SB287,36 8Section 36. 623.06 (1m) (intro.) of the statutes is created to read:
SB287,13,109 623.06 (1m) (intro.) Before the operative date of the valuation manual, all of
10the following apply:
SB287,37 11Section 37. 623.06 (1r) of the statutes is created to read:
SB287,13,1312 623.06 (1r) Beginning on the operative date of the valuation manual, all of the
13following apply:
SB287,13,2214 (a) Every insurance company that has outstanding life insurance contracts,
15accident and health insurance contracts, or deposit-type contracts in this state and
16that is subject to regulation by the commissioner shall submit to the commissioner,
17as prescribed in par. (c), the opinion of the appointed actuary as to whether the
18reserves and related actuarial items held in support of those outstanding contracts
19are computed appropriately, are based on assumptions that satisfy contractual
20provisions, are consistent with prior reported amounts, and comply with applicable
21laws of this state. The valuation manual shall prescribe the specifics of this opinion,
22including any items that are necessary to its scope.
SB287,14,1023 (b) Every insurance company that has outstanding life insurance contracts,
24accident and health insurance contracts, or deposit-type contracts in this state and
25that is subject to regulation by the commissioner, except as exempted in the

1valuation manual, shall also annually include in the opinion required under par. (a)
2an opinion of the same appointed actuary as to whether the reserves and related
3actuarial items held in support of the policies and contracts specified in the valuation
4manual, when considered in light of the assets held by the company with respect to
5the reserves and related actuarial items, including the investment earnings on the
6assets and the considerations anticipated to be received and retained under the
7policies and contracts, make adequate provision for the company's obligations under
8the policies and contracts, including the benefits under and expenses associated with
9the policies and contracts. The opinion required under this paragraph shall be
10governed by the following:
SB287,14,1311 1. A memorandum, in form and substance as specified in the valuation manual
12and acceptable to the commissioner, shall be prepared to support each actuarial
13opinion.
SB287,14,2114 2. If the insurance company fails to provide a supporting memorandum at the
15request of the commissioner within a period specified in the valuation manual, or the
16commissioner determines that the supporting memorandum provided by the
17insurance company fails to meet the standards prescribed by the valuation manual
18or is otherwise unacceptable to the commissioner, the commissioner may engage a
19qualified actuary at the expense of the company to review the opinion and the basis
20for the opinion and prepare the supporting memorandum required by the
21commissioner.
SB287,14,2322 (c) All opinions required under this subsection shall be governed by the
23following:
SB287,14,2524 1. The opinion shall be in form and substance as specified in the valuation
25manual and acceptable to the commissioner.
SB287,15,3
12. The opinion shall be submitted with the annual statement reflecting the
2valuation of such reserve liabilities for each year ending after the operative date of
3the valuation manual.
SB287,15,54 3. The opinion shall apply to all policies and contracts described in pars. (a) and
5(b), plus other actuarial liabilities as may be specified in the valuation manual.
SB287,15,86 4. The opinion shall be based on standards adopted from time to time by the
7actuarial standards board or its successor and on any additional standards
8prescribed in the valuation manual.
SB287,15,139 5. With respect to an opinion required to be submitted by a foreign or alien
10company, the commissioner may accept the opinion filed by that company with the
11insurance supervisory official of another state if the commissioner determines that
12the opinion reasonably meets the requirements applicable to a company domiciled
13in this state.
SB287,15,1714 6. Except in cases of fraud or willful misconduct, the appointed actuary shall
15not be liable for damages to any person, other than the insurance company and the
16commissioner, for any act, error, omission, decision, or conduct with respect to the
17appointed actuary's opinion.
SB287,38 18Section 38. 623.06 (2) (intro.) of the statutes is amended to read:
SB287,16,519 623.06 (2) (intro.) Except as provided in subs. (2a) and (2m), the minimum
20standard for the valuation of all such policies and contracts specified by the
21commissioner under sub. (1m) (a) 1.
issued prior to the effective date of this section
22[see sub. (8) (13) and s. 632.43 (9)] shall be that provided by the laws in effect
23immediately prior to such date. Except as provided in subs. (2a) and (2m), the
24minimum standard for the valuation of all such policies and contracts issued on or
25after the effective date of this section shall be the commissioners reserve valuation

1methods defined in subs. (3) to (4m) and (7), with 3.5 percent interest, or in the case
2of policies and contracts, other than annuity and pure endowment contracts, issued
3on or after June 19, 1974, and prior to November 8, 1977, 4 percent interest, and for
4policies issued on or after November 8, 1977, 4.5 percent interest and the following
5tables:
SB287,39 6Section 39. 623.06 (8) of the statutes is renumbered 623.06 (13) (a) and
7amended to read:
SB287,16,98 623.06 (13) (a) This Except for subs. (1), (1f) (b), (1r), and (8m) to (12), this
9section shall become effective on the same date as does s. 632.43.
SB287,16,11 10(c) The provisions of this section shall supersede all provisions of law
11inconsistent or in conflict therewith.
SB287,40 12Section 40. 623.06 (8m) of the statutes is created to read:
SB287,16,1913 623.06 (8m) For accident and health insurance contracts issued on or after the
14effective date of this subsection .... [LRB inserts date], but before the operative date
15of the valuation manual, the minimum standard of valuation is the standard adopted
16by the commissioner by rule. For accident and health insurance contracts issued on
17or after the operative date of the valuation manual, the standard prescribed in the
18valuation manual shall be the minimum standard of valuation required under sub.
19(1f) (b).
SB287,41 20Section 41. 623.06 (9) of the statutes is created to read:
SB287,16,2421 623.06 (9) (a) For policies and contracts issued on or after the operative date
22of the valuation manual, the standard prescribed in the valuation manual is the
23minimum standard of valuation required under sub. (1f) (b), except as provided in
24pars. (e) and (g).
SB287,17,2
1(b) The operative date of the valuation manual is January 1 of the first calendar
2year beginning after the first July 1 as of which all of the following have occurred:
SB287,17,53 1. The valuation manual has been adopted by the National Association of
4Insurance Commissioners by an affirmative vote of at least 42 members or
5three-fourths of the members voting, whichever is greater.
SB287,17,106 2. The standard valuation law, as amended by the National Association of
7Insurance Commissioners in 2009, or legislation including substantially similar
8terms and provisions, has been enacted by states representing more than 75 percent
9of the direct premiums written as reported in all of the following annual statements
10submitted for 2008:
SB287,17,1111 a. Life, accident, and health annual statements.
SB287,17,1212 b. Health annual statements.
SB287,17,1313 c. Fraternal annual statements.
SB287,17,1714 3. The standard valuation law, as amended by the National Association of
15Insurance Commissioners in 2009, or legislation including substantially similar
16terms and provisions, has been enacted by at least 42 of the following 55
17jurisdictions:
SB287,17,1818 a. The 50 states of the United States.
SB287,17,1919 b. American Samoa.
SB287,17,2020 c. The American Virgin Islands.
SB287,17,2121 d. The District of Columbia.
SB287,17,2222 e. Guam.
SB287,17,2323 f. Puerto Rico.
SB287,18,224 (c) Unless a change in the valuation manual specifies a later effective date,
25changes to the valuation manual shall be effective on the first January 1 after the

1date when such changes have been adopted by the National Association of Insurance
2Commissioners by an affirmative vote representing all of the following:
SB287,18,53 1. At least three-fourths of the members of the National Association of
4Insurance Commissioners voting, but not less than a majority of the total
5membership.
SB287,18,96 2. Members of the National Association of Insurance Commissioners
7representing the jurisdictions specified in par. (b) 3. with more than 75 percent of the
8direct premiums written as reported in all of the following annual statements most
9recently available before the vote under subd. 1.:
SB287,18,1010 a. Life, accident, and health annual statements.
SB287,18,1111 b. Health annual statements.
SB287,18,1212 c. Fraternal annual statements.
SB287,18,1313 (d) The valuation manual must specify all of the following:
SB287,18,1614 1. Minimum valuation standards for and definitions of the policies and
15contracts subject to sub. (1f) (b). The minimum valuation standards shall be all of
16the following:
SB287,18,1817 a. The commissioners reserve valuation method for life insurance contracts,
18other than annuity contracts, subject to sub. (1f) (b).
SB287,18,2019 b. The commissioners annuity reserve valuation method for annuity contracts
20subject to sub. (1f) (b).
SB287,18,2121 c. Minimum reserves for all other policies and contracts subject to sub. (1f) (b).
SB287,18,2422 2. Which policies or contracts, or types of policies or contracts, are subject to the
23requirements of a principle-based valuation in sub. (10) (a) and the minimum
24valuation standards consistent with those requirements.
SB287,19,2
13. For policies and contracts subject to a principle-based valuation under sub.
2(10), all of the following:
SB287,19,53 a. Requirements for the format of reports to the commissioner under sub. (10)
4(b) 3., which reports shall include information necessary to determine if the
5valuation is appropriate and in compliance with this section.
SB287,19,76 b. Requirements regarding the treatment of risks over which the insurance
7company does not have significant control or influence.
SB287,19,98 c. Procedures for corporate governance and oversight of the actuarial function
9and a process for appropriate waiver or modification of such procedures.
SB287,19,1210 4. The minimum valuation standard for policies not subject to a
11principle-based valuation under sub. (10), which minimum valuation standard shall
12be the greater of the following:
SB287,19,1413 a. Reserves that are consistent with the minimum standard of valuation before
14the operative date of the valuation manual.
SB287,19,1915 b. Reserves that quantify the benefits, guarantees, and funding associated with
16the contracts and their risks at a level of conservatism that reflects conditions that
17include unfavorable events that have a reasonable probability of occurring. This
18does not preclude, for policies with significant tail risk, reflecting in the reserve
19conditions appropriately adverse to quantify that tail risk.
SB287,19,2320 5. Other requirements, including those relating to reserve methods, models for
21measuring risk, generation of economic scenarios, assumptions, margins, use of
22insurance company experience, risk measurement, disclosure, certifications,
23reports, actuarial opinions and memoranda, transition rules, and internal controls.
SB287,20,3
16. The data and form of the data required under sub. (11) and to whom the data
2must be submitted. The valuation manual may specify other related requirements,
3including data analyses and reporting of analyses.
SB287,20,84 (e) In the absence of a specific valuation requirement, or if a specific valuation
5requirement in the valuation manual is not, in the opinion of the commissioner, in
6compliance with this section, the insurance company shall, with respect to such
7requirements, comply with minimum valuation standards prescribed by the
8commissioner by rule.
SB287,20,169 (f) The commissioner may engage a qualified actuary, at the expense of the
10insurance company, to perform an actuarial examination of the company and opine
11on the appropriateness of any reserve assumption or method used by the company,
12or to review and opine on a company's compliance with any requirement in this
13section. The commissioner may rely on the opinion, regarding provisions in this
14section, of a qualified actuary engaged by the commissioner of another state or
15district or territory of the United States. As used in this paragraph, the term
16"engage" includes both "employ" and "contract with."
SB287,20,2217 (g) The commissioner may require an insurance company to make any change
18to an assumption or method that, in the opinion of the commissioner, is necessary to
19comply with the requirements of the valuation manual or this section. An insurance
20company shall adjust the reserves as required by the commissioner. The
21commissioner may take any disciplinary action permitted under ss. 601.41 (4) and
22601.64.
SB287,20,2523 (h) 1. The commissioner may exempt specific product forms or product lines of
24a domestic company that is licensed and doing business only in Wisconsin from the
25requirements of this subsection if all of the following are satisfied:
SB287,21,2
1a. The commissioner has issued an exemption in writing to the company and
2has not subsequently revoked the exemption in writing.
SB287,21,53 b. The company computes reserves using assumptions and methods used
4before the operative date of the valuation manual in addition to any requirements
5established by the commissioner and promulgated by rule.
SB287,21,86 2. For policy forms and product lines for which a company is granted an
7exemption under subd. 1., subs. (1f) (a), (1m), and (2) to (7) apply, and any reference
8to the valuation manual does not apply.
SB287,42 9Section 42. 623.06 (10) of the statutes is created to read:
SB287,21,1310 623.06 (10) (a) For policies and contracts issued on or after the operative date
11of the valuation manual, an insurer must establish reserves for policies and
12contracts as specified in the valuation manual using a principle-based valuation
13that does all of the following:
SB287,21,1914 1. Quantifies the benefits, guarantees, and funding associated with the
15contracts and their risks at a level of conservatism that reflects conditions that
16include unfavorable events that have a reasonable probability of occurring during
17the lifetime of the contracts. For policies or contracts with significant tail risk, the
18principle-based valuation should reflect conditions appropriately adverse to
19quantify the tail risk.
SB287,21,2420 2. Incorporates assumptions, risk analysis methods and financial models, and
21management techniques that are consistent with, but not necessarily identical with,
22those used within the company's overall risk assessment process, while recognizing
23potential differences in financial reporting structures and any prescribed
24assumptions or methods.
SB287,21,2525 3. Incorporates assumptions that are derived in one of the following ways:
SB287,22,1
1a. The assumption is prescribed in the valuation manual.
SB287,22,62 b. For an assumption that is not prescribed in the valuation manual, the
3assumption is established using the company's available experience to the extent it
4is relevant and statistically credible. To the extent that company data is not
5available, relevant, or statistically credible, the assumption is established using
6other relevant, statistically credible experience.
SB287,22,97 4. Provides margins for uncertainty, including adverse deviation and
8estimation error, such that the greater the uncertainty, the larger the margin and
9resulting reserve.
SB287,22,1210 (b) A company using a principle-based valuation for one or more policies or
11contracts subject to this section as specified in the valuation manual shall do all of
12the following:
SB287,22,1413 1. Establish procedures for corporate governance and oversight of the actuarial
14valuation function consistent with those described in the valuation manual.
SB287,22,2115 2. Provide to the commissioner and the board of directors an annual
16certification of the effectiveness of the internal controls with respect to the
17principle-based valuation. The internal controls shall be designed to ensure that all
18material risks inherent in the liabilities and associated assets subject to the
19valuation are included in the valuation and that valuations are made in accordance
20with the valuation manual. The certification shall be based on the controls in place
21as of the end of the preceding calendar year.
SB287,22,2322 3. Develop, and file with the commissioner upon request, a principle-based
23valuation report that complies with standards prescribed in the valuation manual.
SB287,22,2524 (c) A principle-based valuation may include a prescribed formulaic reserve
25component.
SB287,43
1Section 43. 623.06 (11) of the statutes is created to read:
SB287,23,52 623.06 (11) Beginning on the operative date of the valuation manual, a
3company shall submit mortality, morbidity, policyholder behavior, or expense
4experience and other data for all policies and contracts in force as prescribed in the
5valuation manual.
SB287,44 6Section 44. 623.06 (12) of the statutes is created to read:
SB287,23,77 623.06 (12) (a) In this subsection:
SB287,23,98 1. "Experience data" means any documents, materials, data, or other
9information submitted by a company under sub. (11).
SB287,23,1410 2. "Experience materials" means any documents, materials, data, or other
11information, including all working papers and copies of working papers, created or
12produced in connection with experience data, in each case that include any
13potentially company-identifying or personally identifiable information, that is
14provided to or obtained by the commissioner, together with any experience data.
SB287,23,1615 (am) For purposes of pars. (b) and (c), all of the following are confidential
16information:
SB287,23,2017 1. A memorandum in support of an opinion submitted under sub. (1m) or (1r)
18and any other documents, materials, or other information, including all working
19papers and copies of working papers, created, produced, or obtained by or disclosed
20to the commissioner or any other person in connection with the memorandum.
SB287,24,421 2. All documents, materials, and other information, including all working
22papers and copies of working papers, created, produced, or obtained by or disclosed
23to the commissioner or any other person in the course of an examination made under
24sub. (9) (f), except that if an examination report or other material prepared in
25connection with an examination made under ss. 601.43 and 601.44 is not held as

1private and confidential information under s. 601.465 (1m) (b), an examination
2report or other material prepared in connection with an examination made under
3sub. (9) (f) is not confidential information to the same extent as if the examination
4report or other material had been prepared under ss. 601.43 and 601.44.
SB287,24,115 3. Any reports, documents, materials, or other information developed by a
6company in support of, or in connection with, an annual certification by the company
7under sub. (10) (b) 2. evaluating the effectiveness of the company's internal controls
8with respect to a principle-based valuation and any other documents, materials, or
9other information, including all working papers and copies of working papers,
10created, produced, or obtained by or disclosed to the commissioner or any other
11person in connection with the reports, documents, materials, and other information.
SB287,24,1512 4. Any principle-based valuation report developed under sub. (10) (b) 3. and
13any other documents, materials, or other information, including all working papers
14and copies of working papers, created, produced, or obtained by or disclosed to the
15commissioner or any other person in connection with the report.
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