Chapter 623

623.06(9)(d)5. 5. Other requirements, including those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of insurance company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memoranda, transition rules, and internal controls.

623.06(9)(d)6. 6. The data and form of the data required under sub. (11) and to whom the data must be submitted. The valuation manual may specify other related requirements, including data analyses and reporting of analyses.

623.06(9)(e) (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 this section, the insurance company shall, with respect to such requirements, comply with minimum valuation standards prescribed by the commissioner by rule.

623.06(9)(f) (f) The commissioner may engage a qualified actuary, at the expense of the insurance 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 in this section. The commissioner may rely on the opinion, regarding provisions in this section, of a qualified actuary engaged by the commissioner of another state or district or territory of the United States. As used in this paragraph, the term “engage” includes both “employ” and “contract with.”

623.06(9)(g) (g) The commissioner may require an insurance company to make any change to an assumption or method that, in the opinion of the commissioner, is necessary to comply with the requirements of the valuation manual or this section. An insurance company shall adjust the reserves as required by the commissioner. The commissioner may take any disciplinary action permitted under ss. 601.41 (4) and 601.64.

623.06(9)(h) (h)

623.06(9)(h)1. 1. The commissioner may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in Wisconsin from the requirements of this subsection if all of the following are satisfied:

623.06(9)(h)1.a. a. The commissioner has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing.

623.06(9)(h)1.b. b. The company computes reserves using assumptions and methods used before the operative date of the valuation manual in addition to any requirements established by the commissioner and promulgated by rule.

623.06(9)(h)2. 2. For policy forms and product lines for which a company is granted an exemption under subd. 1., subs. (1f) (a), (1m), and (2) to (7) apply, and any reference to the valuation manual does not apply.

623.06(10) (10) 

623.06(10)(a) (a) For policies and contracts issued on or after the operative date of the valuation manual, an insurer must establish reserves for policies and contracts as specified in the valuation manual using a principle-based valuation that does all of the following:

623.06(10)(a)1. 1. Quantifies the benefits, guarantees, and 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, the principle-based valuation should reflect conditions appropriately adverse to quantify the tail risk.

623.06(10)(a)2. 2. Incorporates assumptions, risk analysis methods and financial models, and management techniques that are consistent with, but not necessarily identical with, those used within the company’s overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods.

623.06(10)(a)3. 3. Incorporates assumptions that are derived in one of the following ways:

623.06(10)(a)3.a. a. The assumption is prescribed in the valuation manual.

623.06(10)(a)3.b. b. For an assumption that is not prescribed in the valuation manual, the assumption is established using the company’s available experience to the extent it is relevant and statistically credible. To the extent that company data is not available, relevant, or statistically credible, the assumption is established using other relevant, statistically credible experience.

623.06(10)(a)4. 4. Provides margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty, the larger the margin and resulting reserve.

623.06(10)(b) (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 all of the following:

623.06(10)(b)1. 1. Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.

623.06(10)(b)2. 2. Provide to the commissioner and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. The internal controls shall be designed to ensure that all material risks inherent in the liabilities and associated assets subject to the 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.

623.06(10)(b)3. 3. Develop, and file with the commissioner upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.

623.06(10)(c) (c) A principle-based valuation may include a prescribed formulaic reserve component.

623.06(11) (11) Beginning on the operative date of the valuation manual, a company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data for all policies and contracts in force as prescribed in the valuation manual.

623.06(12) (12) 

623.06(12)(a) (a) In this subsection:

623.06(12)(a)1. 1. “Experience data” means any documents, materials, data, or other information submitted by a company under sub. (11).

623.06(12)(a)2. 2. “Experience materials” means any documents, materials, data, or other information, including all working papers and copies of working papers, created or produced in connection with experience data, in each case that include any potentially company-identifying or personally identifiable information, that is provided to or obtained by the commissioner, together with any experience data.

623.06(12)(am) (am) For purposes of pars. (b) and (c), all of the following are confidential information:

623.06(12)(am)1. 1. A memorandum in support of an opinion submitted under sub. (1m) or (1r) and any other documents, materials, or other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with the memorandum.

623.06(12)(am)2. 2. All documents, materials, and other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in the course of an examination made under sub. (9) (f), except that if an examination report or other material prepared in connection with an examination made under ss. 601.43 and 601.44 is not held as private and confidential information under s. 601.465 (1m) (b), an examination report or other material prepared in connection with an examination made under sub. (9) (f) is not confidential information to the same extent as if the examination report or other material had been prepared under ss. 601.43 and 601.44.

623.06(12)(am)3. 3. Any reports, documents, materials, or other information developed by a company in support of, or in connection with, an annual certification by the company under sub. (10) (b) 2. evaluating the effectiveness of the company’s internal controls with respect to a principle-based valuation and any other documents, materials, or other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with the reports, documents, materials, and other information.

623.06(12)(am)4. 4. Any principle-based valuation report developed under sub. (10) (b) 3. and any other documents, materials, or other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with the report.

623.06(12)(am)5. 5. Experience data, experience materials, and any other documents, materials, data, or other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with experience materials.

623.06(12)(b) (b)

623.06(12)(b)1. 1. Information described as confidential under par. (am) is confidential and privileged; is not subject to receipt, inspection, or copying under s. 19.35 (1); is not subject to subpoena; and is not subject to discovery or admissible in evidence in any private civil action. The commissioner is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the commissioner’s official duties.

623.06(12)(b)2. 2. Neither the commissioner nor any person who received confidential information while acting under the authority of the commissioner may testify in any private civil action concerning any confidential information.

623.06(12)(b)3. 3.

623.06(12)(b)3.a. a. In furtherance of the performance of the commissioner’s regulatory duties, the commissioner may share confidential information with other state, federal, and international regulatory agencies; the National Association of Insurance Commissioners and its affiliates and subsidiaries; the Actuarial Board for Counseling and Discipline or its successor, in the case of confidential information under par. (am) 1. and 4. only, upon request stating that the confidential information is required for the purposes of professional disciplinary proceedings; and state, federal, and international law enforcement agencies.

623.06(12)(b)3.b. b. Confidential information may be shared under subd. 3. a. only if the recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of such documents, materials, data, and other information in the same manner and to the same extent as required for the commissioner.

623.06(12)(b)3.c. c. The commissioner may receive documents, materials, or other information, including otherwise confidential and privileged documents, materials, data, or information from the National Association of Insurance Commissioners and its affiliates and subsidiaries, from regulatory or law enforcement agencies 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, 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 information.

623.06(12)(b)3.d. d. The commissioner may enter into agreements governing sharing and use of information consistent with this subsection.

623.06(12)(b)3.e. e. No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure of such information or documents to the commissioner under this subsection or as a result of the commissioner sharing such information or documents as authorized in this subsection.

623.06(12)(b)3.f. f. A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this subsection shall be available and enforced in any proceeding in, and in any court of, this state.

623.06(12)(c) (c) Notwithstanding par. (b), any confidential information specified in par. (am) 1. and 4. is subject to all of the following:

623.06(12)(c)1. 1. The confidential information 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 sub. (1m) or (1r) or the principle-based valuation report developed under sub. (10) (b) 3. by reason of an action required by this section or rules promulgated under this section.

623.06(12)(c)2. 2. The confidential information may otherwise be released by the commissioner with the written consent of the company.

623.06(12)(c)3. 3. If any portion of a memorandum in support of an opinion submitted under sub. (1m) or (1r) or any portion of the principle-based valuation report developed under sub. (10) (b) 3. is cited by the company in its marketing, is publicly volunteered to or before a government agency other than a state insurance department, or is released by the company to the news media, all portions of such memorandum or report shall no longer be confidential.

623.06(13) (13) 

623.06(13)(a) (a) Except for subs. (1), (1f) (b), (1r), and (8m) to (12), this section shall become effective on the same date as does s. 632.43.

623.06(13)(b) (b) Subsections (1), (1f) (b), (1r), and (8m) to (12) shall become effective on November 13, 2015.

623.06(13)(c) (c) The provisions of this section shall supersede all provisions of law inconsistent or in conflict therewith.

623.06 History History: 1973 c. 303; 1977 c. 153 ss. 2, 4, 6; 1977 c. 273; 1977 c. 339 ss. 17, 44; Stats. 1977 s. 623.06; 1979 c. 110 s. 60 (13); 1981 c. 307 ss. 1x to 6, 13; 1989 a. 56; 1993 a. 490; 1995 a. 396; 1999 a. 85; 2001 a. 103; 2011 a. 257; 2015 a. 90.

623.06 Cross-reference Cross-reference: See also ch. Ins 50, Wis. adm. code.

623.11 623.11 Amount of compulsory surplus.

623.11(1) (1) Determination of amount. Except as provided in sub. (3), the commissioner shall, when necessary, determine the amount of compulsory surplus that an insurer is required to have in order not to be financially hazardous under s. 645.41 (4), as an amount that will provide reasonable security against contingencies affecting the insurer’s financial position that are not fully covered by reserves or by reinsurance.

623.11(1)(a) (a) Types of contingencies. The commissioner shall consider the risks of:

623.11(1)(a)1. 1. Increases in the frequency or severity of losses beyond the levels contemplated by the rates charged;

623.11(1)(a)2. 2. Increases in expenses beyond those contemplated by the rates charged;

623.11(1)(a)3. 3. Decreases in the value of or the return on invested assets below those planned on;

623.11(1)(a)4. 4. Changes in economic conditions that would make liquidity more important than contemplated and would force untimely sale of assets or prevent timely investments;

623.11(1)(a)5. 5. Currency devaluation to which the insurer may be subject; and

623.11(1)(a)6. 6. Any other contingencies the commissioner can identify which may affect the insurer’s operations.

623.11(1)(b) (b) Controlling factors. In making the determination under this subsection, the commissioner shall take into account the following factors:

623.11(1)(b)1. 1. The most reliable information available as to the magnitude of the various risks under par. (a);

623.11(1)(b)2. 2. The extent to which the risks in par. (a) are independent of each other or are related, and whether any dependency is direct or inverse;

623.11(1)(b)3. 3. The insurer’s recent history of profits or losses;

623.11(1)(b)4. 4. The extent to which the insurer has provided protection against the contingencies in other ways than the establishment of surplus, including redundancy of premiums; adjustability of contracts under their terms; investment valuation reserves whether voluntary or mandatory; appropriate reinsurance; the use of conservative actuarial assumptions to provide a margin of security; reserve adjustments after rate increases for policies written at earlier and less adequate rates; contingency or catastrophe reserves; diversification of assets and underwriting risks;

623.11(1)(b)5. 5. Independent judgments of the soundness of the insurer’s operations, as evidenced by the ratings of reliable professional financial reporting services; and

623.11(1)(b)6. 6. Any other relevant factors.

623.11(2) (2) Rules. Except as provided in sub. (3), the commissioner may, subject to adjustment to the circumstances of individual insurers in accordance with the factors in sub. (1) (b), establish by rule minimum ratios for the compulsory surplus in relation to any relevant variables, including the following:

623.11(2)(a) (a) Amounts at risk;

623.11(2)(b) (b) Premiums written or premiums earned;

623.11(2)(c) (c) Liabilities;

623.11(2)(d) (d) Equity investments of all or certain kinds in combination with any of the variables under pars. (a) to (c).

623.11(3) (3) Health maintenance organization insurers. The amount of compulsory surplus required of a health maintenance organization insurer is the amount provided in s. 609.97.

623.11 History History: 1971 c. 260; 1979 c. 102; 1989 a. 23.

623.11 Note NOTE: Chapter 260, laws of 1971, which created this chapter of the statutes, contained notes explaining the revision.

623.12 623.12 Amount of security surplus. The security surplus shall be set by the commissioner between 110 percent and 140 percent of the compulsory surplus. In setting the figure the commissioner may consider such factors as the size of the insurer, its recent experience, the volatility of the lines of insurance in which it engages and any other relevant factors.

623.12 History History: 1971 c. 260.

623.15 623.15 Fraternal rates and reserves.

623.15(1) (1) Nonreserve fraternals.

623.15(1)(a) (a) In this subsection, “owner” means the owner of a policy or certificate issued by a fraternal in accordance with s. 614.10.

623.15(1)(b) (b) A fraternal may be organized for the transaction of business on a plan set forth in the contract which provides for sufficient contributions by each owner in each year to pay the owner’s share of the actual death claims of the year through advance payments graded according to any mortality table approved by the commissioner, without any reserve, or with such reserve as may accumulate from overpayments of individual owners, in which case each owner shall each year be informed of the owner’s credit and of the cost of the owner’s insurance.

623.15(2) (2) Rates. Every fraternal shall collect regular premiums for each coverage it provides at adequate rates that are approved by the commissioner or conform to standards set in rules promulgated by the commissioner.

623.15(3) (3) Reserves. The reserves of a fraternal are subject to the same requirements as those of ch. 611 insurers writing the same coverages except that the commissioner may authorize the use of suitable fraternal mortality tables or other appropriate tables instead of the tables used by ch. 611 insurers.

623.15 History History: 1975 c. 373, 421; 1989 a. 336; 1997 a. 177.

623.15 Cross-reference Cross-reference: See also s. Ins 1.01, Wis. adm. code.

623.15 Annotation Legislative Council Note, 1975: Sub. (1) continues s. 208.18 with a change from a specified mortality table to one approved by the commissioner. A nonreserve society can be perfectly sound actuarially and should be permitted if it is. The natural premium basis contemplated by this section is sound but not very attractive in the market.