Chapter Ins 50

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.”

Ins 50.78(2)(f)1m. 1m. The commissioner may approve omission of the language in subd. 1. f. for an opinion filed on behalf of a company doing business only in this state and in no other state.

Ins 50.78(2)(f)2. 2. The appropriate one of the following 2 paragraphs:

Ins 50.78(2)(f)2.a. a. This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion.” or

Ins 50.78(2)(f)2.b. b. “The following material change(s) which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: (Describe the change or changes.)“

Ins 50.78(2)(f)3. 3. “The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company’s future experience may not follow all the assumptions used in the analysis.

Signature of Appointed Actuary

Address of Appointed Actuary

Telephone Number of Appointed Actuary

Date

Ins 50.78(3) (3) Assumptions for new issues. The adoption for new issues or new claims or other new liabilities of an actuarial assumption which differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of this section.

Ins 50.78(4) (4) Adverse opinions. If the appointed actuary is unable to form an opinion, then he or she shall refuse to issue a statement of actuarial opinion. If the appointed actuary’s opinion is adverse or qualified, then he or she shall issue an adverse or qualified actuarial opinion explicitly stating the reason for such opinion. This statement should follow the scope paragraph and precede the opinion paragraph.

Ins 50.78(5) (5) Reliance on information furnished by other persons. If the appointed actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the actuarial opinion, or the appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, the actuarial opinion shall indicate the persons the actuary is relying upon and a precise identification of the items subject to reliance. In addition, the persons on whom the appointed actuary relies shall provide a certification that precisely identifies the items on which the person is providing information and a statement as to the accuracy, completeness or reasonableness, as applicable, of the items. This certification shall include the signature, title, company, address and telephone number of the person rendering the certification, as well as the date on which it is signed.

Ins 50.78(6) (6) Alternate option.

Ins 50.78(6)(a) (a) The commissioner has authority under ch. 623, Stats., to accept the valuation of a foreign insurer when that valuation meets the requirements applicable to a company domiciled in this state in the aggregate. As an alternative to the requirements sub. (2) (f) 1. c., the commissioner may, by written approval issued to a specific insurer, allow the opining actuary to use one or more of the following additional approaches:

Ins 50.78(6)(a)1. 1. A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and the formal written standards and conditions of this state for filing an opinion based on the law of the state of domicile.” If the commissioner chooses to allow this alternative, the commissioner’s approval shall provide instructions with a list of standards and conditions. If a company chooses to use this alternative, the commissioner’s approval, including standards and conditions for that approval in effect on July 1 of a calendar year, shall apply to statements for that calendar year, and they shall remain in effect until they are revised or revoked. The commissioner will not grant approval under this subdivision unless instructions are included with standards and conditions.

Ins 50.78(6)(a)2. 2. A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have verified that the company’s request to file an opinion based on the law of the state of domicile has been approved and that any conditions required by the commissioner for approval of that request have been met.” This alternative may be used only if the commissioner issues a formal written statement of such allowance no later than March 31 of the year it is first effective. It shall remain valid until rescinded or modified by the commissioner. The rescission or modifications shall be issued no later than March 31 of the year they are first effective. Subsequent to that statement being issued, if a company chooses to use this alternative, the company shall file a request to do so, along with justification for its use, no later than April 30 of the year of the opinion to be filed. The request is deemed approved on October 1 of that year if the commissioner has not denied the request by that date.

Ins 50.78(6)(a)3. 3. A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have submitted the required comparison as specified by this state.” This alternative statement may be used only if the commissioner gives written approval to the specific insurer, with instructions for a written list of products, to be added to the table in subd. 3. a., for which the required comparison shall be provided. If a company chooses to use this alternative, the approved instructions in effect on July 1 of a calendar year shall apply to statements for that calendar year, and the approval and instructions shall remain in effect until they are revised or revoked. This alternative is not available unless the commissioner approves and includes instructions. If a company uses this alternative, the appointed actuary shall provide a comparison of the gross nationwide reserves held to the gross nationwide reserves that would be held under NAIC codification standards. The comparison provided by the company is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum. Gross nationwide reserves are the total reserves calculated for the total company in force business directly sold and assumed, indifferent to the state in which the risk resides, without reduction for reinsurance ceded. The information provided shall comply with the commissioner’s instructions and shall include at least all the following:

Ins 50.78(6)(a)3.a. a. A table as follows:

- See PDF for table

Ins 50.78(6)(a)3.b. b. The information listed shall include all products identified by either the state of filing or any other states subscribing to this alternative.

Ins 50.78(6)(a)3.c. c. If there is no codification standard for the type of product or risk in force or if the codification standard does not directly address the type of product or risk in force, the appointed actuary shall provide detailed disclosure of the specific method and assumptions used in determining the reserves held.

Ins 50.78(6)(b) (b) The comparison provided by the company under par. (a) shall be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

Ins 50.78(6)(c) (c) Notwithstanding par. (a), the commissioner may reject an opinion based on the laws and regulations of the state of domicile and require an opinion based on the laws of this state. The commissioner may contract an independent actuary at the company’s expense to prepare and file the opinion unless a company provides the required opinion within sixty days of the date the commissioner demands that the company provide such an opinion or such other period of time determined by the commissioner after consultation with the company. The paragraph does not limit or restrict the penalties or other consequence that otherwise apply for failure to timely file the required opinion.

Ins 50.78 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96; CR 04-071: am. (1) (intro.), (2) (bg) 1., 3., (c) (intro.), (d), (eg), (f) 1. c., e., and 3., r. (1) (e) 2. and 3., (2) (c) 1. and 2., renum. (1) (e) 4. to 6. to be (1) (e) 2. to 4., r. and recr. (2) (b), (e), and (5), cr. (2) (f) 1. f. and g., 1m., and (6) Register December 2004 No. 588, eff. 12-31-05.

Ins 50.79 Ins 50.79 Description of the actuarial memorandum including an asset adequacy analysis and regulatory asset adequacy issues summary.

Ins 50.79(1) (1) General.

Ins 50.79(1)(a) (a) In accordance with subch. IV and ch. 623, Stats., the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of his or her opinion regarding the reserves under a s. Ins 50.78 opinion. The memorandum shall be made available for examination by the commissioner upon his or her request but shall be returned to the company after such examination and shall not be subject to automatic filing with the commissioner.

Ins 50.79(1)(b) (b) In preparing the memorandum, the appointed actuary may rely on, and include as a part of his or her own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of s. Ins 50.75 (2), with respect to the areas covered in such memoranda, and so state in their memoranda.

Ins 50.79(1)(c) (c) If the commissioner requests a memorandum and no such memorandum exists or if the commissioner finds that the analysis described in the memorandum fails to meet the standards of the actuarial standards board or the standards and requirements of this subchapter, the commissioner may designate a qualified actuary to review the opinion and prepare such supporting memorandum as is required for review. The reasonable and necessary expense of the independent review shall be paid by the company but shall be directed and controlled by the commissioner.

Ins 50.79(1)(d) (d) The reviewing actuary shall have the same status as an examiner for purposes of obtaining data from the company and the work papers and documentation of the reviewing actuary shall be retained by the commissioner; provided, however, that any information provided by the company to the reviewing actuary and included in the work papers shall be considered as material provided by the company to the commissioner and shall be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the commissioner pursuant to the statute governing this subchapter and as permitted by s. 601.465, Stats. The reviewing actuary shall not be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer pursuant to this subchapter for any one of the current year or the preceding three years.

Ins 50.79(1)(e) (e) In accordance with subch. IV and ch. 623, Stats., the appointed actuary shall prepare a regulatory asset adequacy issues summary, the contents of which are specified in sub. (3). The regulatory asset adequacy issues summary shall be submitted no later than March 15 of the year following the year for which a statement of actuarial opinion based on asset adequacy is required. The regulatory asset adequacy issues summary is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

Ins 50.79(1)(f) (f) An insurer licensed but not domiciled in this state shall provide the office of the commissioner of insurance a regulatory asset adequacy issues summary described under par. (e) upon request.

Ins 50.79(2) (2) Details of the memorandum section documenting asset adequacy analysis. When an actuarial opinion under s. Ins 50.78 is provided, the memorandum shall demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in s. Ins 50.75 (4) and any additional standards under this subchapter. The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions. It shall specify all of the following:

Ins 50.79(2)(a) (a) For reserves:

Ins 50.79(2)(a)1. 1. Product descriptions including market description, underwriting and other aspects of a risk profile and the specific risks the appointed actuary deems significant;

Ins 50.79(2)(a)2. 2. Source of liability in force;

Ins 50.79(2)(a)3. 3. Reserve method and basis;

Ins 50.79(2)(a)4. 4. Investment reserves;

Ins 50.79(2)(a)5. 5. Reinsurance arrangements;

Ins 50.79(2)(a)6. 6. Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis; and

Ins 50.79(2)(a)7. 7. Documentation of assumptions to test reserves for the following:

Ins 50.79(2)(a)7.a. a. Lapse rates, both base and excess;

Ins 50.79(2)(a)7.b. b. Interest crediting rate strategy;

Ins 50.79(2)(a)7.c. c. Mortality;

Ins 50.79(2)(a)7.d. d. Policyholder dividend strategy;

Ins 50.79(2)(a)7.e. e. Competitor or market interest rate;

Ins 50.79(2)(a)7.f. f. Annuitization rates;

Ins 50.79(2)(a)7.g. g. Commissions and expenses; and

Ins 50.79(2)(a)7.h. h. Morbidity.

Ins 50.79(2)(b) (b) For assets:

Ins 50.79(2)(b)1. 1. Portfolio descriptions, including a risk profile disclosing the quality, distribution and types of assets;

Ins 50.79(2)(b)2. 2. Investment and disinvestment assumptions;

Ins 50.79(2)(b)3. 3. Source of asset data;

Ins 50.79(2)(b)4. 4. Asset valuation bases; and