Final Regulations
TITLE 14. INSURANCE
STATE CORPORATION COMMISSION
Title of Regulation: 14VAC 5-310. Rules Governing Actuarial Opinions and Memoranda (amending 14VAC 5-310-10, 14VAC 5-310-20, 14VAC 5-310-30, 14VAC 5-310-40, 14VAC 5-310-50, 14VAC 5-310-80, 14VAC 5-310-90, and 14VAC 5-310-100; adding 14VAC 5-310-105; repealing 14VAC 5-310-60, 14VAC 5-310-70, and 14VAC 5-310-110).
Statutory Authority: §§12.1-13, 38.2-223, and 38.2-3127.1 of the Code of Virginia.
Effective Date: December 31, 2003.
Agency Contact: Ernest L. Johnson, III, Life Actuary, State Corporation Commission, Bureau of Insurance, P.O. Box 1157, Richmond, VA 23218, telephone (804) 371-9589, FAX (804) 371-9511, or e-mail .
Summary:
The revisions amend the rules governing actuarial opinions and memoranda required of life and health insurers by repealing 14 VAC 5-310-60, 14 VAC 5-310-70, and 14 VAC 5-310-110, adding 14 VAC 5-310-105 to address notification requirements for opinions in error and amended opinions, and revising all other sections of the chapter to require that companies subject to the provisions of § 38.2-3127.1 of the Code of Virginia annually file actuarial opinions, which, as defined by the rules, must be prepared by qualified appointed actuaries and based on an asset adequacy analysis that is to be documented in a confidential asset adequacy memorandum with a regulatory (confidential) asset adequacy issues summary. The revisions delete provisions in current rules that describe authorized exemptions and filing exceptions. The revisions also delete provisions that have allowed companies to file a statement of actuarial opinion not including asset adequacy analysis. The revisions adopt for Virginia many of the provisions, including recommended language for actuarial opinions, adopted by the National Association of Insurance Commissioners in 2001 for its Actuarial Opinion and Memorandum Regulation.
AT RICHMOND, OCTOBER 23, 2003
COMMONWEALTH OF VIRGINIA
At the relation of the
STATE CORPORATION COMMISSION
Ex Parte: In the matter of CASE NO. INS-2003-00165
Adopting Revisions to the Rules
Governing Actuarial Opinions
and Memoranda
ORDER ADOPTING REVISIONS TO RULES
By order entered herein August 5, 2003, all interested persons were ordered to take notice that the Commission would consider the entry of an order subsequent to October 15, 2003, adopting revisions proposed by the Bureau of Insurance to the Commission’s Rules Governing Actuarial Opinions and Memoranda, set forth in Chapter 310 of Title 14 of the Virginia Administrative Code, which amend the rules concerning the specifics of the annual actuarial opinion required pursuant to § 38.2-3127.1 of the Code of Virginia effective December 31, 2003, unless on or before October 15, 2003, any person objecting to the adoption of the proposed rules filed a request for a hearing with the Clerk of the Commission.
The August 5, 2003, Order also required all interested persons to file their comments in support of or in opposition to the proposed revisions on or before October 15, 2003.
As of the date of this Order, no request for a hearing has been filed with the Clerk of the Commission, and, as of the date of this Order, no comments have been filed with the Clerk of the Commission.
The Bureau has recommended that the proposed revisions be adopted; and
THE COMMISSION, having considered the proposed revisions and the Bureau's recommendation, is of the opinion that the proposed revisions should be adopted.
THEREFORE, IT IS ORDERED THAT:
(1)The proposed revisions to Chapter 310 of Title 14 of the Virginia Administrative Code entitled "Rules Governing Actuarial Opinions and Memoranda,” which amend the rules at 14 VAC 5-310-10 through 14 VAC 5-310-50, and 14 VAC 5-310-80 through 14 VAC 5-310-100, propose a new rule at 14 VAC 5-310-105, and repeal the rules at 14 VAC 5-310-60, 14 VAC 5-310-70, and 14 VAC 5-310-110, and which are attached hereto and made a part hereof, should be, and they are hereby, ADOPTED to be effective December 31, 2003.
(2)AN ATTESTED COPY hereof shall be sent by the Clerk of the Commission to the Bureau of Insurance in care of Deputy Commissioner Douglas C. Stolte, who forthwith shall give further notice of the adoption of the revisions to the rules by mailing a copy of this Order, including a copy of the attached revised rules, to all companies subject to the provisions of § 38.2-3127.1 of the Code of Virginia, including fraternal benefit societies licensed under Chapter 41 of Title 38.2, and all other companies licensed by the Commission to write or reinsure policies or agreements providing any form of life, life insurance, or annuity benefits, and all life insurers licensed by the Commission to write or reinsure accident and sickness insurance.
(3) The Commission’s Division of Information Resources forthwith shall cause a copy of this Order, including a copy of the attached rules, to be forwarded to the Virginia Registrar of Regulations for appropriate publication in the Virginia Register of Regulations.
(4) On or before October 28, 2003, the Commission’s Division of Information Resources shall make available this Order and the attached rules on the Commission’s website, http://www.state.va.us/scc/caseinfo.htm.
(5)The Bureau of Insurance shall file with the Clerk of the Commission an affidavit of compliance with the notice requirements of paragraph (2) above.
CHAPTER 310.
RULES GOVERNING ACTUARIAL OPINIONS AND MEMORANDA.
14 VAC 5-310-10. Purpose.
The purpose of this chapter (14 VAC 5-310-10 et seq.) is to prescribe:
1. Guidelines and standards Requirements for statements of actuarial opinion which that are to be submitted in accordance with § 38.2-3127.1 B 1 of the Code of Virginia, and for memoranda in support thereof;
2. Guidelines and standards for statements of actuarial opinion which are to be submitted when a company is exempt from filing the actuarial opinion prescribed by § 38.2-3127.1 B 1 of the Code of Virginia; and
3.2. Rules applicable to the appointment of an appointed actuary.; and
3. Guidance as to the meaning of "adequacy of reserves."
14 VAC 5-310-20. Authority; effective date.
This chapter (14 VAC 5-310-10 et seq.) is adopted and promulgated by the commission pursuant to §§ 12.1-13, 38.2-223, and 38.2-3127.1 of the Code of Virginia. This chapter will take effect for annual statements for the year-ending December 31, 1992. Except as otherwise specifically provided, revisions to this chapter shall be effective upon adoption by the commission and applicable as to annual statements and actuarial opinions, memoranda, and statements of reserves filed with the commission for periods ending on or after December 31 of the year in which the revision is adopted.
If a foreign or alien company's state of domicile makes provision in its insurance code or regulations for a later effective date, this later effective date will apply to the company, but under no circumstances will the effective date apply beyond December 31, 1993.
14 VAC 5-310-30. Scope.
A. This chapter (14 VAC 5-310-10 et seq.) shall apply to all companies subject to the provisions of § 38.2-3127.1 of the Code of Virginia, including fraternal benefit societies licensed under Chapter 41 (§ 38.2-4100 et seq.) of Title 38.2 and all other companies licensed under Title 38.2 of the Code of Virginia to write and reinsure policies or agreements providing any form of life, life insurance, or annuity benefits as those terms are defined in §§ 38.2-102 through 38.2-107.1 of the Code of Virginia and also to any life insurer authorized to write or reinsure accident and sickness insurance as defined in § 38.2-109 of the Code of Virginia.
B. This chapter shall be applied in a manner that allows the appointed actuary to utilize professional judgment in performing the asset analysis and developing the actuarial opinion and supporting memoranda, consistent with relevant actuarial standards of practice unless the commission determines particular specifications are necessary for an acceptable opinion to be rendered relative to the adequacy of reserves and related items. Particular specifications, including specific methods of actuarial analysis and actuarial assumptions, may be promulgated by rule or order of the commission or by an administrative letter issued by the Commissioner of Insurance.
C. This chapter, as reflected in rules adopted by the commission by order entered November 5, 1992, in Case No. INS920377, shall be applicable to all annual statements filed with the commission on or after the effective date of this chapter December 15, 1992, and before December 31, 2003. Except with respect to companies which are exempted pursuant to 14 VAC 5-310-60 of this chapter, On and after December 31, 2003, a statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with 14 VAC 5-310-80 of this chapter, and a memorandum in support thereof in accordance with 14 VAC 5-310-90 of this chapter, shall be required each year in accordance with rules as revised and adopted by order of the commission entered in Case No. INS-2003-00165. Any company so exempted must file a statement of actuarial opinion pursuant to 14 VAC 5-310-70 of this chapter.
B. Notwithstanding the foregoing, the Commission may require any company otherwise exempt pursuant to this chapter to submit a statement of actuarial opinion and to prepare a memorandum in support thereof in accordance with 14 VAC 5-310-80 And 14 VAC 5-310-90 of this chapter if, in the opinion of the Commission, an asset adequacy analysis is necessary with respect to the company.
14 VAC 5-310-40. Definitions.
As used in this chapter unless the context clearly indicates otherwise:
"Actuarial opinion" means the opinion of an appointed actuary regarding the adequacy of reserves and related actuarial items based on an asset adequacy analysis in accordance with 14 VAC 5-310-80 and with applicable Actuarial Standards of Practice.
"Actuarial Standards Board" means the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.
"Annual statement" means that statement required by § 38.2-1300 of the Code of Virginia to be filed by the company with the commission annually.
"Appointed actuary" means any individual who is appointed or retained in accordance with the requirements set forth in 14VAC 5-310-50 C of this chapter to provide the actuarial opinion and supporting memorandum as required by § 38.2-3127.1 of the Code of Virginia.
"Asset adequacy analysis" means an analysis that meets the standards and other requirements referred to in 14 VAC 5-310-50 D of this chapter. It may take many forms, including, but not limited to, cash flow testing, sensitivity testing or applications of risk theory.
"Commission" means the Virginia State Corporation Commission.
"Commissioner" means the Commissioner of Insurance in Virginia unless specific reference is made to another state, in which case “commissioner” means the Insurance Commissioner, Director, Superintendent or other supervising regulatory official of a given state who is responsible for administering the insurance laws of said that state.
"Company" means a life insurer, company or fraternal benefit society subject to the provisions of this chapter.
"NAIC" means the National Association of Insurance Commissioners.
"Non-investment grade bonds" are those which are (i) rated 3, 4, 5 or 6 by the NAIC Securities Valuation Office, or (ii) if not rated by the Securities Valuation Office, are rated in an equivalent grade by a national rating agency recognized by the Commission.
"Qualified actuary" means any individual who meets the requirements set forth in 14 VAC 5-310-50 B of this chapter.
14 VAC 5-310-50. General requirements for actuarial opinions.
A. Submission of The following requirements apply to all companies submitting a statement of actuarial opinion in compliance with § 38.2-3127.1 of the Code of Virginia.
1. There is to be included on or attached to page 1 of the annual statement for each year beginning with the year in which this chapter (14 VAC 5-310-10 et seq.) becomes effective ending on or after December 31, 1992, the statement of an appointed actuary, entitled "Statement of Actuarial Opinion," setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with 14 VAC 5-310-80 of this chapter; provided, however, that any company exempted pursuant to 14 VAC 5-310-60 of this chapter from submitting a statement of actuarial opinion in accordance with 14 VAC 5-310-80 of this chapter shall include on or attach to Page 1 of the annual statement a statement of actuarial opinion rendered by an appointed actuary in accordance with 14 VAC 5-310-70 of this chapter.
2. If in the previous year a company provided a statement of actuarial opinion in accordance with 14 VAC 5-310-70 of this chapter, and in the current year fails the exemption criteria of 14 VAC 5-310-60 C 1, 2 or 5 of this chapter to again provide an actuarial opinion in accordance with 14 VAC 5-310-70, the statement of actuarial opinion in accordance with 14 VAC 5-310-80 shall not be required until August 1 following the date of the annual statement. In this instance, the company shall provide a statement of actuarial opinion in accordance with 14 VAC 5-310-70 with appropriate qualification noting the intent to subsequently provide a statement of actuarial opinion in accordance with 14 VAC 5-310-80.
3. In the case of a statement of actuarial opinion required to be submitted by a foreign or alien company, the Commissioner may accept the statement of actuarial opinion filed by such company with the commissioner of another state if the Commission determines that the opinion reasonably meets the requirements applicable to a company domiciled in Virginia.
4. 2. Upon written request by the company, the commission may grant an extension of the date for submission of the statement of actuarial opinion.
B. Qualified actuary. A "qualified actuary" is an individual who:
1. Is a member in good standing of the American Academy of Actuaries; and
2. Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements; and
3. Is familiar with the valuation requirements applicable to life and health insurance companies; and
4. Has not been found by the commission (or if so found has subsequently been reinstated as a qualified actuary), following appropriate notice and hearing, to have:
a. Violated any provision of, or any obligation imposed by Title 38.2 of the Code of Virginia or other law in the course of his or her dealings as a qualified actuary; or