Sec. 38a-78. (Formerly Sec. 38-130e). Ascertainment of reserves for life insurance policies and annuity and pure endowment contracts. Annual reporting of reserves to commissioner. Issuance of opinion
Sec. 38a-78. (Formerly Sec. 38-130e). Ascertainment of reserves for life insurance policies and annuity and pure endowment contracts. Annual reporting of
reserves to commissioner. Issuance of opinion by qualified actuary. Memorandum
in support of opinion. Additional reserves as determined by qualified actuary not
deemed a higher standard of valuation. Minimum standards of valuation for health
insurance plans. Regulations. (a) The commissioner shall annually value, or cause to
be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life
insurance policies and annuity and pure endowment contracts of every life insurance
company doing business in this state except that in the case of an alien company, the
valuation shall be limited to its United States business, and may certify the amount of
any such reserves, specifying the mortality table or tables, rate or rates of interest, and
methods, including net level premium method or other, used in the calculation of such
reserves. In calculating such reserves, he may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves herein
required of any foreign or alien company, he may accept any valuation made, or caused
to be made, by the insurance supervisory official of any state or other jurisdiction when
such valuation complies with the minimum standard herein provided and if the official
of such state or jurisdiction accepts as sufficient and valid for all legal purposes the
certificate of valuation of the commissioner when such certificate states the valuation
to have been made in a specified manner according to which the aggregate reserves
would be at least as large as if they had been computed in the manner prescribed by the
law of that state or jurisdiction.
(b) (1) Every life insurance company doing business in this state shall annually
submit the opinion of a qualified actuary as to whether the reserves and related actuarial
items held in support of the policies and contracts specified by the commissioner by
regulation are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable
laws of this state. The commissioner by regulation shall define the specifics of this
opinion and add any other items deemed to be necessary to its scope.
(2) The opinion shall be submitted with the annual statement reflecting the valuation
of such reserve liabilities for each year ending on or after December 31, 1991.
(3) The opinion shall apply to all business in force including individual and group
health insurance plans, in form and substance acceptable to the commissioner as specified by regulation.
(4) The opinion shall be based on standards adopted from time to time by the actuarial standards board and on such additional standards as the commissioner may by regulation prescribe.
(5) In the case of an opinion required to be submitted by a foreign or alien company,
the commissioner may accept the opinion filed by that company with the insurance
supervisory official of another state if the commissioner determines that the opinion
reasonably meets the requirements applicable to a company domiciled in this state.
(6) For the purposes of this section, "qualified actuary" means a member in good
standing of the American Academy of Actuaries who meets the requirements set forth
in regulations the commissioner may prescribe.
(7) Except in cases of fraud or wilful misconduct, the qualified actuary shall not be
liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision or conduct with respect to the actuary's
opinion.
(8) Disciplinary action by the commissioner against the company or the qualified
actuary shall be as defined in such regulations by the commissioner.
(9) A memorandum, in form and substance acceptable to the commissioner as specified by regulation, shall be prepared to support each actuarial opinion.
(10) If the insurance company fails to provide a supporting memorandum at the
request of the commissioner within a period specified by regulation or the commissioner
determines that the supporting memorandum provided by the insurance company fails
to meet the standards prescribed by the regulations or is otherwise unacceptable to the
commissioner, the commissioner may engage a qualified actuary at the expense of the
company to review the opinion and the basis for the opinion and prepare such supporting
memorandum as is required by the commissioner.
(11) Any memorandum in support of the opinion, and any other material provided
by the company to the commissioner in connection therewith, shall be kept confidential
by the commissioner and shall not be made public and shall not be subject to subpoena,
other than for the purpose of defending an action seeking damages from any person by
reason of any action required by this section or by regulations adopted under this section
provided the memorandum or other material may otherwise be released by the commissioner (A) with the written consent of the company or (B) upon the request of the American Academy of Actuaries stating that the memorandum or other material is required
for the purpose of professional disciplinary proceedings and setting forth procedures
satisfactory to the commissioner for preserving the confidentiality of the memorandum
or other material. Once any portion of the confidential memorandum is referred to by
the company in its marketing or is referred to before any governmental agency other
than a state insurance department or is released by the company to the news media, all
portions of the confidential memorandum shall no longer be confidential.
(12) Any regulation adopted by the commissioner under the provisions of this subsection shall be adopted in accordance with the provisions of chapter 54.
(c) (1) Every life insurance company, except as exempted by or pursuant to regulation, shall annually include in the opinion required by subdivision (1) of subsection (b)
of this section, an opinion of the same qualified actuary as to whether the reserves and
related actuarial items held in support of the policies and contracts specified by the
commissioner by regulation, when considered in light of the assets held by the company
with respect to the reserves and related actuarial items, including but not limited to the
investment earnings on the assets and the considerations anticipated to be received and
retained under the policies and contracts, make adequate provision for the company's
obligations under the policies and contracts, including but not limited to the benefits
under and expenses associated with the policies and contracts.
(2) The commissioner may provide by regulation for a transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to
render the opinion required by this section.
(d) Except as otherwise provided in subsections (e), (f) and (l) of this section, the
minimum standard for the valuation of all such policies and contracts issued prior to
the effective date specified in accordance with the provisions of subsection (h) of section
38-130e of the general statutes, revision of 1958, revised to 1981, shall be that provided
by the laws in effect immediately prior to such date, except that the minimum standard
for the valuation of annuities and pure endowments purchased prior to January 1, 1973,
under group annuity and pure endowment contracts shall be the 1971 Group Annuity
Mortality Table, or any modification of this table approved by the commissioner, and
an interest rate of five per cent per annum. Except as otherwise provided in subsections
(e), (f) and (l) of this section, the minimum standard for the valuation of all such policies
and contracts issued on and after such effective date shall be the commissioner's reserve
valuation methods defined in subsections (g), (h) and (j) of this section, four and one-half per cent interest for all other such policies and contracts, and the following tables:
(1) For all ordinary policies of life insurance issued on the standard basis, excluding
any disability and accidental death benefits in such policies, the Commissioners' 1958
Standard Ordinary Mortality Table for such policies issued prior to the compliance date
established by subdivision (11) of subsection (e) of section 38a-439, provided that for
any category of such policies issued on female risks, all modified net premiums and
present values referred to in this section may be calculated according to an age not more
than six years younger than the actual age of the insured and for such policies issued
on or after the compliance date established by subdivision (11) of subsection (e) of
section 38a-439, (A) the Commissioners' 1980 Standard Ordinary Mortality Table, or
(B) at the election of the company for any one or more specified plans of life insurance,
the Commissioners' 1980 Standard Ordinary Mortality Table with ten-year select mortality factors, or (C) on or after January 1, 2005, until January 1, 2009, at the election
of the company for any one or more specified plans of life insurance issued on or after
January 1, 2004, on the basis of the Commissioners' 2001 Standard Ordinary Mortality
Table, except that with respect to such plans issued before April 1, 2005, such mortality
table shall be used solely for the basis of valuation and nonforfeiture and shall not be used
to increase the previously agreed required premium, or (D) issued on or after January 1,
2009, the Commissioners' 2001 Standard Ordinary Mortality Table, or (E) any ordinary
mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with
the provisions of chapter 54 for use in determining the minimum standard of valuation for
such policies; (2) for all industrial life insurance policies issued on the standard basis,
excluding any disability and accidental death benefits in such policies, the Commissioners' 1961 Standard Industrial Mortality Table or any industrial mortality table, adopted
after 1980 by the National Association of Insurance Commissioners, that is approved
by regulations adopted by the commissioner in accordance with the provisions of chapter
54 for use in determining the minimum standard of valuation for such policies; (3)
for total and permanent disability benefits in or supplementary to ordinary policies or
contracts, the tables of period 2 disablement rates and the 1930 to 1950 termination rates
of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of
benefit or any tables of disablement rates and termination rates, adopted after 1980 by
the National Association of Insurance Commissioners, that are approved by regulations
adopted by the commissioner in accordance with the provisions of chapter 54 for use
in determining the minimum standard of valuation for such policies. These tables shall,
for active lives, be combined with a mortality table permitted for calculating the reserves
for life insurance policies; (4) for accidental death benefits in or supplementary to policies, the 1959 Accidental Death Benefits Table or any accidental death benefits table,
adopted after 1980 by the National Association of Insurance Commissioners, that is
approved by regulations adopted by the commissioner in accordance with the provisions
of chapter 54 for use in determining the minimum standard of valuation for such policies.
These tables shall be combined with a mortality table permitted for calculating the
reserves for life insurance policies; and (5) for group life insurance, life insurance issued
on the substandard basis and other special benefits, such tables as may be approved by
the commissioner.
(e) Except as otherwise provided in subsection (f) of this section, the minimum
standard for the valuation of all individual annuity and pure endowment contracts issued
on or after the effective date as specified in accordance with the provisions of subsection
(h) of section 38-130e of the general statutes, revision of 1958, revised to 1981, and for
all annuities and pure endowments purchased on or after such effective date under group
annuity and pure endowment contracts, shall be the commissioners reserve valuation
methods defined in subsections (g) and (h) of this section and the following tables and
interest rates: (1) For individual single premium immediate annuity contracts issued on
or after such effective date, excluding any disability and accidental death benefits in
such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity
mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulations adopted by the commissioner in accordance with
the provisions of chapter 54 for use in determining the minimum standard of valuation for
such contracts, or any modification of these tables approved by the commissioner, and
seven and one-half per cent interest; (2) for individual annuity and pure endowment
contracts issued on or after such effective date, other than single premium immediate
annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity mortality
table, adopted after 1980 by the National Association of Insurance Commissioners,
that is approved by regulations adopted by the commissioner in accordance with the
provisions of chapter 54 for use in determining the minimum standard of valuation for
such contract, or any modification of these tables approved by the commissioner, and
five and one-half per cent interest for single premium deferred annuity and pure endowment contracts and four and one-half per cent interest for all other such annuity and pure
endowment contracts; (3) for all annuities and pure endowments purchased on or after
such effective date under group annuity and pure endowment contracts, excluding any
disability and accidental death benefits purchased under such contracts, the 1971 Group
Annuity Mortality Table or any group annuity mortality table, adopted after 1980 by
the National Association of Insurance Commissioners, that is approved by regulations
adopted by the commissioner in accordance with the provisions of chapter 54 for use
in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven
and one-half per cent interest.
(f) (1) The interest rates used in determining the minimum standard for the valuation of (A) all life insurance policies issued in a particular calendar year, on or after the
compliance date established by subdivision (11) of subsection (e) of section 38a-439,
(B) all individual annuity and pure endowment contracts issued in a particular calendar
year on or after January 1, 1982, (C) all annuities and pure endowments purchased in
a particular calendar year on or after January 1, 1982, under group annuity and pure
endowment contracts, and (D) the net increase, if any, in a particular calendar year after
January 1, 1982, in amounts held under guaranteed interest contracts shall be the calendar
year statutory valuation interest rates as defined in this subsection;
(2) The calendar year statutory valuation interest rates, I, shall be determined as
follows and the results rounded to the nearest one-quarter of one per cent:
(A) For life insurance,
I = .03 + W (R1 − .03) +
W
2(R2 − .09);
(B) For single premium immediate annuities and for annuity benefits involving
life contingencies arising from other annuities with cash settlement options and from
guaranteed interest contracts with cash settlement options,
I = .03 + W(R − .03),
Where
R1 is the lesser of R and .09,
R2 is the greater of R and .09,
R is the reference interest rate defined in subdivision (4) of this subsection and
W is the weighting factor defined in subdivision (3) of this subsection.
(C) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in
subparagraph (B), the formula for life insurance stated in subparagraph (A) shall apply
to annuities and guaranteed interest contracts with guarantee durations in excess of ten
years and the formula for single premium immediate annuities stated in subparagraph
(B) shall apply to annuities and guaranteed interest contracts with guarantee durations
of ten years or less.
(D) For other annuities with no cash settlement options and for guaranteed interest
contracts with no cash settlement options, the formula for single premium immediate
annuities stated in subparagraph (B) shall apply.
(E) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for
single premium immediate annuities stated in subparagraph (B) shall apply.
(F) If the calendar year statutory valuation interest rate for any life insurance policies
issued in any calendar year determined without reference to this subdivision differs from
the corresponding actual rate for similar policies issued in the immediately preceding
calendar year by less than one- half of one per cent, the calendar year statutory valuation
interest rate for such life insurance policies shall be equal to the corresponding actual rate
for the immediately preceding calendar year. For purposes of applying the foregoing,
the calendar year statutory valuation interest rate for life insurance policies issued in a
calendar year shall be determined for 1980 using the reference interest rate defined
for 1979 and shall be determined for each subsequent calendar year regardless of the
compliance date established by subdivision (11) of subsection (e) of section 38a-439;
(3) The weighting factors referred to in the formulas stated in subdivision (2) of
this subsection are given in the following tables:
(A) Weighting Factors For Life Insurance:
Guarantee Duration (Years)Weighting Factors
10 or less.50
More than 10, but not more than 20.45
More than 20.35
For life insurance, the guarantee duration is the maximum number of years the life
insurance can remain in force on a basis guaranteed in the policy or under options to
convert to plans of life insurance with premium rates or nonforfeiture values or both
which are guaranteed in the original policy.
(B) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options
and guaranteed interest contracts with cash settlement options: .80
(C) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in subparagraph (B), shall be as specified in tables (i), (ii) and (iii) according
to the rules and definitions in (iv), (v) and (vi):
(i) For annuities and guaranteed interest contracts valued on an issue year basis:
Guarantee Duration (Years)Weighting Factor For
Plan Type
ABC
5 or less.80.60.50
More than 5, not more than 10.75.60.50
More than 10, not more than 20.65.50.45
More than 20.45.35.35
(ii) For annuities and guaranteed interest contracts valued on a change in fund basis,
the factors shown in (i) increased by:
Weighting Factor For
Plan Type
More than 10 not more than 20:ABC
More than 10 not more than 20:.15.25.05
(iii) For annuities and guaranteed interest contracts valued on an issue guarantee
interest on considerations received more than one year after issue or purchase and for
annuities and guaranteed interest contracts valued on a change in fund basis which do
not guarantee interest rates on considerations received more than twelve months beyond
the valuation date, the factors shown in (i) or derived in (ii) increased by:
Weighting Factor For
Plan Type
More than 10 not more than 20:ABC
More than 10 not more than 20:.05.05.05
(iv) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for
which the contract guarantees interest rates in excess of the calendar year statutory
valuation interest rate for life insurance policies with guarantee duration in excess of
twenty years. For other annuities with no cash settlement options and for guaranteed
interest contracts with no cash settlement options, the guarantee duration is the number
of years from the date of issue or date of purchase to the date annuity benefits are
scheduled to commence.
(v) Plan type as used in the tables in subparagraph (C) is defined as follows:
a. Plan Type A: At any time policyholder may withdraw funds only: (1) With an
adjustment to reflect changes in interest rates or asset values since receipt of the funds
by the insurance company, or (2) without such adjustment but in installments over five
years or more, or (3) as an immediate life annuity, or (4) no withdrawal permitted.
b. Plan Type B: Before expiration of the interest rate guarantee, policyholder may
withdraw funds only: (1) With an adjustment to reflect changes in interest rates or asset
values since receipt of the funds by the insurance company, or (2) without such adjustment but in installments over five years or more, or (3) no withdrawal permitted. At the
end of the interest rate guarantee, funds may be withdrawn without such adjustment in
a single sum or installments over less than five years.
c. Plan Type C: Policyholder may withdraw funds before expiration of interest rate
guarantee in a single sum or installments over less than five years either: (1) Without
adjustment to reflect changes in interest rates or asset values since receipt of the funds
by the insurance company, or (2) subject only to a fixed surrender charge stipulated in
the contract as a percentage of the fund.
(vi) A company may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or
on a change in fund basis. Guaranteed interest contracts with no cash settlement options
and other annuities with no cash settlement options must be valued on an issue year
basis. As used in this subsection, an issue year basis of valuation refers to a valuation
basis under which the interest rate used to determine the minimum valuation standard
for the entire duration of the annuity or guaranteed interest contract is the calendar year
valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract. The change in fund basis of valuation refers to a valuation basis
under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is
the calendar year valuation interest rate for the year of the change in fund;
(4) The reference interest rate referred to in subdivision (2) of this subsection shall
be defined as follows: a. For all life insurance, the lesser of the average over a period
of thirty-six months and the average over a period of twelve months, ending on June
thirtieth of the calendar year next preceding the year of issue, of Moody's Corporate
Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors
Service, Inc.; b. for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, the average over a period of
twelve months, ending on June thirtieth of the calendar year of issue or year of purchase
of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published
by Moody's Investors Service, Inc.; c. for other annuities with cash settlement options
and guaranteed interest contracts with cash settlement options, valued on a year of issue
basis, except as stated in b. above, with guarantee duration in excess of ten years, the
lesser of the average over a period of thirty-six months and the average over a period
of twelve months, ending on June thirtieth of the calendar year of issue or purchase of
Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published
by Moody's Investors Service, Inc.; d. for other annuities with cash settlement options
and guaranteed interest contracts with cash settlement options, valued on a year of issue
basis, except as stated in b. above, with guarantee duration of ten years or less, the
average over a period of twelve months, ending on June thirtieth of the calendar year
of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly Average
Corporates, as published by Moody's Investors Service, Inc.; e. for other annuities with
no cash settlement options and for guaranteed interest contracts with no cash settlement
options, the average over a period of twelve months, ending on June thirtieth of the
calendar year of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly
Average Corporates, as published by Moody's Investors Service, Inc.; f. for other annuities with cash settlement options and guaranteed interest contracts with cash settlement
options, valued on a change in fund basis, except as stated in b. above, the average over
a period of twelve months, ending on June thirtieth of the calendar year of the change
in the fund, of Moody's Corporate Bond Yield Average-Monthly Average Corporates,
as published by Moody's Investors Service, Inc.
(5) In the event that Moody's Corporate Bond Yield Average-Monthly Average
Corporates is no longer published by Moody's Investors Service, Inc., or in the event
that the National Association of Insurance Commissioners determines that Moody's
Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's
Investors Service, Inc. is no longer appropriate for the determination of the reference
interest rate, an alternative method for determination of the reference interest rate, which
is adopted by the National Association of Insurance Commissioners and approved by
regulations adopted by the commissioner in accordance with the provisions of chapter
54, may be substituted.
(g) Except as otherwise provided in subsections (h), (j) and (l) of this section, reserves according to the commissioner's reserve valuation method, for the life insurance
and endowment benefits of policies providing for a uniform amount of insurance and
requiring the payment of uniform premiums shall be the excess, if any, of the present
value, at the date of valuation, of such future guaranteed benefits provided for by such
policies, over the then present value of any future modified net premiums therefor. The
modified net premiums for any such policy shall be such uniform percentage of the
respective contract premiums for such benefits that the present value, at the date of issue
of the policy, of all such modified net premiums shall be equal to the sum of the then
present value of such benefits provided for by the policy and the excess of (1) over (2),
as follows: (1) A net level annual premium equal to the present value, at the date of
issue, of such benefits provided for after the first policy year, divided by the present
value, at the date of issue, of an annuity of one per annum payable on the first and each
subsequent anniversary of such policy on which a premium falls due; provided such net
level annual premium shall not exceed the net level annual premium on the nineteen-year premium whole life plan for insurance of the same amount at an age one year higher
than the age at issue of such policy, and (2) a net one year term premium for such benefits
provided for in the first policy year provided that for any life insurance policy issued
on or after January 1, 1985, for which the contract premium in the first policy year
exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a
cash surrender value or a combination thereof in an amount greater than such excess
premium, the reserve according to the commissioners reserve valuation method as of
any policy anniversary occurring on or before the assumed ending date defined herein
as the first policy anniversary on which the sum of any endowment benefit and any cash
surrender value then available is greater than such excess premium shall, except as
otherwise provided in subsection (j) of this section, be the greater of the reserve as of
such policy anniversary calculated as described in this subsection and the reserve as of
such policy anniversary calculated as described in this subsection but with the value
defined in subdivision (1) of this subsection being reduced by fifteen per cent of the
amount of such excess first year premium, all present values of benefits and premiums
being determined without reference to premiums or benefits provided for by the policy
after the assumed ending date, the policy being assumed to mature on such date as an
endowment, and the cash surrender value provided on such date being considered as an
endowment benefit. In making the above comparison, the mortality and interest bases
stated in subsections (e) and (f) of this section shall be used. Reserves according to the
commissioners reserve valuation method for: (A) Life insurance policies providing for
a varying amount of insurance or requiring the payment of varying premiums; (B) group
annuity and pure endowment contracts purchased under a retirement plan or plan of
deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a
plan providing individual retirement accounts or individual retirement annuities under
Section 408 of the Internal Revenue Code, as now or hereafter amended; (C) disability
and accidental death benefits in all policies and contracts; and (D) all other benefits,
except life insurance and endowment benefits in life insurance policies and benefits
provided by all other annuity and pure endowment contracts, shall be calculated by a
method consistent with the principles of this subsection.
(h) This subsection shall apply to all annuity and pure endowment contracts other
than group annuity and pure endowment contracts purchased under a retirement plan
or plan of deferred compensation, established or maintained by an employer, including
a partnership or sole proprietorship, or by an employee organization, or by both, other
than a plan providing individual retirement accounts or individual retirement annuities
under Section 408 of the Internal Revenue Code, as now or hereafter amended. Reserves
according to the commissioners annuity reserve method for benefits under annuity or
pure endowment contracts, excluding any disability and accidental death benefits in
such contracts, shall be the greatest of the respective excesses of the present values, at the
date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture
benefits, provided for by such contracts at the end of each respective contract year, over
the present value, at the date of valuation, of any future valuation considerations derived
from future gross considerations, required by the terms of such contract, that become
payable prior to the end of such respective contract year. The future guaranteed benefits
shall be determined by using the mortality table, if any, and the interest rate, or rates,
specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of
such contracts to determine nonforfeiture values.
(i) (1) In no event shall a company's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after the effective
date as specified in accordance with the provisions of subsection (h) of section 38-130e
of the general statutes, revision of 1958, revised to 1981, be less than the aggregate
reserves calculated in accordance with the methods set forth in subsections (f), (g), (i)
and (k) of this section, and the mortality table or tables and rate or rates of interest used
in calculating nonforfeiture benefits for such policies; (2) in no event shall the aggregate
reserves for all policies, contracts and benefits be less than the aggregate reserves determined by the qualified actuary to be necessary to render the opinion required by subsection (b) of this section; (3) reserves for any category of policies, contracts or benefits
as established by the commissioner may be calculated, at the option of the company,
according to any standards which produce greater aggregate reserves for such category
than those calculated according to the minimum standard herein provided, but the rate or
rates of interest used for policies and contracts, other than annuity and pure endowment
contracts, shall not be higher than the corresponding rate or rates of interest used in
calculating any nonforfeiture benefits provided for therein; (4) any such company which
at any time shall have adopted any standard of valuation producing greater aggregate
reserves than those calculated according to the minimum standard herein provided may,
with the approval of the commissioner, adopt any lower standard of valuation, but not
lower than the minimum herein provided; provided, for the purposes of this subsection,
the holding of additional reserves previously determined by a qualified actuary to be
necessary to render the opinion required by subsection (b) of this section shall not be
deemed to be the adoption of a higher standard of valuation.
(j) If in any contract year the gross premium charged by any life insurance company
on any policy or contract, in force as of or written after the effective date as specified
in accordance with the provisions of subsection (h) of section 38-130e of the general
statutes, revision of 1958, revised to 1981, is less than the valuation net premium for
the policy or contract calculated by the method used in calculating the reserve thereon
but using the most recent minimum valuation standards of mortality and rate of interest,
the minimum reserve required for such policy or contract shall be the greater of either
the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually
used for such policy or contract but using the minimum standards of mortality and rate
of interest in effect in the year that the policy or contract was issued and replacing the
valuation net premium by the actual gross premium in each contract year for which
the valuation net premium exceeds the actual gross premium. The minimum valuation
standards of mortality and rate of interest referred to in this subsection are those standards
stated in subsections (d) and (f) of this section. For any life insurance policy issued on
or after January 1, 1985, for which the gross premium in the first policy year exceeds
that of the second year and for which no comparable additional benefit is provided in
the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the
foregoing provisions of this subsection shall be applied as if the method actually used
in calculating the reserve for such policy were the method described in subsection (g)
of this section. The minimum reserve at each policy anniversary of such policy shall be
the greater of the minimum reserve calculated in accordance with subsection (g) of this
section and the minimum reserve calculated in accordance with this subsection.
(k) In the case of any plan of life insurance which provides for future premium
determination, the amounts of which are to be determined by the insurance company
based on then estimates of future experience, or in the case of any plan of life insurance
or annuity which is of such nature that the minimum reserves cannot be determined by
the methods described in subsections (g), (h), and (j) of this section, the reserves which
are held under any such plan must be appropriate in relation to the benefits and the
pattern of premiums for that plan, and be computed by a method which is consistent
with the principles of this standard valuation law, as determined by regulations adopted
by the commissioner in accordance with the provisions of chapter 54.
(l) The commissioner shall adopt regulations in accordance with the provisions
of chapter 54 containing the minimum standards applicable to the valuation of health
insurance plans.
(m) The provisions of sections 38a-77 and 38a-433 shall apply to policies issued
by a company before the date of its election to comply with section 38-130e of the general
statutes, revision of 1958, revised to 1981, or January 1, 1981, whichever occurred first.
The provisions of section 38-130e of the general statutes, revision of 1958, revised to
1981, shall apply to policies issued by a company on and after the date of such election
or on and after January 1, 1981, whichever occurred first, and before October 1, 1981.
(P.A. 78-312, S. 4; P.A. 81-170, S. 2; P.A. 90-243, S. 56; P.A. 91-175, S. 2; P.A. 05-162, S. 2.)
History: P.A. 81-170 authorized the use of new mortality tables, specified the formula used in calculating the interest
rate for determining a company's maximum reserves and provided for the reference interest rate as an average over a
specified time period of Moody's Corporate Index; P.A. 90-243 made technical corrections substituting "alien" for "foreign", "the" for "such", "foreign" for "nonresident" and amended the method for calculating the reserves on life insurance
policies in Subsec. (h); Sec. 38-130e transferred to Sec. 38a-78 in 1991; P.A. 91-175 amended Subsec. (a) to include the
phrase "or cause to be valued" to allow the insurance companies to submit to the insurance commissioner an independent
evaluation of the reserves, inserted a new Subsec. (b) requiring that every life insurance company annually submit the
opinion of a qualified actuary re the computation and adequacy of the reserves, the reserving practices of that particular
insurance company and provide a written memorandum to the insurance commissioner, inserted a new Subsec. (c) requiring
that the insurance company provide an actuarial opinion to the insurance commissioner which contains a determination
of whether the company's reserve and actuarial items which support the policies and contracts are sufficient to meet the
company's obligations, relettered former Subsecs. (b) to (f) as (d) to (h) and amended internal references, relettered Subsec.
(g) as Subsec. (i), amended all internal references, added a provision re aggregate reserves for all policies, contracts and
benefits and added a provision that the adoption of additional reserves determined by a qualified actuary in the rendition
of his annual opinion would not heighten the standard of valuation, relettered Subsecs. (h) and (i) as (j) and (k) and amended
internal references, added new Subsec. (l) requiring the insurance commissioner to adopt regulations for the minimum
standards valuation of health insurance plans and relettered Subsec. (j) as (m) and amended internal references; P.A. 05-162 amended Subsec. (d) to insert new Subdiv. (1)(C) and (1)(D) re the Commissioners' 2001 Standard Ordinary Mortality
Table, and redesignate existing Subdiv. (1)(C) as Subdiv. (1)(E), effective July 1, 2005.
See Sec. 38a-77 re Standard Valuation Law.
See Secs. 38a-438 to 38a-440, inclusive, re Standard Nonforfeiture Law.