BILL REQ. #: H-4508.1
| State of Washington | 63rd Legislature | 2014 Regular Session |
Read first time 03/10/14. Referred to Committee on Business & Financial Services.
AN ACT Relating to modernizing life insurance reserve requirements; amending RCW 42.56.400; reenacting and amending RCW 42.56.400; adding new sections to chapter 48.74 RCW; adding new sections to chapter 48.76 RCW; repealing RCW 48.74.010, 48.74.020, 48.74.025, 48.74.030, 48.74.040, 48.74.050, 48.74.060, 48.74.070, 48.74.080, and 48.74.090; providing effective dates; and providing an expiration date.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1
(2) For the purposes of this chapter, the following definitions
shall apply on or after the operative date of the valuation manual:
(a) "Appointed actuary" means a qualified actuary who is appointed
in accordance with the valuation manual to prepare the actuarial
opinion required in section 3(4) of this act.
(b) "Company" means an entity which (i) has written, issued, or
reinsured life insurance contracts, disability insurance contracts, or
deposit-type contracts in this state and has at least one such policy
in force or on claim; or (ii) has written, issued, or reinsured life
insurance contracts, disability insurance contracts, or deposit-type
contracts in any state and is required to hold a certificate of
authority to write life insurance, disability insurance, or
deposit-type contracts in this state.
(c) "Deposit-type contract" means contracts that do not incorporate
mortality or morbidity risks and as may be specified in the valuation
manual.
(d) "Disability insurance," which also may be known in industry as
"accident and health insurance," means contracts that incorporate
morbidity risk and provide protection against economic loss resulting
from accident, sickness, or medical conditions and as may be specified
in the valuation manual.
(e) "Life insurance" means contracts that incorporate mortality
risk, including annuity and pure endowment contracts, and as may be
specified in the valuation manual.
(f) "NAIC" means the national association of insurance
commissioners.
(g) "Policyholder behavior" means any action a policyholder,
contract holder, or any other person with the right to elect options,
such as a certificate holder, may take under a policy or contract
subject to this chapter including, but not limited to, lapse,
withdrawal, transfer, deposit, premium payment, loan, annuitization, or
benefit elections prescribed by the policy or contract but excluding
events of mortality or morbidity that result in benefits prescribed in
their essential aspects by the terms of the policy or contract.
(h) "Principle-based valuation" means a reserve valuation that uses
one or more methods or one or more assumptions determined by the
insurer and is required to comply with section 15 of this act as
specified in the valuation manual.
(i) "Qualified actuary" means an individual who is qualified to
sign the applicable statement of actuarial opinion in accordance with
the American academy of actuaries qualification standards for actuaries
signing such statements and who meets the requirements specified in the
valuation manual.
(j) "Tail risk" means a risk that occurs either where the frequency
of low probability events is higher than expected under a normal
probability distribution or where there are observed events of very
significant size or magnitude.
(k) "Valuation manual" means the manual of valuation instructions
adopted by the NAIC as specified in this chapter or as subsequently
amended.
NEW SECTION. Sec. 2
(a) The provisions set forth in sections 4 through 13 of this act
shall apply to all policies and contracts, as appropriate, subject to
this chapter issued on or after July 10, 1982, and prior to the
operative date of the valuation manual and the provisions set forth in
sections 14 and 15 of this act shall not apply to any such policies and
contracts.
(b) The minimum standard for the valuation of policies and
contracts issued prior to July 10, 1982, shall be that provided by the
laws in effect immediately prior to that date.
(2)(a) The commissioner may annually value, or cause to be valued,
the reserve liabilities, known as reserves, for all outstanding life
insurance contracts, annuity and pure endowment contracts, disability
contracts, and deposit-type contracts of every company issued on or
after the operative date of the valuation manual. In lieu of the
valuation of the reserves required of a foreign or alien company, the
commissioner may accept a valuation made, or caused to be made, by the
insurance supervisory official of any state or other jurisdiction when
the valuation complies with the minimum standard provided in this
chapter.
(b) The provisions set forth in sections 14 and 15 of this act
shall apply to all policies and contracts issued on or after the
operative date of the valuation manual.
NEW SECTION. Sec. 3
(a) Every life insurance company, except as exempted by rule, must
also annually include in the opinion required by this subsection (1),
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 rule, 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.
(b) The commissioner may provide by rule for a transition period
for establishing any higher reserves that the qualified actuary may
deem necessary in order to render the opinion required by this section.
(2) Each opinion required by subsection (1)(a) of this section
shall be governed by the following provisions:
(a) A memorandum, in form and substance acceptable to the
commissioner as specified in rule, must be prepared to support each
actuarial opinion.
(b) If the insurance company fails to provide a supporting
memorandum at the request of the commissioner within a period specified
in rule or the commissioner determines that the supporting memorandum
provided by the insurance company fails to meet the standards set forth
in rule 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
the supporting memorandum required by the commissioner.
(3) Every opinion required by subsection (1) of this section shall
be governed by the following provisions:
(a) The opinion must be submitted with the annual statement
reflecting the valuation of such reserve liabilities for each year
ending on or after December 31, 1994.
(b) The opinion must apply to all business in force including
individual and group disability insurance plans, in form and substance
acceptable to the commissioner as specified by rule.
(c) The opinion must be based on standards adopted by the
commissioner, who in settling the standards shall give due regard to
the standards established by the actuarial standards board or its
successors.
(d) 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.
(e) 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 the rule.
(f) Except in cases of fraud or willful 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.
(g) Rules adopted by the commissioner must define disciplinary
action by the commissioner against the company or the qualified
actuary.
(h) Except as provided in (l), (m), and (n) of this subsection,
documents, materials, or other information in the possession or control
of the office of the insurance commissioner that are a memorandum in
support of the opinion, and any other material provided by the company
to the commissioner in connection with the memorandum, is confidential
by law and privileged, is not subject to chapter 42.56 RCW, is not
subject to subpoena, and is not subject to discovery or admissible in
evidence in any private civil action. However, the commissioner is
authorized to use the documents, materials, or other information in the
furtherance of any regulatory or legal action brought as a part of the
commissioner's official duties.
(i) Neither the commissioner nor any person who received documents,
materials, or other information while acting under the authority of the
commissioner is permitted or required to testify in any private civil
action concerning any confidential documents, materials, or information
subject to (h) of this subsection.
(j) In order to assist in the performance of the commissioner's
duties, the commissioner:
(i) May share documents, materials, or other information, including
the confidential and privileged documents, materials, or information
subject to (h) of this subsection with other state, federal, and
international regulatory agencies, with the national association of
insurance commissioners and its affiliates and subsidiaries, and with
state, federal, and international law enforcement authorities, provided
that the recipient agrees to maintain the confidentiality and
privileged status of the document, material, or other information;
(ii) May receive documents, materials, or information, including
otherwise confidential and privileged documents, materials, or
information, from the national association of insurance commissioners
and its affiliates and subsidiaries, and from regulatory and law
enforcement officials of other foreign or domestic jurisdictions, and
shall maintain as confidential or privileged any document, material, or
information received with notice or the understanding that it is
confidential or privileged under the laws of the jurisdiction that is
the source of the document, material, or information; and
(iii) May enter into agreements governing the sharing and use of
information consistent with (h) through (j) of this subsection.
(k) No waiver of any applicable privilege or claim of
confidentiality in the documents, materials, or information shall occur
as a result of disclosure to the commissioner under this section or as
a result of sharing as authorized in (j) of this subsection.
(l) A memorandum in support of the opinion, and any other material
provided by the company to the commissioner in connection with the
memorandum, must be kept confidential by the commissioner and may not
be made public and are not subject to subpoena, other than for the
purpose of defending an action seeking damages from any person by
reason of an action required by this section or by rules adopted under
it.
(m) The commissioner may otherwise release the memorandum or other
material (a) with the written consent of the company; or (b) to the
American academy of actuaries upon request 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.
(n) Once any portion of the confidential memorandum is cited by the
company in its marketing or is cited before a governmental agency other
than a state insurance department or is released by the company to the
news media, all portions of the confidential memorandum are no longer
confidential.
(4)(a) Every company with outstanding life insurance contracts,
disability insurance contracts, or deposit-type contracts in this state
and subject to rule adopted by the commissioner must annually submit
the opinion of the appointed actuary as to whether the reserves and
related actuarial items held in support of the policies and contracts
are computed appropriately, are based on assumptions that satisfy
contractual provisions, are consistent with prior reported amounts and
comply with applicable laws of this state. The valuation manual will
prescribe the specifics of this opinion including any items deemed to
be necessary to its scope.
(b) Every company with outstanding life insurance contracts,
disability insurance contracts, or deposit-type contracts in this state
and subject to rule adopted by the commissioner, except as exempted in
the valuation manual, must also annually include in the opinion
required by subsection (1) of this section, an opinion of the same
appointed actuary as to whether the reserves and related actuarial
items held in support of the policies and contracts specified in the
valuation manual, 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.
(5) Each opinion required by subsection (4) of this section must be
governed by the following provisions:
(a) A memorandum, in form and substance as specified in the
valuation manual, and acceptable to the commissioner, must be prepared
to support each actuarial opinion.
(b) If the insurance company fails to provide a supporting
memorandum at the request of the commissioner within a period specified
in the valuation manual or the commissioner determines that the
supporting memorandum provided by the insurance company fails to meet
the standards prescribed by the valuation manual 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 the supporting memorandum
required by the commissioner.
(6) Every opinion required under this section must be governed by
the following provisions:
(a) The opinion must be in form and substance as specified in the
valuation manual and acceptable to the commissioner.
(b) The opinion must be submitted with the annual statement
reflecting the valuation of such reserve liabilities for each year
ending on or after the operative date of the valuation manual.
(c) The opinion must apply to all policies and contracts subject to
subsection (4) of this section, plus other actuarial liabilities as may
be specified in the valuation manual.
(d) The opinion must be based on standards adopted from time to
time by the actuarial standards board or its successor, and on such
additional standards as may be prescribed in the valuation manual.
(e) 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.
(f) Except in cases of fraud or willful misconduct, the appointed
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 appointed actuary's opinion.
(g) Rules adopted by the commissioner must define disciplinary
action by the commissioner against the company or the appointed
actuary.
NEW SECTION. Sec. 4
(1) For ordinary policies of life insurance issued on the standard
basis, excluding any disability and accidental death benefits in the
policies: The commissioners 1941 standard ordinary mortality table for
policies issued prior to the operative date of January 1, 1948, the
commissioners 1958 standard ordinary mortality table for policies
issued on or after the operative date of January 1, 1966, and prior to
the operative date of January 1, 1989, except that for any category of
policies issued on female risks, all modified net premiums and present
values referred to in this chapter may be calculated according to an
age not more than six years younger than the actual age of the insured;
and for policies issued on or after the operative date of January 1,
1989:
(a) The commissioners 1980 standard ordinary mortality table;
(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) Any ordinary mortality table, adopted after 1980 by the NAIC,
which is approved by rule adopted by the commissioner for use in
determining the minimum standard of valuation for such policies;
(2) For industrial life insurance policies issued on the standard
basis, excluding any disability and accidental death benefits in the
policies: The 1941 standard industrial mortality table for policies
issued prior to the operative date of January 1, 1948, and for policies
issued on or after the operative date of January 1, 1968, the
commissioners 1961 standard industrial mortality table or any
industrial mortality table adopted after 1980 by the NAIC that is
approved by rule adopted by the commissioner for use in determining the
minimum standard of valuation for the policies;
(3) For individual annuity and pure endowment contracts, excluding
any disability and accidental death benefits in the policies: The 1937
standard annuity mortality table, or at the option of the company, the
annuity mortality table for 1949, ultimate, or any modification of
either of these tables approved by the commissioner;
(4) For group annuity and pure endowment contracts, excluding any
disability and accidental death benefits in the policies: The group
annuity mortality table for 1951, a modification of the table approved
by the commissioner, or at the option of the company, any of the tables
or modifications of tables specified for individual annuity and pure
endowment contracts;
(5) For total and permanent disability benefits in or supplementary
to ordinary policies or contracts: For policies or contracts issued on
or after January 1, 1966, 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 NAIC, that are approved by rules adopted by the commissioner for
use in determining the minimum standard of valuation for those
policies; for policies or contracts issued on or after January 1, 1961,
and prior to January 1, 1966, either those tables or, at the option of
the company, the class (3) disability table (1926); and for policies
issued prior to January 1, 1961, the class (3) disability table (1926).
Any such table shall, for active lives, be combined with a mortality
table permitted for calculating the reserves for life insurance
policies;
(6) For accidental death benefits in or supplementary to policies
issued on or after January 1, 1966: The 1959 accidental death benefits
table or any accidental death benefits table adopted after 1980 by the
NAIC that is approved by rule adopted by the commissioner for use in
determining the minimum standard of valuation for those policies, for
policies issued on or after January 1, 1961, and prior to January 1,
1966, either that table or, at the option of the company, the
inter-company double indemnity mortality table; and for policies issued
prior to January 1, 1961, the inter-company double indemnity mortality
table. Either table shall be combined with a mortality table for
calculating the reserves for life insurance policies; and
(7) For group life insurance, life insurance issued on the
substandard basis and other special benefits: Tables approved by the
commissioner.
NEW SECTION. Sec. 5
(a) For individual annuity and pure endowment contracts issued
prior to September 1, 1979, excluding any disability and accidental
death benefits in those contracts: The 1971 individual annuity
mortality table, or any modification of this table approved by the
commissioner, and six percent interest for single premium immediate
annuity contracts and four percent interest for all other individual
annuity and pure endowment contracts;
(b) For individual single premium immediate annuity contracts
issued on or after September 1, 1979, excluding any disability and
accidental death benefits in those contracts: The 1971 individual
annuity mortality table or any individual annuity mortality table
adopted after 1980 by the NAIC that is approved by rule adopted by the
commissioner for use in determining the minimum standard of valuation
for these contracts, or any modification of these tables approved by
the commissioner, and seven and one-half percent interest;
(c) For individual annuity and pure endowment contracts issued on
or after September 1, 1979, other than single premium immediate annuity
contracts, excluding any disability and accidental death benefits in
those contracts: The 1971 individual annuity mortality table or any
individual annuity mortality table adopted after 1980 by the NAIC, that
is approved by rule adopted by the commissioner for use in determining
the minimum standard of valuation for those contracts, or any
modification of these tables approved by the commissioner, and five and
one-half percent interest for single premium deferred annuity and pure
endowment contracts and four and one-half percent interest for all
other individual annuity and pure endowment contracts;
(d) For annuities and pure endowments purchased prior to September
1, 1979, under group annuity and pure endowment contracts, excluding
any disability and accidental death benefits purchased under those
contracts: The 1971 group annuity mortality table or any modification
of this table approved by the commissioner, and six percent interest;
and
(e) For annuities and pure endowments purchased on or after
September 1, 1979, under group annuity and pure endowment contracts,
excluding any disability and accidental death benefits purchased under
those contracts: The 1971 group annuity mortality table, or any group
annuity mortality table adopted after 1980 by the NAIC that is approved
by rule adopted by the commissioner for use in determining the minimum
standard of valuation for annuities and pure endowments, or any
modification of these tables approved by the commissioner, and seven
and one-half percent interest.
(2) After July 16, 1973, any company may file with the commissioner
a written notice of its election to comply with the provisions of this
section after a specified date before January 1, 1979, which shall be
the operative date of this section for that company. If a company
makes no election, the operative date of this section for that company
shall be January 1, 1979.
NEW SECTION. Sec. 6
(a) Life insurance policies issued in a particular calendar year,
on or after the operative date of RCW 48.76.050(4);
(b) Individual annuity and pure endowment contracts issued in a
particular calendar year on or after January 1, 1982;
(c) 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.
(2) The calendar year statutory valuation interest rates,
represented by I, shall be determined as follows and the results
rounded to the nearer one-quarter of one percent:
(a) For life insurance:
| I = .03 + W • (R1 - .03) + | W • (R2 - .09) |
| 2 |
| Guarantee Duration
(Years) | Weighting Factors |
| 10 or less | .50 |
| More than 10, but not more than 20 | .45 |
| More than 20 | .35 |
| Guarantee Duration (Years) | Weighting Factor for Plan Type | ||
| A | B | C | |
| 5 or less: | .80 | .60 | .50 |
| More than 5, but not more than 10: | .75 | .60 | .50 |
| More than 10, but not more than 20 | .65 | .50 | .45 |
| More than 20: | .45 | .35 | .35 |
| Plan Type | ||
| A | B | C |
| .15 | .25 | .05 |
| Plan Type | ||
| A | B | C |
| .05 | .05 | .05 |
NEW SECTION. Sec. 7
(a) A net level annual premium equal to the present value, at the
date of issue, of the 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 the policy on which a premium falls due. However, the 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 the policy.
(b) A net one-year term premium for the benefits provided for in
the first policy year.
(2) For a life insurance policy issued on or after January 1, 1986,
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 the excess and which provides an
endowment benefit or a cash surrender value or a combination in an
amount greater than the 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 as the first
policy anniversary on which the sum of any endowment benefit and any
cash surrender value then available is greater than the excess premium
shall, except as otherwise provided in section 11 of this act, be the
greater of the reserve as of the policy anniversary calculated as
described in subsection (1) of this section and the reserve as of the
policy anniversary calculated as described in subsection (1) of this
section, but with (a) the value defined in subsection (1) of this
section being reduced by fifteen percent of the amount of such excess
first year premium, (b) 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, (c) the policy being
assumed to mature on that date as an endowment, and (d) the cash
surrender value provided on that date being considered as an endowment
benefit. In making this comparison the mortality and interest bases
stated in sections 4 and 6 of this act shall be used.
(3) Reserves according to the commissioners reserve valuation
method shall be calculated by a method consistent with the principles
of subsections (1) and (2) of this section 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;
(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.
NEW SECTION. Sec. 8
(2) Reserves according to the commissioners annuity reserve method
for benefits under annuity or pure endowment contracts, excluding any
disability and accidental death benefits in the 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 the 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 the contract, that
become payable prior to the end of the 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 the
contracts for determining guaranteed benefits. The valuation
considerations are the portions of the respective gross considerations
applied under the terms of the contracts to determine nonforfeiture
values.
NEW SECTION. Sec. 9
(2) In no event may the aggregate reserves for all policies,
contracts, and benefits be less than the aggregate reserves determined
by the appointed actuary to be necessary to render the opinion required
by section 3 of this act.
NEW SECTION. Sec. 10
(2) Reserves for any category of policies, contracts, or benefits
established by the commissioner, issued on or after July 10, 1982, may
be calculated, at the option of the company, according to any standards
that produce greater aggregate reserves for the category than those
calculated according to the minimum standard, but the rate or rates of
interest used for policies and contracts, other than annuity and pure
endowment contracts, shall not be greater than the corresponding rate
or rates of interest used in calculating any nonforfeiture benefits
provided in the policies or contracts.
(3) Any company, which at any time has adopted any standard of
valuation producing greater aggregate reserves than those calculated
according to the minimum standard provided under this chapter, may,
with the approval of the commissioner, adopt any lower standard of
valuation with the approval of the commissioner, but not lower than the
minimum provided. For the purposes of this section, the holding of
additional reserves previously determined by the appointed actuary to
be necessary to render the opinion required by section 3 of this act is
not to be the adoption of a higher standard of valuation.
NEW SECTION. Sec. 11
For a life insurance policy issued on or after January 1, 1986, 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 the excess and which provides an endowment
benefit or a cash surrender value or a combination in an amount greater
than the excess premium, the provisions of this section shall be
applied as if the method actually used in calculating the reserve for
the policy was the method described in sections 7 and 8 of this act,
excluding section 7(2) of this act. The minimum reserve at each policy
anniversary of such a policy shall be the greater of the minimum
reserve calculated in accordance with sections 7 and 8 of this act,
including section 7(2) of this act, and the minimum reserve calculated
in accordance with this section.
NEW SECTION. Sec. 12
(a) Be appropriate in relation to the benefits and the pattern of
premiums for that plan; and
(b) Be computed by a method that is consistent with the principles
of the standard valuation law.
(2) Notwithstanding any other provision in this chapter, a policy,
contract, or certificate providing life insurance under such a plan
must be affirmatively approved by the commissioner before it can be
marketed, issued, delivered, or used in this state.
(3) If subsection (2) of this section is enacted in a state where
prior filing and approval of life insurance policy forms has not been
previously required by statute, this subsection mandates such action
for plans requiring approval under this section. If subsection (2) of
this section is enacted in a state where approval is deemed under
certain circumstances, the deemed provision would be overridden by the
terms of this section.
NEW SECTION. Sec. 13
NEW SECTION. Sec. 14
(2) The operative date of the valuation manual is January 1st of
the first calendar year following the first July 1st as of which all of
the following have occurred:
(a) The valuation manual has been adopted by the NAIC by an
affirmative vote of at least forty-two members, or three-fourths of the
members voting, whichever is greater.
(b) The standard valuation law, as amended by the NAIC in 2009, or
legislation including substantially similar terms and provisions, has
been enacted by states representing greater than seventy-five percent
of the direct premiums written as reported in the following annual
statements submitted for 2008: Life, accident and health annual
statements; health annual statements; or fraternal annual statements.
(c) The standard valuation law, as amended by the NAIC in 2009, or
legislation including substantially similar terms and provisions, has
been enacted by at least forty-two of the following fifty-five
jurisdictions: The fifty States of the United States, American Samoa,
the American Virgin Islands, the District of Columbia, Guam, and Puerto
Rico.
(3) Unless a change in the valuation manual specifies a later
effective date, changes to the valuation manual shall be effective on
January 1st following the date when the change to the valuation manual
has been adopted by the NAIC by an affirmative vote representing:
(a) At least three-fourths of the members of the NAIC voting, but
not less than a majority of the total membership; and
(b) Members of the NAIC representing jurisdictions totaling greater
than seventy-five percent of the direct premiums written as reported in
the following annual statements most recently available prior to the
vote in (a) of this subsection: Life, accident and health annual
statements, health annual statements, or fraternal annual statements.
(4) The valuation manual must specify all of the following:
(a) Minimum valuation standards for and definitions of the policies
or contracts subject to section 2(2) of this act. Such minimum
valuation standards shall be:
(i) The commissioners reserve valuation method for life insurance
contracts, other than annuity contracts, subject to section 2(2) of
this act;
(ii) The commissioners annuity reserve valuation method for annuity
contracts subject to section 2(2) of this act; and
(iii) Minimum reserves for all other policies or contracts subject
to section 2(2) of this act;
(b) Which policies or contracts or types of policies or contracts
that are subject to the requirements of a principle-based valuation in
section 15(1) of this act and the minimum valuation standards
consistent with those requirements;
(c) For policies and contracts subject to a principle-based
valuation under section 15 of this act:
(i) Requirements for the format of reports to the commissioner
under section 15(2)(c) of this act and which must include information
necessary to determine if the valuation is appropriate and in
compliance with this chapter;
(ii) Assumptions must be prescribed for risks over which the
company does not have significant control or influence;
(iii) Procedures for corporate governance and oversight of the
actuarial function, and a process for appropriate waiver or
modification of such procedures;
(d) For policies not subject to a principle-based valuation under
section 15 of this act the minimum valuation standard must either:
(i) Be consistent with the minimum standard of valuation prior to
the operative date of the valuation manual; or
(ii) Develop reserves that quantify the benefits and guarantees,
and the funding, associated with the contracts and their risks at a
level of conservatism that reflects conditions that include unfavorable
events that have a reasonable probability of occurring;
(e) Other requirements, including, but not limited to, those
relating to reserve methods, models for measuring risk, generation of
economic scenarios, assumptions, margins, use of company experience,
risk measurement, disclosure, certifications, reports, actuarial
opinions and memorandums, transition rules, and internal controls; and
(f) The data and form of the data required under section 16 of this
act, with whom the data must be submitted, and may specify other
requirements including data analyses and reporting of analyses.
(5) In the absence of a specific valuation requirement or if a
specific valuation requirement in the valuation manual is not, in the
opinion of the commissioner, in compliance with this chapter, then the
company must, with respect to such requirements, comply with minimum
valuation standards adopted by the commissioner by rule.
(6) The commissioner may engage a qualified actuary, at the expense
of the company, to perform an actuarial examination of the company and
opine on the appropriateness of any reserve assumption or method used
by the company, or to review and opine on a company's compliance with
any requirement set forth in this chapter. The commissioner may rely
upon the opinion, regarding provisions contained within this chapter,
of a qualified actuary engaged by the commissioner of another state,
district, or territory of the United States. As used in this
subsection, "engage" includes employment and contracting.
(7) The commissioner may require a company to change any assumption
or method that in the opinion of the commissioner is necessary in order
to comply with the requirements of the valuation manual or this
chapter; and the company must adjust the reserves as required by the
commissioner. The commissioner may take other disciplinary action as
permitted pursuant to this title.
NEW SECTION. Sec. 15
(a) Quantify the benefits and guarantees, and the funding,
associated with the contracts and their risks at a level of
conservatism that reflects conditions that include unfavorable events
that have a reasonable probability of occurring during the lifetime of
the contracts. For polices or contracts with significant tail risk,
reflects conditions appropriately adverse to quantify the tail risk;
(b) Incorporate assumptions, risk analysis methods, and financial
models and management techniques that are consistent with, but not
necessarily identical to, those utilized within the company's overall
risk assessment process, while recognizing potential differences in
financial reporting structures and any prescribed assumptions or
methods;
(c) Incorporate assumptions that are derived in one of the
following manners:
(i) The assumption is prescribed in the valuation manual;
(ii) For assumptions that are not prescribed, the assumptions must:
(A) Be established utilizing the company's available experience,
to the extent it is relevant and statistically credible; or
(B) To the extent that company data is not available, relevant, or
statistically credible, be established utilizing other relevant,
statistically credible experience;
(d) Provide margins for uncertainty including adverse deviation and
estimation error, such that the greater the uncertainty the larger the
margin and resulting reserve.
(2) A company using a principle-based valuation for one or more
policies or contracts subject to this section as specified in the
valuation manual must:
(a) Establish procedures for corporate governance and oversight of
the actuarial valuation function consistent with those described in the
valuation manual;
(b) Provide to the commissioner and the board of directors an
annual certification of the effectiveness of the internal controls with
respect to the principle-based valuation. Such controls must be
designed to assure that all material risks inherent in the liabilities
and associated assets subject to such valuation are included in the
valuation, and that valuations are made in accordance with the
valuation manual. The certification must be based on the controls in
place as of the end of the preceding calendar year;
(c) Develop, and file with the commissioner upon request, a
principle-based valuation report that complies with standards
prescribed in the valuation manual.
(3) A principle-based valuation may include a prescribed formulaic
reserve component.
NEW SECTION. Sec. 16
NEW SECTION. Sec. 17
(a) A memorandum in support of an opinion submitted under section
3 of this act and any other documents, materials, and other
information, including, but not limited to, all working papers, and
copies thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in connection with such memorandum;
(b) All documents, materials, and other information, including, but
not limited to, all working papers, and copies thereof, created,
produced, or obtained by or disclosed to the commissioner or any other
person in the course of an examination made under section 14(6) of this
act. However, if an examination report or other material prepared in
connection with an examination made under chapter 48.03 RCW is not held
as private and confidential information under chapter 48.03 RCW, an
examination report or other material prepared in connection with an
examination made under section 14(6) of this act shall not be
"confidential information" to the same extent as if such examination
report or other material had been prepared under chapter 48.03 RCW;
(c) Any reports, documents, materials, and other information
developed by a company in support of, or in connection with, an annual
certification by the company under section 15(2)(b) of this act
evaluating the effectiveness of the company's internal controls with
respect to a principle-based valuation and any other documents,
materials, and other information, including, but not limited to, all
working papers, and copies thereof, created, produced, or obtained by
or disclosed to the commissioner or any other person in connection with
such reports, documents, materials, and other information;
(d) Any principle-based valuation report developed under section
15(2)(c) of this act and any other documents, materials, and other
information, including, but not limited to, all working papers, and
copies thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in connection with such report; and
(e) Any documents, materials, data, and other information submitted
by a company under section 16 of this act and any other documents,
materials, data, and other information, including, but not limited to,
all working papers, and copies thereof, created or produced in
connection with such experience data, in each case that include any
potentially company identifying or personally identifiable information,
that is provided to or obtained by the commissioner and any other
documents, materials, data and other information, including, but not
limited to, all working papers, and copies thereof, created, produced,
or obtained by or disclosed to the commissioner or any other person in
connection with such experience materials.
(2)(a) Except as provided in this section, a company's confidential
information is confidential by law and privileged, and is not subject
to chapter 42.56 RCW, is not subject to subpoena, and is not subject to
discovery or admissible in evidence in any private civil action.
However, the commissioner is authorized to use the confidential
information in the furtherance of any regulatory or legal action
brought against the company as a part of the commissioner's official
duties.
(b) Neither the commissioner nor any person who received
confidential information while acting under the authority of the
commissioner is permitted or required to testify in any private civil
action concerning any confidential information.
(c) In order to assist in the performance of the commissioner's
duties, the commissioner may share confidential information (i) with
other state, federal and international regulatory agencies and with the
NAIC and its affiliates and subsidiaries, and (ii) in the case of
confidential information specified in subsection (1)(a) and (d) of this
section only, with the actuarial board for counseling and discipline or
its successor upon request stating that the confidential information is
required for the purpose of professional disciplinary proceedings and
with state, federal, and international law enforcement officials. In
the case of (c)(i) and (ii) of this subsection, the commission may
share confidential information provided the recipient agrees, and has
the legal authority to agree, to maintain the confidentiality and
privileged status of such documents, materials, data, and other
information in the same manner and to the same extent as required for
the commissioner.
(d) The commissioner may receive documents, materials, data, and
other information, including otherwise confidential and privileged
documents, materials, data, or information, from the NAIC and its
affiliates and subsidiaries, from regulatory or law enforcement
officials of other foreign or domestic jurisdictions, and from the
actuarial board for counseling and discipline or its successor and
shall maintain as confidential or privileged any document, material,
data, or other information received with notice or the understanding
that it is confidential or privileged under the laws of the
jurisdiction that is the source of the document, material, or other
information.
(e) The commissioner may enter into agreements governing sharing
and use of information consistent with this subsection (2).
(f) No waiver of any applicable privilege or claim of
confidentiality in the confidential information shall occur as a result
of disclosure to the commissioner under this section or as a result of
sharing as authorized in (c) of this subsection.
(g) A privilege established under the law of any state or
jurisdiction that is substantially similar to the privilege established
under this subsection shall be available and enforced in any proceeding
in, and in any court of, this state.
(h) In this section "regulatory agency," "law enforcement agency,"
and the "NAIC" include, but are not limited to, their employees,
agents, consultants, and contractors.
(3) Notwithstanding subsection (2) of this section, any
confidential information specified in subsection (1)(a) and (d) of this
section:
(a) May be subject to subpoena for the purpose of defending an
action seeking damages from the appointed actuary submitting the
related memorandum in support of an opinion submitted under section 3
of this act or principle-based valuation report developed under section
15(2)(c) of this act by reason of an action required by this chapter or
by rule;
(b) May otherwise be released by the commissioner with the written
consent of the company; and
(c) Once any portion of a memorandum in support of an opinion
submitted under section 3 of this act or a principle-based valuation
report developed under section 15(2)(c) of this act is cited by the
company in its marketing or is publicly volunteered to or before a
governmental agency other than a state insurance department or is
released by the company to the news media, all portions of such
memorandum or report are no longer confidential.
NEW SECTION. Sec. 18
(a) The commissioner has issued an exemption in writing to the
company and has not subsequently revoked the exemption in writing; and
(b) The company computes reserves using assumptions and methods
used prior to the operative date of the valuation manual in addition to
any requirements established by the commissioner and adopted by rule.
(2) For any company granted an exemption under this section,
sections 3 through 13 of this act shall be applicable. With respect to
any company applying this exemption, any reference to section 14 of
this act found in sections 3 through 13 of this act shall not be
applicable.
Sec. 19 RCW 42.56.400 and 2013 c 277 s 5 and 2013 c 65 s 5 are
each reenacted and amended to read as follows:
The following information relating to insurance and financial
institutions is exempt from disclosure under this chapter:
(1) Records maintained by the board of industrial insurance appeals
that are related to appeals of crime victims' compensation claims filed
with the board under RCW 7.68.110;
(2) Information obtained and exempted or withheld from public
inspection by the health care authority under RCW 41.05.026, whether
retained by the authority, transferred to another state purchased
health care program by the authority, or transferred by the authority
to a technical review committee created to facilitate the development,
acquisition, or implementation of state purchased health care under
chapter 41.05 RCW;
(3) The names and individual identification data of either all
owners or all insureds, or both, received by the insurance commissioner
under chapter 48.102 RCW;
(4) Information provided under RCW 48.30A.045 through 48.30A.060;
(5) Information provided under RCW 48.05.510 through 48.05.535,
48.43.200 through 48.43.225, 48.44.530 through 48.44.555, and 48.46.600
through 48.46.625;
(6) Examination reports and information obtained by the department
of financial institutions from banks under RCW 30.04.075, from savings
banks under RCW 32.04.220, from savings and loan associations under RCW
33.04.110, from credit unions under RCW 31.12.565, from check cashers
and sellers under RCW 31.45.030(3), and from securities brokers and
investment advisers under RCW 21.20.100, all of which is confidential
and privileged information;
(7) Information provided to the insurance commissioner under RCW
48.110.040(3);
(8) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.02.065, all of which are confidential and
privileged;
(9) Confidential proprietary and trade secret information provided
to the commissioner under RCW 48.31C.020 through 48.31C.050 and
48.31C.070;
(10) Data filed under RCW 48.140.020, 48.140.030, 48.140.050, and
7.70.140 that, alone or in combination with any other data, may reveal
the identity of a claimant, health care provider, health care facility,
insuring entity, or self-insurer involved in a particular claim or a
collection of claims. For the purposes of this subsection:
(a) "Claimant" has the same meaning as in RCW 48.140.010(2).
(b) "Health care facility" has the same meaning as in RCW
48.140.010(6).
(c) "Health care provider" has the same meaning as in RCW
48.140.010(7).
(d) "Insuring entity" has the same meaning as in RCW 48.140.010(8).
(e) "Self-insurer" has the same meaning as in RCW 48.140.010(11);
(11) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.135.060;
(12) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.37.060;
(13) Confidential and privileged documents obtained or produced by
the insurance commissioner and identified in RCW 48.37.080;
(14) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.37.140;
(15) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.17.595;
(16) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.102.051(1) and 48.102.140 (3) and (7)(a)(ii);
(17) Documents, materials, or information obtained by the insurance
commissioner in the commissioner's capacity as receiver under RCW
48.31.025 and 48.99.017, which are records under the jurisdiction and
control of the receivership court. The commissioner is not required to
search for, log, produce, or otherwise comply with the public records
act for any records that the commissioner obtains under chapters 48.31
and 48.99 RCW in the commissioner's capacity as a receiver, except as
directed by the receivership court;
(18) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.13.151;
(19) Data, information, and documents provided by a carrier
pursuant to section 1, chapter 172, Laws of 2010;
(20) Information in a filing of usage-based insurance about the
usage-based component of the rate pursuant to RCW 48.19.040(5)(b);
(21) Data, information, and documents, other than those described
in RCW 48.02.210(2), that are submitted to the office of the insurance
commissioner by an entity providing health care coverage pursuant to
RCW 28A.400.275 and 48.02.210; ((and))
(22) Data, information, and documents obtained by the insurance
commissioner under RCW 48.29.017; ((and))
(23) Information not subject to public inspection or public
disclosure under RCW 48.43.730(5); and
(24) Documents, materials, or information obtained by the insurance
commissioner under chapter 48.74 RCW.
Sec. 20 RCW 42.56.400 and 2013 c 65 s 5 are each amended to read
as follows:
The following information relating to insurance and financial
institutions is exempt from disclosure under this chapter:
(1) Records maintained by the board of industrial insurance appeals
that are related to appeals of crime victims' compensation claims filed
with the board under RCW 7.68.110;
(2) Information obtained and exempted or withheld from public
inspection by the health care authority under RCW 41.05.026, whether
retained by the authority, transferred to another state purchased
health care program by the authority, or transferred by the authority
to a technical review committee created to facilitate the development,
acquisition, or implementation of state purchased health care under
chapter 41.05 RCW;
(3) The names and individual identification data of either all
owners or all insureds, or both, received by the insurance commissioner
under chapter 48.102 RCW;
(4) Information provided under RCW 48.30A.045 through 48.30A.060;
(5) Information provided under RCW 48.05.510 through 48.05.535,
48.43.200 through 48.43.225, 48.44.530 through 48.44.555, and 48.46.600
through 48.46.625;
(6) Examination reports and information obtained by the department
of financial institutions from banks under RCW 30.04.075, from savings
banks under RCW 32.04.220, from savings and loan associations under RCW
33.04.110, from credit unions under RCW 31.12.565, from check cashers
and sellers under RCW 31.45.030(3), and from securities brokers and
investment advisers under RCW 21.20.100, all of which is confidential
and privileged information;
(7) Information provided to the insurance commissioner under RCW
48.110.040(3);
(8) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.02.065, all of which are confidential and
privileged;
(9) Confidential proprietary and trade secret information provided
to the commissioner under RCW 48.31C.020 through 48.31C.050 and
48.31C.070;
(10) Data filed under RCW 48.140.020, 48.140.030, 48.140.050, and
7.70.140 that, alone or in combination with any other data, may reveal
the identity of a claimant, health care provider, health care facility,
insuring entity, or self-insurer involved in a particular claim or a
collection of claims. For the purposes of this subsection:
(a) "Claimant" has the same meaning as in RCW 48.140.010(2).
(b) "Health care facility" has the same meaning as in RCW
48.140.010(6).
(c) "Health care provider" has the same meaning as in RCW
48.140.010(7).
(d) "Insuring entity" has the same meaning as in RCW 48.140.010(8).
(e) "Self-insurer" has the same meaning as in RCW 48.140.010(11);
(11) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.135.060;
(12) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.37.060;
(13) Confidential and privileged documents obtained or produced by
the insurance commissioner and identified in RCW 48.37.080;
(14) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.37.140;
(15) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.17.595;
(16) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.102.051(1) and 48.102.140 (3) and (7)(a)(ii);
(17) Documents, materials, or information obtained by the insurance
commissioner in the commissioner's capacity as receiver under RCW
48.31.025 and 48.99.017, which are records under the jurisdiction and
control of the receivership court. The commissioner is not required to
search for, log, produce, or otherwise comply with the public records
act for any records that the commissioner obtains under chapters 48.31
and 48.99 RCW in the commissioner's capacity as a receiver, except as
directed by the receivership court;
(18) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.13.151;
(19) Data, information, and documents provided by a carrier
pursuant to section 1, chapter 172, Laws of 2010;
(20) Information in a filing of usage-based insurance about the
usage-based component of the rate pursuant to RCW 48.19.040(5)(b);
(21) Data, information, and documents, other than those described
in RCW 48.02.210(2), that are submitted to the office of the insurance
commissioner by an entity providing health care coverage pursuant to
RCW 28A.400.275 and 48.02.210; ((and))
(22) Data, information, and documents obtained by the insurance
commissioner under RCW 48.29.017; and
(23) Documents, materials, or information obtained by the insurance
commissioner under chapter 48.74 RCW.
NEW SECTION. Sec. 21 The following acts or parts of acts are
each repealed:
(1) RCW 48.74.010 (Short title -- "NAIC" defined) and 1982 1st ex.s.
c 9 s 1;
(2) RCW 48.74.020 (Valuation of reserve liabilities) and 1982 1st
ex.s. c 9 s 2;
(3) RCW 48.74.025 (Reserves and related actuarial items -- Opinion of
a qualified actuary -- Requirements for the opinion -- Rules) and 1993 c
462 s 85;
(4) RCW 48.74.030 (Minimum standard for valuation) and 1993 c 462
s 86 & 1982 1st ex.s. c 9 s 3;
(5) RCW 48.74.040 (Amount of reserves required) and 1993 c 462 s 87
& 1982 1st ex.s. c 9 s 4;
(6) RCW 48.74.050 (Minimum aggregate reserves) and 1993 c 462 s 88
& 1982 1st ex.s. c 9 s 5;
(7) RCW 48.74.060 (Other methods of reserve calculation) and 1993
c 462 s 89 & 1982 1st ex.s. c 9 s 6;
(8) RCW 48.74.070 (Minimum reserve if gross premium less than
valuation net premium) and 1982 1st ex.s. c 9 s 7;
(9) RCW 48.74.080 (Procedure when specified methods of reserve
determination unfeasible) and 1982 1st ex.s. c 9 s 8; and
(10) RCW 48.74.090 (Valuation of disability insurance) and 1993 c
462 s 90.
NEW SECTION. Sec. 22 Sections 22 through 35 of this act may be
known and cited as the standard nonforfeiture law for life insurance
act.
NEW SECTION. Sec. 23
NEW SECTION. Sec. 24
(1) That, in the event of default in any premium payment, the
company will grant, upon proper request not later than sixty days after
the due date of the premium in default, a paid-up nonforfeiture benefit
on a plan stipulated in the policy, effective as of the due date, of
such amount as may be specified. In lieu of the stipulated paid-up
nonforfeiture benefit, the company may substitute, upon proper request
not later than sixty days after the due date of the premium in default,
an actuarially equivalent alternative paid-up nonforfeiture benefit
which provides a greater amount or longer period of death benefits or,
if applicable, a greater amount or earlier payment of endowment
benefits.
(2) That, upon surrender of the policy within sixty days after the
due date of any premium payment in default after premiums have been
paid for at least three full years in the case of ordinary insurance or
five full years in the case of industrial insurance, the company will
pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender
value of such amount as may be specified in this chapter.
(3) That a specified paid-up nonforfeiture benefit shall become
effective as specified in the policy unless the person entitled to make
the election elects another available option not later than sixty days
after the due date of the premium in default.
(4) That if the policy shall have become paid-up by completion of
all premium payments or if it is continued under any paid-up
nonforfeiture benefit which became effective on or after the third
policy anniversary in the case of ordinary insurance or the fifth
policy anniversary in the case of industrial insurance, the company
will pay, upon surrender of the policy within thirty days after any
policy anniversary, a cash surrender value of such amount as may be
specified in this chapter.
(5) In the case of policies which cause, on a basis guaranteed in
the policy, unscheduled changes in benefits or premiums, or which
provide an option for changes in benefits or premiums other than a
change to a new policy; a statement of the mortality table, interest
rate and method used in calculating cash surrender values, and the
paid-up nonforfeiture benefits available under the policy. In the case
of all other policies, a statement of the mortality table and interest
rate used in calculating the cash surrender values and the paid-up
nonforfeiture benefits available under the policy, together with a
table showing the cash surrender value, if any, and paid-up
nonforfeiture benefit, if any, available under the policy on each
policy anniversary either during the first twenty policy years or
during the term of the policy, whichever is shorter, such values and
benefits to be calculated upon the assumption that there are no
dividends or paid-up additions credited to the policy and that there is
no indebtedness to the company on the policy.
(6) A statement that the cash surrender values and the paid-up
nonforfeiture benefits available under the policy are not less than the
minimum values and benefits required by or pursuant to the insurance
law of the state in which the policy is delivered; an explanation of
the manner in which the cash surrender values and the paid-up
nonforfeiture benefits are altered by the existence of any paid-up
additions credited to the policy or any indebtedness to the company on
the policy; if a detailed statement of the method of computation of the
values and benefits shown in the policy is not stated therein, a
statement that such method of computation has been filed with the
insurance supervisory official of the state in which the policy is
delivered; and a statement of the method to be used in calculating the
cash surrender value and a paid-up nonforfeiture benefit available
under the policy on any policy anniversary beyond the last anniversary
for which values and benefits are consecutively shown in the policy.
Any of the provisions of this section or portions thereof not
applicable by reason of the plan of insurance may, to the extent
inapplicable, be omitted from the policy.
The company shall reserve the right to defer the payment of any
cash surrender value for a period of six months after demand therefor
with surrender of the policy.
NEW SECTION. Sec. 25
(a) The then present value of the adjusted premiums as defined in
sections 27 through 30 of this act, corresponding to premiums which
would have fallen due on and after the anniversary; and
(b) The amount of any indebtedness to the company on the policy.
(2) For any policy issued on or after the operative date of section
30 of this act, which provides supplemental life insurance or annuity
benefits at the option of the insured and for an identifiable
additional premium by rider or supplemental policy provision, the cash
surrender value referred to in subsection (1) of this section shall be
an amount not less than the sum of the cash surrender value for an
otherwise similar policy issued at the same age without the rider or
supplemental policy provision and the cash surrender value as defined
in subsection (1) of this section for a policy which provides only the
benefits otherwise provided by such rider or supplemental policy
provision.
(3) For any family policy issued on or after the operative date of
section 30 of this act, which defines a primary insured and provides
term insurance on the life of the spouse of the primary insured
expiring before the spouse's age seventy-one, the cash surrender value
referred to in subsection (1) of this section shall be an amount not
less than the sum of the cash surrender value for an otherwise similar
policy issued at the same age without such term insurance on the life
of the spouse and the cash surrender value as defined in subsection (1)
of this section for a policy which provides only the benefits otherwise
provided by such term insurance on the life of the spouse.
(4) Any cash surrender value available within thirty days after any
policy anniversary under any policy paid-up by completion of all
premium payments or any policy continued under any paid-up
nonforfeiture benefit, whether or not required by section 24 of this
act, shall be an amount not less than the present value, on such
anniversary, of future guaranteed benefits provided for by the policy,
including any existing paid-up additions, decreased by any indebtedness
to the company on the policy.
NEW SECTION. Sec. 26
NEW SECTION. Sec. 27
(a) The then present value of the future guaranteed benefits
provided for by the policy;
(b) Two percent of the amount of insurance, if the insurance be
uniform in amount, or of the equivalent uniform amount, as defined, if
the amount of insurance varies with duration of the policy;
(c) Forty percent of the adjusted premium for the first policy
year;
(d) Twenty-five percent of either the adjusted premium for the
first policy year or the adjusted premium for a whole life policy of
the same uniform or equivalent uniform amount with uniform premiums for
the whole of life issued at the same age for the same amount of
insurance, whichever is less.
However, in applying the percentages specified in (c) and (d) of
this subsection, an adjusted premium may not exceed four percent of the
amount of insurance or level amount equivalent. The date of issue of
a policy for the purpose of this section shall be the date as of which
the rated age of the insured is determined.
(2) In the case of a policy providing an amount of insurance
varying with duration of the policy, the equivalent level amount for
the purpose of this section shall be deemed to be the level amount of
insurance provided by an otherwise similar policy, containing the same
endowment benefit or benefits, if any, issued at the same age and for
the same term, the amount of which does not vary with duration and the
benefits under which have the same present value at the inception of
the insurance as the benefits under the policy.
(3)(a) The adjusted premiums for any policy providing term
insurance benefits by rider or supplemental policy provision shall be
equal to (i) the adjusted premiums for an otherwise similar policy
issued at the same age without such term insurance benefits, increased,
during the period for which premiums for such term insurance benefits
are payable, by (ii) the adjusted premiums for such term insurance.
(b)(a)(i) and (ii) of this subsection are calculated separately and
as specified in subsections (1) and (2) of this section except that,
for the purposes of subsection (1)(b), (c), and (d) of this section,
the amount of insurance or equivalent uniform amount of insurance used
in the calculation of the adjusted premiums referred to in subsection
(1)(b) of this section shall be equal to the excess of the
corresponding amount determined for the entire policy over the amount
used in the calculation of the adjusted premiums in (a)(i) of this
subsection.
(c) Except as otherwise provided in sections 28 and 29 of this act,
all adjusted premiums and present values referred to in this chapter
for all policies of ordinary insurance must be calculated on the basis
of the commissioners 1941 standard ordinary mortality table. However,
for any category of ordinary insurance issued on female risks on or
after July 1, 1957, adjusted premiums and present values may be
calculated according to any age not more than three years younger than
the actual age of the insured and such calculations for all policies of
industrial insurance shall be made on the basis of the 1941 standard
industrial mortality table. All calculations shall be made on the
basis of the rate of interest, not exceeding three and one-half percent
per annum, specified in the policy for calculating cash surrender
values and paid-up nonforfeiture benefits. However, in calculating the
present value of any paid-up term insurance with accompanying pure
endowment, if any, offered as a nonforfeiture benefit, the rates of
mortality assumed may be not more than one hundred thirty percent of
the rates of mortality according to the applicable table. For
insurance issued on a substandard basis, the calculation of any
adjusted premiums and present values may be based on such other table
of mortality as may be specified by the company and approved by the
commissioner.
NEW SECTION. Sec. 28
After June 11, 1959, any company may file with the commissioner a
written notice of its election to comply with the provisions of this
section after a specified date before January 1, 1966. After the
filing of such notice, upon the specified date (which shall be the
operative date of this section for that company), this section shall
become operative with respect to the ordinary policies thereafter
issued by the company. If a company makes no election, the operative
date of this section for the company shall be January 1, 1966.
NEW SECTION. Sec. 29
After July 10, 1982, any company may file with the commissioner a
written notice of its election to comply with the provisions of this
section after a specified date before January 1, 1968. After the
filing of such notice, upon the specified date (which shall be the
operative date of this section for that company), this section shall
become operative with respect to the industrial policies thereafter
issued by the company. If a company makes no election, the operative
date of this section for the company shall be January 1, 1968.
NEW SECTION. Sec. 30
(a) The then present value of the future guaranteed benefits
provided for by the policy;
(b) One percent of either the amount of insurance, if the insurance
be uniform in amount, or the average amount of insurance at the
beginning of each of the first ten policy years; and
(c) One hundred twenty-five percent of the nonforfeiture net level
premium as defined. However, in applying the percentage specified in
this subsection (1)(c) no nonforfeiture net level premium shall be
deemed to exceed four percent of either the amount of insurance, if the
insurance be uniform in amount, or the average amount of insurance at
the beginning of each of the first ten policy years. The date of issue
of a policy for the purpose of this section shall be the date as of
which the rated age of the insured is determined.
(2) The nonforfeiture net level premium shall be equal to the
present value, at the date of issue of the policy, of the guaranteed
benefits provided for by the policy divided by the present value, at
the date of issue of the policy, of an annuity of one per annum payable
on the date of issue of the policy and on each anniversary of the
policy on which a premium falls due.
(3) In the case of policies which cause, on a basis guaranteed in
the policy, unscheduled changes in benefits or premiums; or which
provide an option for changes in benefits or premiums, other than a
change to a new policy; the adjusted premiums and present values shall
initially be calculated on the assumption that future benefits and
premiums do not change from those stipulated at the date of issue of
the policy. At the time of any change in the benefits or premiums, the
future adjusted premiums, nonforfeiture net level premiums, and present
values shall be recalculated on the assumption that future benefits and
premiums do not change from those stipulated by the policy immediately
after the change.
(4) Except as otherwise provided in subsection (7) of this section,
the recalculated future adjusted premiums for any policy shall be
uniform percentage of the respective future premiums specified in the
policy for each policy year, excluding amounts payable as extra
premiums to cover impairments and special hazards, and also excluding
any uniform annual contract charge or policy fee specified in the
policy in a statement of the method to be used in calculating the cash
surrender values and paid-up nonforfeiture benefits, that the present
value, at the time of change to the newly defined benefits or premiums,
of all such future adjusted premiums shall be equal to the excess of
(a) the sum of (i) the then present value of the then future guaranteed
benefits provided for by the policy, and (ii) the additional expense
allowance, if any, over (b) the then cash surrender value, if any, or
present value of any paid-up nonforfeiture benefit under this policy.
(5) The additional expense allowance, at the time of the change to
the newly defined benefits or premiums, shall be the sum of:
(a) One percent of the excess, if positive, of the average amount
of insurance at the beginning of each of the first ten policy years
subsequent to the change over the average amount of insurance prior to
the change at the beginning of each of the first ten policy years
subsequent to the time of the most recent previous change, or, if there
has been no previous change, the date of issue of the policy; and
(b) One hundred twenty-five percent of the increase, if positive,
in the nonforfeiture net level premium.
(6) The recalculated nonforfeiture net level premium shall be equal
to the result obtained by dividing (a) by (b) of this subsection (6)
where:
(a) Equals the sum of (i) the nonforfeiture net level premium
applicable prior to the change times the present value of an annuity of
one per annum payable on each anniversary of the policy on or
subsequent to the date of the change on which a premium would have
fallen due had the change not occurred, and (ii) the present value of
the increase in future guaranteed benefits provided for by the policy;
and
(b) Equals the present value of an annuity of one per annum payable
on each anniversary of the policy on or subsequent to the date of
change on which a premium falls due.
(7) Notwithstanding any other provisions of this section to the
contrary, in the case of a policy issued on a substandard basis which
provides reduced graded amounts of insurance so that, in each policy
year, the policy has the same tabular mortality cost as an otherwise
similar policy issued on the standard basis which provides higher
uniform amounts of insurance, adjusted premiums and present values for
the substandard policy may be calculated as if it were issued to
provide higher uniform amounts of insurance on the standard basis.
(8) All adjusted premiums and present values referred to in this
chapter shall for all policies of ordinary insurance be calculated on
the basis of the commissioners 1980 standard ordinary mortality table;
or 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; shall for all policies of
industrial insurance be calculated on the basis of the commissioners
1961 standard industrial mortality table; and shall for all policies
issued in a particular calendar year be calculated on the basis of a
rate of interest not exceeding the nonforfeiture interest rate as
defined in this section, for policies issued in that calendar year,
subject to the following provisions:
(a) At the option of the company, calculations for all policies
issued in a particular calendar year may be made on the basis of a rate
of interest not exceeding the nonforfeiture interest rate, as defined
in this section, for policies issued in the immediately preceding
calendar year.
(b) Under any paid-up nonforfeiture benefit, including any paid-up
dividend additions, any cash surrender value available, whether or not
required by section 24 of this act, shall be calculated on the basis of
the mortality table and rate of interest used in determining the amount
of such paid-up nonforfeiture benefit and paid-up dividend additions,
if any.
(c) A company may calculate the amount of any guaranteed paid-up
nonforfeiture benefit including any paid-up additions under the policy
on the basis of an interest rate no lower than that specified in the
policy for calculating cash surrender values.
(d) In calculating the present value of any paid-up term insurance
with accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than those
shown in the commissioners 1980 extended term insurance table for
policies of ordinary insurance and not more than the commissioners 1961
industrial extended term insurance table for policies of industrial
insurance.
(e) For insurance issued on a substandard basis, the calculation of
any adjusted premiums and present values may be based on appropriate
modifications of the aforementioned tables.
(f) For policies issued prior to the operative date of the
valuation manual, any commissioners standard ordinary mortality tables,
adopted after 1980 by the national association of insurance
commissioners, that are approved by rule adopted by the commissioner
for use in determining the minimum nonforfeiture standard may be
substituted for the commissioners 1980 standard ordinary mortality
table with or without ten-year select mortality factors or for the
commissioners 1980 extended term insurance table.
For policies issued on or after the operative date of the valuation
manual the valuation manual shall provide the commissioners standard
mortality table for use in determining the minimum nonforfeiture
standard that may be substituted for the commissioners 1980 standard
ordinary mortality table with or without ten-year select mortality
factors or for the commissioners 1980 extended term insurance table.
If the commissioner approves by rule any commissioners standard
ordinary mortality table adopted by the national association of
insurance commissioners for use in determining the minimum
nonforfeiture standard for policies issued on or after the operative
date of the valuation manual then that minimum nonforfeiture standard
supersedes the minimum nonforfeiture standard provided by the valuation
manual.
(g) For policies issued prior to the operative date of the
valuation manual, any commissioners standard industrial mortality
tables, adopted after 1980 by the national association of insurance
commissioners, that are approved by rule adopted by the commissioner
for use in determining the minimum nonforfeiture standard may be
substituted for the commissioners 1961 standard industrial mortality
table or the commissioners 1961 industrial extended term insurance
table.
For policies issued on or after the operative date of the valuation
manual, the valuation manual shall provide the commissioners standard
mortality table for use in determining the minimum nonforfeiture
standard that may be substituted for the commissioners 1961 standard
industrial mortality table or the commissioners 1961 industrial
extended term insurance table. If the commissioner approves by rule
any commissioners standard industrial mortality table adopted by the
national association of insurance commissioners for use in determining
the minimum nonforfeiture standard for policies issued on or after the
operative date of the valuation manual then that minimum nonforfeiture
standard supersedes the minimum nonforfeiture standard provided by the
valuation manual.
(9) The nonforfeiture interest rate is defined as follows:
(a) For policies issued prior to the operative date of the
valuation manual, the nonforfeiture interest rate per annum for any
policy issued in a particular calendar year shall be equal to one
hundred twenty-five percent of the calendar year statutory valuation
interest rate for such policy as defined in the standard valuation law,
rounded to the nearer one-quarter of one percent. However, the
nonforfeiture interest rate shall not be less than four percent; and
(b) For policies issued on and after the operative date of the
valuation manual, the nonforfeiture interest rate per annum for any
policy issued in a particular calendar year shall be provided by the
valuation manual.
(10) Notwithstanding any other provision in this chapter to the
contrary, any refiling of nonforfeiture values or their methods of
computation for any previously approved policy form which involves only
a change in the interest rate or mortality table used to compute
nonforfeiture values shall not require refiling of any other provisions
of that policy form.
(11) After July 10, 1982, any company may file with the
commissioner a written notice of its election to comply with the
provision of this section after a specified date before January 1,
1989, which shall be the operative date of this section for the
company. If a company makes no election, the operative date of this
section for the company shall be January 1, 1989.
NEW SECTION. Sec. 31
(1) The commissioner must be satisfied that the benefits provided
under the plan are substantially as favorable to policyholders and
insureds as the minimum benefits otherwise required by sections 24
through 30 of this act;
(2) The commissioner must be satisfied that the benefits and the
pattern of premiums of that plan are not such as to mislead prospective
policyholders or insureds;
(3) The cash surrender values and paid-up nonforfeiture benefits
provided by such plan must not be less than the minimum values and
benefits required for the plan computed by a method consistent with the
principles of this standard nonforfeiture law for life insurance, as
determined by rules adopted by the commissioner.
NEW SECTION. Sec. 32
(1) In the event of death or dismemberment by accident or
accidental means;
(2) In the event of total and permanent disability;
(3) As reversionary annuity or deferred reversionary annuity
benefits;
(4) As term insurance benefits provided by a rider or supplemental
policy provision to which, if issued as a separate policy, this chapter
would not apply;
(5) As term insurance in the life on a child or on the lives of
children provided in a policy on the life of a parent of the child, if
such term insurance expires before the child's age is twenty-six, is
uniform in amount after the child's age is one, and has not become
paid-up by reason of the death of a parent of the child; and
(6) As other policy benefits additional to life insurance and
endowment benefits, and premiums for all such additional benefits,
shall be disregarded in ascertaining cash surrender values and
nonforfeiture benefits required by this chapter, and no such additional
benefits shall be required to be included in any paid-up nonforfeiture
benefits.
NEW SECTION. Sec. 33
(a) The greater of zero and the basic cash value specified; and
(b) The present value of any existing paid-up additions less the
amount of any indebtedness to the company under the policy.
(2) The basic cash value shall be equal to the present value, on
such anniversary, of the future guaranteed benefits which would have
been provided for by the policy, excluding any existing paid-up
additions and before deduction of any indebtedness to the company, if
there had been no default, less the then present value of the
nonforfeiture factors, as defined in this chapter, corresponding to
premiums which would have fallen due on and after the anniversary.
However, the effects on the basic cash value of supplemental life
insurance or annuity benefits or of family coverage, as described in
section 25 or 27 of this act, whichever is applicable, shall be the
same as the effects specified in section 25 or 27 of this act,
whichever is applicable, on the cash surrender values defined in that
section.
(3) The nonforfeiture factor for each policy year shall be an
amount equal to a percentage of the adjusted premium for the policy
year, as defined in section 27 or 30 of this act, whichever is
applicable. Except as is required by this subsection, the percentage:
(a) Must be the same percentage for each policy year between the
second policy anniversary and the later of:
(i) The fifth policy anniversary; and
(ii) The first policy anniversary at which there is available under
the policy a cash surrender value in an amount, before including any
paid-up additions and before deducting any indebtedness, of at least
two-tenths of one percent of either the amount of insurance, if the
insurance be uniform in amount, or the average amount of insurance at
the beginning of each of the first ten policy years; and
(b) Must be such that no percentage after the later of the two
policy anniversaries specified in (a) of this subsection may apply to
fewer than five consecutive policy years. No basic cash value may be
less than the value which would be obtained if the adjusted premiums
for the policy, as defined in section 30 of this act, were substituted
for the nonforfeiture factors in the calculation of the basic cash
value.
(4) All adjusted premiums and present values referred to in this
section shall for a particular policy be calculated on the same
mortality and interest bases as are used in demonstrating the policy's
compliance with the other sections of this chapter. The cash surrender
values referred to in this section shall include any endowment benefits
provided for by the policy.
(5)(a) Any cash surrender value available other than in the event
of default in a premium payment due on a policy anniversary, and the
amount of any paid-up nonforfeiture benefit available under the policy
in the event of default in a premium payment shall be determined in
manners consistent with the manners specified for determining the
analogous minimum amounts in sections 24 through 26, 30, and 32 of this
act.
(b) The amounts of any cash surrender values and of any paid-up
nonforfeiture benefits granted in connection with additional benefits
such as those listed in section 32 (1) through (6) of this act shall
conform with the principles of this section.
NEW SECTION. Sec. 34
(1) Reinsurance;
(2) Group insurance;
(3) Pure endowment;
(4) Annuity or reversionary annuity contract;
(5) A term policy of uniform amount, which provides no guaranteed
nonforfeiture or endowment benefits, or renewal thereof, of twenty
years or less expiring before age seventy-one, for which uniform
premiums are payable during the entire term of the policy;
(6) A term policy of decreasing amount, which provides no
guaranteed nonforfeiture or endowment benefits, on which each adjusted
premium, calculated as specified in sections 27 through 30 of this act,
is less than the adjusted premium so calculated, on a term policy of
uniform amount, or renewal thereof, which provides no guaranteed
nonforfeiture or endowment benefits, issued at the same age and for the
same initial amount of insurance and for a term of twenty years or less
expiring before age seventy-one, for which uniform premiums are payable
during the entire term of the policy;
(7) A policy, which provides no guaranteed nonforfeiture or
endowment benefits, for which no cash surrender value, if any, or
present value of any paid-up nonforfeiture benefit, at the beginning of
any policy year, calculated as specified in sections 25 through 30 of
this act, exceeds two and one-half percent of the amount of insurance
at the beginning of the same policy year; and
(8) A policy which shall be delivered outside this state through an
insurance producer or other representative of the company issuing the
policy.
For purposes of determining the applicability of this chapter, the
age at expiration for a joint term life insurance policy shall be the
age at expiration of the oldest life.
NEW SECTION. Sec. 35
After the filing of such notice, then upon the specified date
(which shall be the operative date for the company), this chapter shall
become operative with respect to the policies thereafter issued by such
company. If a company makes no such election, the operative date of
this chapter for the company shall be January 1, 1948.
NEW SECTION. Sec. 36 Sections 1 through 19 of this act take
effect January 1, 2016.
NEW SECTION. Sec. 37 Section 19 of this act expires July 1,
2017.
NEW SECTION. Sec. 38 Section 20 of this act takes effect July 1,
2017.
NEW SECTION. Sec. 39 Sections 1 through 18 of this act are each
added to chapter 48.74 RCW.
NEW SECTION. Sec. 40 Sections 22 through 35 of this act are each
added to chapter 48.76 RCW.