Preproposal statement of inquiry was filed as WSR 06-21-123.
Title of Rule and Other Identifying Information: Actuarial opinion and memorandum regulation.
Hearing Location(s): Insurance Commissioner's Office, Room TR-120, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, on September 25, 2007, at 11:00 a.m.
Date of Intended Adoption: October 1, 2007.
Submit Written Comments to: Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, e-mail KacyS@oic.wa.gov, fax (360) 586-3109, by September 24, 2007.
Assistance for Persons with Disabilities: Contact Lorie Villaflores by September 24, 2007, TTY (360) 586-0241 or (360) 725-7087.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: These proposed rules amend several sections of the actuarial opinion and memorandum regulation (WAC 284-07-310 through 284-07-400) to bring them in line with the model regulation of accreditation part A standards of the National Association of Insurance Commissioners.
Reasons Supporting Proposal: Actuarial opinions and memoranda must meet certain specified standards to be considered appropriate to protect the insurance-buying public. Amendment of the existing regulation is required to meet NAIC accreditation standards. All life companies must perform an asset adequacy analysis and file a regulatory asset adequacy issues summary. These requirements are being added to the existing regulation. Portions of the regulation have been revised for clarity of language.
Statutory Authority for Adoption: RCW 48.02.060, 48.74.025, 48.36A.250, 48.36A.260.
Statute Being Implemented: RCW 48.74.025, 48.36A.250, 48.36A.260.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Mike Kreidler, insurance commissioner, governmental.
Name of Agency Personnel Responsible for Drafting: Roy Olson, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7136; Implementation: Beth Berendt, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7117; and Enforcement: Carol Sureau, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7050.
A small business economic impact statement has been prepared under chapter 19.85 RCW.
and RCW 34.05.310)
These proposed amendments, chapter 284-07 WAC, the actuarial opinion and memorandum rules, would apply to all life insurance companies, fraternal benefit societies, and to all disability insurers (#6311 and #6321) that file annual statements on the "life and accident health blank."
|•||Some proposed amendments are to current rules and are necessary to meet recent changes to the NAIC Actuarial Opinion and Memorandum model regulation.|
|•||Several existing requirements are proposed to be amended for ease of understanding and are not intended to change the meaning of the rules.|
All life insurers, fraternal benefit societies, and disability insurers that file their annual statements on the life and accident health blank will be equally affected by these proposed amendments.
This state is required to adopt these proposed amendments by the National Association of Insurance Commissioners (NAIC) as a condition of retaining Washington's accreditation by that organization.
|•||These amendments are based on NAIC model regulations developed after nationwide discussions that involved state regulators and insurers. The concerns of both insurers and states were considered during the development of the NAIC's model regulations.|
|•||Edits to the NAIC model regulations were made to make these proposed rules easier to understand.|
|&sqbul;||The proposed edits are not intended to change the meaning of the NAIC's model regulations.|
|&sqbul;||Other edits have been made to existing rules to make the rules easier to understand.|
Affected insurers will be developing actuarial opinions and memoranda to file in other states whose rules are also based on the NAIC model regulation.
|•||Standardization among states of requirements for actuarial opinions and memoranda will result in a savings to insurers; that savings is likely to offset any additional compliance costs that would be incurred if insurers were required to complete unique opinions and memoranda for Washington.|
|•||Standardization of filing requirements based on the NAIC model regulation is the least burdensome alternative to both insurers and this state.|
A copy of the statement may be obtained by contacting Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, phone (360) 725-7041, fax (360) 586-3109, e-mail Kacys@oic.wa.gov.
A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, phone (360) 725-7041, fax (360) 586-3109, e-mail Kacys@oic.wa.gov.
August 22, 2007
ACTUARIAL OPINION AND MEMORANDUM REGULATION
AMENDATORY SECTION(Amending Order R 94-26, filed 12/30/94, effective 1/30/95)
WAC 284-07-310 Purpose. The purpose of this regulation, WAC 284-07-310 through and including WAC 284-07-400, called the actuarial opinion and memorandum regulation, is to prescribe:
(1) Guidelines and standards for statements of actuarial
that are to be)) submitted in accordance with the
requirements of RCW 48.74.025, 48.36A.250, 48.36A.260, and for
supporting memoranda (( in support thereof));
Guidelines and standards for statements of
actuarial opinion which are to be submitted when a company is
exempt from RCW 48.74.025(2); and
(3))) Rules applicable to the appointment of an appointed actuary; and
(3) Guidelines and standards relating to "adequacy of reserves."
[Statutory Authority: RCW 48.01.030, 48.02.060, 48.74.025, 48.36A.250 and 48.36A.260. 95-02-036 (Order R 94-26), § 284-07-310, filed 12/30/94, effective 1/30/95.]
(2) This regulation applies to all annual statements
filed with the commissioner on and after ((
the effective date
of this regulation)) December 31, 2007. (( Except with respect
to companies which are exempted pursuant to WAC 284-07-360, a
statement of opinion on the adequacy of the reserves and
related actuarial items based on an asset adequacy analysis in
accordance with WAC 284-07-380, and a memorandum in support
thereof in accordance with WAC 284-07-390, shall be required
each year. Any company so exempted must file a statement of
actuarial opinion pursuant to WAC 284-07-370.
(3) Notwithstanding the foregoing, the commissioner may require any company otherwise exempt pursuant to this regulation to submit a statement of actuarial opinion and to prepare a memorandum in support thereof in accordance with WAC 284-07-380 and 284-07-390 if, in the opinion of the commissioner, an asset adequacy analysis is necessary with respect to the company.))
[Statutory Authority: RCW 48.01.030, 48.02.060, 48.74.025, 48.36A.250 and 48.36A.260. 95-02-036 (Order R 94-26), § 284-07-330, filed 12/30/94, effective 1/30/95.]
(1) "Actuarial opinion" means((
(a) With respect to WAC 284-07-380, 284-07-390, or
284-07-400,)) the opinion of an appointed actuary regarding
the adequacy of the reserves and related actuarial items based
on an asset adequacy ((
test)) analysis set forth in
(( accordance with)) WAC 284-07-380 and (( with presently
accepted)) on applicable actuarial standards(( ;
(b) With respect to WAC 284-07-370, the opinion of an appointed actuary regarding the calculation of reserves and related items, in accordance with WAC 284-07-370 and with those presently accepted actuarial standards which specifically relate to this opinion)) of practice.
(2) "Actuarial Standards Board" means the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.
(3) "Annual statement" means that statement required by RCW 48.05.250 to be filed annually by the company with the commissioner.
(4) "Appointed actuary" means any individual who is appointed or retained in accordance with the requirements set forth in WAC 284-07-350(3) to provide the actuarial opinion and supporting memorandum as required by RCW 48.74.025.
(5) "Asset adequacy analysis" means an analysis that
meets the standards and other requirements ((
referred to)) set
forth in WAC 284-07-350(4)(( ; it may take many forms,
including, but not limited to, cash flow testing, sensitivity
testing, or applications of risk theory)).
(6) "Company" means an insurance company, fraternal benefit society, or reinsurer subject to this regulation.
"Noninvestment-grade bonds" means those bonds
designated as classes 3, 4, 5, or 6 by the National
Association of Insurance Commissioners (NAIC) Securities
Valuation Office (SVO).
(8))) "Qualified actuary" means an individual who meets the requirements set forth in WAC 284-07-350(2).
[Statutory Authority: RCW 48.01.030, 48.02.060, 48.74.025, 48.36A.250 and 48.36A.260. 95-02-036 (Order R 94-26), § 284-07-340, filed 12/30/94, effective 1/30/95.]
(1) Submission of)) Statement of actuarial
(a) There is to be included on or attached to page 1 of
the annual statement for each year beginning with the annual
statement for 1994, the statement of an appointed actuary,
entitled "statement of actuarial opinion," setting forth an
opinion relating to reserves and related actuarial items held
in support of policies and contracts, in accordance with WAC 284-07-380: Provided, however, That any company exempted
pursuant to WAC 284-07-360 from submitting a statement of
actuarial opinion in accordance with WAC 280-07-380 shall
include on or attach to page 1 of the annual statement a
statement of actuarial opinion rendered by an appointed
actuary in accordance with WAC 284-07-370.
(b) If in the previous year a company provided a statement of actuarial opinion in accordance with WAC 284-07-370, and in the current year fails the exemption criteria of WAC 284-07-360 (3)(a), (b), or (c) to again provide an actuarial opinion in accordance with WAC 284-07-370, the statement of actuarial opinion in accordance with WAC 284-07-380 shall not be required until August 1 following the date of the annual statement. In this instance, the company shall provide a statement of actuarial opinion in accordance with WAC 284-07-370 with appropriate qualification noting the intent to subsequently provide a statement of actuarial opinion in accordance with WAC 284-07-380.
(c) In the case of a statement of actuarial opinion required to be submitted by a foreign or alien company, the commissioner may accept the statement of actuarial opinion filed by such company with the insurance supervisory regulator of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.
(d) Upon written request by the company, the commissioner may grant an extension of the date for submission of the statement of actuarial opinion.
(2))) (1) "Qualified actuary" means an individual who:
(a) Is a member in good standing of the American Academy of Actuaries; and
(b) Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements or equivalent standards acceptable to the commissioner; and
(c) Is familiar with the valuation requirements applicable to life and health insurance companies; and
(d) Has not been found by the commissioner (or if so found has subsequently been reinstated as a qualified actuary), following appropriate notice to have:
(i) Violated any provision of, or any obligation imposed by, Title 48 RCW or other law or any applicable regulation or order of the commissioner in the course of his or her dealings as a qualified actuary;
(ii) Been found guilty of fraudulent or dishonest practices;
(iii) Demonstrated his or her ((
incompetence, lack of cooperation, or untrustworthiness to act
as a qualified actuary;
(iv) Submitted to the commissioner during the past five years, an actuarial opinion or memorandum that the commissioner rejected because it did not meet the provisions of this regulation or standards set by the Actuarial Standards Board; or
(v) Resigned or been removed as an actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; and
(e) Has not failed to notify the commissioner of any action taken by any commissioner of any other state similar to that under (d) of this subsection.
(f) The commissioner may accept equivalent qualifications in place of those in (a) and (b) of this subsection if the individual has otherwise demonstrated his or her actuarial competence to the satisfaction of the commissioner, and meets the qualifications in (c), (d), and (e) of this subsection.
(3))) (2) "Appointed actuary" means a qualified actuary
who is appointed or retained to prepare the statement of
actuarial opinion required by this regulation; either directly
by, or by the authority of, the board of directors through an
executive officer of the company.
(a) The company shall give the commissioner timely
written notice of the following: The name, title (and, in the
case of a consulting actuary, the name of the firm), and
manner of appointment or retention of each person appointed or
retained by the company as an appointed actuary ((
(b) The company must state in ((
such)) its notice that
the (( person)) appointed actuary meets the requirements set
forth in subsection (2) of this section.
Once)) (c) After the company furnishes the notice (( is
furnished)), no further notice is required with respect to
this person, (( provided that)) except the following, if
(i) The company ((
shall)) must give the commissioner
timely written notice (( in the event)) if the actuary ceases
to be appointed or retained as an appointed actuary (( or));
(ii) The company must give the commissioner timely written notice if the actuary fails to meet the requirements set forth in subsection (2) of this section.
(d) If any person appointed or retained as an appointed
actuary replaces a previously appointed actuary, the notice
shall so state)) must include that information and give the
reasons for replacement.
(4))) (3) Standards for asset adequacy analysis:
(( Except to the extent)) Unless the commissioner approves
equivalents in advance, the asset adequacy analysis required
by this regulation:
Shall)) Must conform to the standards of practice
as promulgated from time to time by the Actuarial Standards
Board and to any additional standards under this regulation,
(( which standards are to)) and must form the basis of the
statement of actuarial opinion in accordance with (( WAC 284-07-380)) this regulation; and
Shall)) Must be based on methods of analysis (( as))
that are deemed appropriate for such purposes by the Actuarial
(5))) (4) Liabilities to be covered(( .)):
Under authority of)) As required by RCW 48.74.025,
the statement of actuarial opinion (( shall apply)) applies to
all in force business on the statement date regardless of when
or where issued, (( e.g.,)) including reserves of Exhibits (( 8,
9, and 10)) 5, 6, and 7, and claim liabilities in Exhibit
(( 11)) 8, Part 1 and equivalent items in the separate account
statement or statements.
(b) If the appointed actuary determines as the result of
asset adequacy analysis that a reserve should be held in
addition to the aggregate reserve held by the company ((
calculated in accordance with methods set forth in RCW 48.74.040, 48.74.070, 48.74.080, and 48.74.090, the company
(( shall)) must establish (( such)) the appropriate additional
For years ending prior to December 31, 1995, the
company may, in lieu of establishing the full amount of the
additional reserve in the annual statement for that year, set
up an additional reserve in an amount not less than two times
the additional reserve divided by three.
(d))) Additional reserves established under (b) ((
(c))) of this subsection and deemed not necessary in
subsequent years may be released. Any amounts released must
be disclosed in the actuarial opinion for the applicable year.
The release of (( such)) these reserves (( would)) will not be
deemed an adoption of a lower standard of valuation.
[Statutory Authority: RCW 48.01.030, 48.02.060, 48.74.025, 48.36A.250 and 48.36A.260. 95-02-036 (Order R 94-26), § 284-07-350, filed 12/30/94, effective 1/30/95.]
(a) A paragraph identifying the appointed actuary and his or her qualifications (see subsection (2)(a) of this section);
(b) A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary's work, including a tabulation delineating the reserves and related actuarial items which have been analyzed for asset adequacy and the method of analysis, (see subsection (2)(b) of this section) and identifying the reserves and related actuarial items covered by the opinion which have not been so analyzed;
(c) A reliance paragraph describing those areas, if any,
where the appointed actuary has deferred to other experts in
developing data, procedures or assumptions, e.g., anticipated
cash flows from currently owned assets, including variation in
cash flows according to economic scenarios (see subsection
(2)(c) of this section), supported by a statement of each
such)) expert relied on in the form prescribed by subsection
(5) of this section; and
(d) An opinion paragraph expressing the appointed
actuary's opinion ((
with respect to)) concerning the adequacy
of the supporting assets to mature the liabilities (see
subsection (2)(f) of this section).
(e) One or more ((
additional)) of the following
paragraphs (( may be appropriate)) will be needed in individual
company cases, as follows:
(i) If the appointed actuary considers it necessary to state a qualification of his or her opinion;
(ii) If the appointed actuary must disclose the method of aggregation for reserves of different products or lines of business for asset adequacy analysis;
If the appointed actuary must disclose reliance
upon any portion of the assets supporting the asset valuation
reserve (AVR), interest maintenance reserve (IMR), or other
mandatory or voluntary statement of reserves for asset
(iv))) If the appointed actuary must disclose an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for this opinion;
(v))) (iv) If the appointed actuary must disclose
whether additional reserves of the prior opinion date are
released as of this opinion date, and the extent of the
(vi))) (v) If the appointed actuary chooses to add a
paragraph briefly describing the assumptions which form the
basis for the actuarial opinion.
(2) Recommended language: The following paragraphs ((
to)) must be included in the statement of actuarial opinion in
accordance with this section. Language is that which in
typical circumstances shall be included in a statement of
actuarial opinion. The language may be modified as needed to
meet the circumstances of a particular case, but the appointed
actuary (( shall use language which)) must clearly
express(( es)) his or her professional judgment. (( However,))
In any event, the opinion (( shall retain)) must include all
pertinent aspects of the language provided in this section.
(a) The opening paragraph ((
shall)) must generally
(( indicate)) state the appointed actuary's relationship to the
company and his or her qualifications to sign the opinion.
(i) For a company actuary, the opening paragraph of the
actuarial opinion ((
shall)) must read substantially as
|"I, [name], am [title] of [insurance company name] and a
member of the American Academy of Actuaries. I was
appointed by, or by the authority of, the Board of
Directors of that ((
|"I, [name], a member of the American Academy of Actuaries, am associated with the firm of [name of consulting firm]. I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the Commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and disability insurance companies."|
|"I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, 20[ ]. Tabulated below are those reserves and related actuarial items which have been subjected to asset adequacy analysis.|
|Asset Adequacy Tested Amounts||Reserves and Liabilities|
(1) + (2) + (3)
|E||Disability - Active|
|F||Disability - Disabled|
|Total (Exhibit ((
|A||Active Life Reserve|
|Total (Exhibit ((
||Premiums and Other Deposit Funds (Column 6, Line 14)|
Premiums (Page 3, Line 10.1)
(Page 3, Line 10.3))) Annuities Certain (Column 3, Line 14)
(Page 3, Line 3)) (Column 4, Line 14)
|Total (Exhibit ((
|1||Life (Page 3, Line 4.1)|
|2||Health (Page 3, ((
|Total Exhibit ((
|IMR (General Account, Page
3, Line ((
|IMR (Separate Accounts, Page 3, Line 3)|
|AVR (Page 3, Line 24.1 )||(c)|
|Net Deferred and Uncollected Premium|
Page and line numbers refer to the ((
1992)) 2005 blank. Corresponding entries from blanks from later years (( shall))
are to be substituted as appropriate.
|(a)||The additional actuarial reserves are the reserves
established under WAC 284-07-350 (5)(b) ((
|(b)||The appointed actuary ((
|(c)||Allocated amount of Asset Valuation Reserve (AVR)."
||"I have relied on [name], [title] for [e.g.,
anticipated cash flows from currently owned
assets, including variations in cash flows
according to economic scenarios] ((
(d) If the appointed actuary has examined the underlying
asset and liability records, the reliance paragraph ((
must also include substantially the following statement:
|"My examination included ((
||"In forming my opinion on [specify types of reserves] I
(f) The opinion paragraph ((
shall)) must include a
statement substantially similar to the following:
"In my opinion the reserves and related actuarial values concerning the statement items identified above:
|(i)||Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;|
|(ii)||Are based on actuarial assumptions which produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;|
|(iii)||Meet the requirements of the insurance laws and regulations of the state of [state of domicile] and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;|
|(iv)||Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end (with any exceptions noted below);|
|(v)||Include provision for all actuarial reserves and related statement items which ought to be established.|
|The reserves and related items, when considered in
light of the assets held by the company with respect
to such reserves and related actuarial items
including, but not limited to, the investment
earnings on ((
|The actuarial methods, considerations, and analyses
used in forming my opinion conform to the
appropriate Standards of Practice as promulgated by
the Actuarial Standards Board, which standards form
the basis of this statement of opinion.
|This opinion is updated annually as required by
statute. To the best of my knowledge, there have
been no material changes from the applicable date of
the annual statement to the date of the rendering of
this opinion which should be considered in reviewing
|The following material change(s) which occurred
between the date of the statement for which this
opinion is applicable and the date of this opinion
should be considered in reviewing this opinion:
(Describe the change or changes.)
|The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company's future experience may not follow all the assumptions used in the analysis.|
(4) Adverse opinions: If the appointed actuary is unable
to form an opinion, then he or she ((
shall)) must refuse to
issue a statement of actuarial opinion. If the appointed
actuary's opinion is adverse or qualified, then he or she
(( shall)) must issue an adverse or qualified actuarial opinion
explicitly stating the reason(s) for (( such)) the adverse
opinion. This statement (( should)) must follow the scope
paragraph and precede the opinion paragraph.
(5) Reliance on data furnished by other persons((
the appointed actuary does not express an opinion as to the
accuracy and completeness of the listings and summaries of
policies in force or (( asset-oriented information, there
shall)) if the actuary relies on the certification of others
on matters concerning the accuracy or completeness of any data
underlying the actuarial opinion, or the appropriateness of
any other information used by the appointed actuary in forming
the actuarial opinion, the actuarial opinion must include the
names of the persons the actuary is relying upon and a precise
identification of the items subject to reliance. In addition,
the persons on whom the appointed actuary relies must provide
a certification that precisely identifies the items on which
the person is providing information and a statement as to the
accuracy, completeness or reasonableness of the items, as
applicable. This certification must include the signature,
title, company's legal name, address and telephone number of
the person providing the certification, and the date on which
it is signed. This certification must include the reporting
date, the name of the appointed actuary, and must be attached
to the opinion (( the statement of a company officer or
accounting firm who prepared such underlying data)), in a form
substantially similar to (( either or both of)) the following,
|Signature of the Officer of the Company
|Address of the Officer of the Company
|Telephone Number of the Officer of the
Accounting Firm or the Security Analyst
Accounting Firm or the Security Analyst
Company, Accounting Firm or
the Security Analyst"))
[Statutory Authority: RCW 48.02.060. 06-12-077 (Matter No. R 2006-04), § 284-07-380, filed 6/6/06, effective 7/7/06. Statutory Authority: RCW 48.01.030, 48.02.060, 48.74.025, 48.36A.250 and 48.36A.260. 95-02-036 (Order R 94-26), § 284-07-380, filed 12/30/94, effective 1/30/95.]
Reviser's note: The brackets and enclosed material in the text of the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.
Reviser's note: The typographical error in the above section occurred in the copy filed by the agency and appears in the Register pursuant to the requirements of RCW 34.08.040.
AMENDATORY SECTION(Amending Order R 94-26, filed 12/30/94, effective 1/30/95)
WAC 284-07-390 Description of actuarial memorandum including an asset adequacy analysis and regulatory asset adequacy issues summary. (1)(a) In accordance with RCW 48.74.025, the appointed actuary ((
shall)) must prepare a
memorandum to the company describing the analysis done in
support of his or her opinion regarding the reserves (( under a
WAC 284-07-380 opinion)). The memorandum (( shall)) must be
made available for examination by the commissioner upon his or
her request but (( shall)) will be returned to the company
after (( such)) the examination and (( shall)) will not be
considered a record of the commissioner or subject to
automatic filing with the commissioner.
(b) In preparing the memorandum, the appointed actuary
may rely on, and include as a part of his or her own
memorandum, memoranda prepared and signed by other actuaries
who are qualified within the meaning of WAC 284-07-350(2),
with respect to the areas covered in such memoranda, and
shall so state)) must include a statement to that effect in
(c) If the commissioner requests a memorandum and an
adequate memorandum is not provided within ten days ((
after the request, or, if the commissioner finds that the
analysis described in the memorandum fails to meet the
standards of the Actuarial Standards Board or the standards
and requirements of this regulation, the commissioner may
designate a qualified actuary to review the opinion and
prepare the supporting memorandum required for review. All
reasonable and necessary expenses of the independent review
(( shall)) must be paid by the company but all expenses
(( connected therewith shall)) related to the review will be
directed and controlled by the commissioner.
(d)(i) The reviewing actuary ((
shall)) must have the same
status as an examiner for purposes of obtaining data from the
company and the work papers and documentation of the reviewing
actuary (( shall)) must be retained by the commissioner(( :
Provided, however, That any)). Information provided by the
company to the reviewing actuary and included in the work
papers (( shall)) will be considered material provided by the
company to the commissioner and (( shall)) will be kept
confidential to the same extent as prescribed by law with
respect to other material provided by the company to the
commissioner (( pursuant to the statute governing this
(ii) The reviewing actuary ((
shall)) must not be an
employee of a consulting firm involved with the preparation of
any prior memorandum or opinion for the (( insurer pursuant to
this regulation)) company for the current year or any one of
the preceding three years.
(e) In accordance with RCW 48.74.025, the appointed actuary must prepare a regulatory asset adequacy issues summary according to the requirements set forth in subsection (3) of this section. The regulatory asset adequacy issues summary must be submitted no later than March 15 of the year following the year for which a statement of actuarial opinion based on asset adequacy is required. Except for a domestic life insurance company, the regulatory asset adequacy issues summary must be submitted only upon request of the commissioner. The regulatory asset adequacy issues summary has the standing of a memorandum in support of the actuarial opinion, and will be kept confidential to the extent and under the conditions provided for in RCW 48.74.025(4).
(2) When an actuarial opinion ((
under WAC 284-07-380)) is
provided, the memorandum (( shall)) must demonstrate that the
analysis has been completed in accordance with the standards
for asset adequacy (( referred to)) set forth in WAC 284-07-350(4) and any additional standards required by the
commissioner. The memorandum (( shall specify)) must include
(a) For reserves:
(i) Product descriptions including market description, underwriting and other aspects of a risk profile, and the specific risks the appointed actuary deems significant;
(ii) Sources of liabilities in force;
(iii) Reserve methods and bases;
(iv) Investment reserves;
(v) Reinsurance arrangements;
(vi) Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis;
(vii) Documentation of assumptions, including comparisons with experience, to test reserves for the following:
(A) Lapse rates, both base and excess;
(B) Interest crediting rate strategy;
(D) Policyholder dividend strategy;
(E) Competitor or market interest rate;
(F) Annuitization rates;
(G) Commissions and expenses; and
The documentation of the assumptions must allow an actuary reviewing the actuarial memorandum to form a conclusion regarding the reasonableness of the assumptions.
(b) For assets:
(i) Portfolio descriptions, including a risk profile disclosing the quality, distribution, and types of assets;
(ii) Investment and disinvestment assumptions;
(iii) Sources of asset data;
(iv) Asset valuation bases;
(v) Documentation of assumptions made for:
(A) Default costs;
(B) Bond call function;
(C) Mortgage prepayment function;
(D) Determining market value for assets sold due to disinvestment strategy; and
(E) Determining yield on assets acquired through the investment strategy.
The documentation of the assumptions must allow an actuary reviewing the actuarial memorandum to form a conclusion regarding the reasonableness of the assumptions.
(c) Analysis basis:
(ii) Rationale for inclusion or exclusion of different blocks of business and how pertinent risks were analyzed;
(iii) Rationale for degree of rigor in analyzing different blocks of business, including the level of "materiality" that was used in determining how rigorously to analyze different blocks of business;
(iv) Criteria for determining asset adequacy, including the precise basis for determining if assets are adequate to cover reserves under "moderately adverse conditions" or other conditions, as specified in relevant actuarial standards of practice;
Effect)) Consideration of the impact of federal
income taxes(( , reinsurance, and other relevant factors.
(i) Lapse rates, including a comparison of assumed lapse rates with actual lapse rates, if lapse experience studies have been performed;
(ii) Interest crediting rate strategy;
(iii) Mortality rates, either specified directly or stated with reference to nonproprietary, published tables;
(iv) Dividend strategy;
(v) Competitor or market interest rate;
(vi) Annuitization rates;
(vii) Commissions and expenses, including a comparison of assumptions with recent actual commissions and expenses;
(viii) Asset default costs;
(ix) Bond call function;
(x) Mortgage prepayment function;
(xi) Determination of market value for assets sold due to disinvestment strategy;
(xii) Anticipated yield on assets acquired through the investment strategy.
(vi) The method of treating reinsurance in the asset adequacy analysis.
(d) Sensitivity testing: Impact of changes in assumptions used in asset adequacy analysis, based on sensitivity tests performed.
(e) Material changes: Summary of material changes in methods, procedures, or assumptions from prior year's asset adequacy analysis.
(i) Schedules under each required scenario showing the
cash flows by each of the major items of income, benefits, and
expenses, statutory gains or losses, and statutory balance
sheet, as modeled, for each year in the projection period((
Provided however, That for 1994, abbreviated schedules,
appropriate in the judgment of the appointed actuary, are
(ii) Summary of results.
(3) The regulatory asset adequacy issues summary must contain the name of the company for which the regulatory asset adequacy issues summary is being supplied and must be signed and dated by the appointed actuary providing the actuarial opinion. The regulatory asset adequacy issues summary must include all of the following:
(a) Descriptions of the scenarios tested, including whether those scenarios are stochastic or deterministic, and the sensitivity testing performed relative to those scenarios.
(i) If certain tests produce negative ending surplus in the aggregate, the actuary must describe those tests and state the amount of additional reserve as of the valuation date that, if held, would eliminate the negative aggregate surplus values.
(ii) The actuary must determine ending surplus values by either:
(A) Extending the projection period until the in force and associated assets and liabilities at the end of the projection period are immaterial; or
(B) Adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in force.
(b) An explanation of the extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different from the assumptions used in the previous asset adequacy analysis.
(c) A description of the amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but were not subject to analysis for the current opinion.
(d) Comments on any interim results that may be of significant concern to the appointed actuary.
(e) The methods used by the actuary to recognize the impact of reinsurance on the company's cash flows, including both assets and liabilities, under each of the scenarios tested.
(f) A paragraph explaining whether the actuary is satisfied that all options whether explicit or embedded, in any asset or liability (including but not limited to those affecting cash flows embedded in fixed income securities) and equity-like features in any investments have been appropriately considered in the asset adequacy analysis.
(4) The memorandum ((
shall)) must include a statement
substantially similar to the following:
"Actuarial methods, considerations, and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum."
[Statutory Authority: RCW 48.01.030, 48.02.060, 48.74.025, 48.36A.250 and 48.36A.260. 95-02-036 (Order R 94-26), § 284-07-390, filed 12/30/94, effective 1/30/95.]
The following sections of the Washington Administrative Code are repealed:
|WAC 284-07-360||Required opinions.|
|WAC 284-07-370||Statement of actuarial opinion not including an asset adequacy analysis.|