4. Related statutes or rules:
The proposed rule relates to existing rules prescribing valuation of liabilities, non-forfeiture values, and actuarial reporting and analysis under ss. 601.42, 623.06 and 632.43, Stats., and ss. Ins 2.80 and ch. 50, Wis. Adm. Code. 5. The plain language analysis and summary of the proposed rule:
The proposed rule would require life insurers to use the 2012 IAR Table when determining the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after January 1, 2015. The proposed rule would modernize an outdated table that risks leaving insurers with an insufficient level of reserves. The 2012 IAR Table is comprised of a basic experience table with margins (2012 IAM Period Table) and a projection scale. The addition of a projection scale to the 2012 IAR Table allows the Table to remain up-to-date over a longer period of time because it allows the Table to adjust by considering the most accurate statistics during each valuation year.
6. Summary of and preliminary comparison with any existing or proposed federal regulation that is intended to address the activities to be regulated by the proposed rule:
The office is unaware of any proposed or existing federal regulation that is intended to address the activities to be regulated by this proposed rule.
7. Comparison of similar rules in adjacent states as found by OCI:
Illinois: 50 Ill. Adm. Code 935 was adopted on June 20, 2014 and becomes effective January 1, 2015. This rule closely resembles Wisconsin’s proposed rule by adopting the 2012 IAR Table in determining the minimum standard of valuation of annuity and pure endowment contracts.
Iowa: 191 IAC 43.1 to 43.7 closely resembles Wisconsin’s proposed rule and incorporates the 2012 IAR Table for determining the minimum standard of valuation for annuity and pure endowment contracts.
Minnesota: ch. 2752 closely resembles Wisconsin’s proposed rule and incorporates the 2012 IAR Table for determining the minimum standard of valuation for annuity and pure endowment contracts.
8. A summary of the factual data and analytical methodologies that OCI used in support of the proposed rule and how any related findings support the regulatory approach chosen for the proposed rule:
The existing requirements are contained primarily in ss. 623.06 (2a) (b) and (4m), Wis. Stat., s. Ins 2.30 (3), and Subch. V of Ch. 50, Wis. Adm. Code. These provisions establish that mortality tables are to be used by insurers to calculate minimum reserves and establish requirements related to testing and reporting of actuarial information. Current rules require insurers to use the Annuity 2000 Mortality Table as adopted by the NAIC. The proposed rule will require insurers to use the 2012 IAR Table as adopted by the NAIC in December 2012 for calculating the minimum reserves on contracts written on or after January 1, 2015. The proposed rule is being considered as it has been recommended by the NAIC and is in the process of being adopted by other states. Further, not adopting the 2012 IAR Table may place domestic insurers at a competitive disadvantage compared to insurers from states where the table has been adopted. 9. Any analysis and supporting documentation that OCI used in support of OCI’s determination of the rule’s effect on small businesses under s. 227.114: The proposed rule would have an impact on life insurers, however based on revenue and ownership structure very few, if any, life insurers meet the definition of small businesses. In addition, many of the potential implementation and compliance costs are mitigated by other factors contained in the proposed rule. Therefore, any economic impact on small businesses posed by the proposed rule would not be significant.
10. See the attached Private Sector Fiscal Analysis.
This rule change will have no significant effect on the private sector regulated by OCI.
11. A description of the Effect on Small Business:
This rule will have little or no effect on small business since very few, if any, life insurers meet the definition of a small business. In addition, many of the implementation and compliance costs are mitigated by other factors contained in the proposed rule. First, insurers already have the systems in place perform the calculations, they primarily just need to substitute in new numbers and equations. Moreover, the 2012 IAR Table will only apply to contracts issued on or after January 1, 2015, which provides insurers with the opportunity to minimize any economic impact by adjusting their products. Finally, with a majority of states on the verge of adopting the 2012 IAR Table, insurers will be able to avoid excess federal taxes on reserves held in excess of the current federally recognized mortality table.
12. Agency contact person:
A copy of the full text of the proposed rule changes, analysis and fiscal estimate may be obtained from the Web site at: http://oci.wi.gov/ocirules.htm or by contacting Inger Williams, OCI Services Section, at:
Phone: (608) 264-8110
Address: 125 South Webster St – 2nd Floor, Madison WI 53703-3474
Mail: PO Box 7873, Madison, WI 53707-7873
13. Place where comments are to be submitted and deadline for submission:
The deadline for submitting comments is 4:00 p.m. on the 14th day after the date for the hearing stated in the Notice of Hearing.
Mailing address:
Richard B. Wicka
Legal Unit - OCI Rule Comment for Rule Ins 08614
Office of the Commissioner of Insurance
PO Box 7873
Madison WI 53707-7873
Street address:
Richard B. Wicka
Legal Unit - OCI Rule Comment for Rule Ins 08614
Office of the Commissioner of Insurance
125 South Webster St – 2nd Floor
Madison WI 53703-3474
Email address:
Richard B. Wicka
The proposed rule changes are:
SECTION 1.
Ins 2.30 (2) (f) to (j) are created to read:Ins 2.30 (2) (f) “Period table” means a table of mortality rates applicable to a given calendar year (the Period).
(g) “Generational mortality table” means a mortality table containing a set of mortality rates that decrease for a given age from one year to the next based on a combination of a Period table and a projection scale containing rates of mortality improvement.
(h) “2012 IAR Table” means that generational mortality table developed by the society of actuaries committee on life insurance research and containing rates, qx2012+n, derived from a combination of the 2012 IAM Period Table and Projection Scale G2, using the methodology stated in Section 3m.
(i) “2012 Individual Annuity Mortality Period Life Table” or “2012 IAM Period Table” means the Period Table containing loaded mortality rates for calendar year 2012. This table contains rates, qx2012, developed by the society of actuaries committee on life insurance research, and published in the 2012 proceedings of the NAIC, Fall Volume I, pages 149-150.
(j) “Projection Scale G2” or “Scale G2” is a table of annual rates, G2x, of mortality improvement by age for projecting future mortality rates beyond calendar year 2012. This table was developed by the society of actuaries committee on life insurance research, and published in the 2012 proceedings of the NAIC, Fall Volume I, pages 151-152.
SECTION 2.
Ins 2.30 (3) (c) is amended to read: Ins 2.30 (3) (c) Except as provided in par. (d) the annuity 2000 mortality table shall be used to determine the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1999. but before January 1, 2015.
