(1) AUTHORITY. This
section is promulgated by the commissioner of insurance pursuant to s.
623.06(2) (am) 3, Stats., standard valuation law, and
s.
632.43(6m) (e) 3 f., Stats., standard nonforfeiture law
for life insurance.
(2) PURPOSE.
The purpose of this section is to recognize, permit and prescribe the use of:
the 2001 commissioners' standard ordinary CSO mortality table in accordance
with s.
623.06(2) (am) 3, Stats., standard valuation law, and s.
632.43(6m) (e) 3 f., Stats., standard nonforfeiture law
for life insurance; the 2001 CSO mortality table in s.
Ins 2.20 unisex nonforfeiture values in certain life
insurance policies, s.
Ins 2.35 smoker and nonsmoker mortality tables for minimum
reserve liabilities and minimum nonforfeiture benefits, and s.
Ins 2.80 valuation of life insurance policies; mortality
tables that reflect differences in mortality between preferred and standard
lives in determining minimum reserve liabilities in accordance with s.
623.06(2) (am) 3, Stats., standard valuation law, and s.
Ins 2.80 valuation of life insurance policies; and the
1980 commissioners' standard ordinary CSO mortality table for determining the
minimum standard of valuation of reserves and the minimum standard
nonforfeiture values for funeral policies.
(3) DEFINITIONS. In this section:
(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 is
supplemented by the 2001 CSO preferred class structure mortality table and may
be obtained from the office. 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.
Note: The 2001 CSO mortality table may be obtained
from the website of the Office of the Commissioner of Insurance
(http://oci.wi.gov) or by writing to the Office.
(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.
(cm) "2001 CSO preferred class structure
mortality table" means mortality tables with separate rates 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 Proceedings of the NAIC (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.
Note: The 2001 CSO preferred class structure
mortality table may be obtained from the website of the Office of the
Commissioner of Insurance (http://oci.wi.gov) or by writing to the
Office.
(d) "Commissioner"
means the commissioner of insurance.
(e) "Composite mortality tables" means
mortality tables with rates of mortality that do not distinguish between
smokers and nonsmokers.
(em)
"Funeral policies" means life insurance policies as defined in s.
632.415,
Stats.
(f) "NAIC" means the
national association of insurance commissioners.
(g) "Office" means the office of the
commissioner of insurance.
(h)
"Smoker and nonsmoker mortality tables" means mortality tables with separate
rates of mortality for smokers and nonsmokers.
(i) "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.
(j) "Ultimate
1980 CSO" means the commissioners 1980 standard ordinary mortality table
without 10-year select mortality factors, incorporated into the standard
valuation law as provided in s.
623.06(2) (am) 1, Stats.
Note: The Ultimate 1980 CSO mortality table may be
obtained from the website of the Office of the Commissioner of Insurance
(http://oci.wi.gov) or by writing to the Office.
(4) 2001 cso mortality table.
(a) Except as provided in sub. (8), at the
election of the company for any one or more specified plans of insurance and
subject to the conditions stated in this section, the 2001 CSO mortality table
may be used as the minimum standard for policies issued on or after January 1,
2005 and before the date specified in par. (b) to which s.
623.06(2) (am)
3 or
632.43(6m)
(e) 3 f., Stats., or s.
Ins 2.20, 2.35, or 2.80 are applicable. If the company
elects to use the 2001 CSO mortality table, it shall do so for both valuation
and nonforfeiture purposes.
(b)
Except as provided in sub. (8), and subject to the conditions stated in this
section, the 2001 CSO mortality table shall be used in determining minimum
standards for policies issued on and after January 1, 2009, to which s.
623.06(2) (am)
3 or
632.43(6m)
(e) 3 f., Stats., or s.
Ins 2.20, 2.35, or 2.80 are applicable.
(c) At the election of the insurer, for each
calendar year of issue, for any one or more specified plans of insurance and
subject to satisfying the conditions stated in this paragraph and sub. (5) (e)
1. to 3., the 2001 CSO preferred class structure mortality table may be elected
in place of the smoker mortality table found in the 2001 CSO mortality table or
the nonsmoker mortality table found in the 2001 CSO mortality table or both as
the minimum valuation standard for policies issued on or after January 1, 2007.
For policies issued on or after January 1, 2005, and prior to January 1, 2007,
the 2001 CSO preferred class structure mortality table may be elected in place
of the smoker and nonsmoker mortality tables found in the 2001 CSO mortality
table with the consent of the commissioner and subject to the conditions of
sub. (5) (e) 1. to 4. In considering a request by a foreign insurer for such
consent, the commissioner may rely on the consent of the commissioner of the
foreign company's state of domicile. No such election may be made until the
insurer demonstrates to the commissioner in a form acceptable to the
commissioner that 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 section, will be treated as part of the 2001 CSO
mortality table only for purposes of reserve valuation.
Note: There is no new Commissioners Extended Term
(CET) table being proposed to replace the 1980 CET Table. Therefore, the new
minimum basis for the computation of values related to extended term benefits
will be the 2001 CSO Mortality Table.
(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 s.
623.06(7),
Stats., and 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 sub. (6) and s.
Ins 2.80 relative to 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 annual statement filed with the commissioner shall be
based on an asset adequacy analysis as specified in s.
Ins 50.75(1). The commissioner may exempt
a company from this requirement if it only does business in this state and in
no other state.
(e) The following
conditions are applicable for plans of insurance using the 2001 CSO preferred
class structure mortality table:
1. 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 both of the following are true:
a. The present value of death benefits over
the next 10 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, and
b. 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.
2. For
each plan of insurance with separate rates 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 both of the following are true:
a. The present value of death benefits over
the next 10 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, and
b.
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.
3. Unless exempted
by the commissioner under s.
600.13,
Stats., every insurer using the 2001 CSO preferred class structure mortality
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 section. The form of the reports shall be established by the
commissioner or the commissioner may require the use of a form acceptable to
the commissioner established by the NAIC or by a statistical agent designated
by the NAIC.
Note: The form for the annual report required
under s. Ins 2.81(5) (e) 3. may be obtained from the website of the Office of
the Commissioner of Insurance (http://oci.wi.gov) or by writing to the
office.
4. The use of the
2001 CSO preferred class structure mortality table for the valuation of
policies issued prior to January 1, 2007 is not permitted in any statutory
financial statement in which a company reports, with respect to any policy or
portion of a policy coinsured, as specified under subd. 4. a. or b.:
a. In cases where the mode of payment of the
reinsurance premium is less frequent than the mode of payment of the policy
premium, a reserve credit that exceeds, by more than the amount specified in
this subdivision paragraph as Y, the gross reserve calculated before
reinsurance. Y is the amount of the gross reinsurance premium that provides
coverage for the period from the next policy premium due date to the end of the
policy year or the next reinsurance premium due date whichever is earlier, and
that would be refunded to the ceding entity upon the termination of the
policy.
b. In cases where the mode
of payment of the reinsurance premium is more frequent than the mode of payment
of the policy premium, a reserve credit that is less than the gross reserve,
calculated before reinsurance, by an amount that is less than the amount
specified in this subdivision paragraph as Z. Z is the amount of the gross
reinsurance premium that the ceding entity would need to pay the assuming
company to provide reinsurance coverage from the period of the next reinsurance
premium due date to the next policy premium due date minus any liability
established for the proportionate amount not remitted to the
reinsurer.
5. For
purposes of the condition described in subd. 4., both the reserve credit and
the gross reserve before reinsurance for the mean reserve method shall be
defined as the mean reserve minus the deferred premium asset, and for the
mid-terminal reserve method shall include the unearned premium reserve. A
company may estimate and adjust its accounting on an aggregate basis in order
to meet the conditions to use the 2001 CSO preferred class structure
table.
(6)
APPLICABILITY OF THE 2001 CSO MORTALITY TABLE TO S. INS 2.80, VALUATION OF LIFE
INSURANCE POLICIES.
(a) The 2001 CSO mortality
table may be used in applying s.
Ins 2.80 in the following manner, subject to the
transition dates for use of the 2001 CSO mortality table in sub. (4):
1. Section
Ins 2.80(2)
(b) 1. b.: The net level reserve premium is
based on the ultimate mortality rates in the 2001 CSO mortality
table.
2. Section
Ins 2.80(3)
(b): All calculations are made using the 2001
CSO mortality table, and, if elected, the optional minimum mortality standard
for deficiency reserves stipulated in subd. 4. 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
Ins 2.80(4)
(a): The 2001 CSO mortality table is the
minimum standard for basic reserves.
4. Section
Ins 2.80(4)
(b): 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 subd. 3. 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 law or
necessary to be in compliance with relevant actuarial standards of
practice.
5. Section
Ins 2.80(5)
(f): 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
Ins 2.80(5)
(j): The calculations specified in s.
Ins 2.80(5)
(j) shall use the ultimate mortality rates in
the 2001 CSO mortality table.
7.
Section
Ins 2.80(5)
(k): The calculations specified in s.
Ins 2.80(5)
(k) shall use the ultimate mortality rates in
the 2001 CSO mortality table.
8.
Section
Ins 2.80(5)
(L): The calculations specified in s.
Ins 2.80(5)
(L) shall use the ultimate mortality rates
in the 2001 CSO mortality table.
9.
Section
Ins 2.80(6)
(a) 2.: The one-year valuation premium shall
be calculated using the ultimate mortality rates in the 2001 CSO mortality
table.
(b) Nothing in
this subsection shall be construed to expand the applicability of s.
Ins 2.80 to include life insurance policies exempted under
s.
Ins 2.80(2)
(a) and (b).
(7) GENDER-BLENDED TABLES.
(a) For any ordinary life insurance policy
delivered or issued for delivery in this state on and after January 1, 2005,
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.
Note: The blended tables may be obtained from the
website of the Office of the Commissioner of Insurance (http://oci.wi.gov) or
by writing to the Office.
(c) It shall not, in and of itself, be a
violation of s.
628.34,
Stats., for an insurer to issue the same kind of policy of life insurance on
both a sex-distinct and sex-neutral basis.
(8) FUNERAL POLICIES.
(a) For funeral policies, the minimum
mortality standard for determining reserve liabilities and nonforfeiture values
for both male and female insureds shall be the Ultimate 1980 CSO, except as
provided in par. (b).
(b) For
funeral policies issued on or after January 1, 2009, and before January 1,
2012, the 2001 CSO mortality table may be used as the minimum mortality
standard for determining reserve liabilities and nonforfeiture values for both
male and female insureds.
(c) If an
insurer elects to use the 2001 CSO mortality table as a minimum standard for
any funeral policy issued on or after January 1, 2009, and before January 1,
2012, the insurer shall provide, as a part of the regulatory asset adequacy
issues summary submitted in support of the insurer's asset adequacy testing, an
annual written notification to the domiciliary commissioner which shall include
all of the following:
1. A complete list of
all funeral policy forms that use the 2001 CSO mortality table as a minimum
standard.
2. A certification signed
by the appointed actuary stating that the reserve methodology employed by the
insurer in determining reserves for the funeral policies issued on or after
January 1, 2009, and before January 1, 2012, using the 2001 CSO mortality table
as a minimum standard, develops adequate reserves. For purposes of the
certification, the funeral policies using the 2001 CSO mortality table as a
minimum standard may not be aggregated with any other policies.
3. Supporting information regarding the
adequacy of reserves for funeral policies issued on or after January 1, 2009,
and before January 1, 2012, and using the 2001 CSO mortality table as a minimum
standard for reserves.
(d) For funeral policies issued on or after
January 1, 2012, the Ultimate 1980 CSO mortality table shall be used as the
minimum mortality standard for determining reserve liabilities and
nonforfeiture values.
(9)This section may be enforced under s.
601.41 or
601.64, ch.
645, Stats., or any other enforcement provision of chs. 600 to 646,
Stats.