Bill Text: CA SB696 | 2015-2016 | Regular Session | Chaptered
Bill Title: Insurance: principle-based valuation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2015-10-08 - Chaptered by Secretary of State. Chapter 658, Statutes of 2015. [SB696 Detail]
Download: California-2015-SB696-Chaptered.html
BILL NUMBER: SB 696 CHAPTERED
BILL TEXT
CHAPTER 658
FILED WITH SECRETARY OF STATE OCTOBER 8, 2015
APPROVED BY GOVERNOR OCTOBER 8, 2015
PASSED THE SENATE SEPTEMBER 10, 2015
PASSED THE ASSEMBLY SEPTEMBER 8, 2015
AMENDED IN ASSEMBLY AUGUST 28, 2015
AMENDED IN ASSEMBLY JULY 16, 2015
AMENDED IN ASSEMBLY JULY 2, 2015
AMENDED IN ASSEMBLY JUNE 29, 2015
AMENDED IN SENATE MAY 5, 2015
AMENDED IN SENATE APRIL 14, 2015
INTRODUCED BY Senator Roth
FEBRUARY 27, 2015
An act to amend Sections 10159.1, 10163.2, 10489.15, 10489.2,
10489.3, 10489.5, 10489.6, 10489.7, 10489.8, 10489.9, 10489.93, and
10489.94 of, to add Sections 10489.12, 10489.96, 10489.97, 10489.98,
10489.99, and 10489.992 to, and to repeal and add Sections 10489.1,
10489.4, and 10489.95 of, the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 696, Roth. Insurance: principle-based valuation.
Existing law governs the issuance of life and disability insurance
and authorizes the Insurance Commissioner to regulate those
insurers. Existing law requires every life and disability insurer
doing business in this state to annually submit the opinion of a
qualified actuary as to whether the reserves and related actuarial
items held in support of the policies and contracts specified by the
commissioner by regulation are computed appropriately, are based on
assumptions that satisfy contractual provisions, are consistent with
prior reported amounts, and comply with applicable state law. Among
other things, existing law requires insurers to calculate the minimum
standard for the valuation of those policies and contracts using
specified mortality tables approved by the commissioner, sets forth
the applicable interest rates, and establishes the reserve
requirements for various types of life and disability policies and
contracts.
This bill would explicitly refer to the body of laws imposing
those requirements, as specified, as the Standard Valuation Law. The
bill would require the commissioner and companies engaging in
specified activities relating to the business of life insurance to
incorporate the methodology employed by a specified manual of
valuation instructions adopted by the National Association of
Insurance Commissioners in making determinations relating to reserve
requirements and the minimum standard of valuation for policies and
contracts, as specified. The bill would require a company to
establish reserves using a principle-based valuation that meets
specified conditions in the valuation manual, including quantifying
the benefits, guarantees, and funding associated with the contracts,
and would require the company to develop and file with the
commissioner, upon request, a principle-based valuation report. The
bill would require a company to submit mortality, morbidity,
policyholder behavior, or expense experience and other data as
prescribed in the valuation manual.
This bill would authorize the commissioner to impose an annual
assessment on each insurance company, based on the company's gross
annual life insurance premium written by the insurer in California
during the immediately preceding year, thereby imposing a tax. The
bill would exempt certain information submitted by a company to the
commissioner from disclosure pursuant to the California Public
Records Act and would provide that it is not subject to subpoena or
discovery or admissible in evidence in any private civil action. The
bill would also authorize the commissioner to hire and assign
Department of Insurance staff, and retain nondepartmental actuaries
and other consultants, to assist the commissioner in implementing
principle-based valuation.
This bill would provide that the valuation manual would not be
operative until the commissioner certifies that adequate funding has
been appropriated by the Legislature, and all other necessary
resources, including, but not limited to, adequate staff, are
available and sufficient to enable the commissioner to carry out the
duties required by specified provisions of the bill. The bill would
require the commissioner to make that certification by submitting a
letter to the Chairs of the Assembly Committee on Insurance and the
Senate Committee on Insurance stating that the funding and other
necessary resources are available and sufficient to carry out those
duties. The bill would also require the commissioner to post a notice
on the department's Internet Web site immediately after submitting
that certification letter stating that the certification letter has
been submitted and that the provisions of the valuation manual are in
effect.
Existing constitutional provisions require that a statute that
limits the right of access to the meetings of public bodies or the
writings of public officials and agencies be adopted with findings
demonstrating the interest protected by the limitation and the need
for protecting that interest.
This bill would make legislative findings to that effect.
This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10159.1 of the Insurance Code is amended to
read:
10159.1. (a) This article is applicable only to policies and
contracts issued on or after the operative date as to such policies
or contracts of this article.
(b) The term "operative date of the valuation manual" means the
January 1 of the first calendar year that the valuation manual, as
defined in Section 10489.1, is effective.
SEC. 2. Section 10163.2 of the Insurance Code is amended to read:
10163.2. (a) This section shall apply to all policies issued on
or after the operative date of this section as defined herein. Except
as provided in subdivision (g), the adjusted premiums for any policy
shall be calculated on an annual basis and shall be such uniform
percentage of the respective premiums specified in the policy for
each policy year, excluding amounts payable as extra premiums to
cover impairments or special hazards and also excluding any uniform
annual contract charge or policy fee specified in the policy in a
statement of the method to be used in calculating the cash surrender
values and paid-up nonforfeiture benefits, that the present value, at
the date of issue of the policy, of all adjusted premiums shall be
equal to the sum of (1) the then present value of the future
guaranteed benefits provided for by the policy; (2) 1 percent of
either the amount of insurance, if the insurance is uniform in
amount, or the average amount of insurance at the beginning of each
of the first 10 policy years; and (3) 125 percent of the
nonforfeiture net level premium as hereinafter defined. Provided,
however, that in applying the percentage specified in (3) no
nonforfeiture net level premium shall be deemed to exceed 4 percent
of either the amount of insurance, if the insurance is uniform in
amount, or the average amount of insurance at the beginning of each
of the first 10 policy years. The date of issue of a policy for the
purpose of this section shall be the date as of which the rated age
of the insured is determined.
(b) The nonforfeiture net level premium shall be equal to the
present value, at the date of issue of the policy, of the guaranteed
benefits provided for by the policy, divided by the present value, at
the date of issue of the policy, of an annuity of 1 percent per
annum payable on the date of issue of the policy and on each
anniversary of such policy on which a premium falls due.
(c) In the case of policies that cause on a basis guaranteed in
the policy, unscheduled changes in benefits or premiums, or that
provide an option for changes in benefits or premiums other than a
change to a new policy, the adjusted premiums and present values
shall initially be calculated on the assumption that future benefits
and premiums do not change from those stipulated at the date of issue
of the policy. At the time of any such change in the benefits or
premiums, the future adjusted premiums, nonforfeiture net level
premiums, and present values shall be recalculated on the assumption
that future benefits and premiums do not change from those stipulated
by the policy immediately after the change.
(d) Except as otherwise provided in subdivision (g), the
recalculated future adjusted premiums for any such policy shall be
such uniform percentage of the respective future premiums specified
in the policy for each policy year, excluding amounts payable as
extra premiums to cover impairments and special hazards, and also
excluding any uniform annual contract charge or policy fee specified
in the policy in a statement of the method to be used in calculating
the cash surrender values and paid-up nonforfeiture benefits, that
the present value, at the time of change to the newly defined
benefits or premiums, of all such future adjusted premiums shall be
equal to the excess of (1) the sum of (A) the then present value of
the then future guaranteed benefits provided for by the policy and
(B) the additional expense allowance, if any, over (2) the then cash
surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
(e) The additional expense allowance, at the time of the change to
the newly defined benefits or premiums, shall be the sum of (1) 1
percent of the excess, if positive, of the average amount of
insurance at the beginning of each of the first 10 policy years
subsequent to the change over the average amount of insurance prior
to the change at the beginning of each of the first 10 policy years
subsequent to the time of the most recent previous change, or, if
there has been no previous change, the date of issue of the policy;
and (2) 125 percent of the increase, if positive, in the
nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium shall be
equal to the result obtained by dividing (1) by (2) where:
(1) It equals the sum of:
(A) The nonforfeiture net level premium applicable prior to the
change times the present value of an annuity of 1 percent per annum
payable on each anniversary of the policy on or subsequent to the
date of the change on which a premium would have fallen due had the
change not occurred, and
(B) The present value of the increase in future guaranteed
benefits provided for by the policy, and
(2) It equals the present value of an annuity of 1 percent per
annum payable on each anniversary of the policy on or subsequent to
the date of change on which a premium falls due.
(g) Notwithstanding any other provision of this section to the
contrary, in the case of a policy issued on a substandard basis that
provides reduced graded amounts of insurance so that, in each policy
year, such policy has the same tabular mortality cost as an otherwise
similar policy issued on the standard basis that provides higher
uniform amounts of insurance, adjusted premiums and present values
for such substandard policy may be calculated as if it were issued to
provide such higher uniform amounts of insurance on the standard
basis.
(h) All adjusted premiums and present values referred to in this
article shall for all policies of ordinary insurance be calculated on
the basis of (1) the Commissioners 1980 Standard Ordinary Mortality
Table or (2) at the election of the company for any one or more
specified plans of life insurance, the Commissioners 1980 Standard
Ordinary Mortality Table with Ten-Year Select Mortality Factors;
shall for all policies of industrial insurance be calculated on the
basis of the Commissioners 1961 Standard Industrial Mortality Table;
and shall for all policies issued in a particular calendar year be
calculated on the basis of a rate of interest not exceeding the
nonforfeiture interest rate as defined in this section for policies
issued in that calendar year. Provided, however, that:
(1) At the option of the company, calculations for all policies
issued in a particular calendar year may be made on the basis of a
rate of interest not exceeding the nonforfeiture interest rate, as
defined in this section, for policies issued in the immediately
preceding calendar year.
(2) Under any paid-up nonforfeiture benefit, including any paid-up
dividend additions, any cash surrender value available, whether or
not required by Section 10160, shall be calculated on the basis of
the mortality table and rate of interest used in determining the
amount of such paid-up nonforfeiture benefit and paid-up dividend
additions, if any.
(3) A company may calculate the amount of any guaranteed paid-up
nonforfeiture benefit including any paid-up additions under the
policy on the basis of an interest rate no lower than that specified
in the policy for calculating cash surrender values.
(4) In calculating the present value of any paid-up term insurance
with accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than those
shown in the Commissioners 1980 Extended Term Insurance Table for
policies of ordinary insurance and not more than the Commissioners
1961 Industrial Extended Term Insurance Table for policies of
industrial insurance.
(5) For insurance issued on a substandard basis, the calculation
of any such adjusted premiums and present values may be based on
appropriate modifications of the aforementioned tables.
(6) (A) For policies issued prior to the operative date of the
valuation manual, any Commissioners Standard Ordinary mortality
tables, adopted after 1980 by the National Association of Insurance
Commissioners (NAIC), or its successor, that are approved by
regulation promulgated or bulletin issued by the commissioner for use
in determining the minimum nonforfeiture standard may be substituted
for the Commissioners 1980 Standard Ordinary Mortality Table with or
without Ten-Year Select Mortality Factors or for the Commissioners
1980 Extended Term Insurance Table.
(B) For policies issued on or after the operative date of the
valuation manual, the valuation manual shall provide the
Commissioners Standard mortality table for use in determining the
minimum nonforfeiture standard that may be substituted for the
Commissioners 1980 Standard Ordinary Mortality Table with or without
Ten-Year Select Mortality Factors or for the Commissioners 1980
Extended Term Insurance Table. If the commissioner approves by
regulation any Commissioners Standard Ordinary mortality table
adopted by the NAIC for use in determining the minimum nonforfeiture
standard for policies issued on or after the operative date of the
valuation manual then that minimum nonforfeiture standard supersedes
the minimum nonforfeiture standard provided by the valuation manual.
(7) (A) For policies issued prior to the operative date of the
valuation manual, any Commissioners Standard Industrial mortality
tables, adopted after 1980 by the NAIC, or its successor, that are
approved by regulation promulgated or bulletin issued by the
commissioner for use in determining the minimum nonforfeiture
standard may be substituted for the Commissioners 1961 Standard
Industrial Mortality Table or the Commissioners 1961 Industrial
Extended Term Insurance Table.
(B) For policies issued on or after the operative date of the
valuation manual, the valuation manual shall provide the
Commissioners Standard mortality table for use in determining the
minimum nonforfeiture standard that may be substituted for the
Commissioners 1961 Standard Ordinary Mortality Table or the
Commissioners 1961 Industrial Extended Term Insurance Table. If the
commissioner approves by regulation any Commissioners Standard
Ordinary mortality table adopted by the NAIC for use in determining
the minimum nonforfeiture standard for policies issued on or after
the operative date of the valuation manual then that minimum
nonforfeiture standard supersedes the minimum nonforfeiture standard
provided by the valuation manual.
(i) The nonforfeiture interest rate.
(1) For policies issued prior to the operative date of the
valuation manual, the nonforfeiture interest rate per annum for any
policy issued in a particular calendar year shall be equal to 125
percent of the calendar year statutory valuation interest rate for
the policy as defined in the Standard Valuation Law, rounded to the
nearer one-fourth of 1 percent, provided, however, that the
nonforfeiture interest rate shall not be less than 4 percent.
(2) For policies issued on or after the operative date of the
valuation manual, the nonforfeiture interest rate per annum for any
policy issued in a particular calendar year shall be provided by the
valuation manual.
(j) Notwithstanding any other provision in this code to the
contrary, any refiling of nonforfeiture values or their methods of
computation for any previously approved policy form that involves
only a change in the interest rate or mortality table used to compute
nonforfeiture values shall not require refiling of any other
provisions of that policy form.
(k) After the effective date of this section, any company may file
with the commissioner a written notice of its election to comply
with this section after a specified date before January 1, 1989,
which shall be the operative date of this section for such company.
If a company makes no such election, the operative date of this
section for such company shall be January 1, 1989.
SEC. 3. Section 10489.1 of the Insurance Code is repealed.
SEC. 4. Section 10489.1 is added to the Insurance Code, to read:
10489.1. (a) This article shall be known as the Standard
Valuation Law.
(b) For the purposes of this article, the following definitions
shall apply:
(1) "Accident and health insurance" means contracts that
incorporate morbidity risk and provide protection against economic
loss resulting from accident, sickness, or medical conditions and as
may be specified in the valuation manual.
(2) "Company" means an entity that (A) has written, issued, or
reinsured life insurance contracts, accident and health insurance
contracts, or deposit-type contracts in this state and has at least
one policy in force or on claim or (B) has written, issued, or
reinsured life insurance contracts, accident and health insurance
contracts, or deposit-type contracts in any state and is required to
hold a certificate of authority to write life insurance, accident and
health insurance, or deposit-type contracts in this state.
(3) "Deposit-type contract" means contracts that do not
incorporate mortality or morbidity risks and as may be specified in
the valuation manual.
(4) "Life insurance" means contracts that incorporate mortality
risk, including annuity and pure endowment contracts, and as may be
specified in the valuation manual.
(5) "NAIC" means the National Association of Insurance
Commissioners.
(6) "Principle-based valuation" means a reserve valuation that
uses one or more methods or one or more assumptions determined by the
insurer and is required to comply with Section 10489.97, as
specified in the valuation manual.
(7) "Valuation manual" means the manual of valuation instructions
adopted by the NAIC as specified in this article or as subsequently
amended.
(c) For the purposes of this article, the following definitions
shall apply on and after the operative date of the valuation manual:
(1) "Appointed actuary" means a qualified actuary who is appointed
in accordance with the valuation manual to prepare the actuarial
opinion required in subdivision (b) of Section 10489.15.
(2) "Policyholder behavior" means any action a policyholder,
contractholder, or any other person with the right to elect options,
such as a certificate holder, may take under a policy or contract
subject to this article, including, but not limited to, lapse,
withdrawal, transfer, deposit, premium payment, loan, annuitization,
or benefit elections prescribed by the policy or contract, but
excluding events of mortality or morbidity that result in benefits
prescribed in their essential aspects by the terms of the policy or
contract.
(3) "Qualified actuary" means an individual who is qualified to
sign the applicable statement of actuarial opinion in accordance with
the American Academy of Actuaries qualification standards for
actuaries signing those statements and who meets the requirements
specified in the valuation manual.
(4) "Tail risk" means a risk that occurs either when the frequency
of low probability events is higher than expected under a normal
probability distribution or when there are observed events of very
significant size or magnitude.
(d) This article and Sections 10480, 10481, 10483, 10484, and
10486 shall apply (1) to the valuation of policies and contracts
subject to this article issued on or after the operative date of the
valuation manual and (2) as provided in Section 10489.3 as to the
valuation of benefits purchased under group annuity and pure
endowment contracts issued prior to that operative date.
SEC. 5. Section 10489.12 is added to the Insurance Code, to read:
10489.12. (a) For policies and contracts issued prior to the
operative date of the valuation manual, both of the following shall
be satisfied:
(1) The commissioner shall annually value, or cause to be valued,
the reserve liabilities (hereinafter called reserves) for all
outstanding life insurance policies and annuity and pure endowment
contracts of every life insurance company doing business in this
state issued prior to the operative date of the valuation manual. In
calculating reserves, the commissioner may use group methods and
approximate averages for fractions of a year or otherwise. In lieu of
the valuation of the reserves required of a foreign or alien
company, the commissioner may accept a valuation made, or caused to
be made, by the insurance supervisory official of any state or other
jurisdiction when the valuation complies with the minimum standard
provided in this article.
(2) Sections 10489.2, 10489.3, 10489.4, 10489.5, 10489.6, 10489.7,
10489.8, 10489.9, 10489.93, and 10489.95 shall apply to all
appropriate policies and contracts subject to this article and issued
prior to the operative date of the valuation manual. Sections
10489.96 and 10489.97 shall not apply to any of those policies and
contracts.
(b) For policies and contracts issued on or after the operative
date of the valuation manual, both of the following shall be
satisfied:
(1) The commissioner shall annually value, or cause to be valued,
the reserves for all outstanding life insurance contracts, annuity
and pure endowment contracts, accident and health contracts, and
deposit-type contracts of every company issued on or after the
operative date of the valuation manual. In lieu of the valuation of
the reserves required of a foreign or alien company, the commissioner
may accept a valuation made, or caused to be made, by the insurance
supervisory official of any state or other jurisdiction when the
valuation complies with the minimum standard provided in this
article.
(2) Sections 10489.96 and 10489.97 shall apply to all policies and
contracts issued on or after the operative date of the valuation
manual.
SEC. 6. Section 10489.15 of the Insurance Code is amended to read:
10489.15. (a) Each of the following shall apply to actuarial
opinions submitted prior to the operative date of the valuation
manual:
(1) For an actuarial opinion, every life insurance company doing
business in this state shall annually submit the opinion of a
qualified actuary as to whether the reserves and related actuarial
items held in support of the policies and contracts specified by the
commissioner by regulation are computed appropriately, are based on
assumptions that satisfy contractual provisions, are consistent with
prior reported amounts, and comply with applicable laws of this
state. The commissioner shall define by regulation the specifics of
this opinion and add any other items deemed to be necessary to its
scope.
(2) (A) For an actuarial analysis of reserves and assets
supporting reserves, every life insurance company, except as exempted
by regulation, shall also annually include in the opinion required
by paragraph (1), an opinion of the same qualified actuary as to
whether the reserves and related actuarial items held in support of
the policies and contracts specified by the commissioner by
regulation, when considered in light of the assets held by the
company with respect to the reserves and related actuarial items,
including, but not limited to, the investment earnings on the assets
and the considerations anticipated to be received and retained under
the policies and contracts, make adequate provision for the company's
obligations under the policies and contracts, including, but not
limited to, the benefits under and expenses associated with the
policies and contracts.
(B) The commissioner may provide by regulation for a transition
period for establishing any higher reserves that the qualified
actuary may deem necessary in order to render the opinion required by
this section.
(3) An opinion required by paragraphs (1) and (2) shall be
governed by the following:
(A) A memorandum, in form and substance acceptable to the
commissioner as specified by regulation, shall be prepared to support
each actuarial opinion.
(B) If the insurance company fails to provide a supporting
memorandum at the request of the commissioner within a period
specified by regulation, or the commissioner determines that the
supporting memorandum provided by the insurance company fails to meet
the standards prescribed by the regulations or is otherwise
unacceptable to the commissioner, the commissioner may engage a
qualified actuary at the expense of the company to review the opinion
and the basis for the opinion and prepare the supporting memorandum
required by the commissioner.
(4) Every opinion required by this subdivision shall be governed
by the following provisions:
(A) The opinion shall be submitted with the annual statement
reflecting the valuation of the reserve liabilities for each year
ending on or after December 31, 1992.
(B) The opinion shall apply to all business in force, including
individual and group health insurance plans, in form and substance
acceptable to the commissioner as specified by regulation.
(C) The opinion shall be based on standards adopted from time to
time by the Actuarial Standards Board and on any additional standards
as the commissioner may by regulation prescribe.
(D) In the case of an opinion required to be submitted by a
foreign or alien company, the commissioner may accept the opinion
filed by that company with the insurance supervisory official of
another state if the commissioner determines that the opinion
reasonably meets the requirements applicable to a company domiciled
in this state.
(E) For the purposes of this paragraph, "qualified actuary" means
a member in good standing of the American Academy of Actuaries who
meets the requirements set forth in the regulation.
(F) The qualified actuary shall be liable for his or her
negligence or other tortious conduct.
(G) Disciplinary action by the commissioner against the company or
the qualified actuary may be defined in regulations by the
commissioner.
(H) Except as provided in subparagraphs (L), (M), and (N),
documents, materials, or other information in the possession or
control of the Department of Insurance that are a memorandum in
support of the opinion, and any other material provided by the
company to the commissioner in connection with the memorandum, shall
be confidential by law and privileged, shall not be subject to
disclosure pursuant to the California Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code), and shall not be subject to subpoena or discovery
or admissible in evidence in any private civil action. However, the
commissioner is authorized to use those documents, materials, or
other information in the furtherance of any regulatory or legal
action brought as a part of the commissioner's official duties.
(I) The commissioner, any person who received documents,
materials, or other information while acting under the authority of
the commissioner, or any person with whom those documents, materials,
or other information are shared pursuant to clause (i) of
subparagraph (J), shall not be permitted or required to testify in
any private civil action concerning those confidential documents,
materials, or information subject to subparagraph (H).
(J) In order to assist in the performance of the commissioner's
duties, the commissioner:
(i) May share documents, materials, or other information,
including the confidential and privileged documents, materials, or
information subject to subparagraph (H), with other state, federal,
and international regulatory agencies, with the NAIC and its
affiliates and subsidiaries, and with state, federal, and
international law enforcement authorities, provided that the
recipient agrees to maintain the confidentiality and privileged
status of the document, material, or other information.
(ii) May receive documents, materials, or information, including
otherwise confidential and privileged documents, materials, or
information, from the NAIC and its affiliates and subsidiaries, and
from regulatory and law enforcement officials of other foreign or
domestic jurisdictions, and shall maintain as confidential or
privileged any document, material, or 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.
(iii) Enter into agreements governing sharing and use of
information consistent with subparagraphs (H) to (J), inclusive.
(K) No waiver of any applicable privilege or claim of
confidentiality in the documents, materials, or information shall
occur as a result of disclosure of the documents, materials, or
information to the commissioner under this section or as a result of
sharing as authorized in subparagraph (J).
(L) A memorandum in support of the opinion, and any other material
provided by the company to the commissioner in connection with the
memorandum, may be subject to subpoena for the purpose of defending
an action seeking damages from the actuary submitting the memorandum
by reason of an action required by this section or by regulations
promulgated pursuant to this section.
(M) The memorandum or the other material may otherwise be released
by the commissioner with the written consent of the company or to
the American Academy of Actuaries upon request stating that the
memorandum or other material is required for the purpose of
professional disciplinary proceedings and setting forth procedures
satisfactory to the commissioner for preserving the confidentiality
of the memorandum or the other material.
(N) Once any portion of the confidential memorandum is cited by
the company in its marketing efforts or is cited before a
governmental agency other than a state insurance department or is
released by the company to the news media, all portions of the
confidential memorandum shall no longer be confidential.
(b) Each of the following shall apply to actuarial opinions
submitted after the operative date of the valuation manual:
(1) For an actuarial opinion, every company with outstanding life
insurance contracts, accident and health insurance contracts, or
deposit-type contracts in this state and subject to regulation by the
commissioner shall annually submit the opinion of the appointed
actuary as to whether the reserves and related actuarial items held
in support of the policies and contracts are computed appropriately,
are based on assumptions that satisfy contractual provisions, are
consistent with prior reported amounts, and comply with applicable
laws of this state. The
valuation manual shall prescribe the specifics of this opinion,
including any items deemed to be necessary to its scope.
(2) For an actuarial analysis of reserves and assets supporting
reserves, every company with outstanding life insurance contracts,
accident and health insurance contracts, or deposit-type contracts in
this state and subject to regulation by the commissioner, except as
exempted in the valuation manual, shall also annually include in the
opinion required by paragraph (1) an opinion of the same appointed
actuary as to whether the reserves and related actuarial items held
in support of the policies and contracts specified in the valuation
manual, when considered in light of the assets held by the company
with respect to the reserves and related actuarial items, including,
but not limited to, the investment earnings on the assets and the
considerations anticipated to be received and retained under the
policies and contracts, adequately provide for the company's
obligations under the policies and contracts, including, but not
limited to, the benefits under and expenses associated with the
policies and contracts.
(3) Every opinion required by this subdivision shall be governed
by both of the following provisions:
(A) A memorandum, in form and substance as specified in the
valuation manual, and acceptable to the commissioner, shall be
prepared to support each actuarial opinion.
(B) If the insurance company fails to provide a supporting
memorandum at the request of the commissioner within a period
specified in the valuation manual, or the commissioner determines
that the supporting memorandum provided by the insurance company
fails to meet the standards prescribed by the valuation manual or is
otherwise unacceptable to the commissioner, the commissioner may
engage a qualified actuary at the expense of the company to review
the opinion and the basis for the opinion and prepare the supporting
memorandum required by the commissioner.
(4) Every opinion subject to this subdivision shall be governed by
the following provisions:
(A) The opinion shall be in form and substance as specified in the
valuation manual and acceptable to the commissioner.
(B) The opinion shall be submitted with the annual statement
reflecting the valuation of the reserve liabilities for each year
ending on or after the operative date of the valuation manual.
(C) The opinion shall apply to all policies and contracts subject
to paragraph (2), plus other actuarial liabilities as may be
specified in the valuation manual.
(D) The opinion shall be based on standards adopted from time to
time by the Actuarial Standards Board or its successor, and on such
additional standards as may be prescribed in the valuation manual.
(E) If an opinion is required to be submitted by a foreign or
alien company, the commissioner may accept the opinion filed by that
company with the insurance supervisory official of another state if
the commissioner determines that the opinion reasonably meets the
requirements applicable to a company domiciled in this state.
(F) The qualified actuary shall be liable for his or her
negligence or other tortious conduct.
(G) Disciplinary action by the commissioner against the company or
the appointed actuary may be defined in regulations by the
commissioner.
(c) Nothing in this section shall be construed to limit the right
of access to, or prohibit the admissibility as evidence in a private
civil action of, any information, documents, data, or other materials
not held for the purposes of this article by the commissioner or a
person acting under the authority of the commissioner, including
nondepartment actuaries and other consultants hired to implement this
article, or a person with whom the commissioner has shared
confidential information pursuant to clause (i) of subparagraph (J)
of paragraph (4) of subdivision (a).
SEC. 7. Section 10489.2 of the Insurance Code is amended to read:
10489.2. For a computation of minimum standard, except as
provided in Sections 10489.3, 10489.4, and 10489.95, the minimum
standard for the valuation of policies and contracts issued prior to
the effective date of the amendments to this section shall be that
provided by the laws in effect immediately prior to that date. Except
as otherwise provided in Sections 10489.3, 10489.4, and 10489.95,
the minimum standard for the valuation of those policies and
contracts shall be the commissioners reserve valuation methods
defined in Sections 10489.5, 10489.6, 10489.9, and 10489.95, 31/2
percent per annum interest, or in the case of life insurance policies
and contracts, other than certain annuity and pure endowment
contracts, issued on or after January 1, 1970, 4 percent per annum
interest for policies issued prior to January 1, 1980, 51/2 percent
per annum interest may be used for single premium life insurance
policies and 41/2 percent per annum interest for all other policies
issued on or after January 1, 1980, and the following tables:
(a) For ordinary policies of life insurance issued on the standard
basis, excluding any disability and accidental death benefits in
those policies--the Commissioners 1941 Standard Ordinary Mortality
Table for policies issued prior to the operative date of subdivision
(a) of Section 10163.1, and the Commissioners 1958 Standard Ordinary
Mortality Table for policies issued on or after the operative date of
subdivision (a) of Section 10163.1, as amended by Chapter 940 of the
Statutes of 1982, and prior to the operative date of Section
10163.2, as amended by Chapter 28 of the Statutes of 1997, provided
that for any category of policies issued on female risks, all
modified net premiums and present values referred to in this article
may be calculated according to an age not more than six years younger
than the actual age of the insured. For policies issued on or after
the original operative date of Section 10163.2, as amended by Chapter
28 of the Statutes of 1997, the following shall apply:
(1) The Commissioners 1980 Standard Ordinary Mortality Table.
(2) At the election of the company for any one or more specified
plans of life insurance, the Commissioners 1980 Standard Ordinary
Mortality Table with Ten-Year Select Mortality Factors.
(3) Any ordinary mortality table, adopted after 1980 by the NAIC,
or its successor, that is approved by regulation promulgated or
bulletin issued by the commissioner for use in determining the
minimum standard of valuation for such policies.
(b) For industrial life insurance policies issued on the standard
basis, excluding any disability and accidental death benefits in the
policies, the 1941 Standard Industrial Mortality Table for policies
issued prior to the operative date of subdivision (b) of Section
10163.1, of the Standard Nonforfeiture Law for Life Insurance as
amended, and for policies issued on or after the operative date the
Commissioners 1961 Standard Industrial Mortality Table or any
industrial mortality table adopted after 1980 by the NAIC that is
approved by regulation promulgated or bulletin issued by the
commissioner for use in determining the minimum standard of valuation
for the policies.
(c) For individual annuity and pure endowment contracts issued
prior to the compliance date of Section 10489.3, excluding any
disability and accidental death benefits in the policies: 1937
Standard Annuity Mortality Table or, at the option of the company,
the Annuity Mortality Table for 1949, Ultimate, or any modification
of these tables approved by the commissioner. However, the minimum
standard for such contracts issued from January 1, 1968, through
December 31, 1968, with commencement of benefits deferred not more
than one year from date of issue, may be, at the option of the
company, 4 percent per annum interest, and for contracts issued from
January 1, 1969, to the compliance date of Section 10489.3, with
commencement of benefits deferred not more than 10 years from the
date of issue and with premiums payable in one sum may be, at the
option of the company, 5 percent per annum interest.
(d) For group annuity and pure endowment contracts, excluding any
disability and accidental death benefits in the policies: the Group
Annuity Mortality Table for 1951, a modification of the table
approved by the commissioner, or, at the option of the company, any
of the tables or modifications of the tables specified for individual
annuity and pure endowment contracts. However, the minimum standard
for annuities and pure endowments purchased or to be purchased prior
to the compliance date of Section 10489.3, under group annuity and
pure endowment contracts with considerations received on or after
January 1, 1968, through December 31, 1968, may be, at the option of
the company, 4 percent per annum interest, and for annuities and pure
endowments purchased or to be purchased prior to the compliance date
of Section 10489.3, under group annuity and pure endowment contracts
with considerations received from January 1, 1969, to the compliance
date of Section 10489.3, may be at the option of the company, 5
percent per annum interest.
(e) For total and permanent disability benefits in or
supplementary to ordinary policies or contracts: for policies or
contracts issued on or after January 1, 1966, the tables of Period 2
disablement rates and the 1930 to 1950 termination rates of the 1952
Disability Study of the Society of Actuaries, with due regard to the
type of benefit or any tables of disablement rates and termination
rates, adopted after 1980 by the NAIC that are approved by regulation
promulgated or bulletin issued by the commissioner for use in
determining the minimum standard of valuation for those policies; for
policies or contracts issued on or after January 1, 1961, and prior
to January 1, 1966, either those tables or, at the option of the
company, the Class (3) Disability Table (1926); and for policies
issued prior to January 1, 1961, the Class (3) Disability Table
(1926). Any such table shall, for active lives, be combined with a
mortality table permitted for calculating the reserves for life
insurance policies.
(f) For accidental death benefits in or supplementary to policies
issued on or after January 1, 1966: the 1959 Accidental Death
Benefits Table or any accidental death benefits table, adopted after
1980 by the NAIC that is approved by regulation promulgated or
bulletin issued by the commissioner for use in determining the
minimum standard of valuation for those policies, for policies issued
on or after January 1, 1961, and prior to January 1, 1966, either
that table or, at the option of the company, the Inter-Company Double
Indemnity Mortality Table; and for policies issued prior to January
1, 1961, the Inter-Company Double Indemnity Mortality Table. Either
table shall be combined with a mortality table for calculating the
reserves for life insurance policies.
(g) For group life insurance, life insurance issued on the
substandard basis and other special benefits: tables approved by the
commissioner.
(h) The commissioner may by bulletin withdraw approval to use
tables that have been replaced by newly adopted tables.
SEC. 8. Section 10489.3 of the Insurance Code is amended to read:
10489.3. (a) Except as provided in Section 10489.4, the minimum
standard of valuation for individual annuity and pure endowment
contracts issued on or after the operative date of this section and
for annuities and pure endowments purchased on or after that
operative date under group annuity and pure endowment contracts,
shall be the commissioners reserve valuation methods defined in
Sections 10489.5 and 10489.6 and the following tables and interest
rates:
(1) For individual annuity and pure endowment contracts issued
prior to January 1, 1980, excluding any disability and accidental
death benefits in those contracts: the 1971 Individual Annuity
Mortality Table, or any modification of this table approved by the
commissioner, and 6 percent per annum interest rate for all contracts
with commencement of benefits deferred not more than 10 years from
the date of issue and with premiums payable in one sum and 4 percent
per annum interest for all other individual annuity and pure
endowment contracts.
(2) For individual single premium immediate annuity contracts
issued on or after January 1, 1980, excluding any disability and
accidental death benefits in those contracts: the 1971 Individual
Annuity Mortality Table or any individual annuity mortality table
adopted after 1980 by the NAIC that is approved by regulation
promulgated or bulletin issued by the commissioner for use in
determining the minimum standard of valuation for these contracts, or
any modification of these tables approved by the commissioner, and
71/2 percent per annum interest.
(3) For individual annuity and pure endowment contracts issued on
or after January 1, 1980, other than single premium immediate annuity
contracts, excluding any disability and accidental death benefits in
those contracts, the 1971 Individual Annuity Mortality Table or any
individual annuity mortality table, adopted after 1980 by the NAIC
that is approved by regulation promulgated or bulletin issued by the
commissioner for use in determining the minimum standard of valuation
for those contracts, or any modification of these tables approved by
the commissioner, and 51/2 percent per annum interest for single
premium deferred annuity and pure endowment contracts and 41/2
percent per annum interest for all other individual annuity and pure
endowment contracts.
(4) For annuities and pure endowments purchased prior to January
1, 1980, under group annuity and pure endowment contracts, excluding
any disability and accidental death benefits purchased under those
contracts: the 1971 Group Annuity Mortality Table or any modification
of this table approved by the commissioner, and 6 percent per annum
interest.
(5) For annuities and pure endowments purchased on or after
January 1, 1980, under group annuity and pure endowment contracts,
excluding any disability and accidental death benefits purchased
under those contracts: the 1971 Group Annuity Mortality Table, or any
group annuity mortality table adopted after 1980 by the NAIC that is
approved by regulation promulgated or bulletin issued by the
commissioner for use in determining the minimum standard of valuation
for annuities and pure endowments, or any modification of these
tables approved by the commissioner, and 71/2 percent interest.
(6) All individual annuity and pure endowment contracts entered
into prior to January 1, 1980, and all annuities and pure endowments
purchased prior to January 1, 1980, under group annuity and pure
endowment contracts shall remain subject to the provisions of Article
3A (commencing with Section 10489.1) as it existed prior to January
1, 1980.
(b) The commissioner may, by bulletin, withdraw approval to use
tables that have been replaced by newly adopted tables.
SEC. 9. Section 10489.4 of the Insurance Code is repealed.
SEC. 10. Section 10489.4 is added to the Insurance Code, to read:
10489.4. (a) The interest rates used in determining the minimum
standard for the valuation of the following shall be the calendar
year statutory valuation interest rates as defined in this section:
(1) Life insurance policies issued in a particular calendar year,
on or after the operative date of Section 10163.2 as amended by
Section 28 of the Statutes of 1997.
(2) Individual annuity and pure endowment contracts issued in a
particular calendar year on or after January 1, 1982.
(3) Annuities and pure endowments purchased in a particular
calendar year on or after January 1, 1982, under group annuity and
pure endowment contracts.
(4) The net increase, if any, in a particular calendar year after
January 1, 1982, in amounts held under guaranteed interest contracts.
(b) (1) The calendar year statutory valuation interest rates,
expressed in the following formulas as "I," shall be determined as
follows and the results rounded to the nearest one-fourth of 1
percent:
(A) For life insurance:
I = .03 + W
(R1- .03) + W/2
(R2- .09)
Where
R1 is the lesser of R and .09,
R2 is the greater of R and .09,
R is the reference interest rate defined in
this section,
W is the weighting factor defined in this
section.
(B) For single premium immediate annuities and for annuity
benefits involving life contingencies arising from other annuities
with cash settlement options and from guaranteed interest contracts
with cash settlement options:
I = .03 + W(R - .03)
Where
R is the reference interest rate defined in this
section,
W is the weighting factor defined in this
section.
(C) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
an issue year basis, except as stated in subparagraph (B), the
formula for life insurance stated in subparagraph (A) shall apply to
annuities and guaranteed interest contracts with guarantee durations
in excess of 10 years and the formula for single premium immediate
annuities stated in subparagraph (B) shall apply to annuities and
guaranteed interest contracts with guarantee duration of 10 years or
less.
(D) For other annuities with no cash settlement options and for
guaranteed interest contracts with no cash settlement options, the
formula for single premium immediate annuities stated in subparagraph
(B) shall apply.
(E) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
a change in fund basis, the formula for single premium immediate
annuities stated in subparagraph (B) shall apply.
(2) However, if the calendar year statutory valuation interest
rate for a life insurance policy issued in any calendar year
determined without reference to this sentence differs from the
corresponding actual rate for similar policies issued in the
immediately preceding calendar year by less than one-half of 1
percent, the calendar year statutory valuation interest rate for the
life insurance policies shall be equal to the corresponding actual
rate for the immediately preceding calendar year. For purposes of
applying the immediately preceding sentence, the calendar year
statutory valuation interest rate for life insurance policies issued
in a calendar year shall be determined for 1980 (using the reference
interest rate defined in 1979) and shall be determined for each
subsequent calendar year regardless of when Section 10163.2, as
amended, becomes operative.
(c) The weighting factors referred to in the formulas stated above
are given in the following tables:
(1) Weighting Factors for Life Insurance:
Guarantee Duration (Years) Weighting Factors
10 or less ................... .50
More than 10, but not more .45
than 20 ......................
More than 20 ................. .35
For life insurance, the guarantee duration is the maximum number
of years the life insurance can remain in force on a basis guaranteed
in the policy or under options to convert to plans of life insurance
with premium rates or nonforfeiture values or both that are
guaranteed in the original policy.
(2) Weighting factors for single premium immediate annuities and
for annuity benefits involving life contingencies arising from other
annuities with cash settlement options and guaranteed interest
contracts with cash settlement options shall be .80.
(3) Weighting factors for other annuities and for guaranteed
interest contracts, except as stated in paragraph (2), shall be as
specified in subparagraphs (A), (B), and (C), according to the rules
and definitions in subparagraphs (D), (E), and (F):
(A) For annuities and guaranteed interest contracts valued on an
issue year basis:
Guarantee Duration (Years) Weighting Factor for
Plan Type
A B C
5 or less: .80 .60 .50
More than 5, but not more .75 .60 .50
than 10:
More than 10, but not .65 .50 .45
more than 20:
More than 20: .45 .35 .35
(B) For annuities and guaranteed interest contracts valued on a
change in fund basis, the factors shown in subparagraph (A) increased
by:
Plan Type
A B C
.15 .25 .05
(C) For annuities and guaranteed interest contracts valued on an
issue year basis, other than those with no cash settlement options,
that do not guarantee interest on considerations received more than
one year after issue or purchase and for annuities and guaranteed
interest contracts valued on a change in fund basis that do not
guarantee interest rates on considerations received more than 12
months beyond the valuation date, the factors shown in subparagraph
(A) or derived in subparagraph (B) increased by:
Plan Type
A B C
.05 .05 .05
(D) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, the
guarantee duration is the number of years for which the contract
guarantees interest rates in excess of the calendar year statutory
valuation interest rate for life insurance policies with guarantee
duration in excess of 20 years. For other annuities with no cash
settlement options and for guaranteed interest contracts with no cash
settlement options, the guaranteed duration is the number of years
from the date of issue or date of purchase to the date annuity
benefits are scheduled to commence.
(E) Plan type as used in the above tables is defined as follows:
(i) For Plan Type A: At any time a policyholder may withdraw funds
only (I) with an adjustment to reflect changes in interest rates or
asset values since receipt of the funds by the insurance company,
(II) without an adjustment but installments over five years or more,
(III) as an immediate life annuity, or (IV) no withdrawal is
permitted.
(ii) For Plan Type B: Before expiration of the interest rate
guarantee, a policyholder may withdraw funds only (I) with an
adjustment to reflect changes in interest rates or asset values since
receipt of the funds by the insurance company, (II) without an
adjustment but in installments over five years or more, or (III) no
withdrawal is permitted. At the end of the interest rate guarantee,
funds may be withdrawn without an adjustment in a single sum or
installments over less than five years.
(iii) For Plan Type C: Policyholder may withdraw funds before
expiration of interest rate guarantee in a single sum or installments
over less than five years either (I) without adjustment to reflect
changes in interest rates or asset values since receipt of the funds
by the insurance company, or (II) subject only to a fixed surrender
charge stipulated in the contract as a percentage of the fund.
(F) A company may elect to value guaranteed interest contracts
with cash settlement options and annuities with cash settlement
options on either an issue year basis or on a change in fund basis.
Guaranteed interest contracts with no cash settlement options and
other annuities with no cash settlement options shall be valued on an
issue year basis. As used in this section, an issue year basis of
valuation refers to a valuation basis under which the interest rate
used to determine the minimum valuation standard for the entire
duration of the annuity or guaranteed interest contract is the
calendar year valuation interest rate for the year of issue or year
of purchase of the annuity or guaranteed interest contract, and the
change in fund basis of valuation refers to a valuation basis under
which the interest rate used to determine the minimum valuation
standard applicable to each change in the fund held under the annuity
or guaranteed interest contract is the calendar year valuation
interest rate for the year of the change in the fund.
(d) The reference interest rate referred to in subdivision (b)
shall be defined as follows:
(1) For life insurance, the lesser of the average over a period of
36 months and the average over a period of 12 months, ending on June
30 of the calendar year preceding the year of issue, of the monthly
average of the composite yield on seasoned corporate bonds, as
published by Moody's Investors Service, Inc.
(2) For single premium immediate annuities and for annuity
benefits involving life contingencies arising from other annuities
with cash settlement options and guaranteed interest contracts with
cash settlement options, the average over a period of 12 months,
ending on June 30 of the calendar year of issue or year of purchase,
of the monthly average of the composite yield on seasoned corporate
bonds, as published by Moody's Investors Service, Inc.
(3) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
a year of issue basis, except as stated in subdivision (b), with
guarantee duration in excess of 10 years, the lesser of the average
over a period of 36 months and the average over a period of 12
months, ending on June 30 of the calendar year of issue or purchase,
of the monthly average of the composite yield on seasoned corporate
bonds, as published by Moody's Investors Service, Inc.
(4) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
a year of issue basis, except as stated in subparagraph (B) of
paragraph (1) of subdivision (c), with guarantee duration of 10 years
or less, the average over a period of 12 months, ending on June 30
of the calendar year of issue or purchase, of the monthly average of
the composite yield on seasoned corporate bonds, as published by
Moody's Investors Service, Inc.
(5) For other annuities with no cash settlement options and for
guaranteed interest contracts with no cash settlement options, the
average over a period of 12 months, ending on June 30 of the calendar
year of issue or purchase, of the monthly average of the composite
yield on seasoned corporate bonds, as published by Moody's Investors
Service, Inc.
(6) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
a change in fund basis, except as stated in subparagraph (B) of
paragraph (1) of subdivision (c), the average over a period of 12
months, ending on June 30 of the calendar year of the change in the
fund, of the monthly average of the composite yield on seasoned
corporate bonds, as published by Moody's Investors Service, Inc.
(e) If the monthly
average of the composite yield on seasoned corporate bonds is no
longer published by Moody's Investors Service, Inc., or in the event
that the NAIC determines that the monthly average of the composite
yield on seasoned corporate bonds as published by Moody's Investors
Service, Inc., is no longer appropriate for the determination of the
reference interest rate, then an alternative method for determination
of the reference interest rate adopted by the NAIC and approved by
regulation promulgated by the commissioner may be substituted.
(f) This section shall apply to all certificates and contracts
issued by a fraternal benefit society.
SEC. 11. Section 10489.5 of the Insurance Code is amended to read:
10489.5. (a) Except as otherwise provided in Sections 10489.6,
10489.9, and 10489.95, reserves according to the commissioners
reserve valuation method, for the life insurance and endowment
benefits of policies providing for a uniform amount of insurance and
requiring the payment of uniform premiums shall be the excess, if
any, of the present value, at the date of valuation, of the future
guaranteed benefits provided for by those policies, over the then
present value of any future modified net premiums therefor. The
modified net premiums for a policy shall be the uniform percentage of
the respective contract premiums for the benefits such that the
present value, at the date of issue of the policy, of all modified
net premiums shall be equal to the sum of the then present value of
the benefits provided for by the policy and the excess of paragraph
(1) over paragraph (2), as follows:
(1) A net level annual premium equal to the present value, at the
date of issue of the benefits provided for after the first policy
year, divided by the present value, at the date of issue, of an
annuity of one per annum payable on the first and each subsequent
anniversary of the policy on which a premium falls due. However, the
net level annual premium shall not exceed the net level annual
premium on the 19-year premium whole life plan for insurance of the
same amount at an age one year higher than the age at issue of the
policy.
(2) A net one-year term premium for the benefits provided for in
the first policy year.
(b) For a life insurance policy issued on or after January 1,
1986, for which the contract premium in the first policy year exceeds
that of the second year and for which no comparable additional
benefit is provided in the first year for the excess and that
provides an endowment benefit or a cash surrender value or a
combination in an amount greater than the excess premium, the reserve
according to the commissioners reserve valuation method as of any
policy anniversary occurring on or before the assumed ending date
defined herein as the first policy anniversary on which the sum of
any endowment benefit and any cash surrender value then available is
greater than the excess premium shall, except as otherwise provided
in Section 10489.9, be the greater of the reserve as of the policy
anniversary calculated as described in subdivision (a) and the
reserve as of the policy anniversary calculated as described in
subdivision (a), but with (1) the value defined in paragraph (1) of
subdivision (a) being reduced by 15 percent of the amount of the
excess first year premium, (2) all present values of benefits and
premiums being determined without reference to premiums or benefits
provided for by the policy after the assumed ending date, (3) the
policy being assumed to mature on that date as an endowment, and (4)
the cash surrender value provided on that date being considered as an
endowment benefit. In making the above comparison, the mortality and
interest bases stated in Sections 10489.2 and 10489.4 shall be used.
(c) Reserves according to the commissioners reserve valuation
method shall be calculated by a method consistent with subdivisions
(a) and (b) for paragraphs (1) to (4), inclusive. However, any extra
premiums charged because of impairments or special hazards shall be
disregarded in the determination of modified net premiums.
(1) Life insurance policies providing for a varying amount of
insurance or requiring the payment of varying premiums.
(2) Group annuity and pure endowment contracts purchased under a
retirement plan or plan of deferred compensation, established or
maintained by an employer (including a partnership or sole
proprietorship) or by an employee organization, or by both, other
than a plan providing individual retirement accounts or individual
retirement annuities pursuant to Section 408 of the Internal Revenue
Code, as now or hereafter amended.
(3) Disability and accidental death benefits in all policies and
contracts.
(4) All other benefits, except life insurance and endowment
benefits in life insurance policies and benefits provided by all
other annuity and pure endowment contracts.
SEC. 12. Section 10489.6 of the Insurance Code is amended to read:
10489.6. (a) This section shall apply to all annuity and pure
endowment contracts other than group annuity and pure endowment
contracts purchased under a retirement plan or plan of deferred
compensation, established or maintained by an employer (including a
partnership or sole proprietorship) or by an employee organization,
or by both, other than a plan providing individual retirement
accounts or individual retirement annuities pursuant to Section 408
of the Internal Revenue Code, as now or hereafter amended.
(b) Reserves according to the commissioners annuity reserve method
for benefits under annuity or pure endowment contracts, excluding
any disability and accidental death benefits in the contracts, shall
be the greatest of the respective excesses of the present values, at
the date of valuation, of the future guaranteed benefits, including
guaranteed nonforfeiture benefits, provided for by the contracts at
the end of each respective contract year, over the present value, at
the date of valuation, of any future valuation considerations derived
from future gross considerations, required by the terms of the
contract, that become payable prior to the end of the respective
contract year. The future guaranteed benefits shall be determined by
using the mortality table, if any, and the interest rate, or rates,
specified in the contracts for determining guaranteed benefits. The
valuation considerations are the portions of the respective gross
considerations applied under the terms of the contracts to determine
nonforfeiture values.
SEC. 13. Section 10489.7 of the Insurance Code is amended to read:
10489.7. (a) A company's aggregate reserves for all life
insurance policies, excluding disability and accidental death
benefits, shall not be less than the aggregate reserves calculated in
accordance with the methods set forth in Sections 10489.5, 10489.6,
10489.9, and 10489.93 and the mortality table or tables and rate or
rates of interest used in calculating nonforfeiture benefits for the
policies.
(b) The aggregate reserves for all policies, contracts, and
benefits shall not be less than the aggregate reserves determined by
the appointed actuary to be necessary to render the opinion required
by Section 10489.15.
SEC. 14. Section 10489.8 of the Insurance Code is amended to read:
10489.8. (a) Reserves for any category of policies, contracts, or
benefits established by the commissioner may be calculated, at the
option of the company, according to any standards that produce
greater aggregate reserves for the category than those calculated
according to the minimum standard provided in this article, but the
rate or rates of interest used for policies and contracts, other than
annuity and pure endowment contracts, shall not be greater than the
corresponding rate or rates of interest used in calculating any
nonforfeiture benefits provided in the policies or contracts.
(b) A company, which adopts at any time a standard of valuation
producing greater aggregate reserves than those calculated according
to the minimum standard provided under this article, may adopt a
lower standard of valuation with the approval of the commissioner,
but not lower than the minimum provided in this article. However, for
the purposes of this section, the holding of additional reserves
previously determined by a qualified actuary to be necessary to
render the opinion required by Section 10489.15 shall not be deemed
to be the adoption of a higher standard of valuation.
SEC. 15. Section 10489.9 of the Insurance Code is amended to read:
10489.9. (a) If in any contract year the gross premium charged by
any life insurer on any policy or contract is less than the
valuation net premium for the policy or contract calculated by the
method used in calculating the reserve thereon but using the minimum
valuation standards of mortality and rate of interest, the minimum
reserve required for such policy or contract shall be the greater of
either the reserve calculated according to the mortality table, rate
of interest, and method actually used for such policy or contract, or
the reserve calculated by the method actually used for such policy
or contract but using the minimum valuation standards of mortality
and rate of interest and replacing the valuation net premium by the
actual gross premium in each contract year for which the valuation
net premium exceeds the actual gross premium. The minimum valuation
standards of mortality and rate of interest referred to in this
section are those standards stated in Sections 10489.2, 10489.3, and
10489.4.
(b) For a life insurance policy issued on or after January 1,
1986, for which the gross premium in the first policy year exceeds
that of the second year and for which no comparable additional
benefit is provided in the first year for such excess and that
provides an endowment benefit or a cash surrender value or a
combination thereof in an amount greater than such excess premium,
the foregoing provisions of this section shall be applied as if the
method actually used in calculating the reserve for such policy were
the method described in Section 10489.5, ignoring the second
paragraph of Section 10489.5. The minimum reserve at each policy
anniversary of such a policy shall be the greater of the minimum
reserve calculated in accordance with Section 10489.5, including the
second paragraph of that section, and the minimum reserve calculated
in accordance with this section.
SEC. 16. Section 10489.93 of the Insurance Code is amended to
read:
10489.93. In the case of a plan of life insurance that provides
for future premium determination, the amounts of which are to be
determined by the insurance company based on then estimates of future
experience, or in the case of a plan of life insurance or annuity
that is of a nature that the minimum reserves cannot be determined by
the methods described in Sections 10489.5, 10489.6, and 10489.9, the
reserves that are held under the plan shall:
(a) Be appropriate in relation to the benefits and the pattern of
premiums for that plan; and
(b) Be computed by a method that is consistent with the principles
of this Standard Valuation Law, as determined by regulations
promulgated by the commissioner.
SEC. 17. Section 10489.94 of the Insurance Code is amended to
read:
10489.94. (a) The commissioner may issue a bulletin to provide
tables of select mortality factors and rules for their use, rules
concerning a minimum standard for the valuation of plans with
nonlevel premiums of benefits, and rules concerning a minimum
standard for the valuation of plans with secondary guarantees. The
bulletin authorized by this subdivision shall have the same force and
effect, and may be enforced by the commissioner to the same extent
and degree, as regulations issued by the commissioner. The
commissioner may also adopt regulations to implement this section.
(b) It is the intent of the Legislature that the bulletin
described in subdivision (a) and the superseding regulations shall
contain the provisions of the NAIC Valuation of Life Insurance
Policies Model Regulation Number 830.
SEC. 18. Section 10489.95 of the Insurance Code is repealed.
SEC. 19. Section 10489.95 is added to the Insurance Code, to read:
10489.95. For accident and health insurance 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 subdivision (b) of Section 10489.12. For
disability and accident and health insurance contracts issued prior
to the operative date of the valuation manual, the minimum standard
of valuation is the standard adopted by the commissioner by
regulation.
SEC. 20. Section 10489.96 is added to the Insurance Code, to read:
10489.96. (a) For policies 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
subdivision (b) of Section 10489.12, except as provided under
subdivision (e) or (g).
(b) (1) The operative date of the valuation manual is January 1 of
the first calendar year following the first July 1 as of which all
the following have occurred:
(A) The valuation manual has been adopted by the NAIC by an
affirmative vote of at least 42 members, or three-fourths of the
members voting, whichever is greater.
(B) The Standard Valuation Law, as amended by the NAIC in 2009, or
legislation including substantially similar terms and provisions,
has been enacted by states representing greater than 75 percent of
the direct premiums written as reported in the following annual
statements submitted for 2008: life, accident, and health annual
statements, health annual statements, or fraternal annual statements.
(C) The Standard Valuation Law, as amended by the NAIC in 2009, or
legislation including substantially similar terms and provisions,
has been enacted by at least 42 of the following 55 jurisdictions:
The 50 states of the United States, American Samoa, the United States
Virgin Islands, the District of Columbia, Guam, and Puerto Rico.
(2) Notwithstanding paragraph (1), the valuation manual shall not
become operative until the commissioner certifies that adequate
funding has been appropriated by the Legislature, and that all other
necessary resources, including, but not limited to, adequate staff,
are available and sufficient to enable the commissioner to carry out
the duties required pursuant to Section 10489.992, and all other
duties imposed on the commissioner pursuant to Senate Bill 696 of the
2015-16 Regular Session. The commissioner shall make that
certification by submitting a letter to the Chairs of the Assembly
Committee on Insurance and the Senate Committee on Insurance stating
that the funding and other necessary resources are available and
sufficient to carry out those duties. The commissioner shall post a
notice on the department's Internet Web site immediately after
submitting that certification letter stating that the certification
letter has been submitted and that the provisions of the valuation
manual are in effect.
(c) Unless a change in the valuation manual specifies a later
effective date, changes to the valuation manual shall be effective on
January 1 following the date when all of the following have
occurred:
(1) The change to the valuation manual has been adopted by the
NAIC by an affirmative vote representing:
(A) At least three-fourths of the members of the NAIC voting, but
not less than a majority of the total membership.
(B) Members of the NAIC representing jurisdictions totaling
greater than 75 percent of the direct premiums written as reported in
the following annual statements most recently available prior to the
vote in subparagraph (A): life, accident, and health annual
statement, health annual statements, or fraternal annual statements.
(2) The commissioner has issued an order adopting the valuation
manual with the changes. The commissioner shall issue the order only
if he or she finds that the conditions set forth in paragraph (1)
have been satisfied.
(d) The valuation manual shall specify all of the following:
(1) Minimum valuation standards for and definitions of the
policies or contracts subject to subdivision (b) of Section 10489.12.
Those minimum valuation standards shall be:
(A) The commissioners reserve valuation method for life insurance
contracts, other than annuity contracts, subject to subdivision (b)
of Section 10489.12.
(B) The commissioners annuity reserve valuation method for annuity
contracts subject to subdivision (b) of Section 10489.12.
(C) Minimum reserves for all other policies or contracts subject
to subdivision (b) of Section 10489.12.
(2) Which policies or contracts or types of policies or contracts
are subject to the requirements of a principle-based valuation in
subdivision (a) of Section 10489.97 and the minimum valuation
standards consistent with those requirements.
(3) For policies and contracts subject to a principle-based
valuation under Section 10489.97:
(A) Requirements for the format of reports to the commissioner
under paragraph (3) of subdivision (b) of Section 10489.97, which
shall include information necessary to determine if the valuation is
appropriate and in compliance with this article.
(B) Assumptions for risks over which the company does not have
significant control or influence.
(C) Procedures for corporate governance and oversight of the
actuarial function, and a process for appropriate waiver or
modification of those procedures.
(4) For policies not subject to a principle-based valuation under
Section 10489.97, the minimum valuation standard that shall either:
(A) Be consistent with the minimum standard of valuation prior to
the operative date of the valuation manual.
(B) Develop reserves that quantify the benefits and guarantees,
and the 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.
(5) Other requirements, including, but not limited to, those
relating to reserve methods, models for measuring risk, generation of
economic scenarios, assumptions, margins, use of company experience,
risk measurement, disclosure, certifications, reports, actuarial
opinions and memorandums, transition rules, and internal controls.
(6) The data and form of the data required pursuant to Section
10489.98, with whom the data is required to be submitted, and may
specify other requirements including data analyses and reporting of
analyses.
(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, or conflicts with,
this code, then the company shall, with respect to those
requirements, comply with the minimum valuation standards prescribed
by the code or by the commissioner by regulation or bulletin.
(f) The commissioner may engage a qualified actuary, at the
expense of the 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 set forth in this article. The
commissioner may rely upon the opinion, regarding the provisions
contained within this article, of a qualified actuary engaged by the
commissioner of another state, district, or territory of the United
States. As used in this subdivision, the term "engage" includes
employment and contracting.
(g) The commissioner may require a company to change any
assumption or method that in the opinion of the commissioner is
necessary in order to comply with the requirements of the valuation
manual or this article, and the company shall adjust the reserves as
required by the commissioner. The commissioner may take other
disciplinary action as permitted pursuant to all other applicable
law.
SEC. 21. Section 10489.97 is added to the Insurance Code, to read:
10489.97. (a) A company shall establish reserves using a
principle-based valuation that meets the following conditions for
policies or contracts as specified in the valuation manual:
(1) Quantify the benefits, guarantees, and the 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,
reflects conditions appropriately adverse to quantify the tail risk.
(2) Incorporate assumptions, risk analysis methods, and financial
models and management techniques that are consistent with, but not
necessarily identical to, those utilized within the company's overall
risk assessment process, while recognizing potential differences in
financial reporting structures and any prescribed assumptions or
methods.
(3) Incorporate assumptions that are derived in one of the
following manners:
(A) The assumption is prescribed in the valuation manual.
(B) For assumptions that are not prescribed, the assumptions
shall:
(i) Be established utilizing the company's available experience,
to the extent it is relevant and statistically credible.
(ii) To the extent that company data is not available, relevant,
or statistically credible, be established utilizing other relevant,
statistically credible experience.
(4) Provide margins for uncertainty, including adverse deviation
and estimation error, such that the greater the uncertainty the
larger the margin and resulting reserve.
(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 the following:
(1) Establish procedures for corporate governance and oversight of
the actuarial valuation function consistent with those described in
the valuation manual.
(2) Provide to the commissioner and the board of directors of the
company an annual certification of the effectiveness of the internal
controls with respect to the principle-based valuation. The controls
shall be designed to ensure that all material risks inherent in the
liabilities and associated assets subject to such 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.
(3) Develop, and file with the commissioner upon request, a
principle-based valuation report that complies with standards
prescribed in the valuation manual.
(c) A principle-based valuation may include a prescribed formulaic
reserve component.
SEC. 22. Section 10489.98 is added to the Insurance Code, to read:
10489.98. A company shall submit mortality, morbidity,
policyholder behavior, or expense experience and other data as
prescribed in the valuation manual.
SEC. 23. Section 10489.99 is added to the Insurance Code, to read:
10489.99. (a) For purposes of this section, "confidential
information" shall mean:
(1) A memorandum in support of an opinion submitted pursuant to
Section 10489.15 and any other documents, materials, and other
information, including, but not limited to, all working papers, and
copies thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in connection with the memorandum.
(2) All documents, materials, and other information, including,
but not limited to, all working papers, and copies thereof, created,
produced, or obtained by or disclosed to the commissioner or any
other person in the course of an examination made under subdivision
(f) of Section 10489.96. However, if an examination report or other
material prepared in connection with an examination made under
Article 4 (commencing with Section 729) of Chapter 1 of Part 2 of
Division 1 is not held as private and confidential information under
that article, an examination report or other material prepared in
connection with an examination made under subdivision (f) of Section
10489.96 shall not be "confidential information" to the same extent
as if the examination report or other material had been prepared
under Article 4.
(3) Any reports, documents, materials, and other information
developed by a company in support of, or in connection with, an
annual certification by the company under paragraph (2) of
subdivision (b) of Section 10489.97 evaluating the effectiveness of
the company's internal controls with respect to a principle-based
valuation and any other documents, materials, and other information,
including, but not limited to, all working papers, and copies
thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in connection with those reports,
documents, materials, and other information.
(4) Any principle-based valuation report developed under paragraph
(3) of subdivision (b) of Section 10489.97 and any other documents,
materials, and other information, including, but not limited to, all
working papers, and copies thereof, created, produced, or obtained by
or disclosed to the commissioner or any other person in connection
with the report.
(5) All of the following:
(A) Any documents, materials, data, and other information
submitted by a company pursuant to Section 10489.98, to be known
collectively, as "experience data."
(B) Experience data plus any other documents, materials, data, and
other information, including, but not limited to, all working
papers, and copies thereof, created or produced in connection with
the experience data, in each case that includes any potentially
company-identifying or personally identifiable information, that is
provided to or obtained by the commissioner, to be known,
collectively, as "experience materials."
(C) Any other documents, materials, data, and other information,
including, but not limited to, all working papers, and copies
thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in connection with the experience
materials.
(b) (1) Except as provided in this section, a company's
confidential information shall be confidential by law and privileged,
shall not be subject to disclosure pursuant to the California Public
Records Act (Chapter 3.5 (commencing with Section 6250) of Division
7 of Title 1 of the Government Code), and shall not be subject to
subpoena or discovery or admissible in evidence in any private civil
action. However, the commissioner is authorized to use the
confidential information in a regulatory or legal action brought
against the company
as a part of the commissioner's official duties.
(2) The commissioner, any person who received confidential
information while acting under the authority of the commissioner, or
any person with whom those documents, materials, or other information
are shared pursuant to paragraph (3), shall not be permitted or
required to testify in a private civil action concerning any
confidential information.
(3) In order to assist in the performance of the commissioner's
duties, the commissioner may share confidential information with the
following recipients, provided that the recipient agrees, and has the
legal authority to agree, to maintain the confidentiality and
privileged status of the documents, materials, data, and other
information in the same manner and to the same extent as required for
the commissioner:
(A) Other state, federal, and international regulatory agencies
and with the NAIC and its affiliates and subsidiaries.
(B) In the case of confidential information specified in
paragraphs (1) and (4) of subdivision (a) of Section 10489.99 only,
with the Actuarial Board for Counseling and Discipline or its
successor upon request stating that the confidential information is
required for the purpose of professional disciplinary proceedings and
with state, federal, and international law enforcement officials.
(4) The commissioner may receive documents, materials, data, and
other information, including otherwise confidential and privileged
documents, materials, data, or information, from the NAIC and its
affiliates and subsidiaries, from regulatory or law enforcement
officials 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,
data, 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 other
information.
(5) The commissioner may enter into agreements governing sharing
and use of information consistent with this subdivision.
(6) A waiver of any applicable privilege or claim of
confidentiality in the information shall not occur as a result of
disclosure to the commissioner under this section or as a result of
sharing as authorized in paragraph (3).
(7) A privilege established under the law of any state or
jurisdiction that is substantially similar to the privilege
established under subdivision (b) shall be available and enforced in
any proceeding in, and in any court of, this state.
(8) For purposes of this section, "regulatory agency," "law
enforcement agency," and the "NAIC" include, but are not limited to,
their employees, agents, consultants, and contractors.
(c) Notwithstanding subdivision (b), any confidential information
specified in paragraphs (1) and (4) of subdivision (a):
(1) 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 Section
10489.15 or principle-based valuation report developed under
paragraph (3) of subdivision (b) of Section 10489.97 by reason of an
action required by this article or by regulations promulgated
pursuant to this article.
(2) May otherwise be released by the commissioner with the written
consent of the company.
(3) Once any portion of a memorandum in support of an opinion
submitted under Section 10489.15 or a principle-based valuation
report developed pursuant to paragraph (3) of subdivision (b) of
Section 10489.97 is cited by the company in its marketing or is
publicly volunteered to or before a governmental agency other than a
state insurance department or is released by the company to the news
media, all portions of the memorandum or report shall no longer be
confidential.
(d) Nothing in this section shall be construed to limit the right
of access to, or prohibit the admissibility as evidence in a private
civil action of, any information, documents, data, or other materials
not held for the purposes of this article by the commissioner or a
person acting under the authority of the commissioner, including
nondepartment actuaries and other consultants hired to implement this
article, or a person with whom the commissioner has shared
confidential information pursuant to paragraph (3) of subdivision
(b).
SEC. 24. Section 10489.992 is added to the Insurance Code, to
read:
10489.992. (a) (1) The commissioner may hire and assign
department staff, and retain nondepartment actuaries and other
consultants, to assist the commissioner with preparing to implement
and implementing, directly or indirectly, principle-based valuation.
(2) There is in state government the Office of Principle-Based
Reserving within the department. The commissioner may select, for the
Governor's appointment, a person to serve as the head of the office,
who is an expert in preparing to implement and implementing,
directly or indirectly, principle-based valuation. The position
occupied by that person shall be an exempt gubernatorial appointment
within the department exempt from the state civil service system
within the meaning of Section 4 of Article VII of the California
Constitution. The person's salary or compensation shall be fixed by
the commissioner and effective and payable without approval of the
Department of Human Resources, pursuant to Section 19825 of the
Government Code.
(b) (1) Notwithstanding any other law, the commissioner may
annually assess all companies that are subject to this article to
defray costs the department incurs preparing to implement and
implementing, directly or indirectly, principle-based valuation,
including, but not limited to, department salaries and overhead, and
actuary and consultant fees and expenses.
(2) The commissioner shall annually set an "aggregate assessment
amount" and an assessment amount for each tier listed in paragraph
(4). The aggregate assessment amount shall be the amount necessary to
provide sufficient moneys to carry out the projected workload to
implement, directly or indirectly, principle-based valuation. The
annual aggregate assessment amount shall be no less than one million
dollars ($1,000,000).
(3) At least 90 days before finalizing the annual aggregate
assessment amount and assessment amount for the tiers listed in
paragraph (4), the commissioner shall provide notice of the
commissioner's preliminary determination of those amounts. The notice
shall explain how the commissioner derived the amounts and provide
no less than 45 days for interested parties to provide comments.
(4) Not less than 45 days after the due date for comments
specified in paragraph (3), the commissioner shall by bulletin
establish the annual aggregate assessment amount according to the
company's annual premium based on the below tiers. For purposes of
this section, "annual premium" shall mean the gross annual life
insurance premium written by a company in California during the
immediately preceding year as reported in its annual statutory
financial statement. The commissioner may adjust the initial
assessment amount for each tier to ensure a sufficient annual
aggregate assessment amount as defined in paragraph (2) if he or she
adopts a change to the valuation manual pursuant to paragraph (2) of
subdivision (c) of Section 10489.96 that warrants the adjustment, and
provides an accounting explaining the need for the adjustment.
+-----------------------+-------------------------+
|Annual Premium | Initial Annual |
| | Assessment Per Company |
+-----------------------+-------------------------+
|$500,000,001 + | $75,000 |
+-----------------------+-------------------------+
|$400,000,001 - | $50,000 |
|$500,000,000 | |
+-----------------------+-------------------------+
|$300,000,001 - | $40,000 |
|$400,000,000 | |
+-----------------------+-------------------------+
|$200,000,001 - | $30,000 |
|$300,000,000 | |
+-----------------------+-------------------------+
|$150,000,001 - | $20,000 |
|$200,000,000 | |
+-----------------------+-------------------------+
|$100,000,001 - | $10,000 |
|$150,000,000 | |
+-----------------------+-------------------------+
|$50,000,001 - | $5,000 |
|$100,000,000 | |
+-----------------------+-------------------------+
(5) All examinations and analyses of reserves and principle-based
valuation methodologies performed pursuant to Section 730 may be at
the expense of the company, organization, or person examined,
pursuant to Section 736.
(c) Before retaining an independent actuary or consultant under
paragraph (1) of subdivision (a), the commissioner shall require a
written declaration by the actuary or consultant that:
(1) The actuary shall not disclose to another party, other than
the department, and shall protect from unauthorized use, any
confidential information, as defined in Section 10489.99, obtained in
the course of his or her work for the commissioner, unless
authorized to do so by the commissioner or required by law.
(2) The actuary or consultant shall not disclose to another party
and shall protect from unauthorized use, all confidential information
obtained from the department in the course of his or her work for
the commissioner.
(d) Before retaining an independent actuary or consultant under
paragraph (1) of subdivision (a), the commissioner shall require a
written declaration by the actuary or consultant that:
(1) The actuary or consultant will not perform professional
services involving an actual or potential conflict of interest unless
all of the following are satisfied:
(A) The actuary's or consultant's ability to perform the services
fairly is unimpaired.
(B) There has been disclosure of the conflict to all present, or
known prospective, clients or employers of the actuary or consultant
whose interests would be affected by the conflict.
(C) All present, or known prospective, clients or employers of the
actuary or consultant have expressly agreed to the performance of
the services by the actuary or consultant.
(2) The actuary or actuarial firm with which the actuary is
affiliated was not involved in developing the reserves or
principle-based valuation methodology under consideration by the
actuary.
(3) The actuary or consultant has disclosed any financial interest
in the companies whose reserves or principle-based valuation
methodologies may be affected by the actuary's or consultant's
services.
(e) The commissioner may develop and amend regulations to
implement or modify subdivisions (c) and (d). The initial adoption of
the regulations shall be deemed to be an emergency and necessary in
order to address a situation calling for immediate action to avoid
serious harm to the public peace, health, safety, or general welfare.
Any emergency regulation adopted or amended by the commissioner
pursuant to this section shall be adopted or amended in accordance
with Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code and shall remain in
effect for 180 days.
SEC. 25. The Legislature finds and declares that this act, which
amends Section 10489.15 of the Insurance Code, imposes a limitation
on the public's right of access to the meetings of public bodies or
the writings of public officials and agencies within the meaning of
Section 3 of Article I of the California Constitution. Pursuant to
that constitutional provision, the Legislature makes the following
findings to demonstrate the interest protected by this limitation and
the need for protecting that interest:
In order to protect proprietary information, it is necessary to
enact legislation to ensure that information provided pursuant to the
Standard Valuation Law provided pursuant to this act is kept
confidential.
