Chapter 623

623.06(7)(b)1. 1. In this paragraph, “excess premium” means the amount by which a gross premium in the first policy year exceeds the gross premium in the 2nd policy year.

623.06(7)(b)2. 2. If a life insurance policy issued on or after January 1, 1984, provides no comparable benefit in the first year for an excess premium and provides an endowment benefit, cash surrender value or both in an amount greater than the excess premium, the minimum reserve at each policy anniversary is the greater of the minimum reserve under subs. (3) to (4) and the minimum reserve under par. (a).

623.06(7)(b)3. 3. For purposes of par. (a), the method used in calculating the reserve of a policy under subd. 2. is specified under subs. (3) to (4).

623.06(7)(c) (c) If a plan of life insurance provides for future determination of premiums based on recent estimates of future experience available at the time of the determination, or if the minimum reserves for a plan of life insurance or an annuity cannot be determined under subs. (3) to (4m) and this subsection, the commissioner shall by rule adopt a method for determining the minimum reserves for the plan or annuity. A rule adopted under this paragraph shall specify a method consistent with the principles of this section and appropriate in relation to the benefits and pattern of premiums for the plan or annuity.

623.06(8m) (8m) For accident and health insurance contracts issued on or after November 13, 2015, 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).

623.06(9) (9) 

623.06(9)(a) (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).

623.06(9)(b) (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:

623.06(9)(b)1. 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.

623.06(9)(b)2. 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:

623.06(9)(b)2.a. a. Life, accident, and health annual statements.

623.06(9)(b)2.b. b. Health annual statements.

623.06(9)(b)2.c. c. Fraternal annual statements.

623.06(9)(b)3. 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:

623.06(9)(b)3.a. a. The 50 states of the United States.

623.06(9)(b)3.b. b. American Samoa.

623.06(9)(b)3.c. c. The American Virgin Islands.

623.06(9)(b)3.d. d. The District of Columbia.

623.06(9)(b)3.e. e. Guam.

623.06(9)(b)3.f. f. Puerto Rico.

623.06(9)(c) (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:

623.06(9)(c)1. 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.

623.06(9)(c)2. 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.:

623.06(9)(c)2.a. a. Life, accident, and health annual statements.

623.06(9)(c)2.b. b. Health annual statements.

623.06(9)(c)2.c. c. Fraternal annual statements.

623.06(9)(d) (d) The valuation manual must specify all of the following:

623.06(9)(d)1. 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:

623.06(9)(d)1.a. a. The commissioners reserve valuation method for life insurance contracts, other than annuity contracts, subject to sub. (1f) (b).

623.06(9)(d)1.b. b. The commissioners annuity reserve valuation method for annuity contracts subject to sub. (1f) (b).

623.06(9)(d)1.c. c. Minimum reserves for all other policies and contracts subject to sub. (1f) (b).

623.06(9)(d)2. 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.

623.06(9)(d)3. 3. For policies and contracts subject to a principle-based valuation under sub. (10), all of the following:

623.06(9)(d)3.a. 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.

623.06(9)(d)3.b. b. Requirements regarding the treatment of risks over which the insurance company does not have significant control or influence.

623.06(9)(d)3.c. c. Procedures for corporate governance and oversight of the actuarial function and a process for appropriate waiver or modification of such procedures.

623.06(9)(d)4. 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:

623.06(9)(d)4.a. a. Reserves that are consistent with the minimum standard of valuation before the operative date of the valuation manual.

623.06(9)(d)4.b. 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.

623.06(9)(d)5. 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.

623.06(9)(d)6. 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.

623.06(9)(e) (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.

623.06(9)(f) (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.”

623.06(9)(g) (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.

623.06(9)(h) (h)

623.06(9)(h)1. 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:

623.06(9)(h)1.a. a. The commissioner has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing.

623.06(9)(h)1.b. 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.

623.06(9)(h)2. 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.

623.06(10) (10) 

623.06(10)(a) (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:

623.06(10)(a)1. 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.

623.06(10)(a)2. 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.

623.06(10)(a)3. 3. Incorporates assumptions that are derived in one of the following ways:

623.06(10)(a)3.a. a. The assumption is prescribed in the valuation manual.

623.06(10)(a)3.b. 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.

623.06(10)(a)4. 4. Provides margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty, the larger the margin and resulting reserve.

623.06(10)(b) (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:

623.06(10)(b)1. 1. Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.

623.06(10)(b)2. 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.

623.06(10)(b)3. 3. Develop, and file with the commissioner upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.

623.06(10)(c) (c) A principle-based valuation may include a prescribed formulaic reserve component.

623.06(11) (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.

623.06(12) (12) 

623.06(12)(a) (a) In this subsection:

623.06(12)(a)1. 1. “Experience data” means any documents, materials, data, or other information submitted by a company under sub. (11).

623.06(12)(a)2. 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.

623.06(12)(am) (am) For purposes of pars. (b) and (c), all of the following are confidential information:

623.06(12)(am)1. 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.

623.06(12)(am)2. 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.

623.06(12)(am)3. 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.

623.06(12)(am)4. 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.

623.06(12)(am)5. 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.

623.06(12)(b) (b)

623.06(12)(b)1. 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.

623.06(12)(b)2. 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.

623.06(12)(b)3. 3.

623.06(12)(b)3.a. 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.

623.06(12)(b)3.b. 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.

623.06(12)(b)3.c. 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.

623.06(12)(b)3.d. d. The commissioner may enter into agreements governing sharing and use of information consistent with this subsection.

623.06(12)(b)3.e. 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.

623.06(12)(b)3.f. 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.

623.06(12)(c) (c) Notwithstanding par. (b), any confidential information specified in par. (am) 1. and 4. is subject to all of the following:

623.06(12)(c)1. 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.

623.06(12)(c)2. 2. The confidential information may otherwise be released by the commissioner with the written consent of the company.

623.06(12)(c)3. 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.

623.06(13) (13) 

623.06(13)(a) (a) 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.