AB420: Bill Text

AB420,21,19 1. Quantifies the benefits, guarantees, and 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 policies or contracts with significant tail risk, the principle-based valuation should reflect conditions appropriately adverse to quantify the tail risk.

AB420,21,24 2. Incorporates assumptions, risk analysis methods and financial models, and management techniques that are consistent with, but not necessarily identical with, those used within the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods.

AB420,21,25 3. Incorporates assumptions that are derived in one of the following ways:

AB420,22,1 a. The assumption is prescribed in the valuation manual.

AB420,22,6 b. For an assumption that is not prescribed in the valuation manual, the assumption is established using the company's available experience to the extent it is relevant and statistically credible. To the extent that company data is not available, relevant, or statistically credible, the assumption is established using other relevant, statistically credible experience.

AB420,22,9 4. Provides margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty, the larger the margin and resulting reserve.

AB420,22,12 (b) A company using a principle-based valuation for one or more policies or contracts subject to this section as specified in the valuation manual shall do all of the following:

AB420,22,14 1. Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.

AB420,22,21 2. 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. The internal controls shall be designed to ensure that all material risks inherent in the liabilities and associated assets subject to the valuation are included in the valuation and that valuations are made in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year.

AB420,22,23 3. Develop, and file with the commissioner upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.

AB420,22,25 (c) A principle-based valuation may include a prescribed formulaic reserve component.

AB420,43 Section 43. 623.06 (11) of the statutes is created to read:

AB420,23,5 623.06 (11) Beginning on the operative date of the valuation manual, a company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data for all policies and contracts in force as prescribed in the valuation manual.

AB420,44 Section 44. 623.06 (12) of the statutes is created to read:

AB420,23,7 623.06 (12) (a) In this subsection:

AB420,23,9 1. "Experience data" means any documents, materials, data, or other information submitted by a company under sub. (11).

AB420,23,14 2. "Experience materials" means any documents, materials, data, or other information, including all working papers and copies of working papers, created or produced in connection with experience data, in each case that include any potentially company-identifying or personally identifiable information, that is provided to or obtained by the commissioner, together with any experience data.

AB420,23,16 (am) For purposes of pars. (b) and (c), all of the following are confidential information:

AB420,23,20 1. A memorandum in support of an opinion submitted under sub. (1m) or (1r) and any other documents, materials, or other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with the memorandum.

AB420,24,4 2. All documents, materials, and other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in the course of an examination made under sub. (9) (f), except that if an examination report or other material prepared in connection with an examination made under ss. 601.43 and 601.44 is not held as private and confidential information under s. 601.465 (1m) (b), an examination report or other material prepared in connection with an examination made under sub. (9) (f) is not confidential information to the same extent as if the examination report or other material had been prepared under ss. 601.43 and 601.44.

AB420,24,11 3. Any reports, documents, materials, or other information developed by a company in support of, or in connection with, an annual certification by the company under sub. (10) (b) 2. evaluating the effectiveness of the company's internal controls with respect to a principle-based valuation and any other documents, materials, or other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with the reports, documents, materials, and other information.

AB420,24,15 4. Any principle-based valuation report developed under sub. (10) (b) 3. and any other documents, materials, or other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with the report.

AB420,24,19 5. Experience data, experience materials, and any other documents, materials, data, or other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with experience materials.

AB420,24,25 (b) 1. Information described as confidential under par. (am) is confidential and privileged; is not subject to receipt, inspection, or copying under s. 19.35 (1); is not subject to subpoena; and is not subject to discovery or admissible in evidence in any private civil action. 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.

AB420,25,3 2. Neither the commissioner nor any person who received confidential information while acting under the authority of the commissioner may testify in any private civil action concerning any confidential information.

AB420,25,11 3. a. In furtherance of the performance of the commissioner's regulatory duties, the commissioner may share confidential information with other state, federal, and international regulatory agencies; the National Association of Insurance Commissioners and its affiliates and subsidiaries; the Actuarial Board for Counseling and Discipline or its successor, in the case of confidential information under par. (am) 1. and 4. only, upon request stating that the confidential information is required for the purposes of professional disciplinary proceedings; and state, federal, and international law enforcement agencies.

AB420,25,15 b. Confidential information may be shared under subd. 3. a. only if 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.

AB420,25,24 c. The commissioner may receive documents, materials, or other information, including otherwise confidential and privileged documents, materials, data, or information from the National Association of Insurance Commissioners and its affiliates and subsidiaries, from regulatory or law enforcement agencies 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, 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 information.

AB420,26,2 d.   The commissioner may enter into agreements governing sharing and use of information consistent with this subsection.

AB420,26,7 e. No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure of such information or documents to the commissioner under this subsection or as a result of the commissioner sharing such information or documents as authorized in this subsection.

AB420,26,10 f. 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.

AB420,26,12 (c) Notwithstanding par. (b), any confidential information specified in par. (am) 1. and 4. is subject to all of the following:

AB420,26,17 1. The confidential information 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 sub. (1m) or (1r) or the principle-based valuation report developed under sub. (10) (b) 3. by reason of an action required by this section or rules promulgated under this section.

AB420,26,19 2. The confidential information may otherwise be released by the commissioner with the written consent of the company.

AB420,26,25 3. If any portion of a memorandum in support of an opinion submitted under sub. (1m) or (1r) or any portion of the principle-based valuation report developed under sub. (10) (b) 3. is cited by the company in its marketing, is publicly volunteered to or before a government agency other than a state insurance department, or is released by the company to the news media, all portions of such memorandum or report shall no longer be confidential.

AB420,45 Section 45. 623.06 (13) (b) of the statutes is created to read:

AB420,27,3 623.06 (13) (b) Subsections (1), (1f) (b), (1r), and (8m) to (12) shall become effective on the effective date of this paragraph .... [LRB inserts date].

AB420,46 Section 46. 628.07 of the statutes is amended to read:

AB420,27,12 628.07 Licensing of nonresidents. The commissioner may shall waive the any examination requirement of an examination for a nonresident applicant under s. 628.04 if the jurisdiction of the applicant's residence has imposed upon the applicant requirements substantially as rigorous as those of this state and has enforced them with comparable rigor home state or state of residence has issued the applicant a license for which the qualifications are equivalent to the qualifications for a license issued by this state and if that license is in good standing at the time of application.

AB420,47 Section 47. 628.10 (2) (a) of the statutes is amended to read:

AB420,27,25 628.10 (2) (a) For failure to comply with continuing education or annual training requirements. The license of any intermediary or individual navigator who fails to produce evidence of compliance with continuing education standards set by the commissioner or with annual training requirements is revoked, effective on the date on which the evidence of compliance is due. At least 60 days before that date, the commissioner shall send by 1st class mail to the intermediary's or navigator's address that is on file with the commissioner notice notify the intermediary or navigator of the date by which the evidence of compliance is due and that the intermediary's or navigator's license will be revoked if the evidence is not received by that date. An intermediary or navigator whose license is revoked under this paragraph may have his or her license reinstated, or may be relicensed, as provided in sub. (5).

AB420,48 Section 48. 628.10 (2) (am) of the statutes is amended to read:

AB420,28,10 628.10 (2) (am) Nonpayment of fees. The license of an intermediary or individual navigator who fails to pay a fee when due is revoked, effective on the date on which the fee is due. At least 60 days before that date, the commissioner shall send by 1st class mail to the intermediary's or navigator's address that is on file with the commissioner notice notify the intermediary or navigator of the date by which the fee is due and that the intermediary's or navigator's license will be revoked if timely payment is not made. An intermediary who is a natural person, or an individual navigator, whose license is revoked under this paragraph may have his or her license reinstated, or may be relicensed, as provided in sub. (5).

AB420,49 Section 49. 628.347 (1) (a) of the statutes is amended to read:

AB420,28,14 628.347 (1) (a) "Annuity" means a fixed or variable an annuity that is an insurance product that is individually solicited, whether the product is classified as an individual or group annuity.

AB420,50 Section 50. 628.347 (4) (c) of the statutes is amended to read:

AB420,28,18 628.347 (4) (c) This subsection applies to FINRA broker-dealer sales of variable annuities and fixed annuities if the suitability and supervision are similar to those applied to variable annuity sales.

AB420,51 Section 51. 628.347 (4m) (b) 3. c. of the statutes is amended to read:

AB420,28,21 628.347 (4m) (b) 3. c. How fixed, variable, and indexed product-specific annuity contract provisions features affect consumers.

AB420,52 Section 52. 628.81 of the statutes is repealed.

AB420,53 Section 53. 631.95 (3) (a) of the statutes is amended to read:

AB420,29,4 631.95 (3) (a) Disability insurance. In establishing premiums for an individual or group disability insurance policy or a certificate of group disability insurance, an insurer may inquire about a person's existing medical condition and, based on the opinion of a qualified actuary, as defined in s. 623.06 (1c) (1) (h), use information related to a person's existing medical condition, regardless of whether that condition is or may have been caused by abuse or domestic abuse.

AB420,54 Section 54. 632.43 (6m) (a) 3. of the statutes is renumbered 632.43 (6m) (a) 3. (intro.) and amended to read:

AB420,29,8 632.43 (6m) (a) 3. (intro.) "Nonforfeiture interest rate" means 125% either of the following:

AB420,29,11 a. For all policies other than those described in subd. 3. b., 125 percent of the applicable calendar year valuation interest rate under s. 623.06 rounded to the nearest 0.25% 0.25 percent, but in no case less than 4 percent.

AB420,55 Section 55. 632.43 (6m) (a) 3. b. of the statutes is created to read:

AB420,29,14 632.43 (6m) (a) 3. b. For policies issued on or after the operative date of the valuation manual, the rate per annum provided in the valuation manual.

AB420,56 Section 56. 632.43 (6m) (a) 4m. of the statutes is created to read:

AB420,29,17 632.43 (6m) (a) 4m. "Operative date of the valuation manual" has the meaning given in s. 623.06 (1) (f).

AB420,57 Section 57. 632.43 (6m) (e) 3. f. of the statutes is amended to read:

AB420,30,10 632.43 (6m) (e) 3. f. Any For policies issued before the operative date of the valuation manual, any 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 10-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 provides 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 10-year select mortality factors or for the commissioners 1980 extended term insurance table. If the commissioner approves, by rule, any 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.

AB420,58 Section 58. 632.43 (6m) (e) 3. g. of the statutes is amended to read:

AB420,31,2 632.43 (6m) (e) 3. g. Any For policies issued before the operative date of the valuation manual, any 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 provides 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 for the commissioners 1961 industrial extended term insurance table. If the commissioner approves, by rule, any 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.

AB420,59 Section 59. 632.62 (2) of the statutes is amended to read:

AB420,31,8 632.62 (2) Participation. Every participating policy shall by its terms give its holder full right to participate annually in the part of the surplus accumulations from the participating business of the insurer that are to be distributed make its holder eligible to share annually in the part of the surplus to be distributed as provided in sub. (4) (b).

AB420,60 Section 60. 632.62 (3) of the statutes is amended to read:

AB420,31,13 632.62 (3) Accounting. Every insurer issuing both participating and nonparticipating policies shall separately account for the 2 classes of business and no part of the amounts accumulated or credited surplus allocated to the participating class may be voluntarily transferred to the nonparticipating class.

AB420,61 Section 61. 632.62 (4) (a) of the statutes is amended to read:

AB420,31,17 632.62 (4) (a) Deferred dividends. No life insurance policy or certificate may be issued in which the accounting, apportionment and distribution of surplus dividends, if any, is deferred for a period longer than one year.

AB420,62 Section 62. 632.62 (4) (b) of the statutes is amended to read:

AB420,32,12 632.62 (4) (b) Payment. Every insurer doing a participating business shall annually ascertain the surplus over required reserves and other liabilities. After setting aside such contingency reserves amounts as may be lawful and considered necessary and be lawful, such reasonable nondistributable surplus as is needed to permit orderly growth, by the insurer's board of directors for providing for the growth of the company and for protecting the ability to meet ongoing and future claims and other obligations and needs under both normal and stressed environments, and after making provision for the payment of reasonable dividends upon capital stock as determined by the insurer's board of directors and such sums as are required by prior contracts to be held on account of deferred dividend policies, the remaining surplus shall be equitably apportioned and returned as a dividend to the participating policyholders or certificate holders entitled to share therein an insurer shall distribute as dividends the remaining surplus, if any, attributable to participating life insurance and annuity policies in such amounts, including zero, and in such allocations among the participating life insurance and annuity policies as its board of directors determines to be reasonably proportioned to its calculation of the life insurance and annuity policies' contribution to the distributable surplus. A dividend may be conditioned on the payment of the succeeding year's premium only on the first and second anniversaries of the policy.

AB420,63 Section 63. 632.89 (3c) (b) of the statutes is amended to read:

AB420,32,22 632.89 (3c) (b) A cost increase specified under par. (a) may not be determined until the employer's group health benefit plan or self-insured health plan has complied with the requirements under sub. (3) for at least the first 6 months of the plan year for which the increase is to be determined. The cost increase shall be determined, and certified, by a qualified actuary, as defined in s. 623.06 (1c) (1) (h). A copy of the actuary's determination, and all underlying documentation that the actuary relied on in making the determination, shall be filed with and, in accordance with rules promulgated by the commissioner, retained by the insurer issuing the group health benefit plan or by the self-insured health plan.

AB420,64 Section 64. 635.13 (title) of the statutes is repealed.

AB420,65 Section 65. 635.13 (1) of the statutes is renumbered 635.13.

AB420,66 Section 66. 635.13 (2) of the statutes is repealed.

AB420,67 Section 67. 645.675 of the statutes is created to read:

AB420,33,2 645.675 Qualified financial contracts. (1) In this section:

AB420,33,7 (a) "Actual direct compensatory damages" includes normal and reasonable costs of cover or other reasonable measures of damages used in the derivatives, securities, or other markets for the contract and agreement claims. "Actual direct compensatory damages" does not include punitive or exemplary damages, damages for lost profit or lost opportunity, or damages for pain and suffering.

AB420,33,10 (b) "Business day" means any day other than a Saturday, a Sunday, or a day on which the New York Stock Exchange, or the Federal Reserve Bank of New York is closed.

AB420,33,11 (c) "Commodity contract" means any of the following:

AB420,33,15 1. A contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a board of trade or contract market under the federal Commodity Exchange Act, 7 USC 1, et seq., or a board of trade outside the United States.

AB420,33,18 2. An agreement that is subject to regulation under the federal Commodity Exchange Act, 7 USC 23, and that is commonly known to the commodities trade as a margin account, margin contract, leverage account, or leverage contract.

AB420,33,21 3. An agreement or transaction that is subject to regulation under the federal Commodity Exchange Act, 7 USC 6c, and that is commonly known to the commodities trade as a commodity option.

AB420,33,22 4. Any combination of agreements or transactions specified in subds. 1. to 3.

AB420,33,24 5. Any option to enter into an agreement or transaction specified in subds. 1. to 3.

AB420,34,11 (d) "Contractual right" includes any right established in a rule or bylaw, or in a resolution, of the governing board of a derivatives clearing organization or board of trade as defined in the federal Commodity Exchange Act, 7 USC 1, et seq.; a multilateral clearing organization, as defined in the federal Deposit Insurance Corporation Improvement Act of 1991, 12 USC 4402; a national securities exchange, a national securities association, a securities clearing agency, or a control market designated under the federal Commodity Exchange Act, 7 USC 1, et seq.; or a derivatives transaction execution facility registered under the federal Commodity Exchange Act, 7 USC 1, et seq., or any right, regardless whether it is in writing, arising under statutory or common law, or under the uniform commercial code, or by reason of normal business practice.

AB420,34,13 (e) "Counterparty" means a person who enters into a qualified financial contract with an insurer.

AB420,34,16 (f) "Credit insurance" means insurance against loss arising from failure of debtors to meet financial obligations to creditors, except mortgage guaranty insurance.