Oregon Administrative Rules
Chapter 836 - DEPARTMENT OF CONSUMER AND BUSINESS SERVICES, INSURANCE REGULATION
Division 31 - ACCOUNTING AND INVESTMENTS (ORS CHAPTER 733); REHABILITATION AND LIQUIDATION OF INSURERS (ORS CHAPTER 734)
Section 836-031-0250 - Contract Reserves

(a) Unless otherwise specified in subsection (b) of this section (1), an insurer must maintain contract reserves for:

(b) Contracts that cannot be continued after one year from issue do not require a contract reserve;

(c) The contract reserve is in addition to claim reserves and premium reserves;

(d) The methods and procedures for contract reserves must be consistent with those for claim reserves for any contract, or else appropriate adjustment must be made when necessary to assure provision for the aggregate liability. The definition of the date of incurral must be the same in both determinations.

(a) Morbidity or other contingency. Minimum standards with respect to morbidity are those set forth in OAR 836-031-0270. Valuation net premiums used under each contract must have a structure consistent with the gross premium structure at issue of the contract as this relates to advancing age of insured, contract duration and period for which gross premiums have been calculated. Contracts for which tabular morbidity standards are not specified in 836-031-0270 shall be valued using tables established for reserve purposes by a qualified actuary and acceptable to the Director;

(b) Interest. The maximum interest rate is specified in OAR 836-031-0280;

(c) Termination rates. Termination rates used in the computation of reserves shall be on the basis of a mortality table as specified in OAR 836-031-0290, except provided in this subsection. When a morbidity standard specified in OAR 836-031-0270 is on an aggregate basis, the morbidity standard may be adjusted to reflect the effect of insurer underwriting by policy duration. The adjustments must be appropriate to the underwriting and are subject to prior approval by the Director. Total termination rates that exceed the specified mortality table rates may be used for the following benefits, but the total termination rates used may still not exceed the lesser of 80 percent of the total termination rate used in the calculation of the gross premiums or eight percent. The specified benefits are as follows:

(d) Reserve method:

(e) Negative reserves. Negative reserves on any benefit may be offset against positive reserves for other benefits in the same contract, but the total contract reserve with respect to all benefits combined may not be less than zero.

(a) If the contract reserve on all contracts to which an alternative method or basis is applied is not less in the aggregate than the amount determined according to the applicable standards specified in sections (1) and (2) of this rule, an insurer may use any reasonable assumptions as to interest rates, termination and mortality rates, and rates of morbidity or other contingency; and

(b) Subject to subsection (a) of this section, an insurer may employ methods other than the methods stated in sections (1) and (2) of this rule in determining a sound value of its liabilities under such contracts. The methods may include but are not limited to the following:

(a) Annually, an insurer shall make an appropriate review of the prospective contract liabilities of the insurer on contracts valued by tabular reserves to determine the continuing adequacy and reasonableness of the tabular reserves, giving consideration to future gross premiums. Subject to the minimum standards of section (2) of this rule, the insurer shall make appropriate increments to such tabular reserves if such tests indicate that the basis of such reserves is no longer adequate.

(b) In the event an insurer has a contract or a group of related similar contracts for which future gross premiums will be restricted by contract, insurance department regulations or for other reasons, such that the future gross premiums reduced by expenses for administration, commissions, and taxes will be insufficient to cover future claims, the insurer shall establish contract reserves for such shortfall in the aggregate.