West Virginia Code of State Rules
Agency 114 - Insurance Commission
Title 114 - LEGISLATIVE RULE INSURANCE COMMISSIONER
Series 114-102 - Term and Universal Life Insurance Reserve Financing
Section 114-102-3 - Actuarial Method
Universal Citation: 114 WV Code of State Rules 114-102-3
Current through Register Vol. XLI, No. 38, September 20, 2024
3.1. Actuarial Method.
3.1.1. The actuarial method to establish the
required level of primary security for each reinsurance treaty subject to this rule
shall be VM-20, applied on a treaty-by-treaty basis, including all relevant
definitions, from the valuation manual as then in effect, applied as follows:
3.1.1.a. For covered policies described in
subsection 2.3.1 of this rule, the actuarial method is the greater of the
deterministic reserve or the net premium reserve (NPR) 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 NPR. In addition, if such covered policies are reinsured
in a reinsurance treaty that also contains covered policies described in subsection
2.3.2 of this rule, the ceding insurer may elect to instead use subdivision 3.1.1.b
of this rule as the actuarial method for the entire reinsurance agreement. Whether
this subdivision or subdivision 3.1.1.b of this rule 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.
3.1.1.b. For covered
policies described in subsection 2.3.2 of this rule, the actuarial method is the
greatest of the deterministic reserve, the stochastic reserve or the NPR regardless
of whether the criteria for exemption testing can be met.
3.1.1.c. Except as provided in subdivision 3.1.1.d
of this rule, 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.
3.1.1.d. If the reinsurance
treaty cedes less than one hundred percent (100%) of the risk with respect to the
covered policies, then the required level of primary security may be reduced as
follows:
3.1.1.d.1. 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 paragraph
3.1.1.d.3 of this rule, may be reduced to a pro rata portion in accordance with the
percentage of the risk ceded;
3.1.1.d.2.
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;
3.1.1.d.3. 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/ (2 * number of reinsurance premiums per year)] where cx is
calculated using the same mortality table used in calculating the NPR; and
3.1.1.d.4. 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.
3.1.1.e. It is possible for any combination of
paragraphs 3.1.1.d.1, 3.1.1.d.2, 3.1.1.d.3 and 3.1.1.d.4 of this rule 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 one
hundred percent (100%) 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.
3.1.1.f. In no event will the required level of
primary security resulting from application of the actuarial method exceed the
amount of statutory reserves ceded.
3.1.1.g. 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;
3.1.1.h. 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:
3.1.1.h.1.
The actuarial method shall be used to determine the required level of primary
security for the covered policies, and section 4 of this rule shall be used to
determine the reinsurance credit for the covered policy reserves; and
3.1.1.h.2. 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 of paragraph 3.1.1.h.1 of this rule, is
held by or on behalf of the ceding insurer in accordance with W. Va. Code §
33-4-15a(b) and
(c). Any primary security used to meet the
requirements of this paragraph may not be used to satisfy the required level of
primary security for the covered policies.
3.2. Valuation Used for Purposes of Calculations.
3.2.1. 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:
3.2.1.a. For assets, including any such assets
held in trust, that would be admitted under the National Association of Insurance
Commissioners' 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
3.2.1.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. In addition, the
asset spread tables and asset default cost tables required by VM-20 shall be
included in the actuarial method if adopted by the National Association of Insurance
Commissioners' Life Actuarial (A) Task Force no later than the December 31 on or
immediately preceding the valuation date for which the required level of primary
security is being calculated. The tables of asset spreads and asset default costs
shall be incorporated into the actuarial method in the manner specified in
VM-20.
Disclaimer: These regulations may not be the most recent version. West Virginia 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.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
