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;