Chapter Ins 2

Ins 2.81(5) (5) Conditions.

Ins 2.81(5)(a) (a) For each plan of insurance with separate rates for smokers and nonsmokers an insurer may use:

Ins 2.81(5)(a)1. 1. Composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits;

Ins 2.81(5)(a)2. 2. Smoker and nonsmoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by s. 623.06 (7), Stats., and composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up nonforfeiture benefits; or

Ins 2.81(5)(a)3. 3. Smoker and nonsmoker mortality to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

Ins 2.81(5)(b) (b) For plans of insurance without separate rates for smokers and nonsmokers the composite mortality tables shall be used.

Ins 2.81(5)(c) (c) For the purpose of determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits, the 2001 CSO mortality table may, at the option of the company for each plan of insurance, be used in its ultimate or select and ultimate form, subject to the restrictions of sub. (6) and s. Ins 2.80 relative to use of the select and ultimate form.

Ins 2.81(5)(d) (d) When the 2001 CSO mortality table is the minimum reserve standard for any plan for a company, the actuarial opinion in the annual statement filed with the commissioner shall be based on an asset adequacy analysis as specified in s. Ins 50.75 (1). The commissioner may exempt a company from this requirement if it only does business in this state and in no other state.

Ins 2.81(5)(e) (e) The following conditions are applicable for plans of insurance using the 2001 CSO preferred class structure mortality table:

Ins 2.81(5)(e)1. 1. For each plan of insurance with separate rates for preferred and standard nonsmoker lives, an insurer may use the super preferred nonsmoker, preferred nonsmoker, and residual standard nonsmoker tables to substitute for the nonsmoker mortality table found in the 2001 CSO mortality table to determine minimum reserves. At the time of election and annually thereafter, except for business valued under the residual standard nonsmoker table, the appointed actuary shall certify that both of the following are true:

Ins 2.81(5)(e)1.a. a. The present value of death benefits over the next 10 years after the valuation date, using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the valuation basic table corresponding to the valuation table being used for that class, and

Ins 2.81(5)(e)1.b. b. The present value of death benefits over the future life of the contracts, using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the valuation basic table corresponding to the valuation table being used for that class.

Ins 2.81(5)(e)2. 2. For each plan of insurance with separate rates for preferred and standard smoker lives, an insurer may use the preferred smoker and residual standard smoker tables to substitute for the smoker mortality table found in the 2001 CSO mortality table to determine minimum reserves. At the time of election and annually thereafter, for business valued under the preferred smoker table, the appointed actuary shall certify that both of the following are true:

Ins 2.81(5)(e)2.a. a. The present value of death benefits over the next 10 years after the valuation date, using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the preferred smoker valuation basic table corresponding to the valuation table being used for that class, and

Ins 2.81(5)(e)2.b. b. The present value of death benefits over the future life of the contracts, using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the preferred smoker valuation basic table.

Ins 2.81(5)(e)3. 3. Unless exempted by the commissioner under s. 600.13, Stats., every insurer using the 2001 CSO preferred class structure mortality table shall annually file with the commissioner, with the NAIC, or with a statistical agent designated by the NAIC and acceptable to the commissioner, statistical reports showing mortality and such other information as the commissioner may deem necessary or expedient for the administration of the provisions of this section. The form of the reports shall be established by the commissioner or the commissioner may require the use of a form acceptable to the commissioner established by the NAIC or by a statistical agent designated by the NAIC.

Ins 2.81 Note Note: The form for the annual report required under s. Ins 2.81 (5) (e) 3. may be obtained from the website of the Office of the Commissioner of Insurance (http://oci.wi.gov) or by writing to the office.

Ins 2.81(5)(e)4. 4. The use of the 2001 CSO preferred class structure mortality table for the valuation of policies issued prior to January 1, 2007 is not permitted in any statutory financial statement in which a company reports, with respect to any policy or portion of a policy coinsured, as specified under subd. 4. a. or b.:

Ins 2.81(5)(e)4.a. a. In cases where the mode of payment of the reinsurance premium is less frequent than the mode of payment of the policy premium, a reserve credit that exceeds, by more than the amount specified in this subdivision paragraph as Y, the gross reserve calculated before reinsurance. Y is the amount of the gross reinsurance premium that provides coverage for the period from the next policy premium due date to the end of the policy year or the next reinsurance premium due date whichever is earlier, and that would be refunded to the ceding entity upon the termination of the policy.

Ins 2.81(5)(e)4.b. b. In cases where the mode of payment of the reinsurance premium is more frequent than the mode of payment of the policy premium, a reserve credit that is less than the gross reserve, calculated before reinsurance, by an amount that is less than the amount specified in this subdivision paragraph as Z. Z is the amount of the gross reinsurance premium that the ceding entity would need to pay the assuming company to provide reinsurance coverage from the period of the next reinsurance premium due date to the next policy premium due date minus any liability established for the proportionate amount not remitted to the reinsurer.

Ins 2.81(5)(e)5. 5. For purposes of the condition described in subd. 4., both the reserve credit and the gross reserve before reinsurance for the mean reserve method shall be defined as the mean reserve minus the deferred premium asset, and for the mid-terminal reserve method shall include the unearned premium reserve. A company may estimate and adjust its accounting on an aggregate basis in order to meet the conditions to use the 2001 CSO preferred class structure table.

Ins 2.81(6) (6) Applicability of the 2001 cso mortality table to s. ins 2.80, valuation of life insurance policies.

Ins 2.81(6)(a) (a) The 2001 CSO mortality table may be used in applying s. Ins 2.80 in the following manner, subject to the transition dates for use of the 2001 CSO mortality table in sub. (4):

Ins 2.81(6)(a)1. 1. Section Ins 2.80 (2) (b) 1. b.: The net level reserve premium is based on the ultimate mortality rates in the 2001 CSO mortality table.

Ins 2.81(6)(a)2. 2. Section Ins 2.80 (3) (b): All calculations are made using the 2001 CSO mortality table, and, if elected, the optional minimum mortality standard for deficiency reserves stipulated in subd. 4. The value of “qx+k+t–1” is the valuation mortality rate for deficiency reserves in policy year k +t, but using the unmodified select mortality rates if modified select mortality rates are used in the computation of deficiency reserves.

Ins 2.81(6)(a)3. 3. Section Ins 2.80 (4) (a): The 2001 CSO mortality table is the minimum standard for basic reserves.

Ins 2.81(6)(a)4. 4. Section Ins 2.80 (4) (b): The 2001 CSO mortality table is the minimum standard for deficiency reserves. If select mortality rates are used, they may be multiplied by X percent for durations in the first segment, subject to the conditions specified in subd. 3. In demonstrating compliance with those conditions, the demonstrations may not combine the results of tests that utilize the 1980 CSO mortality table with those tests that utilize the 2001 CSO mortality table, unless the combination is explicitly required by law or necessary to be in compliance with relevant actuarial standards of practice.

Ins 2.81(6)(a)5. 5. Section Ins 2.80 (5) (f): The valuation mortality table used in determining the tabular cost of insurance shall be the ultimate mortality rates in the 2001 CSO mortality table.

Ins 2.81(6)(a)6. 6. Section Ins 2.80 (5) (j): The calculations specified in s. Ins 2.80 (5) (j) shall use the ultimate mortality rates in the 2001 CSO mortality table.

Ins 2.81(6)(a)7. 7. Section Ins 2.80 (5) (k): The calculations specified in s. Ins 2.80 (5) (k) shall use the ultimate mortality rates in the 2001 CSO mortality table.

Ins 2.81(6)(a)8. 8. Section Ins 2.80 (5) (L): The calculations specified in s. Ins 2.80 (5) (L) shall use the ultimate mortality rates in the 2001 CSO mortality table.

Ins 2.81(6)(a)9. 9. Section Ins 2.80 (6) (a) 2.: The one-year valuation premium shall be calculated using the ultimate mortality rates in the 2001 CSO mortality table.

Ins 2.81(6)(b) (b) Nothing in this subsection shall be construed to expand the applicability of s. Ins 2.80 to include life insurance policies exempted under s. Ins 2.80 (2) (a) and (b).

Ins 2.81(7) (7) Gender-blended tables.

Ins 2.81(7)(a) (a) For any ordinary life insurance policy delivered or issued for delivery in this state on and after January 1, 2005, that utilizes the same premium rates and charges for male and female lives or is issued in circumstances where applicable law does not permit distinctions on the basis of gender, a mortality table that is a blend of the 2001 CSO mortality table (M) and the 2001 CSO mortality table (F) may, at the option of the company for each plan of insurance, be substituted for the 2001 CSO mortality table for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits. No change in minimum valuation standards is implied by this subsection of the regulation.

Ins 2.81(7)(b) (b) The company may choose from among the blended tables developed by the American Academy of Actuaries CSO Task Force and adopted by the NAIC in December 2002.

Ins 2.81 Note Note: The blended tables may be obtained from the website of the Office of the Commissioner of Insurance (http://oci.wi.gov) or by writing to the Office.

Ins 2.81(7)(c) (c) It shall not, in and of itself, be a violation of s. 628.34, Stats., for an insurer to issue the same kind of policy of life insurance on both a sex-distinct and sex-neutral basis.

Ins 2.81(8) (8) Funeral policies.

Ins 2.81(8)(a) (a) For funeral policies, the minimum mortality standard for determining reserve liabilities and nonforfeiture values for both male and female insureds shall be the Ultimate 1980 CSO, except as provided in par. (b).

Ins 2.81(8)(b) (b) For funeral policies issued on or after January 1, 2009, and before January 1, 2012, the 2001 CSO mortality table may be used as the minimum mortality standard for determining reserve liabilities and nonforfeiture values for both male and female insureds.

Ins 2.81(8)(c) (c) If an insurer elects to use the 2001 CSO mortality table as a minimum standard for any funeral policy issued on or after January 1, 2009, and before January 1, 2012, the insurer shall provide, as a part of the regulatory asset adequacy issues summary submitted in support of the insurer’s asset adequacy testing, an annual written notification to the domiciliary commissioner which shall include all of the following:

Ins 2.81(8)(c)1. 1. A complete list of all funeral policy forms that use the 2001 CSO mortality table as a minimum standard.

Ins 2.81(8)(c)2. 2. A certification signed by the appointed actuary stating that the reserve methodology employed by the insurer in determining reserves for the funeral policies issued on or after January 1, 2009, and before January 1, 2012, using the 2001 CSO mortality table as a minimum standard, develops adequate reserves. For purposes of the certification, the funeral policies using the 2001 CSO mortality table as a minimum standard may not be aggregated with any other policies.

Ins 2.81(8)(c)3. 3. Supporting information regarding the adequacy of reserves for funeral policies issued on or after January 1, 2009, and before January 1, 2012, and using the 2001 CSO mortality table as a minimum standard for reserves.

Ins 2.81(8)(d) (d) For funeral policies issued on or after January 1, 2012, the Ultimate 1980 CSO mortality table shall be used as the minimum mortality standard for determining reserve liabilities and nonforfeiture values.

Ins 2.81(9) (9) This section may be enforced under s. 601.41 or 601.64, ch. 645, Stats., or any other enforcement provision of chs. 600 to 646, Stats.

Ins 2.81 History History: CR 04-071: cr. Register December 2004 No. 588, eff. 1-1-05; CR 07-070: am. (2) and (3) (a), cr. (3) (cm), (i), (4) (c) and (5) (e) Register December 2007 No. 624, eff. 1-1-08; corrections in (4) (a) and (b) made under s. 13.92 (4) (b) 7., Stats., Register August 2009 No. 644; CR 09-027: am. (2), (4) (a) and (b), cr. (3) (em), (j) and (8), renum. (8) to be (9) Register September 2009 No. 645, eff. 10-1-09; CR 10-026: am. (4) (c), cr. (5) (e) 4. and 5. Register August 2010 No. 656, eff. 9-1-10; numbering of (5) (e) 5. and corrections in (5) (e) 4. and 5. made under s. 13.92 (4) (b) 1. and 7., Stats., Register August 2010 No. 656.