HB-5192, As Passed House, December 16, 2014HB-5192, As Passed Senate, December 16, 2014
December 11, 2013, Introduced by Rep. LaFontaine and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending section 838a (MCL 500.838a), as added by 2006 PA 671.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 838a. (1) As used in this section:
(a) "2001 CSO mortality table" means that term as defined in
section 838.
(b) "2001 CSO preferred class structure mortality table" means
mortality tables with separate rates of mortality for super
preferred nonsmokers, preferred nonsmokers, residual standard
nonsmokers, preferred smokers, and residual standard smoker splits
of the 2001 CSO nonsmoker and smoker tables as adopted by the NAIC
at the September 2006 national meeting and published in the "NAIC
Proceedings" (3rd Quarter 2006). Unless the context indicates
otherwise, the "2001 CSO preferred class structure mortality table"
includes both the ultimate form of that table and the select and
ultimate form of that table. It includes both the smoker and
nonsmoker mortality tables. It includes both the male and female
mortality tables and the gender composite mortality tables. It also
includes both the age-nearest-birthday and age-last-birthday bases
of the mortality table.
(c) "Director" means the director of the department of
insurance and financial services.
(d) (c)
"NAIC" means the national
association of insurance
commissioners.
(e) (d)
"Smoker and nonsmoker
mortality tables" means that
term as defined in section 838.
(f) (e)
"Statistical agent" means
an entity with proven
systems for protecting the confidentiality of individual insured
and insurer information; demonstrated resources for and history of
ongoing electronic communications and data transfer ensuring data
integrity
with insurers , which that
are its members or
subscribers; and a history of and means for aggregation of data and
accurate promulgation of the experience modifications in a timely
manner.
(2) Subject to subsections (6) and (7), an insurer may
substitute the 2001 CSO preferred class structure mortality table
in place of the 2001 CSO smoker and nonsmoker mortality tables as
the minimum valuation standard for policies issued after June 30,
2004 and before January 1, 2007. An insurer may, for each calendar
year of issue for any 1 or more specified plans of insurance and
subject to this section, substitute the 2001 CSO preferred class
structure mortality table in place of the 2001 CSO smoker and
nonsmoker mortality tables as the minimum valuation standard for
policies issued on or after January 1, 2007. An insurer shall not
elect the 2001 CSO preferred class structure mortality table until
the
insurer demonstrates that at least not less than 20% of the
business
to be valued on this table is in 1 or more of the
preferred classes. A table from the 2001 CSO preferred class
structure mortality table used in place of a 2001 CSO mortality
table
as provided in this section shall be is treated as part of
the 2001 CSO mortality table only for purposes of reserve valuation
pursuant
to under section 838.
(3) For each plan of insurance with separate rates for
preferred and standard nonsmoker lives, an insurer may use the
super preferred nonsmoker, preferred nonsmoker, and residual
standard nonsmoker tables to substitute for the nonsmoker mortality
table found in the 2001 CSO mortality table to determine minimum
reserves. At the time of election and annually thereafter, except
for business valued under the residual standard nonsmoker table,
the appointed actuary shall certify both of the following:
(a) That the present value of death benefits over the next 10
years after the valuation date, using the anticipated mortality
experience without recognition of mortality improvement beyond the
valuation date for each class, is less than the present value of
death benefits using the valuation basic table corresponding to the
valuation table being used for that class.
(b) That the present value of death benefits over the future
life of the contracts, using anticipated mortality experience
without recognition of mortality improvement beyond the valuation
date for each class, is less than the present value of death
benefits using the valuation basic table corresponding to the
valuation table being used for that class.
(4) For each plan of insurance with separate rates for
preferred and standard smoker lives, an insurer may use the
preferred smoker and residual standard smoker tables to substitute
for the smoker mortality table found in the 2001 CSO mortality
table to determine minimum reserves. At the time of election and
annually thereafter, for business valued under the preferred smoker
table, the appointed actuary shall certify both of the following:
(a) That the present value of death benefits over the next 10
years after the valuation date, using the anticipated mortality
experience without recognition of mortality improvement beyond the
valuation date for each class, is less than the present value of
death benefits using the preferred smoker valuation basic table
corresponding to the valuation table being used for that class.
(b) That the present value of death benefits over the future
life of the contracts, using anticipated mortality experience
without recognition of mortality improvement beyond the valuation
date for each class, is less than the present value of death
benefits using the preferred smoker valuation basic table.
(5)
Unless exempted by the commissioner, director, every
authorized insurer using the 2001 CSO preferred class structure
mortality
table shall file annually with the commissioner,
director, with the NAIC, or with a statistical agent designated by
the
NAIC and acceptable to the commissioner director statistical
reports
showing mortality and such other information as the
commissioner
may consider director
considers necessary or expedient
for the administration of this section. The director shall
establish
the form of the reports shall be
established by the
commissioner.under this subsection.
(6) The use of the 2001 CSO preferred class structure
mortality table as the minimum valuation standard for policies
issued after June 30, 2004 and before January 1, 2007 is subject to
both of the following:
(a) The consent of the director. In determining consent, the
director may rely on whether consent for the use of the 2001 CSO
preferred class structure mortality table was given to the insurer
by the commissioner of the insurer's state of domicile.
(b) The use is not permitted if the insurer reports in any
statutory financial statement for a coinsured policy or portion of
a policy coinsured, either of the following:
(i) If the mode of payment of the reinsurance premium is less
frequent than the mode of payment of the policy premium, a reserve
credit that exceeds by more than the amount specified in this
subdivision as "Y", the gross reserve calculated before
reinsurance. "Y" is the amount of the gross reinsurance premium
that provides coverage for the period from the next policy premium
due date to the earlier of the end of the policy year and the next
reinsurance premium due date, and would be refunded to the ceding
entity upon the termination of the policy.
(ii) If the mode of payment of the reinsurance premium is more
frequent than the mode of payment of the policy premium, a reserve
credit that is less than the gross reserve, calculated before
reinsurance, by an amount that is less than the amount specified in
this subdivision as "Z". "Z" is the amount of the gross reinsurance
premium that the ceding entity would need to pay the assuming
company to provide reinsurance coverage from the period of the next
reinsurance premium due date to the next policy premium due date
minus any liability established for the proportionate amount not
remitted to the reinsurer.
(7) For purposes of (6)(b), the reserve for the mean reserve
method is the mean reserve minus the deferred premium asset, and
the reserve for the midterminal reserve method includes the
unearned premium reserve. To satisfy subsection (6)(b), an insurer
may estimate and adjust its accounting on an aggregate basis.