Current through August, 2024
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"), and 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.
Section 2
Purpose
The purpose of this Regulation is to recognize, permit and
prescribe the use of mortality tables that reflect differences in mortality
between Preferred and Standard lives in determining minimum reserve liabilities
in accordance with
8 V.S.A. §
15, 8 V.S.A. § 3784(a)(2), 8 V.S.A.
§ 3747a(h)(6), and Sections 5A and 5B of Regulation 99-3-I of the Vermont
Department of Banking, Insurance, Securities and Health Care
Administration.
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) and supplemented by the 2001 CSO
Preferred Class Structure Mortality Table defined below in Subsection B. 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. Mortality tables in the 2001
CSO Mortality Table include the following:
1.
"2001 CSO Mortality Table (F)" means that mortality table consisting of the
rates of mortality for female lives from the 2001 CSO Mortality
Table.
2. "2001 CSO Mortality Table
(M)" means that mortality table consisting of the rates of mortality for male
lives from the 2001 CSO Mortality Table.
3. "Composite mortality tables" means
mortality tables with rates of mortality that do not distinguish between
smokers and nonsmokers.
4. "Smoker
and nonsmoker mortality tables" means mortality tables with separate rates of
mortality for smokers and nonsmokers.
B. "2001 CSO Preferred Class Structure
Mortality Table" means mortality tables with separate rates of mortality for
Super Preferred Nonsmokers, Preferred Nonsmokers, Residual Standard Nonsmokers,
Preferred Smokers, and Residual Standard Smoker splits of the 2001 CSO
Nonsmoker and Smoker tables as adopted by the NAIC at the September, 2006
National Meeting and published in the NAIC Proceedings (3rd Quarter 2006).
Unless the context indicates otherwise, the "2001 CSO Preferred Class Structure
Mortality Table" includes both the ultimate form of that table and the select
and ultimate form of that table. It includes both the smoker and nonsmoker
mortality tables. It includes both the male and female mortality tables and the
gender composite mortality tables. It also includes both the age-nearest
birthday and age-last birthday bases of the mortality table.
C. "Statistical agent" means an entity with
proven systems for protecting the confidentiality of individual insured and
insurer information; demonstrated resources for and history of ongoing
electronic communications and data transfer ensuring data integrity with
insurers, which are its members or subscribers; and a history of and means for
aggregation of data and accurate promulgation of the experience modifications
in a timely manner.
Section
4 2001 CSO Preferred Class Structure Table
At the election of the company, for each calendar year of
issue, for any one or more specified plans of insurance and subject to
satisfying the conditions stated in this regulation, the 2001 CSO Preferred
Class Structure Mortality Table may be substituted in place of the 2001 CSO
Smoker or Nonsmoker Mortality Table as the minimum valuation standard for
policies issued on or after January 1, 2007. No such election shall be made
until the company demonstrates at least 20% of the business to be valued on
this table is in one or more of the preferred classes. A table from the 2001
CSO Preferred Class Structure Mortality Table used in place of a 2001 CSO
Mortality Table, pursuant to the requirements of this rule, will be treated as
part of the 2001 CSO Mortality Table only for purposes of reserve valuation
pursuant to the requirements of Department Regulation
1-2005-01.
Section 5
Conditions
A. For each plan of insurance with
separate rates for Preferred and Standard Nonsmoker lives, an insurer may use
the Super Preferred Nonsmoker, Preferred Nonsmoker, and Residual Standard
Nonsmoker tables to substitute for the Nonsmoker mortality table found in the
2001 CSO Mortality Table to determine minimum reserves. At the time of election
and annually thereafter, except for business valued under the Residual Standard
Nonsmoker Table, the appointed actuary shall certify that:
1. The present value of death benefits over
the next ten years after the valuation date, using the anticipated mortality
experience without recognition of mortality improvement beyond the valuation
date for each class, is less than the present value of death benefits using the
valuation basic table corresponding to the valuation table being used for that
class.
2. The present value of
death benefits over the future life of the contracts, using anticipated
mortality experience without recognition of mortality improvement beyond the
valuation date for each class, is less than the present value of death benefits
using the valuation basic table corresponding to the valuation table being used
for that class.
B. For
each plan of insurance with separate fees for Preferred and Standard Smoker
lives, an insurer may use the Preferred Smoker and Residual Standard Smoker
tables to substitute for the Smoker mortality table found in the 2001 CSO
Mortality Table to determine minimum reserves. At the time of election and
annually thereafter, for business valued under the Preferred Smoker Table, the
appointed actuary shall certify that:
1. The
present value of death benefits over the next ten years after the valuation
date, using the anticipated mortality experience without recognition of
mortality improvement beyond the valuation date for each class, is less than
the present value of death benefits using the Preferred Smoker valuation basic
table corresponding to the valuation table being used for that class.
2. The present value of death benefits over
the future life of the contracts, using anticipated mortality experience
without recognition of mortality improvement beyond the valuation date for each
class, is less than the present value of death benefits using the Preferred
Smoker valuation basic table.
C. Unless exempted by the commissioner, every
authorized insurer using the 2001 CSO Preferred Class Structure Table shall
annually file with the commissioner, with the NAIC, or with a statistical agent
designated by the NAIC and acceptable to the commissioner, statistical reports
showing mortality and such other information as the commissioner may deem
necessary or expedient for the administration of the provisions of this
regulation. The form of the reports shall be established by the commissioner or
the commissioner may require the use of a form established by the NAIC or by a
statistical agent designated by the NAIC and acceptable to the
commissioner.
Section 6
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 7 Effective Date
The effective date of this Regulation is December 21,
2007.
STATUTORY AUTHORITY:
8 V.S.A.
§§
15,
3747,
3784
