§ 84b.8. Statement of actuarial opinion based on an asset adequacy analysis.
General description. The statement of actuarial opinion required under § 84b.5 (relating to general requirements) must consist of the following:
(1) An opening paragraph that meets the following requirements:
(i) Identifies the actuary’s name and title.
(ii) Identifies the insurance company employing the actuary, or if a consulting actuary, the name of the firm with which the actuary is associated.
(iii) States that the actuary is a member of the American Academy of Actuaries (Academy) and that the actuary meets the Academy qualification standards for rendering the opinion.
(iv) States that the actuary was appointed by, or by the authority of, the board of directors of the insurer to render the opinion and is familiar with the valuation requirements applicable to life and health insurance companies.
(v) States the date of the notification letter sent to the Commissioner with respect to the appointment.
(2) A scope paragraph that meets the following requirements:
(i) Describes the extent of the appointed actuary’s work.
(ii) Includes a tabulation that meets the following requirements:
(A) Reconciles the reserves and related actuarial items that are covered by the opinion to the annual statement of the company.
(B) Identifies the reserves and related actuarial items that have been analyzed for asset adequacy and the method of analysis.
(C) Identifies the reserves and related actuarial items that have not been analyzed for asset adequacy.
(D) Indicates, for each applicable annual statement item the formula reserves, additional actuarial reserves, analysis method, other amount, and total amount in a format consistent with the ‘‘Reserves and Liabilities’’ Table as adopted by the NAIC in the Actuarial Opinion and Memorandum Model Regulation No. 822.
(iii) Includes a statement that the actuary has examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items that are included in the tabulation and reported in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31 of the relevant year.
(3) A reliance paragraph that meets the following requirements:
(i) Documents the appointed actuary’s reliance on other experts to develop certain portions of the analysis in accordance with subsection (c) and states that the actuary has reviewed the information relied upon for reasonableness.
(ii) If the appointed actuary has examined the underlying asset and liability records, includes the following statements:
(A) The examination included a review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and tests of the actuarial calculations, as considered necessary by the actuary.
(B) The actuary reconciled the underlying basic asset and liability records to the applicable exhibits and schedules of the company’s current annual statement.
(iii) If the appointed actuary has not examined the underlying records, but has relied upon data (for example, listings and summaries of policies in force or asset records) prepared by the company, includes the following:
(A) Documentation of the reliance in accordance with subsection (c).
(B) A statement that, in forming the opinion on specified types of reserves, the actuary relied upon data prepared by a company officer certifying in force records or other data.
(C) The name and title of the company officer certifying in force records or other data.
(D) A statement confirming that the actuary evaluated that data for reasonableness and consistency and reconciled that data to the applicable exhibits and schedules of the company’s current annual statement.
(E) A statement confirming that the actuary’s examination included review of the actuarial assumptions and actuarial methods used and tests of calculations, as considered necessary by the actuary.
(4) An opinion paragraph that meets the following requirements:
(i) States that the reserves and related actuarial items identified in the tabulation:
(A) Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles.
(B) Are based on actuarial assumptions that produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with other contract provisions.
(C) Meet the requirements of the valuation law and regulations of the state of [state of domicile].
(D) Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end, with any changes in actuarial assumptions noted as exceptions in a separate paragraph. The adoption for new issues or new claims or other new liabilities of an actuarial assumption that differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumption within the meaning of this clause.
(E) Provide for all reserves and related actuarial items that ought to be established.
(ii) Includes a statement substantially similar to the following, except that the statement may be omitted, at the discretion of the Commissioner, for an opinion filed on behalf of a company doing business only in this Commonwealth:
‘‘The reserves and related actuarial items, when considered in light of the assets held by the company with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on such assets, and the considerations anticipated to be received and retained under such policies and contracts, make adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company.’’
(iii) States that the actuarial methods, considerations and analyses used in forming the actuary’s opinion conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion.
(iv) Includes one of the following items, as applicable:
(A) A statement that the opinion is updated annually as required by statute, and to the best of the actuary’s knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of the opinion that should be considered in reviewing the opinion.
(B) A description of the material changes that occurred between the date of the statement for which the opinion is applicable and the date of the opinion that should be considered in reviewing the opinion.
(v) States that the impact of unanticipated events subsequent to the date of the opinion is beyond the scope of the opinion.
(vi) States that the asset adequacy portion of the opinion should be viewed recognizing that the company’s future experience may not follow all the assumptions used in the analysis.
(vii) Includes the date and signature, address and telephone number of the appointed actuary.
(5) One or more paragraphs addressing the following items to the extent applicable:
(i) Disclosure of any qualification of the opinion.
(ii) Disclosure of any inconsistency in the method of asset allocation used at the prior opinion date with that used for the opinion.
(iii) Disclosure of any inconsistency in the method of analysis used at the prior opinion date with that used for the opinion.
(iv) Identification of the existence and extent of additional actuarial reserves released subsequent to the prior opinion date.
(v) At the option of the appointed actuary, assumptions forming the basis for the actuarial opinion.
(b) Adverse opinions. If the appointed actuary is unable to form an opinion, the appointed actuary shall refuse to issue a statement of actuarial opinion. If the appointed actuary’s opinion is adverse or qualified, the appointed actuary shall issue an adverse or qualified actuarial opinion explicitly stating the reason for the opinion. This statement should follow the scope paragraph and precede the opinion paragraph.
(c) Reliance on information furnished by other persons. If the appointed actuary relies upon other persons regarding the accuracy or completeness of any data underlying the actuarial opinion or appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, the actuarial opinion must:
(1) Precisely identify the items subject to reliance and the persons relied upon.
(2) Include a signed, dated certification from each person upon whom the actuary is relying that includes the following:
(i) The name, title, company, address and telephone number of the person upon whom the actuary is relying.
(ii) The items on which the person is providing information.
(iii) A statement as to the accuracy, completeness or reasonableness, as applicable, of the items.
Source The provisions of this § 84b.8 amended October 24, 2008, effective January 1, 2009. Immediately preceding text appears at serial pages (229454) to (229460) and (266391) to (266392).
Cross References This section cited in 31 Pa. Code § 84b.3 (relating to scope); 31 Pa. Code § 84b.4 (relating to definitions); and 31 Pa. Code § 84c.5 (relating to general requirements for basic reserves and premium deficiency reserves).
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