WSR 99-01-142
PERMANENT RULES
INSURANCE COMMISSIONER'S OFFICE
[Insurance Commissioner Matter No. R 98-19--Filed December 22, 1998, 10:23 a.m.]
Date of Adoption: December 22, 1998.
Purpose: To revise the RBS formula and bring it into accord with the formula developed by the National Association of Insurance Commissioners.
Citation of Existing Rules Affected by this Order: Repealing WAC 284-36A-025; and amending WAC 284-36A-010 and 284-36A-020.
Statutory Authority for Adoption: RCW 48.02.060, 48.36A.100, 48.36A.290.
Adopted under notice filed as WSR 98-20-101 on October 7, 1998.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, amended 0, repealed 0; Federal Rules or Standards: New 0, amended 0, repealed 0; or Recently Enacted State Statutes: New 0, amended 0, repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, amended 0, repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, amended 2, repealed 1.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, amended 2, repealed 1.
Number of Sections Adopted Using Negotiated Rule Making: New 0, amended 0, repealed 0; Pilot Rule Making: New 0, amended 0, repealed 0; or Other Alternative Rule Making: New 0, amended 0, repealed 0.
Effective Date of Rule: Thirty-one days after filing.
December 22, 1998
James T. Odiorne
Deputy Commissioner
OTS-2511.2
AMENDATORY SECTION (Amending Matter R 98-03, filed 4/6/98, effective 5/7/98)
WAC 284-36A-010 Definitions. (1) "Adjusted RBS report" means an RBS report which has been adjusted by the commissioner in accordance with WAC 284-36A-020(4).
(2) "AVR" means asset valuation reserve.
(3) "Corrective order" means an order issued by the commissioner specifying corrective actions which the commissioner has determined are required.
(4) "Fraternal benefit society" is defined at RCW 48.36A.010.
(5) "NAIC" means the National Association of Insurance Commissioners.
(6) "Negative trend" means, with respect to a fraternal benefit society, negative trend over a period of time, as determined in accordance with the "trend test calculation" included in the RBS instructions.
(7) "RBC" means risk-based capital.
(8) "RBS" means risk-based surplus.
(9) "RBS instructions" means the ((RBS)) RBC report for life
insurance companies, including risk-based capital instructions
adopted, by the NAIC((, except where specifically amended in WAC
284-36A-020 and 284-36A-025)).
(10) "RBS level" means a fraternal benefit society's society action level RBS, regulatory action level RBS, authorized control level RBS, or mandatory control level RBS where:
(a) "Society action level RBS" means, with respect to a fraternal benefit society, the product of 2.0 and its authorized control level RBS;
(b) "Regulatory action level RBS" means the product of 1.5 and its authorized control level RBS;
(c) "Authorized control level RBS" means the number determined under the risk-based surplus formula in accordance with the RBS instructions;
(d) "Mandatory control level RBS" means the product of.70 and the authorized control level RBS.
(11) "RBS plan" means a comprehensive financial plan containing the elements specified in WAC 284-36A-040(2). If the commissioner rejects the RBS plan, and it is revised by the fraternal benefit society, with or without the commissioner's recommendation, the plan shall be called the "revised RBS plan."
(12) "RBS report" means the report required in WAC 284-36A-050 and 284-36A-020.
(13) "Total adjusted surplus" means the sum of:
(a) A fraternal benefit society's statutory surplus as determined in accordance with statutory accounting applicable to the annual financial statement required to be filed under RCW 48.36A.260; and
(b) Other items, if any, as the RBS instructions may provide.
[Statutory Authority: RCW 48.02.060, 48.36A.100 and 48.36A.290. 98-09-016 (Matter R 98-03), § 284-36A-010, filed 4/6/98, effective 5/7/98. Statutory Authority: RCW 48.02.060, 48.36A.100(7), 48.36A.290(4), 48.36A.100, 48.36A.282, 48.36A.284, 48.36A.286, 48.36A.290, 48.36A.310 and 1996 c 236. 96-22-064 (Matter No. R 96-5), § 284-36A-010, filed 11/4/96, effective 12/5/96.]
AMENDATORY SECTION (Amending Matter R 98-03, filed 4/6/98, effective 5/7/98)
WAC 284-36A-020 Report of RBS level--Formula for
determining level--Inaccurate reports adjusted by commissioner.
(1) On or prior to the annual filing date, which is hereby
established as ((April)) March 1, every fraternal benefit society
authorized to transact insurance business in this state, shall
prepare and submit to the commissioner a report of its RBS level
as of the end of the calendar year just ended, in a form and
containing all information required by the RBS instructions.
(2) The RBS of a fraternal benefit society shall be determined in accordance with the formula set forth in the RBS instructions. The formula shall take into account and may adjust for the covariance between:
(a) The risk with respect to the assets of the fraternal benefit society;
(b) The risk of adverse insurance experience with respect to the liabilities and obligations of the fraternal benefit society;
(c) The interest rate risk with respect to the business of the fraternal benefit society; and
(d) All other business risks and other relevant risks as are set forth in the RBS instructions, determined in each case by applying the factors in the manner set forth in the RBS instructions.
(3) An excess of surplus over the amount produced by the RBS requirements and the formulas, schedules, and instructions under this chapter is desirable in the insurance business of fraternal benefit societies. Accordingly, fraternal benefit societies should seek to maintain unimpaired surplus above the RBS level required. Additional unimpaired surplus is used and useful in the insurance business of fraternal benefit societies and helps to secure a fraternal benefit society against various risks inherent in, or affecting, the insurance business of fraternal benefit societies and not accounted for or only partially measured by the RBS requirements.
(4) If a fraternal benefit society files an RBS report that in the judgment of the commissioner is inaccurate, then the commissioner shall adjust the RBS report to correct the inaccuracy and shall notify the fraternal benefit society of the adjustment. The notice shall contain a statement of the reason for the adjustment. An RBS report as so adjusted is referred to as an "adjusted RBS report."
[Statutory Authority: RCW 48.02.060, 48.36A.100 and 48.36A.290. 98-09-016 (Matter R 98-03), § 284-36A-020, filed 4/6/98, effective 5/7/98. Statutory Authority: RCW 48.02.060, 48.36A.100(7), 48.36A.290(4), 48.36A.100, 48.36A.282, 48.36A.284, 48.36A.286, 48.36A.290, 48.36A.310 and 1996 c 236. 96-22-064 (Matter No. R 96-5), § 284-36A-020, filed 11/4/96, effective 12/5/96.]
REPEALER
The following section of the Washington Administrative Code is repealed:
WAC 284-36A-025 Risk-based surplus (RBS) financial standard formula.