BILL NUMBER: SB 696 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Roth
FEBRUARY 27, 2015
An act to amend Sections 10159.1, 10163.2, 10489.15, 10489.2,
10489.3, 10489.5, 10489.6, 10489.7, 10489.8, 10489.9, and 10489.93
of, to add Sections 10489.12, 10489.4, 10489.96, 10489.97, 10489.98,
10489.99, and 10489.992 to, and to repeal and add Sections 10489.1
and 10489.95 of, the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 696, as introduced, Roth. Insurance: principle-based valuation.
Existing law governs the issuance of life and disability insurance
and authorizes the Insurance Commissioner to regulate those
insurers. Existing law requires every life and disability insurer
doing business in this state to annually submit the opinion of a
qualified actuary as to whether the reserves and related actuarial
items held in support of the policies and contracts specified by the
commissioner by regulation are computed appropriately, are based on
assumptions that satisfy contractual provisions, are consistent with
prior reported amounts, and comply with applicable state law. Among
other things, existing law requires insurers to calculate the minimum
standard for the valuation of those policies and contracts using
specified mortality tables approved by the commissioner, sets forth
the applicable interest rates, and establishes the reserve
requirements for various types of life and disability policies and
contracts.
This bill would explicitly refer to the body of laws imposing
those requirements, as specified, as the Standard Valuation Law. The
bill would require the commissioner and companies engaging in
specified activities relating to the business of life insurance to
incorporate the methodology employed by a specified manual of
valuation instructions adopted by the National Association of
Insurance Commissioners in making determinations relating to reserve
requirements and the minimum standard of valuation for policies and
contracts, as specified. The bill would require a company to
establish reserves using a principle-based valuation that meets
specified conditions in that manual, including quantifying the
benefits, guarantees, and funding associated with the contracts, and
would require the company to develop and file with the commissioner
upon request, a principle-based valuation report. The bill would
require a company to submit mortality, morbidity, policyholder
behavior, or expense experience and other data as prescribed in the
valuation manual. The bill would require the commissioner to impose
an annual assessment on each insurer, based on the insurer's gross
annual life insurance premium written by an insurer in California
during the immediately preceding year, thereby imposing a tax. The
bill would exempt certain information submitted by a company to the
commissioner from disclosure pursuant to the California Public
Records Act and would provide that it is not subject to subpoena or
discovery or admissible in evidence in any private civil action. The
bill would also authorize the commissioner to hire and assign
department staff, and retain nondepartmental actuaries and other
consultants, to assist the commissioner in implementing
principle-based valuation.
Existing constitutional provisions require that a statute that
limits the right of access to the meetings of public bodies or the
writings of public officials and agencies be adopted with findings
demonstrating the interest protected by the limitation and the need
for protecting that interest.
This bill would make legislative findings to that effect.
This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10159.1 of the Insurance Code is amended to
read:
10159.1. (a) This article is applicable
only to policies and contracts issued on or after the operative date
as to such policies or contracts of this article.
(b) The term "operative date of the valuation manual" means the
January 1 of the first calendar year that the valuation manual, as
defined in Section 10489.1, is effective.
SEC. 2. Section 10163.2 of the Insurance Code is amended to read:
10163.2. (a) This section shall apply to all policies issued on
or after the operative date of this section as defined herein. Except
as provided in subdivision (g), the adjusted premiums for any policy
shall be calculated on an annual basis and shall be such uniform
percentage of the respective premiums specified in the policy for
each policy year, excluding amounts payable as extra premiums to
cover impairments or special hazards and also excluding any uniform
annual contract charge or policy fee specified in the policy in a
statement of the method to be used in calculating the cash surrender
values and paid-up nonforfeiture benefits, that the present value, at
the date of issue of the policy, of all adjusted premiums shall be
equal to the sum of (1) the then present value of the future
guaranteed benefits provided for by the policy; (2) 1 percent of
either the amount of insurance, if the insurance be uniform in
amount, or the average amount of insurance at the beginning of each
of the first 10 policy years; and (3) 125 percent of the
nonforfeiture net level premium as hereinafter defined. Provided,
however, that in applying the percentage specified in (3) no
nonforfeiture net level premium shall be deemed to exceed 4 percent
of either the amount of insurance, if the insurance be uniform in
amount, or the average amount of insurance at the beginning of each
of the first 10 policy years. The date of issue of a policy for the
purpose of this section shall be the date as of which the rated age
of the insured is determined.
(b) The nonforfeiture net level premium shall be equal to the
present value, at the date of issue of the policy, of the guaranteed
benefits provided for by the policy, divided by the present value, at
the date of issue of the policy, of an annuity of 1 percent per
annum payable on the date of issue of the policy and on each
anniversary of such policy on which a premium falls due.
(c) In the case of policies which cause on a basis guaranteed in
the policy, unscheduled changes in benefits or premiums, or which
provide an option for changes in benefits or premiums other than a
change to a new policy, the adjusted premiums and present values
shall initially be calculated on the assumption that future benefits
and premiums do not change from those stipulated at the date of issue
of the policy. At the time of any such change in the benefits or
premiums the future adjusted premiums, nonforfeiture net level
premiums and present values shall be recalculated on the assumption
that future benefits and premiums do not change from those stipulated
by the policy immediately after the change.
(d) Except as otherwise provided in subdivision (g), the
recalculated future adjusted premiums for any such policy shall be
such uniform percentage of the respective future premiums specified
in the policy for each policy year, excluding amounts payable as
extra premiums to cover impairments and special hazards, and also
excluding any uniform annual contract charge or policy fee specified
in the policy in a statement of the method to be used in calculating
the cash surrender values and paid-up nonforfeiture benefits, that
the present value, at the time of change to the newly defined
benefits or premiums, of all such future adjusted premiums shall be
equal to the excess of (1) the sum of (A) the then present value of
the then future guaranteed benefits provided for by the policy and
(B) the additional expense allowance, if any, over (2) the then cash
surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
(e) The additional expense allowance, at the time of the change to
the newly defined benefits or premiums, shall be the sum of (1) 1
percent of the excess, if positive, of the average amount of
insurance at the beginning of each of the first 10 policy years
subsequent to the change over the average amount of insurance prior
to the change at the beginning of each of the first 10 policy years
subsequent to the time of the most recent previous change, or, if
there has been no previous change, the date of issue of the policy;
and (2) 125 percent of the increase, if positive, in the
nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium shall be
equal to the result obtained by dividing (1) by (2) where:
(1) It equals the sum of:
(A) The nonforfeiture net level premium applicable prior to the
change times the present value of an annuity of 1 percent per annum
payable on each anniversary of the policy on or subsequent to the
date of the change on which a premium would have fallen due had the
change not occurred, and
(B) The present value of the increase in future guaranteed
benefits provided for by the policy, and
(2) It equals the present value of an annuity of 1 percent per
annum payable on each anniversary of the policy on or subsequent to
the date of change on which a premium falls due.
(g) Notwithstanding any other provisions of this section to the
contrary, in the case of a policy issued on a substandard basis which
provides reduced graded amounts of insurance so that, in each policy
year, such policy has the same tabular mortality cost as an
otherwise similar policy issued on the standard basis which provides
higher uniform amounts of insurance, adjusted premiums and present
values for such substandard policy may be calculated as if it were
issued to provide such higher uniform amounts of insurance on the
standard basis.
(h) All adjusted premiums and present values referred to in this
article shall for all policies of ordinary insurance be calculated on
the basis of (1) the Commissioners 1980 Standard Ordinary Mortality
Table or (2) at the election of the company for any one or more
specified plans of life insurance, the Commissioners 1980 Standard
Ordinary Mortality Table with Ten-Year Select Mortality Factors;
shall for all policies of industrial insurance be calculated on the
basis of the Commissioners 1961 Standard Industrial Mortality Table;
and shall for all policies issued in a particular calendar year be
calculated on the basis of a rate of interest not exceeding the
nonforfeiture interest rate as defined in this section for policies
issued in that calendar year. Provided, however, that:
(1) At the option of the company, calculations for all policies
issued in a particular calendar year may be made on the basis of a
rate of interest not exceeding the nonforfeiture interest rate, as
defined in this section, for policies issued in the immediately
preceding calendar year.
(2) Under any paid-up nonforfeiture benefit, including any paid-up
dividend additions, any cash surrender value available, whether or
not required by Section 10160, shall be calculated on the basis of
the mortality table and rate of interest used in determining the
amount of such paid-up nonforfeiture benefit and paid-up dividend
additions, if any.
(3) A company may calculate the amount of any guaranteed paid-up
nonforfeiture benefit including any paid-up additions under the
policy on the basis of an interest rate no lower than that specified
in the policy for calculating cash surrender values.
(4) In calculating the present value of any paid-up term insurance
with accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than those
shown in the Commissioners 1980 Extended Term Insurance Table for
policies of ordinary insurance and not more than the Commissioners
1961 Industrial Extended Term Insurance Table for policies of
industrial insurance.
(5) For insurance issued on a substandard basis, the calculation
of any such adjusted premiums and present values may be based on
appropriate modifications of the aforementioned tables.
(6) Any (A) For
policies issued prior to the operative date of the valuation manual,
any Commissioner's Standard ordinary mortality tables, adopted
after 1980 by the National Association of Insurance Commissioners, or
its successor, that are approved by regulation promulgated or
bulletin issued by the commissioner for use in determining the
minimum nonforfeiture standard may be substituted for the
Commissioners 1980 Standard Ordinary Mortality Table with or without
Ten-Year Select Mortality Factors or for the Commissioners 1980
Extended Term Insurance Table.
(B) For policies issued on or after the operative date of the
valuation manual, the valuation manual shall provide the
Commissioners' Standard mortality table for use in determining the
minimum nonforfeiture standard that may be substituted for the
Commissioners 1980 Standard Ordinary Mortality Table with or without
Ten-year Select Mortality Factors or for the Commissioners 1980
Extended Term Insurance Table. If the commissioner approves by
regulation any Commissioners' Standard ordinary mortality table
adopted by the National Association of Insurance Commissioners for
use in determining the minimum nonforfeiture standard for policies
issued on or after the operative date of the valuation manual then
that minimum nonforfeiture standard supersedes the minimum
nonforfeiture standard provided by the valuation manual.
(7) Any (A) For
policies issued prior to the operative date of the valuation manual,
any Commissioner's Standard industrial mortality tables,
adopted after 1980 by the National Association of Insurance
Commissioners, or its successor, that are approved by regulation
promulgated or bulletin issued by the commissioner for use in
determining the minimum nonforfeiture standard may be substituted for
the Commissioners 1961 Standard Industrial Mortality Table or the
Commissioners 1961 Industrial Extended Term Insurance Table.
(B) For policies issued on or after the operative date of the
valuation manual, the valuation manual shall provide the
Commissioners' Standard mortality table for use in determining the
minimum nonforfeiture standard that may be substituted for the
Commissioners 1961 Standard Ordinary Mortality Table or the
Commissioners 1961 Industrial Extended Term Insurance Table. If the
commissioner approves by regulation any Commissioners' Standard
ordinary mortality table adopted by the National Association of
Insurance Commissioners for use in determining the minimum
nonforfeiture standard for policies issued on or after the operative
date of the valuation manual then that minimum nonforfeiture standard
supersedes the minimum nonforfeiture standard provided by the
valuation manual.
(i) The nonforfeiture interest rate per annum for any
policy issued in a particular calendar year shall be equal to 125
percent of the calendar year statutory valuation interest rate for
such policy as defined in the Standard Valuation Law, rounded to the
nearer one-quarter of 1 percent.
(1) For policies issued prior to the operative date of the
valuation manual, the nonforfeiture interest rate per annum for any
policy issued in a particular calendar year shall be equal to 125
percent of the calendar year statutory valuation interest rate for
the policy as defined in the Standard Valuation Law, rounded to the
nearer one-fourth of 1 percent, provided, however, that the
nonforfeiture interest rate shall not be less that 4 percent.
(2) For policies issued on or after the operative date of the
valuation manual, the nonforfeiture interest rate per annum for any
policy issued in a particular calendar year shall be provided by the
valuation manual.
(j) Notwithstanding any other provision in this code to the
contrary, any refiling of nonforfeiture values or their methods of
computation for any previously approved policy form which involves
only a change in the interest rate or mortality table used to compute
nonforfeiture values shall not require refiling of any other
provisions of that policy form.
(k) After the effective date of this section, any company may file
with the commissioner a written notice of its election to comply
with the provision of this section after a specified date before
January 1, 1989, which shall be the operative date of this section
for such company. If a company makes no such election, the operative
date of this section for such company shall be January 1, 1989.
SEC. 3. Section 10489.1 of the Insurance Code is repealed.
10489.1. This article and Sections 10479, 10480, 10481, 10483,
10484, 10486, and 10489 shall apply to the valuation of policies and
contracts issued on or after the operative date as to policies or
contracts of Article 3a (commencing with Section 10159.1) of Chapter
1 of Part 2 of Division 2 and shall also apply as provided in Section
10489.3 to the valuation of benefits purchased under group annuity
and pure endowment contracts issued prior to such operative date.
SEC. 4. Section 10489.1 is added to the Insurance Code, to read:
10489.1. (a) This article shall be known as the Standard
Valuation Law.
(b) For the purposes of this article, the following definitions
shall apply on or after the operative date of the valuation manual:
(1) "Accident and health insurance" means contracts that
incorporate morbidity risk and provide protection against economic
loss resulting from accident, sickness, or medical conditions and as
may be specified in the valuation manual.
(2) "Appointed actuary" means a qualified actuary who is appointed
in accordance with the valuation manual to prepare the actuarial
opinion required in subdivision (b) of Section 10489.15.
(3) "Company" means an entity, which (A) has written, issued, or
reinsured life insurance contracts, accident and health insurance
contracts, or deposit-type contracts in this state and has at least
one policy in force or on claim or (B) has written, issued, or
reinsured life insurance contracts, accident and health insurance
contracts, or deposit-type contracts in any state and is required to
hold a certificate of authority to write life insurance, accident and
health insurance, or deposit-type contracts in this state.
(4) "Deposit-type contract" means contracts that do not
incorporate mortality or morbidity risks and as may be specified in
the valuation manual.
(5) "Life insurance" means contracts that incorporate mortality
risk, including annuity and pure endowment contracts, and as may be
specified in the valuation manual.
(6) "NAIC" means the National Association of Insurance
Commissioners.
(7) "Policyholder behavior" means any action a policyholder,
contractholder, or any other person with the right to elect options,
such as a certificate holder, may take under a policy or contract
subject to this article, including, but not limited to, lapse,
withdrawal, transfer, deposit, premium payment, loan, annuitization,
or benefit elections prescribed by the policy or contract, but
excluding events of mortality or morbidity that result in benefits
prescribed in their essential aspects by the terms of the policy or
contract.
(8) "Principle-based valuation" means a reserve valuation that
uses one or more methods or one or more assumptions determined by the
insurer and is required to comply with Section 10489.97, as
specified in the valuation manual.
(9) "Qualified actuary" means an individual who is qualified to
sign the applicable statement of actuarial opinion in accordance with
the American Academy of Actuaries qualification standards for
actuaries signing those statements and who meets the requirements
specified in the valuation manual.
(10) "Tail risk" means a risk that occurs either when the
frequency of low probability events is higher than expected under a
normal probability distribution or when there are observed events of
very significant size or magnitude.
(11) "Valuation manual" means the manual of valuation instructions
adopted by the NAIC as specified in this article or as subsequently
amended.
(c) This article and Sections 10480, 10481, 10483, 10484, and
10486 shall apply (1) to the valuation of policies and contracts
subject to this article issued on or after the operative date of the
valuation manual and (2) as provided in Section 10489.3 as to the
valuation of benefits purchased under group annuity and pure
endowment contacts issued prior to that operative date.
SEC. 5. Section 10489.12 is added to the Insurance Code, to read:
10489.12. (a) For policies and contracts issued prior to the
operative date of the valuation manual, both of the following shall
be satisfied:
(1) The commissioner shall annually value, or cause to be valued,
the reserve liabilities (hereinafter called reserves) for all
outstanding life insurance policies and annuity and pure endowment
contracts of every life insurance company doing business in this
state issued prior to the operative date of the valuation manual. In
calculating reserves, the commissioner may use group methods and
approximate averages for fractions of a year or otherwise. In lieu of
the valuation of the reserves required of a foreign or alien
company, the commissioner may accept a valuation made, or caused to
be made, by the insurance supervisory official of any state or other
jurisdiction when the valuation complies with the minimum standard
provided in this article.
(2) Sections 10489.2, 10489.3, 10489.4, 10489.5, 10489.6, 10489.7,
10489.8, 10489.9, 10489.93 and 10489.95 shall apply to all
appropriate policies and contracts subject to this article and issued
prior to the operative date of the valuation manual. Sections
10489.96 and 10489.97 shall not apply to any of those policies and
contracts.
(b) For policies and contracts issued on or after the operative
date of the valuation manual, both of the following shall be
satisfied:
(1) The commissioner shall annually value, or cause to be valued,
the reserves for all outstanding life insurance contracts, annuity
and pure endowment contracts, accident and health contracts, and
deposit-type contracts of every company issued on or after the
operative date of the valuation manual. In lieu of the valuation of
the reserves required of a foreign or alien company, the commissioner
may accept a valuation made, or caused to be made, by the insurance
supervisory official of any state or other jurisdiction when the
valuation complies with the minimum standard provided in this
article.
(2) Sections 10489.96 and 10489.97 shall apply to all policies and
contracts issued on or after the operative date of the valuation
manual.
SEC. 6. Section 10489.15 of the Insurance Code is amended to read:
10489.15. (a) Every life and disability insurer
(1) For an actuarial opinion
prior to the operative date of the valuation manual, every life
insurance company doing business in this state shall annually
submit the opinion of a qualified actuary as to whether the reserves
and related actuarial items held in support of the policies and
contracts specified by the commissioner by regulation are computed
appropriately, are based on assumptions that satisfy contractual
provisions, are consistent with prior reported amounts,
amounts and comply with applicable laws of this
state. The commissioner, by regulation,
commissioner shall define by regulation the
specifics of this opinion and add any other items deemed to be
necessary to its scope.
(b) (1) Every
(2) (A) For an
actuarial analysis of reserves and assets supporting reserves, every
life and disability insurer, insurance
company, except as exempted by or pursuant to
regulation, shall also annually include in the opinion required by
subdivision (a), paragraph (1), an
opinion of the same qualified actuary as to whether the reserves and
related actuarial items held in support of the policies and contracts
specified by the commissioner by regulation, when considered in
light of the assets held by the insurer
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 for the
insurer's company's obligations under
the policies and contracts, including, but not limited to, the
benefits under and expenses associated with the policies and
contracts.
(2)
(B) The commissioner may provide by regulation for a
transition period for establishing any higher reserves that the
qualified actuary may deem necessary in order to render the opinion
required by this section.
(c) The opinion required by either subdivision (a) or subdivision
(b) shall be governed by all of the following provisions:
(3) An opinion required by paragraph (2) shall be governed by the
following:
(A) A memorandum, in form and substance acceptable to the
commissioner as specified by regulation, shall be prepared to support
each actuarial opinion.
(B) If the insurance company fails to provide a supporting
memorandum at the request of the commissioner within a period
specified by regulation, or the commissioner determines that the
supporting memorandum provided by the insurance company fails to meet
the standards prescribed by the regulations or is otherwise
unacceptable to the commissioner, the commissioner may engage a
qualified actuary at the expense of the company to review the opinion
and the basis for the opinion and prepare the supporting memorandum
required by the commissioner.
(4) Every opinion required by this subdivision shall be governed
by the following provisions:
(1)
(A) The opinion shall be submitted with the annual
statement reflecting the valuation of the reserve liabilities for
each year ending on or after December 31, 1992.
(2)
(B) The opinion shall apply to all business in force,
including individual and group life and disability
insurance, health insurance plans, in form and
substance acceptable to the commissioner as specified by regulation.
(3)
(C) The opinion shall be based on standards adopted
from time to time by the Actuarial Standards Board and on any
additional standards that as the
commissioner may by regulation prescribe.
(4)
(D) In the case of an opinion required to be submitted
by a foreign or alien insurer, company,
the commissioner may accept the opinion filed by that
insurer company with the insurance supervisory
official of another state if the commissioner determines that the
opinion reasonably meets the requirements applicable to an
insurer a company domiciled in this state.
(5)
(E) For the purposes of this section, "qualified
actuary" means a member in good standing of the American Academy of
Actuaries who meets the requirements set forth in
regulations of the commissioner. the regulation.
(6)
(F) The qualified actuary shall be liable for his or
her negligence or other tortious conduct.
(7)
(G) Disciplinary action by the commissioner against the
insurer company or the qualified
actuary shall may be defined in
regulations by the commissioner.
(H) Except as provided in subparagraphs (L), (M), and (N),
documents, materials, or other information in the possession or
control of the Department of Insurance that are a memorandum in
support of the opinion, and any other material provided by the
company to the commissioner in connection with the memorandum, shall
be confidential by law and privileged, shall not be subject to the
California Public Records Act, shall not be subject to subpoena, and
shall not be subject to discovery or admissible in evidence in any
private civil action. However, the commissioner may use the
documents, materials, or other information in the furtherance of any
regulatory or legal action brought as a part of the commissioner's
official duties.
(I) Neither the commissioner nor any person who received
documents, materials, or other information while acting under the
authority of the commissioner shall be permitted or required to
testify in any private civil action concerning any confidential
documents, materials, or information subject to subparagraph (H).
(J) In order to assist in the performance of the commissioner's
duties, the commissioner may do any of the following:
(i) Share documents, materials, or other information, including
the confidential and privileged documents, materials, or information
subject to subparagraph (H), with other state, federal, and
international regulatory agencies, with the National Association of
Insurance Commissioners and its affiliates and subsidiaries, and with
state, federal, and international law enforcement authorities,
provided that the recipient agrees to maintain the confidentiality
and privileged status of the document, material, or other
information.
(ii) Receive documents, materials, or information, including
otherwise confidential and privileged documents, materials, or
information, from the National Association of Insurance Commissioners
and its affiliates and subsidiaries, and from regulatory and law
enforcement officials of other foreign or domestic jurisdictions, and
shall maintain as confidential or privileged any document, material,
or 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.
(iii) Enter into agreements governing sharing and use of
information consistent with subparagraphs (H) to (J), inclusive.
(K) No waiver of any applicable privilege or claim of
confidentiality in the documents, materials, or information shall
occur as a result of disclosure to the commissioner under this
section or as a result of sharing as authorized in subparagraph (J).
(L) A memorandum in support of the opinion, and any other material
provided by the company to the commissioner in connection with the
memorandum, may be subject to subpoena for the purpose of defending
an action seeking damages from the actuary submitting the memorandum
by reason of an action required by this section or by regulations
promulgated pursuant to this section.
(8) (A) Any memorandum or other material submitted by the insurer
to the commissioner in support of the opinion shall be kept
confidential by the commissioner and shall not be made public,
provided, however, that the
(M) The memorandum or the other
material may otherwise be released by the commissioner
(i) to any party, with the written consent of the
insurer, company or (ii)
to the American Academy of Actuaries upon the
academy's written request and statement
stating that the memorandum or the
other material is required for the purpose of
professional disciplinary proceedings and that the academy
will observe setting forth procedures
satisfactory to the commissioner to preserve
for preserving the confidentiality of the memorandum or the
other material. The entirety of the
(N) Once any portion of the
confidential memorandum shall lose its confidential status
on the occurrence of any of the following events: the citation of any
part of the confidential memorandum is cited by
the insurer company in its marketing
efforts, the citation of any part of the confidential
memorandum by the insurer efforts or is cited
before any a governmental agency other
than a state insurance department, or the release of any
part of the confidential memorandum by the insurer to any news
medium. department or is released by the company to
the news media, all portions of the confidential memorandum shall no
longer be confidential.
(B) Notwithstanding subparagraph (A), the confidential memorandum
shall be subject to subpoena (i) on the commissioner's consent, or
(ii) after notice to the commissioner and all other interested
parties and a hearing in which the superior court determines that (I)
the need for the subpoena outweighs the interests of the insurer or
actuary in preventing release of the confidential memorandum and the
other material, and (II) the public interest and any ongoing
investigation or proceeding conducted by the commissioner will not be
unnecessarily jeopardized by compliance with the subpoena.
(b) (1) For an actuarial opinion of reserves after the operative
date of the valuation manual, every company with outstanding life
insurance contracts, accident and health insurance contracts, or
deposit-type contracts in this state and subject to regulation by the
commissioner shall annually submit the opinion of the appointed
actuary as to whether the reserves and related actuarial items held
in support of the policies and contracts are computed appropriately,
are based on assumptions that satisfy contractual provisions, are
consistent with prior reported amounts, and comply with applicable
laws of this state. The valuation manual shall prescribe the
specifics of this opinion including any items deemed to be necessary
to its scope.
(2) For an actuarial analysis of reserves and assets supporting
reserves, every company with outstanding life insurance contracts,
accident and health insurance contracts or deposit-type contracts in
this state and subject to regulation by the commissioner, except as
exempted in the valuation manual, shall also annually include in the
opinion required by paragraph (1) an opinion of the same appointed
actuary as to whether the reserves and related actuarial items held
in support of the policies and contracts specified in the valuation
manual, 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, adequately provide for the company's
obligations under the policies and contracts, including, but not
limited to, the benefits under and expenses associated with the
policies and contracts.
(d) The
(3) Every opinion required by
subdivision (b) this subdivision shall
be governed by all both of the
following provisions:
(1)
(A) A memorandum, in form and substance as
specified in the valuation manual, and acceptable to the
commissioner as specified by regulation,
commissioner, shall be prepared to support each actuarial
opinion.
(2)
(B) If the insurer insurance
company fails to provide a supporting memorandum at the request
of the commissioner within a period specified by regulation
in the valuation manual, or the commissioner
determines that the supporting memorandum provided by the
insurer insurance company fails to meet the
standards prescribed by the regulations
valuation manual or is otherwise unacceptable to the
commissioner, the commissioner may engage a qualified actuary at the
expense of the insurer company to
review the opinion and the basis for the opinion and prepare the
supporting memorandum as is required by the
commissioner.
(4) Every opinion subject to this subdivision shall be governed by
the following provisions:
(A) The opinion shall be in form and substance as specified in the
valuation manual and acceptable to the commissioner.
(B) The opinion shall be submitted with the annual statement
reflecting the valuation of the reserve liabilities for each year
ending on or after the operative date of the valuation manual.
(C) The opinion shall apply to all policies and contracts subject
to paragraph (2), plus other actuarial liabilities as may be
specified in the valuation manual.
(D) The opinion shall be based on standards adopted from time to
time by the Actuarial Standards Board or its successor, and on such
additional standards as may be prescribed in the valuation manual.
(E) If an opinion is required to be submitted by a foreign or
alien company, the commissioner may accept the opinion filed by that
company with the insurance supervisory official of another state if
the commissioner determines that the opinion reasonably meets the
requirements applicable to a company domiciled in this state.
(F) The qualified actuary shall be liable for his or her
negligence or other tortious conduct.
(G) Disciplinary action by the commissioner against the company or
the appointed actuary may be defined in regulations by the
commissioner.
SEC. 7. Section 10489.2 of the Insurance Code is amended to read:
10489.2. For a computation of minimum standard, except as
provided in Sections 10489.3, 10489.4, and 10489.95, the minimum
standard for the valuation of policies and contracts issued prior to
the effective date of the amendments to this section shall be that
provided by the laws in effect immediately prior to that date.
Except as otherwise provided in Sections 10489.3, 10489.4, and
10489.95, the minimum standard for the valuation of all such
those policies and contracts shall be the
commissioners reserve valuation methods defined in Sections 10489.5,
10489.6, 10489.9, and 10489.95, 31/2 percent per annum interest,
except that the interest specified in subdivisions (c) and
(d) may be used for certain annuity and pure endowment contracts,
or in the case of life insurance policies and
contracts, other than certain annuity and pure endowment contracts,
issued on or after January 1, 1970, 4 percent per annum
interest for such policies issued or contracts entered into
on or after January 1, 1970, but prior to January 1, 1980, 5
1/2 percent per annum interest
for policies issued prior to January 1, 1980, 5
1/2 percent per annum interest may be used for
single premium life insurance policies and 41/2 percent per annum
interest for all other such policies issued on or
after January 1, 1980, and the following tables:
(a) For all ordinary policies of life insurance
issued on the standard basis, excluding any disability and
accidental death benefits in such those
policies--the Commissioners 1941 Standard Ordinary Mortality Table
for such policies issued prior to the operative
date of subdivision (a) of Section 10163.1, and the Commissioners
1958 Standard Ordinary Mortality Table for such
policies issued on or after such the
operative date of subdivision (a) of Section 10163.1, as amended
by Chapter 940 of the Statutes of 1982, and prior to the
operative date of Section 10163.2, as amended by Chapter 28 of
the Statutes of 1997, provided that for any category of
such policies issued on female risks, all modified
net premiums and present values referred to in Sections
10489.5, and 10489.9 this article may be
calculated, at the option of the insurer,
calculated according to an age not more than six years younger
than the actual age of the insured; and for such
insured. For policies issued on or after the operative
date of Section 10163.2, as amended (i) the
by Chapter 28 of the Statutes of 1997, the following shall apply:
(1) The Commissioners 1980
Standard Ordinary Mortality Table, or (ii) at
Table.
(2) At the election of the
company for any one or more specified plans of life insurance, the
Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year
Select Mortality Factors, or (iii) any
Factors.
(3) Any ordinary mortality table,
adopted after 1980 by the National Association of Insurance
Commissioners, or its successor, that is approved by regulation
promulgated or bulletin issued by the commissioner for use in
determining the minimum standard of valuation for such policies.
(b) For all industrial life insurance policies
issued on the standard basis, excluding any disability and accidental
death benefits in such the policies,
the 1941 Standard Industrial Mortality Table for such
policies issued prior to the operative date of subdivision
(b) of Section 10163.1, of the Standard Nonforfeiture Law for
Life Insurance as amended, and for such
policies issued on or after such the
operative date the Commissioners 1961 Standard Industrial Mortality
Table or any industrial mortality table,
table adopted after 1980 by the National Association
of Insurance Commissioners, or its successor NAIC
that is approved by regulation promulgated or bulletin issued
by the commissioner for use in determining the minimum standard of
valuation for such the policies.
(c) For individual annuity and pure endowment contracts issued
prior to the compliance date of Section 10489.3, excluding any
disability and accidental death benefits in such
policies--the the policies: 1937 Standard
Annuity Mortality Table or, at the option of the company, the Annuity
Mortality Table for 1949, ultimate,
Ultimate, or any modification of these tables approved by the
commissioner. However, the minimum standard for such contracts issued
from January 1, 1968, through December 31, 1968, with commencement
of benefits deferred not more than one year from date of issue, may
be, at the option of the company, 4 percent per annum interest, and
for contracts issued from January 1, 1969, to the compliance date of
Section 10489.3, with commencement of benefits deferred not more than
10 years from date of issue and with premiums payable in one sum may
be, at the option of the company, 5 percent per annum interest.
(d) For group annuity and pure endowment contracts, excluding any
disability and accidental death benefits in such
policies--the the policies: the Group Annuity
Mortality Table for 1951, any a
modification of such the table approved
by the commissioner, or, at the option of the company, any of the
tables or modifications of the tables specified for individual
annuity and pure endowment contracts. However, the minimum standard
for annuities and pure endowments purchased or to be purchased prior
to the compliance date of Section 10489.3, under group annuity and
pure endowment contracts with considerations received on or after
January 1, 1968, through December 31, 1968, may be, at the option of
the company, 4 percent per annum interest, and for annuities and pure
endowments purchased or to be purchased prior to the compliance date
of Section 10489.3, under group annuity and pure endowment contracts
with considerations received from January 1, 1969, to the compliance
date of Section 10489.3, may be at the option of the company, 5
percent per annum interest.
(e) For total and permanent disability benefits in or
supplementary to ordinary policies or contracts--for
contracts: for policies or contracts issued on
or after January 1, 1966, the tables of Period 2 disablement rates
and the 1930 to 1950 termination rates of the 1952 Disability Study
of the Society of Actuaries, with due regard to the type of benefit
or any tables of disablement rates and termination rates, adopted
after 1980 by the National Association of Insurance
Commissioners, or its successor, NAIC that are
approved by regulation promulgated or bulletin issued by the
commissioner for use in determining the minimum standard of valuation
for such those policies; for policies
or contracts issued on or after January 1, 1961, and prior to January
1, 1966, either such those tables or,
at the option of the company, the Class (3) Disability Table (1926);
and for policies issued prior to January 1, 1961, the Class (3)
Disability Table (1926). Any such table shall
shall, for active lives, be combined with a mortality table
permitted for calculating the reserves for life insurance policies.
(f) For accidental death benefits in or supplementary to policies
for policies issued on or after January 1,
1966, 1966: the 1959 Accidental Death
Benefits Table or any accidental death benefits table, adopted after
1980 by the National Association of Insurance Commissioners,
or its successor, NAIC that is approved by
regulation promulgated or bulletin issued by the commissioner for use
in determining the minimum standard of valuation for such
policies; those policies, for policies issued on
or after January 1, 1961, and prior to January 1, 1966, either
such that table or, at the option of
the company, the Inter-Company Double Indemnity Mortality Table; and
for policies issued prior to January 1, 1961, the Inter-Company
Double Indemnity Mortality Table. Either table shall be combined with
a mortality table permitted for calculating the
reserves for life insurance policies.
(g) For group life insurance, life insurance issued on the
substandard basis and other special benefits, such
benefits: tables as may be approved by
the commissioner.
(h) With the adoption of tables by the National
Association of Insurance Commissioners after 1980, the
The commissioner may, by regulation or bulletin,
may by bulletin withdraw approval of
the use of previously adopted to tables replaced
by the newly adopted tables.
SEC. 8. Section 10489.3 of the Insurance Code is amended to read:
10489.3. (a) Except as provided in Section
10489.4, the minimum standard for the of
valuation of all for individual
annuity and pure endowment contracts issued on or after the
compliance operative date of Section
10489.3, the amendments made to this section by the
act that added subdivision (b) and for all
annuities and pure endowments purchased on or after the
compliance that operative date of
Section 10489.3, under group annuity and pure endowment
contracts, shall be the commissioners reserve valuation methods
defined in Sections 10489.5 and 10489.6,
10489.6 and the following tables and interest rates:
(a)
(1) For individual annuity and pure endowment contracts
issued prior to January 1, 1980, excluding any disability and
accidental death benefits in such those
contracts, the Individual Annuity Mortality Table for 1971, or any
modification of such this table
approved by the commissioner, and an interest rate of:
(1) Six percent per annum for all such contracts with commencement
of benefits deferred not more than 10 years from date of issue and
with premiums payable in one sum.
(2) Four
6 percent per annum interest rate for all contracts with
commencement of benefits deferred not more than 10 years from
the date of issue and with premiums payable in one sum and 4
percent per annum interest for all other such
individual annuity and pure endowment contracts.
(b)
(2) For individual single premium immediate annuity
contracts issued on or after January 1, 1980, excluding any
disability and accidental death benefits in such contracts,
those contracts: the 1971 Individual
Annuity Mortality Table for 1971 or any individual
annuity mortality table, table adopted
after 1980 by the National Association of Insurance
Commissioners, or its successor, NAIC that is
approved by regulation promulgated or bulletin issued by the
commissioner for use in determining the minimum standard of valuation
for such these contracts, or any
modification of these tables approved by the commissioner, and 71/2
percent per annum interest.
(c)
(3) For individual annuity and pure endowment contracts
issued on or after January 1, 1980, other than single premium
immediate annuity contracts, excluding any disability and accidental
death benefits in such those contracts,
the individual 1971 Individual Annuity
Mortality Table for 1971 or any individual
annuity mortality table, adopted after 1980 by the National
Association of Insurance Commissioners, or its successor,
NAIC that is approved by regulation promulgated or
bulletin issued by the commissioner for use in determining the
minimum standard of valuation for such those
contracts, or any modification of these tables approved by the
commissioner, and 51/2 percent per annum interest for single premium
deferred annuity and pure endowment contracts and 41/2 percent per
annum interest for all other such individual
annuity and pure endowment contracts.
(d) For all
(4) For annuities and pure
endowments purchased prior to January 1, 1980, under group annuity
and pure endowment contracts, excluding any disability and accidental
death benefits purchased under such contracts,
those contracts: the 1971 Group Annuity
Mortality Table for 1971, Table or any
modification of this table approved by the commissioner, and 6
percent per annum interest.
(e) For all
(5) For annuities and pure
endowments purchased on or after January 1, 1980, under group annuity
and pure endowment contracts, excluding any disability and
accidental death benefits purchased under such contracts,
those contracts: the 1971 Group
Annuity Mortality Table for 1971 Table,
or any group annuity mortality table, table
adopted after 1980 by the National Association of
Insurance Commissioners, or its successor, NAIC
that is approved by regulation promulgated or bulletin issued by the
commissioner for use in determining the minimum standard of valuation
for such annuities and pure endowments, or any
modification of these tables approved by the commissioner, and 71/2
percent per annum interest.
All
(6) All individual annuity and
pure endowment contracts entered into prior to January 1, 1980, and
all annuities and pure endowments purchased prior to January 1, 1980,
under group annuity and pure endowment contracts shall remain
subject to the provisions of Article 3A (commencing with Section
10489.1) as it existed prior to January 1, 1980.
(f) With the adoption of tables by the National Association of
Insurance Commissioners after 1980, the
(b) The commissioner
may, by regulation or bulletin, may, by bulletin,
withdraw approval of the to use
of previously adopted tables replaced by
the newly adopted tables.
SEC. 9. Section 10489.4 is added to the Insurance Code, to read:
10489.4. (a) For the computation of minimum standard by calendar
year of issue, the interest rates used in determining the minimum
standard for the valuation of the following shall be the calendar
year statutory valuation interest rates as defined in this section:
(1) Life insurance policies issued in a particular calendar year,
on or after the operative date of Section 10163.2 as amended by
Section 28 of the Statutes of 1997.
(2) Individual annuity and pure endowment contracts issued in a
particular calendar year on or after January 1, 1982.
(3) Annuities and pure endowments purchased in a particular
calendar year on or after January 1, 1982, under group annuity and
pure endowment contracts.
(4) The net increase, if any, in a particular calendar year after
January 1, 1982, in amounts held under guaranteed interest contracts.
(b) (1) For the calendar year statutory valuation interest rates,
expressed in the following formulas as "I," shall be determined as
follows and the results rounded to the nearest one-fourth of 1
percent:
(A) For life insurance:
I = .03 + W
(R1- .03) + W/2
(R2- .09)
Where
R1is the lesser of R and .09,
R2 is the greater of R and .09,
R is the reference interest rate defined in
this section,
W is the weighting factor defined in this
section.
(B) For single premium immediate annuities and for annuity
benefits involving life contingencies arising from other annuities
with cash settlement options and from guaranteed interest contracts
with cash settlement options:
I = .03 + W(R - .03)
Where
R is the reference interest rate defined in this
section,
W is the weighting factor defined in this
section.
(C) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
an issue year basis, except as stated in subparagraph (B), the
formula for life insurance stated in subparagraph (A) shall apply to
annuities and guaranteed interest contracts with guarantee durations
in excess of 10 years and the formula for single premium immediate
annuities stated in subparagraph (B) shall apply to annuities and
guaranteed interest contracts with guarantee duration of 10 years or
less.
(D) For other annuities with no cash settlement options and for
guaranteed interest contracts with no cash settlement options, the
formula for single premium immediate annuities stated in subparagraph
(B) shall apply.
(E) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
a change in fund basis, the formula for single premium immediate
annuities stated in subparagraph (B) shall apply.
(2) However, if the calendar year statutory valuation interest
rate for a life insurance policy issued in any calendar year
determined without reference to this sentence differs from the
corresponding actual rate for similar policies issued in the
immediately preceding calendar year by less than one-half of 1
percent, the calendar year statutory valuation interest rate for the
life insurance policies shall be equal to the corresponding actual
rate for the immediately preceding calendar year. For purposes of
applying the immediately preceding sentence, the calendar year
statutory valuation interest rate for life insurance policies issued
in a calendar year shall be determined for 1980 (using the reference
interest rate defined in 1979) and shall be determined for each
subsequent calendar year regardless of when Section 10163.2, as
amended by Chapter 28 of the Statutes of 1997, becomes operative.
(c) The weighting factors referred to in the formulas stated above
are given in the following tables:
(1) Weighting Factors for Life Insurance:
Guarantee Duration (Years) Weighting Factors
10 or less ................... .50
More than 10, but not more .45
than 20 ......................
More than 20 ................. .35
For life insurance, the guarantee duration is the maximum number
of years the life insurance can remain in force on a basis guaranteed
in the policy or under options to convert to plans of life insurance
with premium rates or nonforfeiture values or both which are
guaranteed in the original policy.
(2) Weighting factors for single premium immediate annuities and
for annuity benefits involving life contingencies arising from other
annuities with cash settlement options and guaranteed interest
contracts with cash settlement options shall be .80.
(3) Weighting factors for other annuities and for guaranteed
interest contracts, except as stated in paragraph (2), shall be as
specified in subparagraphs (A), (B), and (C), according to the rules
and definitions
in subparagraphs (D), (E), and (F):
(A) For annuities and guaranteed interest contracts valued on an
issue year basis:
Guarantee Duration (Years) Weighting Factor for
Plan Type
A B C
5 or less: .80 .60 .50
More than 5, but not more .75 .60 .50
than 10:
More than 10, but not .65 .50 .45
more than 20:
More than 20: .45 .35 .35
(B) For annuities and guaranteed interest contracts valued on a
change in fund basis, the factors shown in subparagraph (A) increased
by:
Plan Type
A B C
.15 .25 .05
(C) For annuities and guaranteed interest contracts valued on an
issue year basis, other than those with no cash settlement options,
that do not guarantee interest on considerations received more than
one year after issue or purchase and for annuities and guaranteed
interest contracts valued on a change in fund basis that do not
guarantee interest rates on considerations received more than 12
months beyond the valuation date, the factors shown in subparagraph
(A) or derived in subparagraph (B) increased by ____.
(D) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, the
guarantee duration is the number of years for which the contract
guarantees interest rates in excess of the calendar year statutory
valuation interest rate for life insurance policies with guarantee
duration in excess of 20 years. For other annuities with no cash
settlement options and for guaranteed interest contracts with no cash
settlement options, the guaranteed duration is the number of years
from the date of issue or date of purchase to the date annuity
benefits are scheduled to commence.
(E) Plan type as used in the above tables is defined as follows:
(i) For Plan Type A: At any time a policyholder may withdraw funds
only (I) with an adjustment to reflect changes in interest rates or
asset values since receipt of the funds by the insurance company,
(II) without an adjustment but installments over five years or more,
(III) as an immediate life annuity, or (IV) no withdrawal permitted.
(ii) For Plan Type B: Before expiration of the interest rate
guarantee, a policyholder may withdraw funds only (I) with an
adjustment to reflect changes in interest rates or asset values since
receipt of the funds by the insurance company, (II) without an
adjustment but in installments over five years or more, or (III) no
withdrawal permitted. At the end of the interest rate guarantee,
funds may be withdrawn without an adjustment in a single sum or
installments over less than five years.
(iii) For Plan Type C: Policyholder may withdraw funds before
expiration of interest rate guarantee in a single sum or installments
over less than five years either (I) without adjustment to reflect
changes in interest rates or asset values since receipt of the funds
by the insurance company, or (II) subject only to a fixed surrender
charge stipulated in the contract as a percentage of the fund.
(F) A company may elect to value guaranteed interest contracts
with cash settlement options and annuities with cash settlement
options on either an issue year basis or on a change in fund basis.
Guaranteed interest contracts with no cash settlement options and
other annuities with no cash settlement options shall be valued on an
issue year basis. As used in this section, an issue year basis of
valuation refers to a valuation basis under which the interest rate
used to determine the minimum valuation standard for the entire
duration of the annuity or guaranteed interest contract is the
calendar year valuation interest rate for the year of issue or year
of purchase of the annuity or guaranteed interest contract, and the
change in fund basis of valuation refers to a valuation basis under
which the interest rate used to determine the minimum valuation
standard applicable to each change in the fund held under the annuity
or guaranteed interest contract is the calendar year valuation
interest rate for the year of the change in the fund.
(d) The reference interest rate referred to in subdivision (b)
shall be defined as follows:
(1) For life insurance, the lesser of the average over a period of
36 months and the average over a period of 12 months, ending on June
30 of the calendar year preceding the year of issue, of the monthly
average of the composite yield on seasoned corporate bonds, as
published by Moody's Investors Service, Inc.
(2) For single premium immediate annuities and for annuity
benefits involving life contingencies arising from other annuities
with cash settlement options and guaranteed interest contracts with
cash settlement options, the average over a period of 12 months,
ending on June 30 of the calendar year of issue or year of purchase,
of the monthly average of the composite yield on seasoned corporate
bonds, as published by Moody's Investors Service, Inc.
(3) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
a year of issue basis, except as stated in subdivision (b), with
guarantee duration in excess of 10 years, the lesser of the average
over a period of 36 months and the average over a period of 12
months, ending on June 30 of the calendar year of issue or purchase,
of the monthly average of the composite yield on seasoned corporate
bonds, as published by Moody's Investors Service, Inc.
(4) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
a year of issue basis, except as stated in subparagraph (B) of
paragraph (1) of subdivision (c), with guarantee duration of 10 years
or less, the average over a period of 12 months, ending on June 30
of the calendar year of issue or purchase, of the monthly average of
the composite yield on seasoned corporate bonds, as published by
Moody's Investors Service, Inc.
(5) For other annuities with no cash settlement options and for
guaranteed interest contracts with no cash settlement options, the
average over a period of 12 months, ending on June 30 of the calendar
year of issue or purchase, of the monthly average of the composite
yield on seasoned corporate bonds, as published by Moody's Investors
Service, Inc.
(6) For other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options, valued on
a change in fund basis, except as stated in subparagraph (B) of
paragraph (1) of subdivision (c), the average over a period of 12
months, ending on June 30 of the calendar year of the change in the
fund, of the monthly average of the composite yield on seasoned
corporate bonds, as published by Moody's Investors Service, Inc.
(e) As an alternative method for determining reference interest
rates, in the event that the monthly average of the composite yield
on seasoned corporate bonds is no longer published by Moody's
Investors Service, Inc., or in the event that the NAIC determines
that the monthly average of the composite yield on seasoned corporate
bonds as published by Moody's Investors Service, Inc., is no longer
appropriate for the determination of the reference interest rate,
then an alternative method for determination of the reference
interest rate adopted by the NAIC and approved by regulation
promulgated by the commissioner may be substituted.
(f) This section shall apply to all certificates and contracts
issued by a fraternal benefit society.
SEC. 10. Section 10489.5 of the Insurance Code is amended to read:
10489.5. (a) Except as otherwise provided
in Sections 10489.6, 10489.9, and 10489. 95,
10489.95, reserves according to the commissioners reserve
valuation method, for the life insurance and endowment benefits of
policies providing for a uniform amount of insurance and requiring
the payment of uniform premiums shall be the excess, if any, of the
present value, at the date of valuation, of such
the future guaranteed benefits provided for by
such those policies, over the then present value
of any future modified net premiums therefor. The modified net
premiums for any such a policy shall be
such the uniform percentage of the
respective contract premiums for such the
benefits such that the present value, at the date of
issue of the policy, of all such modified net
premiums shall be equal to the sum of the then present value of
such the benefits provided for by the
policy and the excess of (a) of (b),
paragraph (1) over paragraph (2), as follows:
(a)
(1) A net level annual premium equal to the present
value, at the date of issue of such of the
benefits provided for after the first policy year, divided by
the present value, at the date of issue, of an annuity of one per
annum payable on the first and each subsequent anniversary of
such the policy on which a premium
falls due; except that such due. However, the
net level annual premium shall not exceed the net level annual
premium, premium on the 19-year premium
whole life plan for insurance of the same amount at an age one year
higher than the age at issue of such the
policy.
(b)
(2) A net one-year term premium for such
the benefits provided for in the first policy
year.
Provided that for any life
(b) For a life insurance policy
issued on or after January 1, 1986, for which the contract premium in
the first policy year exceeds that of the second year and for which
no comparable additional benefit is provided in the first year for
such the excess and which provides an
endowment benefit or a cash surrender value or a combination
thereof in an amount greater than such
the excess premium, the reserve according to the
commissioners reserve valuation method as of any policy anniversary
occurring on or before the assumed ending date defined herein as the
first policy anniversary on which the sum of any endowment benefit
and any cash surrender value then available is greater than
such the excess premium shall, except as
otherwise provided in Section 10489.9, be the greater of the reserve
as of such the policy anniversary
calculated as described in the first paragraph of this
section subdivision (a) and the reserve as of
such the policy anniversary calculated
as described in the first paragraph of this section,
subdivision (a), but with (i)
(1) the value defined in subparagraph (a) of that
paragraph paragraph (1) of subdivision (a)
being reduced by 15 percent of the amount of such
the excess first year premium, (ii)
(2) all present values of benefits and premiums
being determined without reference to premiums or benefits provided
for by the policy after the assumed ending date, (iii)
(3) the policy being assumed to mature on
such that date as an endowment, and
(iv) (4) the cash surrender value
provided on such that date being
considered as an endowment benefit. In making the above comparison
the mortality and interest bases stated in Sections 10489.2 and
10489.4 shall be used.
Reserves
(c) Reserves according to the
commissioners reserve valuation method for (1) life
shall be calculated by a method consistent with
subdivisions (a) and (b) for the following:
(1) Life insurance policies
providing for a varying amount of insurance or requiring the payment
of varying premiums, (2) group premiums.
(2) 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 now or hereafter
amended; (3) disability amended.
(3) Disability and accidental
death benefits in all policies and contracts; and (4) all
contracts.
(4) All other benefits, except
life insurance and endowment benefits in life insurance policies and
benefits provided by all other annuity and pure endowment contracts,
shall be calculated by a method consistent with the
principles of the preceding paragraphs of this section,
except that any extra premiums charged because of impairments or
special hazards shall be disregarded in the determination of modified
net premiums.
SEC. 11. Section 10489.6 of the Insurance Code is amended to read:
10489.6. (a) This section shall apply 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, as now or hereafter amended.
Reserves
(b) 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 the 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 the 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
the contract, that become payable prior to the
end of such the respective contract
year. The future guaranteed benefits shall be determined by using the
mortality table, if any, and the interest rate, or rates, specified
in such the contracts for determining
guaranteed benefits. The valuation considerations are the portions of
the respective gross considerations applied under the terms of
such the contracts to determine
nonforfeiture values.
SEC. 12. Section 10489.7 of the Insurance Code is amended to read:
10489.7. (a) In no event shall an insurer's
A company's aggregate reserves for all life insurance
policies, excluding disability and accidental death benefits,
shall not be less than the aggregate reserves calculated in
accordance with the methods set forth in Sections 10489.5, 10489.6,
10489.9, and 10489.93 and the mortality table or tables and rate or
rates of interest used in calculating nonforfeiture benefits for
such the policies.
(b) In no event shall the The
aggregate reserves for all policies, contracts, and benefits
shall not be less than the aggregate reserves determined by the
qualified appointed actuary to be
necessary to render the opinion required by Section 10489.15.
SEC. 13. Section 10489.8 of the Insurance Code is amended to read:
10489.8. (a) Reserves for any category of
policies, contracts contracts, or
benefits as established by the commissioner may be
calculated, at the option of the insurer,
company, according to any standards which
that produce greater aggregate reserves for such
the category than those calculated according to
the minimum standard herein provided,
provided in this article, but the rate or rates of interest
used for policies and contracts, other than annuity and pure
endowment contracts, shall not be higher
greater than the corresponding rate or rates of interest used
in calculating any nonforfeiture benefits provided for
therein. in the policies or contracts.
Any such company
(b) A company, which adopts
at any time shall have adopted any a
standard of valuation producing greater aggregate reserves than
those calculated according to the minimum standard provided
in this article may, with the approval of the commissioner, adopt
any under this article, may adopt a lower
standard of valuation with the approval of the commissioner
, but not lower than the minimum provided in this
article. However, article unless, for the
purposes of this section, the holding of additional reserves
previously determined by a qualified actuary to be necessary to
render the opinion required by Section 10489.15 shall not be deemed
to be the adoption of a higher standard of valuation.
SEC. 14. Section 10489.9 of the Insurance Code is amended to read:
10489.9. (a) If in any contract year the
gross premium charged by any life insurer on any policy or contract
is less than the valuation net premium for the policy or contract
calculated by the method used in calculating the reserve thereon but
using the minimum valuation standards of mortality and rate of
interest, the minimum reserve required for such 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
such policy or contract, or the reserve calculated by the method
actually used for such policy or contract but using the minimum
valuation standards of mortality and rate of interest 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. The minimum valuation standards of mortality and
rate of interest referred to in this section are those standards
stated in Sections 10489.2, 10489.3, and 1489.4.
Provided that for any
(b) For a life insurance policy
issued on or after January 1, 1986, for which the gross premium in
the first policy year exceeds that of the second year and for which
no comparable additional benefit is provided in the first year for
such excess and which provides an endowment benefit or a cash
surrender value or a combination thereof in an amount greater than
such excess premium, the foregoing provisions of this section shall
be applied as if the method actually used in calculating the reserve
for such policy were the method described in Section 10489.5,
ignoring the second paragraph of Section 10489.5. The minimum reserve
at each policy anniversary of such a policy shall be the greater of
the minimum reserve calculated in accordance with Section 10489.5,
including the second paragraph of that section, and the minimum
reserve calculated in accordance with this section.
SEC. 15. Section 10489.93 of the Insurance Code is amended to
read:
10489.93. In the case of any a plan
of life insurance that provides for future premium determination,
the amounts of which are to be determined by the insurance company
based on then estimates of future experience, or in the case of
any a plan of life insurance or annuity
that is of such a nature that the minimum
reserves cannot be determined by the methods described in Sections
10489.5, 10489.6, and 10489.9, the reserves which
that are held under any such plan must:
the plan shall:
(a) Be appropriate in relation to the benefits and the pattern of
premiums for that plan; and
(b) Be computed by a method which that
is consistent with the principles of this Standard Valuation
Law, as determined by regulations promulgated by the commissioner.
SEC. 16. Section 10489.95 of the Insurance Code is repealed.
10489.95. The commissioner shall adopt a regulation concerning
the minimum standards applicable to the valuation of disability
insurance.
SEC. 17. Section 10489.95 is added to the Insurance Code, to read:
10489.95. For accident and health insurance 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 subdivision (b) of Section 10489.12. For
disability and accident and health insurance contracts issued prior
to the operative date of the valuation manual, the minimum standard
of valuation is the standard adopted by the commissioner by
regulation.
SEC. 18. Section 10489.96 is added to the Insurance Code, to read:
10489.96. (a) For policies 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
subdivision (b) of Section 10489.12, except as provided under
subdivision (e) or (g).
(b) The operative date of the valuation manual is January 1 of the
first calendar year following the first July 1 as of which all the
following have occurred:
(1) The valuation manual has been adopted by the NAIC by an
affirmative vote of at least 42 members, or three-fourths of the
members voting, whichever is greater.
(2) The Standard Valuation Law, as amended by the NAIC in 2009, or
legislation including substantially similar terms and provisions,
has been enacted by states representing greater than 75 percent of
the direct premiums written as reported in the following annual
statements submitted for 2008: life, accident, and health annual
statements, health annual statements, or fraternal annual statements.
(3) The Standard Valuation Law, as amended by the NAIC in 2009, or
legislation including substantially similar terms and provisions,
has been enacted by at least 42 of the following 55 jurisdictions:
The 50 States of the United States, American Samoa, the American
Virgin Islands, the District of Columbia, Guam, and Puerto Rico.
(c) Unless a change in the valuation manual specifies a later
effective date, changes to the valuation manual shall be effective on
January 1 following the date when all of the following have
occurred:
(1) The change to the valuation manual has been adopted by the
NAIC by an affirmative vote representing:
(A) At least three-fourths of the members of the NAIC voting, but
not less than a majority of the total membership.
(B) Members of the NAIC representing jurisdictions totaling
greater than 75 percent of the direct premiums written as reported in
the following annual statements most recently available prior to the
vote in subparagraph (A): life, accident, and health annual
statement, health annual statements, or fraternal annual statements.
(2) The valuation manual becomes effective pursuant to an order
adopted by the commissioner, which shall not be subject to Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.
(d) The valuation manual shall specify all of the following:
(1) Minimum valuation standards for and definitions of the
policies or contracts subject to subdivision (b) of Section 10489.12.
Those minimum valuation standards shall be:
(A) The commissioners reserve valuation method for life insurance
contracts, other than annuity contracts, subject to subdivision (b)
of Section 10489.12.
(B) The commissioners annuity reserve valuation method for annuity
contracts subject to subdivision (b) of Section 10489.12.
(C) Minimum reserves for all other policies or contracts subject
to subdivision (b) of Section 10489.12.
(2) Which policies or contracts or types of policies or contracts
that are subject to the requirements of a principle-based valuation
in subdivision (a) of Section 10489.97 and the minimum valuation
standards consistent with those requirements.
(3) For policies and contracts subject to a principle-based
valuation under Section 10489.97:
(A) Requirements for the format of reports to the commissioner
under paragraph (3) of subdivision (b) of Section 10489.97, and which
shall include information necessary to determine if the valuation is
appropriate and in compliance with this article.
(B) Assumptions shall be prescribed for risks over which the
company does not have significant control or influence.
(C) Procedures for corporate governance and oversight of the
actuarial function, and a process for appropriate waiver or
modification of those procedures.
(4) For policies not subject to a principle-based valuation under
Section 10489.97, the minimum valuation standard shall be either of
the following:
(A) Be consistent with the minimum standard of valuation prior to
the operative date of the valuation manual.
(B) Develop reserves that quantify the benefits and guarantees,
and the 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.
(5) Other requirements, including, but not limited to, those
relating to reserve methods, models for measuring risk, generation of
economic scenarios, assumptions, margins, use of company experience,
risk measurement, disclosure, certifications, reports, actuarial
opinions and memorandums, transition rules, and internal controls.
(6) The data and form of the data required under Section 10489.98,
with whom the data is required to be submitted, and may specify
other requirements including data analyses and reporting of analyses.
(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, or conflicts with,
this code, then the company shall, with respect to those
requirements, comply with the minimum valuation standards prescribed
by the code or by the commissioner by regulation or bulletin.
(f) The commissioner may engage a qualified actuary, at the
expense of the 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 set forth in this article. The
commissioner may rely upon the opinion, regarding the provisions
contained within this article, of a qualified actuary engaged by the
commissioner of another state, district, or territory of the United
States. As used in this subdivision, the term "engage" includes
employment and contracting.
(g) The commissioner may require a company to change any
assumption or method that in the opinion of the commissioner is
necessary in order to comply with the requirements of the valuation
manual or this article, and the company shall adjust the reserves as
required by the commissioner. The commissioner may take other
disciplinary action as
permitted pursuant to all other applicable law.
SEC. 19. Section 10489.97 is added to the Insurance Code, to read:
10489.97. (a) A company shall establish reserves using a
principle-based valuation that meets the following conditions for
policies or contracts as specified in the valuation manual:
(1) Quantify the benefits, guarantees, and the 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,
reflects conditions appropriately adverse to quantify the tail risk.
(2) Incorporate assumptions, risk analysis methods, and financial
models and management techniques that are consistent with, but not
necessarily identical to, those utilized within the company's overall
risk assessment process, while recognizing potential differences in
financial reporting structures and any prescribed assumptions or
methods.
(3) Incorporate assumptions that are derived in one of the
following manners:
(A) The assumption is prescribed in the valuation manual.
(B) For assumptions that are not prescribed, the assumptions
shall:
(i) Be established utilizing the company's available experience,
to the extent it is relevant and statistically credible.
(ii) To the extent that company data is not available, relevant,
or statistically credible, be established utilizing other relevant,
statistically credible experience.
(4) Provide margins for uncertainty including adverse deviation
and estimation error, such that the greater the uncertainty the
larger the margin and resulting reserve.
(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 the following:
(1) Establish procedures for corporate governance and oversight of
the actuarial valuation function consistent with those described in
the valuation manual.
(2) Provide to the commissioner and the board of directors of the
company an annual certification of the effectiveness of the internal
controls with respect to the principle-based valuation. The controls
shall be designed to assure that all material risks inherent in the
liabilities and associated assets subject to such 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.
(3) Develop, and file with the commissioner upon request, a
principle-based valuation report that complies with standards
prescribed in the valuation manual.
(c) A principle-based valuation may include a prescribed formulaic
reserve component.
SEC. 20. Section 10489.98 is added to the Insurance Code, to read:
10489.98. A company shall submit mortality, morbidity,
policyholder behavior, or expense experience and other data as
prescribed in the valuation manual.
SEC. 21. Section 10489.99 is added to the Insurance Code, to read:
10489.99. (a) For purposes of this section, "confidential
information" shall mean:
(1) A memorandum in support of an opinion submitted under Section
10489.15 and any other documents, materials, and other information,
including, but not limited to, all working papers, and copies
thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in connection with the memorandum.
(2) All documents, materials, and other information, including,
but not limited to, all working papers, and copies thereof, created,
produced, or obtained by or disclosed to the commissioner or any
other person in the course of an examination made under subdivision
(f) of Section 10489.96. However, if an examination report or other
material prepared in connection with an examination made under
Article 4 (commencing with Section 729) of Chapter 1 of Part 2 of
Division 1 is not held as private and confidential information under
that article, an examination report or other material prepared in
connection with an examination made under subdivision (f) of Section
10489.96 shall not be "confidential information" to the same extent
as if the examination report or other material had been prepared
under Article 4.
(3) Any reports, documents, materials, and other information
developed by a company in support of, or in connection with, an
annual certification by the company under paragraph (2) of
subdivision (b) of Section 10489.97 evaluating the effectiveness of
the company's internal controls with respect to a principle-based
valuation and any other documents, materials, and other information,
including, but not limited to, all working papers, and copies
thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in connection with those reports,
documents, materials, and other information.
(4) Any principle-based valuation report developed under paragraph
(3) of subdivision (b) of Section 10489.97 and any other documents,
materials, and other information, including, but not limited to, all
working papers, and copies thereof, created, produced, or obtained by
or disclosed to the commissioner or any other person in connection
with the report.
(5) All of the following:
(A) Any documents, materials, data, and other information
submitted by a company under Section 10489.98, to be known
collectively, as "experience data."
(B) Experience data plus any other documents, materials, data, and
other information, including, but not limited to, all working
papers, and copies thereof, created or produced in connection with
the experience data, in each case that includes any potentially
company-identifying or personally identifiable information, that is
provided to or obtained by the commissioner, to be known,
collectively, as "experience materials."
(C) Any other documents, materials, data, and other information,
including, but not limited to, all working papers, and copies
thereof, created, produced, or obtained by or disclosed to the
commissioner or any other person in connection with the experience
materials.
(b) (1) Except as provided in this section, a company's
confidential information is confidential by law and privileged, it
shall not be subject to the California Public Records Act, and shall
not be subject to subpoena or discovery or admissible in evidence in
any private civil action. However, the commissioner is authorized to
use the confidential information in a regulatory or legal action
brought against the company as a part of the commissioner's official
duties.
(2) The commissioner, and any person who received confidential
information while acting under the authority of the commissioner,
shall not be permitted or required to testify in a private civil
action concerning any confidential information.
(3) In order to assist in the performance of the commissioner's
duties, the commissioner may share confidential information with the
following recipients, provided that the recipient agrees, and has the
legal authority to agree, to maintain the confidentiality and
privileged status of the documents, materials, data, and other
information in the same manner and to the same extent as required for
the commissioner:
(A) Other state, federal, and international regulatory agencies
and with the NAIC and its affiliates and subsidiaries.
(B) In the case of confidential information specified in
paragraphs (1) and (4) of subdivision (a) of Section 10489.99 only,
with the Actuarial Board for Counseling and Discipline or its
successor upon request stating that the confidential information is
required for the purpose of professional disciplinary proceedings and
with state, federal, and international law enforcement officials.
(4) The commissioner may receive documents, materials, data, and
other information, including otherwise confidential and privileged
documents, materials, data, or information, from the NAIC and its
affiliates and subsidiaries, from regulatory or law enforcement
officials 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,
data, 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 other
information.
(5) The commissioner may enter into agreements governing sharing
and use of information consistent with this subdivision.
(6) A waiver of any applicable privilege or claim of
confidentiality in the confidentiality information shall not occur as
a result of disclosure to the commissioner under this section or as
a result of sharing as authorized in paragraph (3).
(7) A privilege established under the law of any state or
jurisdiction that is substantially similar to the privilege
established under subdivision (b) shall be available and enforced in
any proceeding in, and in any court of, this state.
(8) For purposes of this section, "regulatory agency," "law
enforcement agency," and the "NAIC" include, but are not limited to,
their employees, agents, consultants, and contractors.
(c) Notwithstanding subdivision (b), any confidential information
specified in paragraphs (1) and (4) of subdivision (a):
(1) 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 Section
10489.15 or principle-based valuation report developed under
paragraph (3) of subdivision (b) of Section 10489.97 by reason of an
action required by this article or by regulations promulgated
pursuant to this article.
(2) May otherwise be released by the commissioner with the written
consent of the company.
(3) Once any portion of a memorandum in support of an opinion
submitted under Section 10489.15 or a principle-based valuation
report developed under paragraph (3) of subdivision (b) of Section
10489.97 is cited by the company in its marketing or is publicly
volunteered to or before a governmental agency other than a state
insurance department or is released by the company to the news media,
all portions of the memorandum or report shall no longer be
confidential.
SEC. 22. Section 10489.992 is added to the Insurance Code, to
read:
10489.992. (a) (1) The commissioner may hire and assign
department staff, and retain nondepartment actuaries and other
consultants, to assist the commissioner with preparing to implement
and implementing, directly or indirectly, principle-based valuation.
(2) The commissioner may appoint a person to serve as an expert in
preparing to implement and implementing, directly or indirectly,
principle-based valuation. That person may be an employee of the
department exempt from the state civil service system within the
meaning of Section 4 of Article VII of the California Constitution.
The person's salary or compensation shall be fixed by the
commissioner and effective and payable without approval of the
Department of Human Resources, pursuant to Section 19825 of the
Government Code.
(b) (1) Notwithstanding any other law, the commissioner may
annually assess all insurers that are subject to this article to
defray costs the department incurs preparing to implement and
implementing, directly or indirectly, principle-based valuation,
including, but not limited to, department salaries and overhead, and
actuary and consultant fees and expenses.
(2) The commissioner shall annually set an "aggregate assessment
amount" and an assessment amount for each tier listed in paragraph
(4). The aggregate assessment amount shall be the amount necessary to
provide sufficient moneys to carry-out the projected workload to
implement, directly or indirectly, principle-based valuation. The
annual aggregate assessment amount shall be no less than one million
dollars ($1,000,000).
(3) At least 90 days before finalizing the annual aggregate
assessment amount and assessment amount for the tiers listed in
paragraph (4), the commissioner shall provide notice of the
commissioner's preliminary determination of those amounts. The notice
shall explain how the commissioner derived the amounts and provide
no less than 45 days for interested parties to provide comments.
(4) Not less than 45 days after the due date for comments
specified in paragraph (3), the commissioner shall by bulletin
establish the annual aggregate assessment amount according to the
insurer's annual premium based on the below tiers. For purposes of
this section, "annual premium" shall mean the gross annual life
insurance premium written by an insurer in California during the
immediately preceding year as reported in its annual statutory
financial statement.
+-----------------------+-------------------------+
|Annual Premium | Initial Annual |
| | Assessment Per Insurer |
+-----------------------+-------------------------+
|$500,000,001 + | $75,000 |
+-----------------------+-------------------------+
|$400,000,001 - | $50,000 |
|$500,000,000 | |
+-----------------------+-------------------------+
|$300,000,001 - | $40,000 |
|$400,000,000 | |
+-----------------------+-------------------------+
|$200,000,001 - | $30,000 |
|$300,000,000 | |
+-----------------------+-------------------------+
|$150,000,001 - | $20,000 |
|$200,000,000 | |
+-----------------------+-------------------------+
|$100,000,001 - | $10,000 |
|$150,000,000 | |
+-----------------------+-------------------------+
|$50,000,001 - | $5,000 |
|$100,000,000 | |
+-----------------------+-------------------------+
(5) All examinations and analyses of reserves and principle-based
valuation methodologies performed under Section 730 may be at the
expense of the company, organization, or person examined, pursuant to
Section 736.
(c) Before retaining an independent actuary or consultant under
paragraph (1) of subdivision (a), the commissioner shall require a
written declaration by the actuary or consultant that:
(1) The actuary shall not disclose to another party, other than
the department, and shall protect from unauthorized use, any
confidential information, as defined in Section 10489.99, obtained in
the course of his or her work for the commissioner, unless
authorized to do so by the commissioner or required by law.
(2) The actuary or consultant shall not disclose to another party
and shall protect from unauthorized use, all confidential information
obtained from the department in the course of his or her work for
the commissioner.
(d) Before retaining an independent actuary or consultant under
paragraph (1) of subdivision (a), the commissioner shall require a
written declaration by the actuary or consultant that:
(1) The actuary or consultant will not perform professional
services involving an actual or potential conflict of interest unless
all of the following are satisfied:
(A) The actuary's or consultant's ability to perform the services
fairly is unimpaired.
(B) There has been disclosure of the conflict to all present, or
known prospective, clients or employers of the actuary or consultant
whose interests would be affected by the conflict.
(C) All present, or known prospective, clients or employers of the
actuary or consultant have expressly agreed to the performance of
the services by the actuary or consultant.
(2) The actuary or actuarial firm with which the actuary is
affiliated was not involved in developing the reserves or
principle-based valuation methodology under consideration by the
actuary.
(3) The actuary or consultant has disclosed any financial interest
in the companies whose reserves or principle-based valuation
methodologies may be affected by the actuary's or consultant's
services.
(e) The commissioner may develop and amend regulations to
implement or modify subdivisions (c) and (d). The initial adoption of
the regulations shall be deemed to be an emergency and necessary in
order to address a situation calling for immediate action to avoid
serious harm to the public peace, health, safety, or general welfare.
Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part
1 of Division 3 of Title 2 of the Government Code, any emergency
regulation adopted or amended by the commissioner pursuant to this
section shall remain in effect until amended or repealed by the
department. All bulletins adopted by the commissioner pursuant to
this article shall not be subject to Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.
SEC. 23. The Legislature finds and declares that Section 3 of this
act, which amends Section 10489.15 of the Insurance Code, imposes a
limitation on the public's right of access to the meetings of public
bodies or the writings of public officials and agencies within the
meaning of Section 3 of Article I of the California Constitution.
Pursuant to that constitutional provision, the Legislature makes the
following findings to demonstrate the interest protected by this
limitation and the need for protecting that interest:
In order to protect proprietary information, it is necessary to
enact legislation to ensure that information provided pursuant to the
Standard Valuation Law provided pursuant to this act is kept
confidential.