Chapter Ins 50

Ins 50.67 Ins 50.67 Reserves.

Ins 50.67(1) (1) An insurance company’s aggregate reserves for all policies, contracts and benefits may not be less than the aggregate reserves determined by a qualified actuary in an opinion under this chapter to be necessary to make adequate provision for the company’s obligations under the policies and contracts.

Ins 50.67(2) (2) For the purpose of s. 623.06 (6), Stats., holding any additional reserves that a qualified actuary, in an opinion under this chapter determined to be necessary to make adequate provision for the company’s obligations under the policies and contracts shall not be considered the adoption of a higher standard of valuation.

Ins 50.67 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96.

Ins 50.68 Ins 50.68 Reliance on actuary opinion. An actuarial opinion which is issued by a qualified actuary and required under this subchapter and subch. V is solely for the benefit of the insurer which is the subject of the opinion, the commissioner and the office. It is not for the benefit of any other person and is therefore not to be relied upon by any other person unless reliance is induced by fraud or willful misconduct.

Ins 50.68 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96.

subch. V of ch. Ins 50 Subchapter V — Actuarial Opinion and Memorandum Regulation

Ins 50.70 Ins 50.70 Purpose. The purpose of this rule is to prescribe:

Ins 50.70(1) (1) Guidelines and standards for statements of actuarial opinion which are to be submitted in accordance with subch. IV and ch. 623, Stats., and for memoranda in support of such an opinion.

Ins 50.70(2) (2) Rules applicable to the appointment of an appointed actuary.

Ins 50.70(3) (3) Guidance as to the meaning of “adequacy of reserves.”

Ins 50.70 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96; CR 04-071: r. (2), renum. (3) to be (2), cr. (3) Register December 2004 No. 588, eff. 12-31-05.

Ins 50.71 Ins 50.71 Authority. This rule is issued pursuant to the authority vested in the commissioner under ss. 601.42, 601.43, 601.465, Stats., and ch. 623, Stats.

Ins 50.71 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96; CR 04-071: am. Register December 2004 No. 588, eff. 12-31-05.

Ins 50.72 Ins 50.72 Scope. This subchapter shall apply to all life insurance companies and fraternal benefit societies doing business in this state and to all life insurance companies and fraternal benefit societies which are authorized to reinsure life insurance, annuities or accident and health insurance business in this state. This subchapter shall be applied in a manner that allows the appointed actuary to utilize his or her professional judgment in performing the asset analysis and developing the actuarial opinion and supporting memoranda, consistent with relevant actuarial standards of practice. However, the commissioner may specify specific methods of actuarial analysis and actuarial assumptions when, in the commissioner’s judgment, these specifications are necessary for an acceptable opinion to be rendered relative to the adequacy of reserves and related items. This subchapter shall be applicable to all annual statements filed with the office of the commissioner of insurance. A statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with s. Ins 50.78, and a memorandum in support thereof in accordance with s. Ins 50.79, is required each year.

Ins 50.72 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96; CR 04-071: renum. (1) to be Ins 50.72 and am., r. (2) Register December 2004 No. 588, eff. 12-31-05.

Ins 50.73 Ins 50.73 Definitions. In this subchapter:

Ins 50.73(1) (1) “Actuarial opinion” means the opinion of an appointed actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with s. Ins 50.78 and with applicable actuarial standards of practice.

Ins 50.73(2) (2) “Actuarial standards board” is the board established by the american academy of actuaries to develop and promulgate standards of actuarial practice.

Ins 50.73(3) (3) “Annual statement” means that statement required by s. Ins 50.20 to be filed by the company annually.

Ins 50.73(4) (4) “Appointed actuary” means any individual who is appointed or retained in accordance with the requirements set forth in s. Ins 50.75 (3) to provide the actuarial opinion and supporting memorandum as required by subch. IV and ch. 623, Stats.

Ins 50.73(5) (5) “Asset adequacy analysis” means an analysis that meets the standards and other requirements referred to in s. Ins 50.75 (4). It may take many forms, including, but not limited to, cash flow testing, sensitivity testing or applications of risk theory.

Ins 50.73(6) (6) “AVR” means asset valuation reserve.

Ins 50.73(7) (7) “Commissioner” means the commissioner of insurance of this state.

Ins 50.73(8) (8) “Company” means a life insurance company, fraternal benefit society or reinsurer subject to the provisions of [this] subchapter.

Ins 50.73(9) (9) “Qualified Actuary” means any individual who meets the requirements set forth in s. Ins 50.75 (2).

Ins 50.73 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96; CR 04-071: cr. (intro.) and (6), am. (1), renum. (6) and (7) to be (7) and (8), r. (8) Register December 2004 No. 588, eff. 12-31-05.

Ins 50.75 Ins 50.75 General requirements.

Ins 50.75(1) (1) Submission of statement of actuarial opinion.

Ins 50.75(1)(a) (a) There is to be included on or attached to Page 1 of the annual statement for each year beginning with 1996 the statement of an appointed actuary, entitled “Statement of Actuarial Opinion,” setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with s. Ins 50.78.

Ins 50.75(1)(b) (b) Upon written request by the company, the commissioner may grant an extension of the date for submission of the statement of actuarial opinion.

Ins 50.75(2) (2) Qualified actuary. A qualified actuary is an individual who:

Ins 50.75(2)(a) (a) Is a member in good standing of the American academy of actuaries;

Ins 50.75(2)(b) (b) Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American academy of actuaries qualification standards for actuaries signing such statements;

Ins 50.75(2)(c) (c) Is familiar with the valuation requirements applicable to life and health insurance companies; and

Ins 50.75(2)(d) (d) Has not been found by the commissioner (or if so found has subsequently been reinstated as a qualified actuary), following appropriate notice and hearing to have:

Ins 50.75(2)(d)1. 1. Violated any provision of, or any obligation imposed by, an insurance law or other law in the course of his or her dealings as a qualified actuary;

Ins 50.75(2)(d)2. 2. Been found guilty of fraudulent or dishonest practices;

Ins 50.75(2)(d)3. 3. Demonstrated his or her incompetency, lack of cooperation, or untrustworthiness to act as a qualified actuary;

Ins 50.75(2)(d)4. 4. Submitted to the commissioner during the past 5 years, pursuant to this subchapter, an actuarial opinion or memorandum that the commissioner rejected because it did not meet the provisions of this subchapter including standards set by the actuarial standards board; or

Ins 50.75(2)(d)5. 5. Resigned or been removed as an actuary within the past 5 years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; and

Ins 50.75(2)(e) (e) Has not failed to notify the commissioner of any action taken by any commissioner of any other state similar to that under par. (d).

Ins 50.75(3) (3) Appointed actuary. An “appointed actuary” is a qualified actuary who is appointed or retained to prepare the statement of actuarial opinion required by this subchapter either directly by or by the authority of the board of directors through an executive officer of the company other than the qualified actuary. The company shall give the commissioner timely written notice of the name, title (and, in the case of a consulting actuary, the name of the firm) and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in such notice that the person meets the requirements set forth in sub. (2). Once notice is furnished, no further notice is required with respect to this person, provided that the company shall give the commissioner timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements set forth in sub. (2). If any person appointed or retained as an appointed actuary replaces a previously appointed actuary, the notice shall so state and give the reasons for replacement.

Ins 50.75(4) (4) Standards for asset adequacy analysis. The asset adequacy analysis required by this subchapter:

Ins 50.75(4)(a) (a) Shall conform to the standards of practice as promulgated from time to time by the actuarial standards board and on any additional standards under this subchapter, which standards are to form the basis of the statement of actuarial opinion in accordance with s. Ins 50.78; and

Ins 50.75(4)(b) (b) Shall be based on methods of analysis as are deemed appropriate for such purposes by the actuarial standards board.

Ins 50.75(5) (5) Liabilities to be covered.

Ins 50.75(5)(a) (a) Under authority of ch. 623, Stats., and subch. IV, the statement of actuarial opinion shall apply to all in force business on the statement date regardless of when or where issued. This includes items reported in the annual statement exhibits pertaining to contract reserves for life insurance, annuities, accident and health insurance, and deposit type contracts; liabilities for unpaid claims; and equivalent items in the separate account statement or statements.

Ins 50.75(5)(b) (b) If the appointed actuary determines as the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods set forth in s. 623.06 (3), (3m), (4m) and (7), Stats., and s. Ins 3.17, the company shall establish such additional reserve.

Ins 50.75(5)(c) (c) Additional reserves established under par. (b) and deemed not necessary in subsequent years may be released. Any amounts released must be disclosed in the actuarial opinion for the applicable year. The release of such reserves would not be deemed an adoption of a lower standard of valuation.

Ins 50.75 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96; CR 04-071: am. (1) (a), (3) and (5) (a), r. (1) (b), (c) and (5) (c), renum. (1) (d) and (5) (d) to be (1) (b) and (5) (c) and am. (5) (c) Register December 2004 No. 588, eff. 12-31-05.

Ins 50.76 Ins 50.76 Required opinions. In accordance with subch. IV and ch. 623, Stats., every company doing business in this state shall annually submit the opinion of an appointed actuary as provided for by this subchapter.

Ins 50.76 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96; CR 04-071: r. and recr. Register December 2004 No. 588, eff. 12-31-05.

Ins 50.78 Ins 50.78 Statement of actuarial opinion based on an asset adequacy analysis.

Ins 50.78(1) (1) General description. The statement of actuarial opinion submitted in accordance with this subchapter shall consist of:

Ins 50.78(1)(a) (a) A paragraph identifying the appointed actuary and his or her qualifications;

Ins 50.78(1)(b) (b) A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary’s work, including a tabulation delineating the reserves and related actuarial items which have been analyzed for asset adequacy and the method of analysis, and identifying the reserves and related actuarial items covered by the opinion which have not been so analyzed;

Ins 50.78(1)(c) (c) A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, including anticipated cash flows from currently owned assets and variation in cash flows according to economic scenarios, supported by a statement of each such expert in the form prescribed by sub. (5); and

Ins 50.78(1)(d) (d) An opinion paragraph expressing the appointed actuary’s opinion with respect to the adequacy of the supporting assets to mature the liabilities.

Ins 50.78(1)(e) (e) One or more additional paragraphs will be needed in individual company cases as follows:

Ins 50.78(1)(e)1. 1. If the appointed actuary considers it necessary to state a qualification of his or her opinion;

Ins 50.78(1)(e)2. 2. If the appointed actuary must disclose an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for this opinion.

Ins 50.78(1)(e)3. 3. If the appointed actuary must disclose whether additional reserves of the prior opinion date are released as of this opinion date, and the extent of the release.

Ins 50.78(1)(e)4. 4. If the appointed actuary chooses to add a paragraph briefly describing the assumptions which form the basis for the actuarial opinion.

Ins 50.78(2) (2) Recommended language. The following paragraphs are to be included in the statement of actuarial opinion in accordance with this section. The language provided in this subsection is that which in typical circumstances should be included in a statement of actuarial opinion. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary shall use language which clearly expresses his or her professional judgment. However, in any event the opinion shall retain all pertinent aspects of the language provided in this section.

Ins 50.78(2)(a) (a) The opening paragraph should generally indicate the appointed actuary’s relationship to the company and his or her qualifications to sign the opinion.

Ins 50.78(2)(a)1. 1. For a company actuary, the opening paragraph of the actuarial opinion should read as follows: “I, [name], am [title] of [insurance company name] and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”

Ins 50.78(2)(a)2. 2. For a consulting actuary, the opening paragraph should contain a sentence such as: “I, [name], a member of the American Academy of Actuaries, am associated with the firm of [name of consulting firm]. I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”

Ins 50.78(2)(b) (b) The scope paragraph shall include a statement, and table, such as the following: “I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, [year]. Tabulated below are those reserves and related actuarial items which have been subjected to asset adequacy analysis.

- See PDF for table

- See PDF for table

Ins 50.78(2)(bg) (bg) The tabulation in the scope paragraph required under par. (b) shall conform to the following:

Ins 50.78(2)(bg)1. 1. The additional actuarial reserves are the reserves established under s. Ins 50.75 (5) (b).

Ins 50.78(2)(bg)2. 2. The appointed actuary should indicate the method of analysis, determined in accordance with the standards for asset adequacy analysis referred to in s. Ins 50.75 (4), by means of symbols which should be defined in footnotes to the table.

Ins 50.78(2)(bg)3. 3. The AVR shall be the allocated amount of asset valuation reserve.

Ins 50.78(2)(c) (c) If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph should include a statement such as the following: “I have relied on [name], [title] for [insert description of a portion relied upon such as anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios] and, as certified in the attached statement. I have reviewed the information relied on for reasonableness.”

Ins 50.78(2)(cg) (cg) A statement of reliance on other experts shall be accompanied by a statement by each of such experts in the form prescribed by sub. (5).

Ins 50.78(2)(d) (d) If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph shall also include the following: “My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and such tests of the actuarial calculations as I considered necessary. I also reconciled the underlying basic asset and liability records to [exhibits and schedules listed as applicable] of the company’s current annual statement.”

Ins 50.78(2)(e) (e) If the appointed actuary has not examined the underlying records, but has relied upon data, such as listings and summaries of policies in force or asset records, prepared by the company, the reliance paragraph shall include a statement such as: “In forming my opinion on [specify types of reserves] I relied upon data prepared by [name and title of company officer certifying in force records or other data] as certified in the attached statements. I evaluated that data for reasonableness and consistency. I also reconciled that data to [exhibits and schedules to be listed as applicable] of the company’s current annual statement. In other respects, my examination included review of the actuarial assumptions and actuarial methods used and tests of the calculations I considered necessary.”

Ins 50.78(2)(eg) (eg) A section described in par. (e) shall be accompanied by a statement by each person relied upon in the form prescribed by sub. (5).

Ins 50.78(2)(f) (f) The opinion paragraph should include all of the following:

Ins 50.78(2)(f)1. 1. “In my opinion the reserves and related actuarial values concerning the statement items identified above:

Ins 50.78(2)(f)1.a. a. Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;

Ins 50.78(2)(f)1.b. b. Are based on actuarial assumptions which produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;

Ins 50.78(2)(f)1.c. c. Meet the requirements of the insurance law and rules of the state of [state of domicile] and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed, unless alternative language is approved under sub. (6).

Ins 50.78(2)(f)1.d. d. Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end (with any exceptions noted below);

Ins 50.78(2)(f)1.e. e. Include provision for all actuarial reserves and related statement items which ought to be established.

Ins 50.78(2)(f)1.f. f. The reserves and related items, 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, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company.

Ins 50.78(2)(f)1.g. g. The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Standards of Practice as promulgated by the actuarial standards board, which standards form the basis of this statement of opinion.”