Chapter 623

623.06(3m)(b)1. 1. The value defined in sub. (3) (a) is reduced by 15 percent of the amount of the excess premium.

623.06(3m)(b)2. 2. All present values of benefits and premiums are determined without reference to premiums or benefits provided by the policy after the assumed ending date.

623.06(3m)(b)3. 3. The policy matures on the assumed ending date as an endowment.

623.06(3m)(b)4. 4. The cash surrender value provided on the assumed ending date is an endowment benefit.

623.06(3m)(c) (c) In making the comparison under par. (b) the mortality and interest bases stated in subs. (2) and (2m) shall be used.

623.06(4) (4) Reserves according to the commissioners reserve valuation method for the following shall be calculated by a method consistent with the principles of sub. (3), except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums:

623.06(4)(a) (a) Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums.

623.06(4)(b) (b) Group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the internal revenue code, as amended.

623.06(4)(c) (c) Disability and accidental death benefits in all policies and contracts.

623.06(4)(d) (d) All other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts.

623.06(4m) (4m) This subsection applies to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the Internal Revenue Code. Reserves according to the commissioners annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values.

623.06(5) (5) 

623.06(5)(a) (a) In no event may a company’s aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after the effective date of this section, be less than the aggregate reserves calculated in accordance with the method set forth in subs. (3) to (4m) and (7) and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies.

623.06(5)(b) (b) In no event may a company’s aggregate reserves for all policies, contracts and benefits be less than the aggregate reserves determined by a qualified actuary in an opinion under sub. (1m) (b) 1. to be necessary to make adequate provision for the company’s obligations under the policies and contracts.

623.06(6) (6) Reserves for all policies and contracts issued prior to the effective date of this subsection may be calculated, at the option of the company, according to any standards that produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by the laws in effect immediately prior to such date. Reserves for any category of policies, contracts or benefits as established by the commissioner, issued on or after the effective date of this subsection, may be calculated, at the option of the company, according to any standards that produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein. Any such company that at any time has adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard herein provided may, with the approval of the commissioner, adopt any lower standard of valuation, but not lower than the minimum herein provided. For the purposes of this subsection, holding any additional reserves that a qualified actuary, in an opinion under sub. (1m) (b) 1., 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.

623.06(7) (7) 

623.06(7)(a) (a) If in any contract year the gross premium charged by any life insurance company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating its reserve but using the minimum valuation standards of mortality and rate of interest under subs. (2) and (2m), the minimum reserve required for the policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for the policy or contract, or the reserve calculated by the method actually used for the policy or contract but using the minimum valuation standards of mortality and rate of interest under subs. (2) and (2m) and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium.

623.06(7)(b) (b)

623.06(7)(b)1. 1. In this paragraph, “excess premium” means the amount by which a gross premium in the first policy year exceeds the gross premium in the 2nd policy year.

623.06(7)(b)2. 2. If a life insurance policy issued on or after January 1, 1984, provides no comparable benefit in the first year for an excess premium and provides an endowment benefit, cash surrender value or both in an amount greater than the excess premium, the minimum reserve at each policy anniversary is the greater of the minimum reserve under subs. (3) to (4) and the minimum reserve under par. (a).

623.06(7)(b)3. 3. For purposes of par. (a), the method used in calculating the reserve of a policy under subd. 2. is specified under subs. (3) to (4).

623.06(7)(c) (c) If a plan of life insurance provides for future determination of premiums based on recent estimates of future experience available at the time of the determination, or if the minimum reserves for a plan of life insurance or an annuity cannot be determined under subs. (3) to (4m) and this subsection, the commissioner shall by rule adopt a method for determining the minimum reserves for the plan or annuity. A rule adopted under this paragraph shall specify a method consistent with the principles of this section and appropriate in relation to the benefits and pattern of premiums for the plan or annuity.

623.06(8m) (8m) For accident and health insurance contracts issued on or after November 13, 2015, but before the operative date of the valuation manual, the minimum standard of valuation is the standard adopted by the commissioner by rule. For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual shall be the minimum standard of valuation required under sub. (1f) (b).

623.06(9) (9) 

623.06(9)(a) (a) For policies and contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under sub. (1f) (b), except as provided in pars. (e) and (g).

623.06(9)(b) (b) The operative date of the valuation manual is January 1 of the first calendar year beginning after the first July 1 as of which all of the following have occurred:

623.06(9)(b)1. 1. The valuation manual has been adopted by the National Association of Insurance Commissioners by an affirmative vote of at least 42 members or three-fourths of the members voting, whichever is greater.

623.06(9)(b)2. 2. The standard valuation law, as amended by the National Association of Insurance Commissioners in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing more than 75 percent of the direct premiums written as reported in all of the following annual statements submitted for 2008:

623.06(9)(b)2.a. a. Life, accident, and health annual statements.

623.06(9)(b)2.b. b. Health annual statements.

623.06(9)(b)2.c. c. Fraternal annual statements.

623.06(9)(b)3. 3. The standard valuation law, as amended by the National Association of Insurance Commissioners in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least 42 of the following 55 jurisdictions:

623.06(9)(b)3.a. a. The 50 states of the United States.

623.06(9)(b)3.b. b. American Samoa.

623.06(9)(b)3.c. c. The American Virgin Islands.

623.06(9)(b)3.d. d. The District of Columbia.

623.06(9)(b)3.e. e. Guam.

623.06(9)(b)3.f. f. Puerto Rico.

623.06(9)(c) (c) Unless a change in the valuation manual specifies a later effective date, changes to the valuation manual shall be effective on the first January 1 after the date when such changes have been adopted by the National Association of Insurance Commissioners by an affirmative vote representing all of the following:

623.06(9)(c)1. 1. At least three-fourths of the members of the National Association of Insurance Commissioners voting, but not less than a majority of the total membership.

623.06(9)(c)2. 2. Members of the National Association of Insurance Commissioners representing the jurisdictions specified in par. (b) 3. with more than 75 percent of the direct premiums written as reported in all of the following annual statements most recently available before the vote under subd. 1.:

623.06(9)(c)2.a. a. Life, accident, and health annual statements.

623.06(9)(c)2.b. b. Health annual statements.

623.06(9)(c)2.c. c. Fraternal annual statements.

623.06(9)(d) (d) The valuation manual must specify all of the following:

623.06(9)(d)1. 1. Minimum valuation standards for and definitions of the policies and contracts subject to sub. (1f) (b). The minimum valuation standards shall be all of the following:

623.06(9)(d)1.a. a. The commissioners reserve valuation method for life insurance contracts, other than annuity contracts, subject to sub. (1f) (b).

623.06(9)(d)1.b. b. The commissioners annuity reserve valuation method for annuity contracts subject to sub. (1f) (b).

623.06(9)(d)1.c. c. Minimum reserves for all other policies and contracts subject to sub. (1f) (b).

623.06(9)(d)2. 2. Which policies or contracts, or types of policies or contracts, are subject to the requirements of a principle-based valuation in sub. (10) (a) and the minimum valuation standards consistent with those requirements.

623.06(9)(d)3. 3. For policies and contracts subject to a principle-based valuation under sub. (10), all of the following:

623.06(9)(d)3.a. a. Requirements for the format of reports to the commissioner under sub. (10) (b) 3., which reports shall include information necessary to determine if the valuation is appropriate and in compliance with this section.

623.06(9)(d)3.b. b. Requirements regarding the treatment of risks over which the insurance company does not have significant control or influence.

623.06(9)(d)3.c. c. Procedures for corporate governance and oversight of the actuarial function and a process for appropriate waiver or modification of such procedures.

623.06(9)(d)4. 4. The minimum valuation standard for policies not subject to a principle-based valuation under sub. (10), which minimum valuation standard shall be the greater of the following:

623.06(9)(d)4.a. a. Reserves that are consistent with the minimum standard of valuation before the operative date of the valuation manual.

623.06(9)(d)4.b. b. Reserves that quantify 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. This does not preclude, for policies with significant tail risk, reflecting in the reserve conditions appropriately adverse to quantify that tail risk.

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.