SB287: Bill Text

SB287,13,22 (a) Every insurance company that has outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and that is subject to regulation by the commissioner shall submit to the commissioner, as prescribed in par. (c), the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of those outstanding 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 shall prescribe the specifics of this opinion, including any items that are necessary to its scope.

SB287,14,10 (b) Every insurance company that has outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and that is subject to regulation by the commissioner, except as exempted in the valuation manual, shall also annually include in the opinion required under par. (a) 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 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 the benefits under and expenses associated with the policies and contracts. The opinion required under this paragraph shall be governed by the following:

SB287,14,13 1. A memorandum, in form and substance as specified in the valuation manual and acceptable to the commissioner, shall be prepared to support each actuarial opinion.

SB287,14,21 2. 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.

SB287,14,23 (c) All opinions required under this subsection shall be governed by the following:

SB287,14,25 1. The opinion shall be in form and substance as specified in the valuation manual and acceptable to the commissioner.

SB287,15,3 2. The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending after the operative date of the valuation manual.

SB287,15,5 3. The opinion shall apply to all policies and contracts described in pars. (a) and (b), plus other actuarial liabilities as may be specified in the valuation manual.

SB287,15,8 4. The opinion shall be based on standards adopted from time to time by the actuarial standards board or its successor and on any additional standards prescribed in the valuation manual.

SB287,15,13 5. With respect to 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.

SB287,15,17 6. 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.

SB287,38 Section 38. 623.06 (2) (intro.) of the statutes is amended to read:

SB287,16,5 623.06 (2) (intro.) Except as provided in subs. (2a) and (2m), the minimum standard for the valuation of all such policies and contracts specified by the commissioner under sub. (1m) (a) 1. issued prior to the effective date of this section [see sub. (8) (13) and s. 632.43 (9)] shall be that provided by the laws in effect immediately prior to such date. Except as provided in subs. (2a) and (2m), the minimum standard for the valuation of all such policies and contracts issued on or after the effective date of this section shall be the commissioners reserve valuation methods defined in subs. (3) to (4m) and (7), with 3.5 percent interest, or in the case of policies and contracts, other than annuity and pure endowment contracts, issued on or after June 19, 1974, and prior to November 8, 1977, 4 percent interest, and for policies issued on or after November 8, 1977, 4.5 percent interest and the following tables:

SB287,39 Section 39. 623.06 (8) of the statutes is renumbered 623.06 (13) (a) and amended to read:

SB287,16,9 623.06 (13) (a) This Except for subs. (1), (1f) (b), (1r), and (8m) to (12), this section shall become effective on the same date as does s. 632.43.

SB287,16,11 (c) The provisions of this section shall supersede all provisions of law inconsistent or in conflict therewith.

SB287,40 Section 40. 623.06 (8m) of the statutes is created to read:

SB287,16,19 623.06 (8m) For accident and health insurance contracts issued on or after the effective date of this subsection .... [LRB inserts date], but before the operative date of the valuation manual, the minimum standard of valuation is the standard adopted by the commissioner by rule. For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual shall be the minimum standard of valuation required under sub. (1f) (b).

SB287,41 Section 41. 623.06 (9) of the statutes is created to read:

SB287,16,24 623.06 (9) (a) For policies and contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under sub. (1f) (b), except as provided in pars. (e) and (g).

SB287,17,2 (b) The operative date of the valuation manual is January 1 of the first calendar year beginning after the first July 1 as of which all of the following have occurred:

SB287,17,5 1. The valuation manual has been adopted by the National Association of Insurance Commissioners by an affirmative vote of at least 42 members or three-fourths of the members voting, whichever is greater.

SB287,17,10 2. The standard valuation law, as amended by the National Association of Insurance Commissioners in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing more than 75 percent of the direct premiums written as reported in all of the following annual statements submitted for 2008:

SB287,17,11 a. Life, accident, and health annual statements.

SB287,17,12 b. Health annual statements.

SB287,17,13 c. Fraternal annual statements.

SB287,17,17 3. The standard valuation law, as amended by the National Association of Insurance Commissioners in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least 42 of the following 55 jurisdictions:

SB287,17,18 a. The 50 states of the United States.

SB287,17,19 b. American Samoa.

SB287,17,20 c. The American Virgin Islands.

SB287,17,21 d. The District of Columbia.

SB287,17,22 e. Guam.

SB287,17,23 f. Puerto Rico.

SB287,18,2 (c) Unless a change in the valuation manual specifies a later effective date, changes to the valuation manual shall be effective on the first January 1 after the date when such changes have been adopted by the National Association of Insurance Commissioners by an affirmative vote representing all of the following:

SB287,18,5 1. At least three-fourths of the members of the National Association of Insurance Commissioners voting, but not less than a majority of the total membership.

SB287,18,9 2. Members of the National Association of Insurance Commissioners representing the jurisdictions specified in par. (b) 3. with more than 75 percent of the direct premiums written as reported in all of the following annual statements most recently available before the vote under subd. 1.:

SB287,18,10 a. Life, accident, and health annual statements.

SB287,18,11 b. Health annual statements.

SB287,18,12 c. Fraternal annual statements.

SB287,18,13 (d) The valuation manual must specify all of the following:

SB287,18,16 1. Minimum valuation standards for and definitions of the policies and contracts subject to sub. (1f) (b). The minimum valuation standards shall be all of the following:

SB287,18,18 a. The commissioners reserve valuation method for life insurance contracts, other than annuity contracts, subject to sub. (1f) (b).

SB287,18,20 b. The commissioners annuity reserve valuation method for annuity contracts subject to sub. (1f) (b).

SB287,18,21 c. Minimum reserves for all other policies and contracts subject to sub. (1f) (b).

SB287,18,24 2. Which policies or contracts, or types of policies or contracts, are subject to the requirements of a principle-based valuation in sub. (10) (a) and the minimum valuation standards consistent with those requirements.

SB287,19,2 3. For policies and contracts subject to a principle-based valuation under sub. (10), all of the following:

SB287,19,5 a. Requirements for the format of reports to the commissioner under sub. (10) (b) 3., which reports shall include information necessary to determine if the valuation is appropriate and in compliance with this section.

SB287,19,7 b. Requirements regarding the treatment of risks over which the insurance company does not have significant control or influence.

SB287,19,9 c. Procedures for corporate governance and oversight of the actuarial function and a process for appropriate waiver or modification of such procedures.

SB287,19,12 4. The minimum valuation standard for policies not subject to a principle-based valuation under sub. (10), which minimum valuation standard shall be the greater of the following:

SB287,19,14 a. Reserves that are consistent with the minimum standard of valuation before the operative date of the valuation manual.

SB287,19,19 b. Reserves that quantify 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. This does not preclude, for policies with significant tail risk, reflecting in the reserve conditions appropriately adverse to quantify that tail risk.

SB287,19,23 5. Other requirements, including those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of insurance company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memoranda, transition rules, and internal controls.

SB287,20,3 6. The data and form of the data required under sub. (11) and to whom the data must be submitted. The valuation manual may specify other related requirements, including data analyses and reporting of analyses.

SB287,20,8 (e) 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 section, the insurance company shall, with respect to such requirements, comply with minimum valuation standards prescribed by the commissioner by rule.

SB287,20,16 (f) The commissioner may engage a qualified actuary, at the expense of the insurance 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 in this section. The commissioner may rely on the opinion, regarding provisions in this section, of a qualified actuary engaged by the commissioner of another state or district or territory of the United States. As used in this paragraph, the term "engage" includes both "employ" and "contract with."

SB287,20,22 (g) The commissioner may require an insurance company to make any change to an assumption or method that, in the opinion of the commissioner, is necessary to comply with the requirements of the valuation manual or this section. An insurance company shall adjust the reserves as required by the commissioner. The commissioner may take any disciplinary action permitted under ss. 601.41 (4) and 601.64.

SB287,20,25 (h) 1. The commissioner may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in Wisconsin from the requirements of this subsection if all of the following are satisfied:

SB287,21,2 a. The commissioner has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing.

SB287,21,5 b. The company computes reserves using assumptions and methods used before the operative date of the valuation manual in addition to any requirements established by the commissioner and promulgated by rule.

SB287,21,8 2. For policy forms and product lines for which a company is granted an exemption under subd. 1., subs. (1f) (a), (1m), and (2) to (7) apply, and any reference to the valuation manual does not apply.

SB287,42 Section 42. 623.06 (10) of the statutes is created to read:

SB287,21,13 623.06 (10) (a) For policies and contracts issued on or after the operative date of the valuation manual, an insurer must establish reserves for policies and contracts as specified in the valuation manual using a principle-based valuation that does all of the following:

SB287,21,19 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.

SB287,21,24 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.

SB287,21,25 3. Incorporates assumptions that are derived in one of the following ways:

SB287,22,1 a. The assumption is prescribed in the valuation manual.

SB287,22,6 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.

SB287,22,9 4. Provides margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty, the larger the margin and resulting reserve.

SB287,22,12 (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:

SB287,22,14 1. Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.

SB287,22,21 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.

SB287,22,23 3. Develop, and file with the commissioner upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.

SB287,22,25 (c) A principle-based valuation may include a prescribed formulaic reserve component.

SB287,43 Section 43. 623.06 (11) of the statutes is created to read:

SB287,23,5 623.06 (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.

SB287,44 Section 44. 623.06 (12) of the statutes is created to read:

SB287,23,7 623.06 (12) (a) In this subsection:

SB287,23,9 1. "Experience data" means any documents, materials, data, or other information submitted by a company under sub. (11).

SB287,23,14 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.

SB287,23,16 (am) For purposes of pars. (b) and (c), all of the following are confidential information:

SB287,23,20 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.

SB287,24,4 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.

SB287,24,11 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.

SB287,24,15 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.

SB287,24,19 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.

SB287,24,25 (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.

SB287,25,3 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.

SB287,25,11 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.