the Actuarial Method for the
entire reinsurance agreement. Whether OAR
836-012-0250
(1)(a) or OAR
836-012-0250
(1)(b) is used, the Actuarial Method must
comply with any requirements or restrictions that the Valuation Manual imposes
when aggregating these policy types for purposes of principle-based reserve
calculations.
(b) For Covered
Policies described in OAR
836-012-0210
(2)(b), the Actuarial Method is the greatest
of the deterministic reserve, the stochastic reserve, or the net premium
reserve (as those terms are defined in the Valuation Manual) regardless of
whether the criteria for exemption testing can be met.
(c) Except as provided in OAR
836-012-0250
(1)(d), the Actuarial Method is to be applied
on a gross basis to all risks with respect to the Covered Policies as
originally issued or assumed by the ceding insurer.
(d) If the reinsurance treaty cedes less than
100 percent of the risk with respect to the Covered Policies then the Required
Level of Primary Security may be reduced as follows:
(A) If a reinsurance treaty cedes only a
quota share of some or all of the risks pertaining to the Covered Policies, the
Required Level of Primary Security, as well as any adjustment under OAR
836-012-0250
(1)(d)(C), may be reduced to a pro rata
portion in accordance with the percentage of the risk ceded;
(B) If the reinsurance treaty in a non-exempt
arrangement cedes only the risks pertaining to a secondary guarantee, the
Required Level of Primary Security may be reduced by an amount determined by
applying the Actuarial Method on a gross basis to all risks, other than risks
related to the secondary guarantee, pertaining to the Covered Policies, except
that for Covered Policies for which the ceding insurer did not elect to apply
the provisions of VM-20 to establish statutory reserves, the Required Level of
Primary Security may be reduced by the statutory reserve retained by the ceding
insurer on those Covered Policies, where the retained reserve of those Covered
Policies should be reflective of any reduction pursuant to the cession of
mortality risk on a yearly renewable term basis in an exempt
arrangement;
(C) If a portion of
the Covered Policy risk is ceded to another reinsurer on a yearly renewable
term basis in an exempt arrangement, the Required Level of Primary Security may
be reduced by the amount resulting by applying the Actuarial Method including
the reinsurance section of VM-20 to the portion of the Covered Policy risks
ceded in the exempt arrangement, except that for Covered Policies issued prior
to January 1, 2017, this adjustment is not to exceed [Cx divided by (2
multiplied by the number of reinsurance premiums per year)] where Cx is
calculated using the same mortality table used in calculating the net premium
reserve; and
(D) For any other
treaty ceding a portion of risk to a different reinsurer, including but not
limited to stop loss, excess of loss and other non-proportional reinsurance
treaties, there will be no reduction in the Required Level of Primary Security.
It is possible for any combination of OAR
836-012-0250 (1)(d)(A), (B), (C), and
(D) to apply. Such adjustments to the
Required Level of Primary Security will be done in the sequence that accurately
reflects the portion of the risk ceded via the treaty. The ceding insurer
should document the rationale and steps taken to accomplish the adjustments to
the Required Level of Primary Security due to the cession of less than 100
percent of the risk. The adjustments for other reinsurance will be made only
with respect to reinsurance treaties entered into directly by the ceding
insurer. The ceding insurer will make no adjustment as a result of a
retrocession treaty entered into by the assuming insurers.
(e) In no event will the Required Level of
Primary Security resulting from application of the Actuarial Method exceed the
amount of statutory reserves ceded.
(f) If the ceding insurer cedes risks with
respect to Covered Policies, including any riders, in more than one reinsurance
treaty subject to this rule, in no event will the aggregate Required Level of
Primary Security for those reinsurance treaties be less than the Required Level
of Primary Security calculated using the Actuarial Method as if all risks ceded
in those treaties were ceded in a single treaty subject to this rule;
(g) If a reinsurance treaty subject to this
rule cedes risk on both Covered and Non-Covered Policies, credit for the ceded
reserves shall be determined as follows:
(A)
The Actuarial Method shall be used to determine the Required Level of Primary
Security for the Covered Policies, and OAR
836-012-0260 shall be used to
determine the reinsurance credit for the Covered Policy reserves; and
(B) Credit for the Non-Covered Policy
reserves shall be granted only to the extent that security, in addition to the
security held to satisfy the requirements OAR
836-012-0250
(1)(g)(A), is held by or on behalf of the
ceding insurer in accordance with OAR
836-012-0031 and OAR
836-012-0060. Any Primary
Security used to meet the requirements of this Subparagraph may not be used to
satisfy the Required Level of Primary Security for the Covered
Policies.
(2) For the purposes of both calculating the Required Level of Primary Security pursuant to the Actuarial Method and determining the amount of Primary Security and Other Security, as applicable, held by or on behalf of the ceding insurer, the following shall apply:
(a) For assets,
including any such assets held in trust, that would be admitted under the NAIC
Accounting Practices and Procedures Manual if they were held by the ceding
insurer, the valuations are to be determined according to statutory accounting
procedures as if such assets were held in the ceding insurer's general account
and without taking into consideration the effect of any prescribed or permitted
practices; and
(b) For all other
assets, the valuations are to be those that were assigned to the assets for the
purpose of determining the amount of reserve credit taken.
Statutory/Other Authority: ORS 731.244, ORS 731.508 - 731.511 & 731.514
Statutes/Other Implemented: ORS 731.508 - 731.511 & 731.514
Disclaimer: These regulations may not be the most recent version. Oregon may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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