Ins 52.22(2)(2) “Covered policies” means the following: subject to the exemptions described in s. Ins 52.21 covered policies are those policies, other than grandfathered policies, of the following policy types:

Ins 52.22(2)(a)(a) Life insurance policies with guaranteed nonlevel gross premiums and/or guaranteed nonlevel benefits, except for flexible premium universal life insurance policies; or,

Ins 52.22(2)(b)(b) Flexible premium universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period.

Ins 52.22(3)(3) “Grandfathered policies” means policies of the types in sub. (2) that were issued prior to January 1, 2015; and ceded, as of December 31, 2014, as part of a reinsurance treaty that would not have met one of the exemptions set forth in s. Ins 52.21, had that section then been in effect.

Ins 52.22(6)(a)(a) Cash meeting the requirements of s. Ins 52.04 (1);

Ins 52.22(6)(b)(b) Securities listed by the securities valuation office meeting the requirements of s. Ins 52.04 (2) and (3), but excluding any synthetic letter of credit, contingent note, credit-linked note, or other similar security that operates in a manner similar to a letter of credit, and excluding any securities issued by the ceding insurer of any of its affiliates; and

Ins 52.22(6)(c)(c) For security held in connection with funds-withheld or modified coinsurance reinsurance treaties, primary security may include any of the following:

Ins 52.22(7)(7) “Required level of primary security” means the dollar amount determined by applying the actuarial method to the risks ceded with respect to covered policies, but not more than the total reserve ceded.

Ins 52.22(9)(9) “Valuation manual” means the valuation manual adopted by the national association of insurance commissioners as described s. 623.06 (9) (b), Stats., with all amendments adopted by the national association of insurance commissioners that are effective for the financial statement date on which credit for reinsurance is claimed.

Ins 52.23(1)(1) Actuarial method. The actuarial method to establish the required level of primary security for each reinsurance treaty subject to this regulation shall be VM-20, applied on a treaty-by-treaty basis, including all relevant definitions, from the valuation manual as then in effect, applied as follows:

Ins 52.23(1)(a)(a) For covered policies described in s. Ins 52.22 (2) (a), the actuarial method is the greater of the deterministic reserve or the net premium reserve regardless of whether the criteria for exemption testing can be met. However, if the covered policies do not meet the requirements of the stochastic reserve exclusion test in the valuation manual, then the actuarial method is the greatest of the deterministic reserve, the stochastic reserve, or the net premium reserve. In addition, if such covered policies are reinsured in a reinsurance treaty that also contains covered policies described in s. Ins 52.22 (2) (b), the ceding insurer may elect to instead use par. (b) below as the actuarial method for the entire reinsurance agreement. Whether this paragraph or par. (b) are used, the actuarial method must comply with any requirements or restrictions that the valuation manual imposes when aggregating these policy types for purposes of principle-based reserve calculations.

Ins 52.23(1)(b)(b) For covered policies described in s. Ins 52.22 (2) (b), the actuarial method is the greatest of the deterministic reserve, the stochastic reserve, or the net premium reserve, regardless of whether the criteria for exemption testing can be met.

Ins 52.23(1)(c)(c) Except as provided in par. (d), the actuarial method is to be applied on a gross basis to all risks with respect to the covered policies as originally issued or assumed by the ceding insurer.

Ins 52.23(1)(d)(d) If the reinsurance treaty cedes less than 100% of the risk with respect to the covered policies then the required level of primary security may be reduced as follows:

Ins 52.23(1)(d)1.1. If a reinsurance treaty cedes only a quota share of some or all of the risks pertaining to the covered policies, the required level of primary security, as well as any adjustment under subd. 3., may be reduced to a pro rata portion in accordance with the percentage of the risk ceded;

Ins 52.23(1)(d)2.2. If the reinsurance treaty in a non-exempt arrangement cedes only the risks pertaining to a secondary guarantee, the required level of primary security may be reduced by an amount determined by applying the actuarial method on a gross basis to all risks, other than risks related to the secondary guarantee, pertaining to the covered policies, except that for covered policies for which the ceding insurer did not elect to apply the provisions of VM-20 to establish statutory reserves, the required level of primary security may be reduced by the statutory reserve retained by the ceding insurer on those covered policies, where the retained reserve of those covered policies should be reflective of any reduction pursuant to the cession of mortality risk on a yearly renewable term basis in an exempt arrangement;