Chapter Ins 50

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

Ins 50.79(2)(b)5. 5. Documentation of assumptions made for:

Ins 50.79(2)(b)5.a. a. Default costs;

Ins 50.79(2)(b)5.b. b. Bond call function;

Ins 50.79(2)(b)5.c. c. Mortgage prepayment function;

Ins 50.79(2)(b)5.d. d. Determining market value for assets sold due to disinvestment strategy; and

Ins 50.79(2)(b)5.e. e. Determining yield on assets acquired through the investment strategy.

Ins 50.79(2)(c) (c) Analysis basis:

Ins 50.79(2)(c)1. 1. Methodology;

Ins 50.79(2)(c)2. 2. Rationale for inclusion/exclusion of different blocks of business and how pertinent risks were analyzed;

Ins 50.79(2)(c)3. 3. Rationale for degree of rigor in analyzing different blocks of business, including the rationale for the level of materiality that was used in determining how rigorously to analyze different blocks of business;

Ins 50.79(2)(c)4. 4. Criteria for determining asset adequacy, including the precise basis for determining if assets are adequate to cover reserves under moderately adverse conditions or other conditions as specified in relevant actuarial standards of practice; and

Ins 50.79(2)(c)5. 5. Whether the effect of federal income taxes was considered and the method of treating reinsurance in the asset adequacy analysis.

Ins 50.79(2)(d) (d) Summary of material changes in methods, procedures, or assumptions from prior year’s asset adequacy analysis.

Ins 50.79(2)(e) (e) Summary of results.

Ins 50.79(2)(f) (f) Conclusions.

Ins 50.79(3) (3) Details of the regulatory asset adequacy issues summary.

Ins 50.79(3)(a) (a) The regulatory asset adequacy issues summary shall include all of the following:

Ins 50.79(3)(a)1. 1. Descriptions of the scenarios tested, including whether those scenarios are stochastic or deterministic, and the sensitivity testing done relative to those scenarios. If negative ending surplus results under certain tests in the aggregate, the actuary shall describe those tests and the amount of additional reserve as of the valuation date which, if held, would eliminate the negative aggregate surplus values. Ending surplus values shall be determined by either extending the projection period until the in force and associated assets and liabilities at the end of the projection period are immaterial or by adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in force.

Ins 50.79(3)(a)2. 2. The extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different than the assumptions used in the previous asset adequacy analysis.

Ins 50.79(3)(a)3. 3. The amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but were not subject to analysis for the current opinion.

Ins 50.79(3)(a)4. 4. Comments on any interim results that may be of significant concern to the appointed actuary, including, the impact of any insufficiency of assets to support the payment of benefits and expenses and the establishment of statutory reserves during one or more interim periods.

Ins 50.79(3)(a)5. 5. The methods used by the actuary to recognize the impact of reinsurance on the company’s cash flows, including both assets and liabilities, under each of the scenarios tested.

Ins 50.79(3)(a)6. 6. Whether the actuary has been satisfied that all options whether explicit or embedded in any asset or liability, including, but not limited to, those affecting cash flows embedded in fixed income securities and equity-like features in any investments, have been appropriately considered in the asset adequacy analysis.

Ins 50.79(3)(b) (b) The regulatory asset adequacy issues summary shall contain the name of the company for which the regulatory asset adequacy issues summary is being supplied and shall be signed and dated by the appointed actuary rendering the actuarial opinion.

Ins 50.79(4) (4) Conformity to standards of practice. The memorandum shall include the following statement: “Actuarial methods, considerations and analyses used in the preparation of this memorandum conform to the appropriate standards of practice as promulgated by the actuarial standards board, which standards form the basis for this memorandum.”

Ins 50.79(5) (5) Use of assets supporting the interest maintenance reserve and the asset valuation reserve. An appropriate allocation of assets in the amount of the interest maintenance reserve, whether positive or negative, shall be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the AVR; these AVR assets may not be applied for any other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support. The amount of the assets used for the AVR shall be disclosed in the table of reserves and liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets shall be disclosed in the memorandum.

Ins 50.79(6) (6) Documentation. The appointed actuary shall retain on file, for at least 7 years, sufficient documentation so that it will be possible to determine the procedures followed, the analyses performed, the bases for assumptions and the results obtained.

Ins 50.79 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96; CR 04-071: cr. (1) (e), (2) (a) 6. and 7., (b) 5., (d), (3) and (5), am. (2) (intro.), (a) 4. and 5., (b) 3. and 4., (c) 3. to 5., renum. (2) (d), (e) and (3) to be (2) (e), (f) and (4), sub. (6) renum. from Ins 50.80 (5) Register December 2004 No. 588, eff. 12-31-05; CR 14-008: cr. (1) (f), am. (3) (a) 4. Register August 2014 No. 704, eff. 9-1-14.

subch. VI of ch. Ins 50 Subchapter VI — Risk Retention and Purchasing Groups

Ins 50.85 Ins 50.85 Risk retention groups and risk purchasing groups.

Ins 50.85(1) (1) The commissioner is constituted attorney to receive service of summons, notices, orders, pleadings and all other legal process relating to any court or administrative agency in this state for all risk retention groups and risk purchasing groups as to any proceeding arising out of the business of insurance in this state, insurance activities in this state, or out-of-state activities related to policies on risks within this state.

Ins 50.85(2) (2) A risk retention group or risk purchasing group may not conduct an insurance business or engage in any insurance activity in this state until it registers with the commissioner and designates the commissioner as its agent for the purposes described under sub. (1). If a risk retention group or risk purchasing group fails to designate the commissioner as required by this section, the commissioner is deemed appointed as provided by sub. (1).

Ins 50.85 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96.