Rule-Making Notices
Notice of Hearing
Insurance
Notice is hereby given that pursuant to the authority granted under s.
601.41 (3), Wis. Stats., and the procedures set forth in under s.
227.18, Wis. Stats., the Office of the Commissioner of Insurance (OCI) will hold a public hearing to consider the adoption of the attached proposed rulemaking order affecting Sections
Ins 2.80 and
50.79, Wis. Adm. Code, relating to reserve and reporting requirements for life and fraternal insurers and affecting small business.
Hearing Information
Date: Friday, February 28, 2014
Time: 10:00 a.m., or as soon thereafter as the
matter may be reached
Location: OCI, Room 227
125 South Webster Street
2nd Floor
Madison, Wisconsin
Place where Comments are to be Submitted and Deadline For Submission
Written comments can be mailed to:
Timothy L. Cornelius
Legal Unit — OCI Rule Comment for Rule Ins 071-12
Office of the Commissioner of Insurance
PO Box 7873
Madison WI 53707-7873
Written comments can be hand delivered to:
Timothy L. Cornelius
Legal Unit — OCI Rule Comment for Rule Ins 071-12
Office of the Commissioner of Insurance
125 South Webster St — 2nd Floor
Madison WI 53703-3474
Comments can be e-mailed to:
Timothy L. Cornelius
The deadline for submitting comments is 4:00 p.m. on March 7, 2014.
Summary of Proposed Rule and Fiscal Estimate
For a summary of the rule, see the analysis contained in the attached proposed rulemaking order. There will be no state or local government fiscal effect. The full text of the proposed changes, a summary of the changes and the fiscal estimate are attached to this Notice of Hearing.
Analysis Prepared by the Office of the Commissioner of Insurance (Oci)
Statutes interpreted
Statutory authority
Explanation of OCI's authority to promulgate the proposed rule under these statutes
The statutory authority for this rule is ss.
227.11 (2) (a) and
601.41 (3), Wis. Stats., which provide for the commissioner's rule making authority in general. More specifically, ss.
601.42 (2) and
623.04, Wis. Stats., authorize the commissioner to “promulgate rules specifying the liabilities required to be reported by insurers in the financial statements submitted under s.
601.42 (1g) (a) and the methods shall be consistent with s.
623.06."
The changes are authorized pursuant to ss.
623.04 and
601.42, Wis. Stats. Under s.
601.42 (1g) (a), Wis. Stat., the commissioner may request “statements, reports, answers to questionnaires and other information, and evidence thereof, in whatever reasonable form the commissioner designates, and at such reasonable intervals as the commissioner chooses, or from time to time." Under s.
601.42 (2), Wis. Stats., “the commissioner may prescribe forms for the reports under subs. (1g) and (1r) and specify who shall execute or certify such reports. The forms for the reports required under sub. (1g) shall be consistent, so far as practicable, with those prescribed by other jurisdictions."
Related statutes or rules
Sections
623.04,
623.06,
623.15, and
623.21, Wis. Stats., establish accounting and reserve requirements for all insurers authorized to do business in this states.
The plain language analysis and summary of the proposed rule
The proposed rule changes modify the reserve requirements for life and fraternal insurers, and revise and clarify the reporting requirements related to the life reserves. The proposed rule changes also repeal a table that is both outdated and unnecessary.
The proposed rule changes specifically address the four items described below. Changes contemplated in items (a) and (b) would allow Wisconsin regulations to align with the model regulations of the National Association of Insurance Commissioners (NAIC) and the regulations of 18 other states. This consistency would assist domestic insurers specifically, as a significant number of life insurers are doing business in several of the states that have implemented the NAIC model regulations. Changes contemplated in item (c) would ease the administrative burden on the Office of the Commissioner of Insurance (OCI) and foreign insurers doing business in Wisconsin by eliminating an unnecessary filing requirement. Finally, changes contemplated in item (d) would correct an outdated and unnecessary table contained in existing regulation.
(a) Section
Ins 2.80, Wis. Admin. Code, establishes the minimum standards for life insurance policy reserves and the method for calculating the reserves. The existing rule includes requirements for a premium deficiency reserve, under which the company can incorporate “X" factors to adjust the mortality factor to a level that is based on the company's own mortality experience. Currently, under s.
Ins 2.80 (4), Wis. Admin. Code, the X factors used in the calculation of deficiency reserves are subject to a minimum of 20% and cannot be decreased in any successive policy years. The changes contemplated for the proposed rule would remove these limits on the X factors. When the rule was first enacted, the limits were included to provide additional conservatism. Subsequently, the industry has demonstrated to the NAIC and OCI that the conservative limits are no longer needed. This change could result in a reduction of reserves for some insurers and would create a more level playing field with the 18 states that have already adopted the NAIC model regulation.
(b) Sections
Ins 50.79 (3) (a) and
2.80 (4) (b) 3., Wis. Admin. Code, would be better understood with the addition of clarifying language specifying that the Regulatory Asset Adequacy Issues Summary, a confidential document filed annually with the Commissioner, must disclose the impact of cash flow insufficiencies projected to occur during the interim periods prior to the end of the test period. The current wording is somewhat ambiguous regarding the reporting requirements with respect to deficiencies in interim periods. The anticipated changes would improve the rule by eliminating reporting inconsistencies.
(c) Currently, all licensed life and fraternal insurers must submit a confidential Regulatory Asset Adequacy Issues Summary annually to the Commissioner. Proposed changes to the language of s.
Ins 50.79, Wis. Admin. Code, would not require foreign insurers (approximately 450 companies) to submit the Summary unless specifically requested by the Commissioner.
(d) The proposed rule would repeal the table of select mortality factors at the end of ch.
Ins 2, Wis. Admin. Code, which is outdated and unnecessary. Since the original rule was adopted a more accurate table contained in a NAIC model rule has been released, and is referenced in two places in s.
Ins 2.80 (4), Wis. Admin. Code, pursuant to s.
601.41 (3) (b), Wis. Stats., which specifically grants OCI the authority to cross-reference NAIC tables. The mortality factors for calculating reserves contained within sub. (4) are more accurate, and are the correct factors insurers should use for their reserve calculations. Therefore the table at the end of ch.
Ins. 2, Wis. Admin. Code, should be removed as it is likely to cause confusion and incorrect reserve calculations.
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 OCI is not aware of any existing or proposed federal regulations intended to address the activities to be regulated by the proposed rule changes.
Comparison of similar rules in adjacent states as found by OCI
Illinois: 215 ILCS 5/223 (1a) (B) contains reserve and reporting provisions comparable to Wisconsin's existing rules.
Iowa: IAC §
508.36 and § 512B.23; § 191-47.4 (508), IA Admin. Code contain reserve provisions more stringent than Wisconsin's existing rules and reporting requirements comparable to the proposed rule change.
Michigan: MCLS §
500.837 (2013) and §
500.8186 (2013), and R. 500.853, Rule 13, Mich. Admin. Code and R. 500.995, Rule 5, Mich. Admin. Code, contain reserve and reporting provisions comparable to Wisconsin's existing rules — is considering the adoption of NAIC Model Law 530 with the 2009 revisions comparable to the proposed Wisconsin rule changes.
Minnesota: Minn. R. 2747.0030 Subp. 2., Admin. Code and § 61A.258 Subd. (1), Minn. Stat. (2013) address the use of minimum standards for life insurance policy reserves, the method for calculating the reserves, and the select mortality factor tables for both basic and deficiency reserves using the 2001 CSO mortality table, comparable to Wisconsin's current law, and Minn. R. 2711.0070, Admin. Code contains reporting requirements comparable to the proposed rule change.
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 OCI is proposing these rule changes based on the NAIC model laws, the financial information of insurers, the need to ensure reporting consistency and the requirement to remove incorrect information. The changes will bring Wisconsin's requirements for life insurers into line with the NAIC model regulations and those of 18 other states.
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
Based upon revenue and ownership structure, there may be an effect on small businesses, but any such effect would be minimal. Very few, if any, insurers meet the definition of small businesses, and those that might would be assisted by the more uniform, less-stringent reserve and reporting requirements. Any effect on non-insurance small businesses would be beneficial, in that insurance regulations would be more understandable, accurate, and uniform.
Private Sector Fiscal Analysis
For Section
Ins 2.80 and
50.79, Wis. Adm. Code, relating to Reserve Requirements for Life and Fraternal Insurers and Affecting Small Business
These rule changes will have no significant effect on the private sector.
A description of the Effect on Small Business
This rule will have little or no effect on small businesses.
Initial Regulatory Flexibility Analysis
Notice is hereby further given that pursuant to s.
227.114, Wis. Stat., the proposed rule may have an effect on small businesses. The initial regulatory flexibility analysis is as follows:
a. Types of small businesses affected:
