PROPOSED RULEMAKINGS
[ 31 PA. CODE CH. 84d ]
Recognition of the 2001 CSO Mortality Table for Use in Determining Minimum Reserve Liabilities and Nonforfeiture Benefits and the 2001 CSO Preferred Class Structure Mortality Table for Use in Determining Minimum Reserve Liabilities
[40 Pa.B. 5067]
[Saturday, September 4, 2010]The Insurance Department (Department) proposes to amend Chapter 84d (relating to recognition of the 2001 CSO Mortality Table for use in determining minimum reserve liabilities and nonforfeiture benefits and the 2001 CSO Preferred Class Structure Mortality Table for use in determining minimum reserve liabilities) to read as set forth in Annex A. The rulemaking is proposed under the authority of sections 206, 506, 1501, 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411, 412), section 301(c)(1) of The Insurance Department Act of 1921 (40 P. S. § 71(c)(1)), section 410A(e)(8)(F) of The Insurance Company Law of 1921 (40 P. S. § 510.1(e)(8)(F)) and the Unfair Insurance Practices Act (40 P. S. §§ 1171.1—1171.15). See § 84c.5(a) and (b) (relating to general requirements for basic reserves and premium deficiency reserves).
Purpose
Section 301(c)(1) of The Insurance Department Act of 1921 authorizes the Insurance Commissioner (Commissioner) to promulgate regulations specifying new mortality tables adopted after 1980 by the National Association of Insurance Commissioners (NAIC) for use in determining minimum valuation standards. The purpose of the proposed rulemaking is to update Chapter 84d to include amendments made by the NAIC to Model Regulation 815, ''Model Regulation Permitting the Recognition of Preferred Mortality Tables for Use in Determining Minimum Reserve Liabilities.'' Model Regulation 815 recognizes, permits and prescribes the use of mortality tables that reflect differences in mortality between preferred and standards lives in determining minimum reserve liabilities. A copy of the copyrighted NAIC model regulation was provided to the legislative standing committees, the Independent Regulatory Review Commission (IRRC), the Governor's Office of Policy and Planning, the Governor's Office of General Counsel and the Attorney General to assist in their analysis of this proposed rulemaking. Copies of NAIC model regulations are available to the general public by contacting the NAIC.
Explanation of Regulatory Requirements
The following is a description of the changes in the proposed rulemaking:
Section 84d.3a (relating to 2001 CSO Preferred Class Structure Mortality Table) is amended to recognize that a company may substitute the 2001 CSO Preferred Class Structure Mortality Table for the 2001 CSO Smoker or Nonsmoker Mortality Table with the consent of the Commissioner if the conditions in § 84d.3a are met. Proposed subsection (f) specifies two cases when a company is not permitted to use the 2001 CSO Preferred Class Structure Table for valuation of policies issued prior to January 1, 2007.
Affected Parties
The proposed rulemaking will apply to insurers issuing life insurance coverage in this Commonwealth.
Fiscal Impact
State government
There will not be an increase in cost to the Department due to the use of the new mortality table since the extent of the analysis performed by the Department is not affected by the mortality table used in the calculation of reserves.
General public
It is possible that the cost of insurance will be reduced for consumers who purchase life insurance coverage due to improved mortality recognized by the 2001 CSO Preferred Class Structure Mortality Table.
Political subdivisions
There will not be fiscal impact on political subdivisions as insurers will continue to maintain adequate reserves.
Private sector
The use of the 2001 CSO Preferred Class Structure Mortality Table generally will reduce the reserve liabilities of an insurance company. In addition, the use of the table is optional.
Paperwork
The proposed rulemaking will not impose additional paperwork on the Department. An insurance company that elects to use the 2001 CSO Preferred Class Structure Mortality Table as the minimum valuation standard will be required to submit at election and annually thereafter a certification to the Commissioner that the conditions for use of the table are satisfied.
Effectiveness/Sunset Date
The proposed rulemaking will become effective on the first of the month following 60 days from the publication date of the final-form rulemaking. The Department continues to monitor the effectiveness of regulations on a triennial basis; therefore, a sunset date has not been assigned.
Contact Person
Questions or comments regarding the proposed rulemaking should be addressed in writing to Peter J. Salvatore, Regulatory Coordinator, Insurance Department, 1326 Strawberry Square, Harrisburg, PA 17120 within 30 days following the publication in the Pennsylvania Bulletin. Questions or comments also may be e-mailed to psalvatore@state.pa.us or faxed to (717) 705-3873.
Under the Regulatory Review Act (71 P. S. §§ 745.1—745.12), the Department is required to write to all commentators requesting whether or not they wish to receive a copy of the final-form rulemaking. To better serve the stakeholders, the Department determined that all commentators will receive a copy of the final-form rulemaking when it is made available to the IRRC and the legislative standing committees.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on August 24, 2010, the Department submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to IRRC and to the Senate Banking and Insurance Committee and the House Insurance Committee. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Department, the General Assembly and the Governor of comments, recommendations or objections raised.
JOEL SCOTT ARIO,
Insurance Commissioner(Editor's Note: For a proposed rulemaking amending Chapter 84c relating to this proposed rulemaking, see 40 Pa.B. 5069 (September 4, 2010).)
Fiscal Note: 11-246. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 31. INSURANCE
PART IV. LIFE INSURANCE
CHAPTER 84d. RECOGNITION OF THE 2001 CSO MORTALITY TABLE FOR USE IN DETERMINING MINIMUM RESERVE LIABILITIES AND NONFORFEITURE BENEFITS AND THE 2001 CSO PREFERRED CLASS STRUCTURE MORTALITY TABLE FOR USE IN DETERMINING MINIMUM RESERVE LIABILITIES § 84d.3a. 2001 CSO Preferred Class Structure Mortality Table.
(a) At the election of the company, for each calendar year of issue, for any one or more specified plans of insurance and subject to satisfying the conditions stated in this chapter, the 2001 CSO Preferred Class Structure Mortality Table may be substituted in place of the 2001 CSO Smoker or Nonsmoker Mortality Table as the minimum valuation standard for policies issued on or after January 1, 2007. For policies issued on and after January 1, 2004, and prior to January 1, 2007, these tables may be substituted as the minimum valuation standard with the consent of the Commissioner subject to the conditions of subsections (b)—(g). In determining consent, the Commissioner may rely on the consent of the chief insurance regulatory official of the company's state of domicile. Prior to that election, the company shall demonstrate to the satisfaction of the Commissioner that at least 20% of the business to be valued on this table is in one or more of the preferred classes.
* * * * * (f) The use of the 2001 CSO Preferred Class Structure Table for the valuation of policies issued prior to January 1, 2007, is not permitted in any statutory financial statement in which a company reports, with respect to any policy or portion of a policy coinsured, either of the following cases:
(1) When the mode of payment of the reinsurance premium is less frequent than the mode of payment of the policy premium, a reserve credit that exceeds, by more than the amount specified in this paragraph as Y, the gross reserve calculated before reinsurance. Y is the amount of the gross reinsurance premium that provides coverage for the period from the next policy premium due date to the earlier of the end of the policy year and the next reinsurance premium due date, and would be refunded to the ceding entity upon the termination of the policy.
(2) When the mode of payment of the reinsurance premium is more frequent than the mode of payment of the policy premium, a reserve credit that is less than the gross reserve, calculated before reinsurance, by an amount that is less than the amount specified in this paragraph as Z. Z is the amount of the gross reinsurance premium that the ceding entity would need to pay the assuming company to provide reinsurance coverage from the period of the next reinsurance premium due date to the next policy premium due date minus any liability established for the proportionate amount not remitted to the reinsurer.
(g) For purposes of the conditions set forth in subsection (f), both the reserve credit and the gross reserve before reinsurance for the mean reserve method are defined as the mean reserve minus the deferred premium asset, and for the mid-terminal reserve method must include the unearned premium reserve. A company may estimate and adjust its accounting on an aggregate basis to meet the conditions to use the 2001 CSO Preferred Class Structure Table.
[Pa.B. Doc. No. 10-1628. Filed for public inspection September 3, 2010, 9:00 a.m.]
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