Current through August, 2024
I-2005-01
RECOGNITION OF THE 2001 CSO MORTALITY TABLE FOR USE IN
DETERMINING MINIMUM RESERVE LIABILITIES AND NONFORFEITURE BENEFITS MODEL
REGULATION
Section 1 Authority
This Regulation is promulgated by the Commissioner of
Banking, Insurance, Securities and Health Care Administration pursuant to
8 V.S.A. §
15, 8 V.S.A. § 3784(a)(2) ("Vermont
Standard Valuation Law"),
8 V.S.A. §
3747a(h)(6) ("Vermont
Standard Nonforfeiture Law for Life Insurance"), Sections 5A and 5B of
Regulation 99-3-I ("Valuation of Life Insurance Policies") of the Vermont
Department of Banking, Insurance, Securities and Health Care Administration,
and Sec. 21 of Act 105 of the 2004 session of the Vermont General
Assembly.
Section 2 Purpose
The purpose of this Regulation is to recognize, permit and
prescribe the use of the 2001 Commissioners Standard Ordinary (CSO) Mortality
Table in accordance with
8 V.S.A. §
15, 8 V.S.A. § 3784(a)(2) ("Vermont
Standard Valuation Law"),
8 V.S.A. §
3747a(h)(6) ("Vermont
Standard Nonforfeiture Law for Life Insurance"), Sections 5A and 5B of
Regulation 99-3-I ("Valuation of Life Insurance Policies") of the Vermont
Department of Banking, Insurance, Securities and Health Care Administration,
and Sec. 21 of Act 105 of the 2004 session.
Section 3 Definitions
As used in this Regulation:
A. "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. "2001 CSO
Mortality Table (F)" means that mortality table consisting of the rates of
mortality for female lives from the 2001 CSO Mortality Table.
C. "2001 CSO Mortality Table (M)" means that
mortality table consisting of the rates of mortality for male lives from the
2001 CSO Mortality Table.
D.
"Composite mortality tables" means mortality tables with rates of mortality
that do not distinguish between smokers and nonsmokers.
E. "Smoker and nonsmoker mortality tables"
means mortality tables with separate rates of mortality for smokers and
nonsmokers.
Section 4
2001 CSO Mortality Table
A. At the election of
the company for any one or more specified plans of insurance and subject to the
conditions stated in this Regulation, the 2001 CSO Mortality Table may be used
as the minimum standard for policies issued on or after October 8, 2004 and
before the date specified in Subsection B of this Section
4
to which
8 V.S.A. §
15, 8 V.S.A. § 3784(a)(2) ("Vermont
Standard Valuation Law"),
8 V.S.A. §
3747a(h)(6) ("Vermont
Standard Nonforfeiture Law for Life Insurance"), Sections 5A and 5B of
Regulation 99-3-I ("Valuation of Life Insurance Policies") of the Vermont
Department of Banking, Insurance, Securities and Health Care Administration are
applicable. If the company elects to use the 2001 CSO Mortality Table, it shall
do so for both valuation and nonforfeiture purposes.
B. Subject to the conditions stated in this
Regulation, the 2001 CSO Mortality Table shall be used in determining minimum
standards for policies issued on and after January 1, 2009, to which
8 V.S.A. §
15, 8 V.S.A. § 3784(a)(2) ("Vermont
Standard Valuation Law"),
8 V.S.A. §
3747a(h)(6) ("Vermont
Standard Nonforfeiture Law for Life Insurance"), Sections 5A and 5B of
Regulation 99-3-I ("Valuation of Life Insurance Policies") of the Vermont
Department of Banking, Insurance, Securities and Health Care Administration are
applicable.
Section 5
Conditions
A. For each plan of insurance with
separate rates for smokers and nonsmokers, an insurer may use:
(1) Composite mortality tables to determine
minimum reserve liabilities and minimum cash surrender values and amounts of
paid-up nonforfeiture benefits;
(2)
Smoker and nonsmoker mortality tables to determine the valuation net premiums
and additional minimum reserves, if any, required by
8 V.S.A. §
3788
and use composite mortality tables to determine the basic minimum reserves,
minimum cash surrender values and amounts of paid-up nonforfeiture benefits;
or
(3) Smoker and nonsmoker
mortality to determine minimum reserve liabilities and minimum cash surrender
values and amounts of paid-up nonforfeiture benefits.
B. For plans of insurance without separate
rates for smokers and nonsmokers, the composite mortality tables shall be
used.
C. For the purpose of
determining minimum reserve liabilities and minimum cash surrender values and
amounts of paid-up nonforfeiture benefits, the 2001 CSO Mortality Table may, at
the option of the company for each plan of insurance, be used in its ultimate
or select and ultimate form, subject to the restrictions of Section
6 and
Regulation 99-3-I ("Valuation of Life Insurance Policies") of the Vermont
Department of Banking, Insurance, Securities and Health Care Administration
relative to the use of the select and ultimate form.
D. When the 2001 CSO Mortality Table is the
minimum reserve standard for any plan for a company, the actuarial opinion in
the statement filed with the Commissioner shall be based on an asset adequacy
analysis as specified in Section
5 of
Regulation 97-4 ("Actuarial Opinion and Memorandum Regulation") of the Vermont
Department of Banking, Insurance, Securities and Health Care Administration. A
Commissioner may exempt a company from this requirement if it only does
business in this state and in no other state.
Section 6 Applicability of the 2001 CSO
Mortality Table to Regulation 99-3-I ("Valuation of Life Insurance Policies")
of the Vermont Department of Banking, Insurance, Securities and Health Care
Administration
A. The 2001 CSO Mortality Table
may be used in applying Regulation 99-3-I ("Valuation of Life Insurance
Policies") of the Vermont Department of Banking, Insurance, Securities and
Health Care Administration in the following manner, subject to the transition
dates for use of the 2001 CSO Mortality Table in Section
4
of this Regulation (unless otherwise noted, the references in this section are
to Regulation 99-3-I ("Valuation of Life Insurance Policies") of the Vermont
Department of Banking, Insurance, Securities and Health Care Administration):
(1) Section 3A(2)(b): The net level reserve
premium is based on the ultimate mortality rates in the 2001 CSO Mortality
Table.
(2) Section 4B: All
calculations are made using the 2001 CSO Mortality Rate, and, if elected, the
optional minimum mortality standard for deficiency reserves stipulated in
Section 6A(4) of this Regulation. The value of "qx+k+t-1" is the valuation
mortality rate for deficiency reserves in policy year k+t, but using the
unmodified select mortality rates if modified select mortality rates are used
in the computation of deficiency reserves.
(3) Section 5A: The 2001 CSO Mortality Table
is the minimum standard for basic reserves.
(4) Section 5B: The 2001 CSO Mortality Table
is the minimum standard for deficiency reserves. If select mortality rates are
used, they may be multiplied by X percent for durations in the first segment,
subject to the conditions specified in Sections 5B(3)(a) to (i). In
demonstrating compliance with those conditions, the demonstrations may not
combine the results of tests that utilize the 1980 CSO Mortality Table with
those tests that utilize the 2001 CSO Mortality Table, unless the combination
is explicitly required by regulation or necessary to be in compliance with
relevant Actuarial Standards of Practice.
(5) Section 6C: The valuation mortality table
used in determining the tabular cost of insurance shall be the ultimate
mortality rates in the 2001 CSO Mortality Table.
(6) Section 6E(4): The calculations specified
in Section 6E shall use the ultimate mortality rates in the 2001 CSO Mortality
Table.
(7) Section 6F(4): The
calculations specified in Section 6F shall use the ultimate mortality rates in
the 2001 CSO Mortality Table.
(8)
Section 6G(2): The calculations specified in Section 6G shall use the ultimate
mortality rates in the 2001 CSO Mortality Table.
(9) Section 7A(1)(b): The one-year valuation
premium shall be calculated using the ultimate mortality rates in the 2001 CSO
Mortality Table.
B.
Nothing in this section shall be construed to expand the applicability of
Regulation 99-3-I ("Valuation of Life Insurance Policies") of the Vermont
Department of Banking, Insurance, Securities and Health Care Administration to
include life insurance policies exempted under Section 3A of such
Regulation.
Section 7
Gender-Blended Tables
A. For any ordinary life
insurance policy delivered or issued for delivery in this state on and after
October 8, 2004, that utilizes the same premium rates and charges for male and
female lives or is issued in circumstances where applicable law does not permit
distinctions on the basis of gender, a mortality table that is a blend of the
2001 CSO Mortality Table (M) and the 2001 CSO Mortality Table (F) may, at the
option of the company for each plan of insurance, be substituted for the 2001
CSO Mortality Table for use in determining minimum cash surrender values and
amounts of paid-up nonforfeiture benefits. No change in minimum valuation
standards is implied by this subsection of the Regulation.
B. The company may choose from among the
blended tables developed by the American Academy of Actuaries CSO Task Force
and adopted by the NAIC in December 2002.
C. It shall not, in and of itself, be a
violation of 8 V.S.A., Chapter 129 ("Insurance Trade Practices") for an insurer
to issue the same kind of policy of life insurance on both a sex-distinct and
sex-neutral basis.
Section
8 Separability
If any provision of this Regulation or its application to any
person or circumstance is for any reason held to be invalid, the remainder of
the Regulation and the application of the provision to other persons or
circumstances shall not be affected.
Section 9 Effective Date
The effective date of this Regulation is February 20, 2005.
8 V.S.A.
§§
15,
3747a(h)
(6),
3784(a)
(2)
