HB-5514, As Passed Senate, December 14, 2016
SENATE SUBSTITUTE FOR
HOUSE BILL NO. 5514
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 240, 438, 834, 835, and 836b (MCL 500.240,
500.438, 500.834, 500.835, and 500.836b), section 240 as amended by
2000 PA 252, section 438 as amended by 1994 PA 227, section 834 as
amended and section 836b as added by 2014 PA 571, and section 835
as amended by 1982 PA 221, and by adding section 835a.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 Sec. 240. (1) The commissioner director shall
collect, and the
2 person affected shall pay to the commissioner, director, the
3 following fees:
|
4 |
(a) Filing fee for original authorization to |
|
|
5 |
transact insurance or health maintenance organization |
|
1 |
business in this state, for each domestic, foreign, |
|
|
2 |
and alien insurer, and each health maintenance |
|
|
3 |
organization........................................... |
$ 25.00. |
|
4 |
(b) |
|
|
5 |
amendatory act that amended this subdivision, filing |
|
|
6 |
fee for annual statement of foreign and alien insurers, |
|
|
7 |
each year, subject to section 476a..................... |
$ 25.00. |
|
8 |
(c) |
|
|
9 |
nonresident, payable by insurer or health maintenance |
|
|
10 |
organization
so represented, for each |
|
|
11 |
each year.............................................. |
$ 5.00. |
|
12 |
(d) Application fee payable by each initial |
|
|
13 |
applicant
for license as resident |
|
|
14 |
nonresident
|
|
|
15 |
producer, solicitor, counselor, or adjuster, not |
|
|
16 |
transferable or refundable............................. |
$ 10.00. |
|
17 |
(e) Solicitor's license, each year................ |
$ 10.00. |
|
18 |
(f) Insurance counselor license, each year........ |
$ 10.00. |
|
19 |
(g) Adjuster's license, each year................. |
$ 5.00. |
|
20 |
(h) License examination fee, payable by applicant |
|
|
21 |
for all subjects covered in any 1 examination, or |
|
|
22 |
portion of an examination, for license as resident |
|
|
23 |
|
|
|
24 |
solicitor, counselor, or adjuster, each examination, |
|
|
25 |
not transferable or refundable......................... |
$ 10.00. |
|
26 |
(i) Surplus lines |
|
|
27 |
year................................................... |
$ 100.00. |
1 (2) Each An incorporated domestic insurer shall pay to the
2 attorney general, for the examination of the insurer's articles of
3 incorporation or any amendments to the articles of incorporation,
4 the sum of $25.00.
5 (3) The fees and charges for official services performed by
6 the commissioner director
or the commissioner's director's deputies
7 or employees, when collected, shall must be
turned over to the
8 state treasurer and a receipt taken. The fees and charges provided
9 for in this section shall must be deposited in the
state treasury
10 to the credit of the general fund.
11 (4) The provisions of subsection (1)(h), insofar as they
12 provide for The examination fees described in subsection (1)(h) ,
13 are applicable only if the examinations are administered by the
14 commissioner. director.
If the examinations are administered by
15 some a designated authority other than the commissioner,
director,
16 appropriate examination fees shall be are payable
directly to the
17 designated authority.
18 Sec. 438. (1) Each An insurer, foreign, alien,
U.S. branch, or
19 domestic, transacting business within this state, shall annually,
20 on or before March 1, prepare under oath and deposit with the
21 commissioner director
a statement concerning its affairs in a
form
22 and manner as prescribed by the commissioner. director. The annual
23 statement shall must
be filed on or before March 1 of the
year
24 following that covered by the statement. Upon On request
and for
25 good cause shown, the commissioner director may
grant to any a
26 company reasonable extensions of the March 1 filing date for
27 periods not to exceed 30 days. The insurer shall pay the filing fee
1 prescribed in section 240(1)(b).
2 (2) The commissioner director shall prescribe the
format and
3 content of statements that are suitable and adaptable to each kind
4 of insurer authorized by this act. The commissioner director shall
5 include requests for information upon any and all on important
6 elements of an insurer's business, including any matter, condition,
7 or requirement regulated by this act. An annual statement filed by
8 an insurer under this section shall must be
prepared in accordance
9 with instructions provided by, and accounting practices and
10 procedures designated by, the commissioner.director.
11 (3) The commissioner director may address
inquiries to any an
12 insurer, in relation to the insurer's activities or conditions, or
13 any matter connected with the insurer's transactions. An The
14 insurer so addressed shall promptly reply in writing to each
15 inquiry by the commissioner.described in this subsection.
16 (4) Each A report filed with the commissioner pursuant to
17 director under this section shall
must be made available to the
18 public in compliance with the freedom of information act, Act No.
19 442 of the Public Acts of 1976, being sections 15.231 to 15.246 of
20 the Michigan Compiled Laws.1976
PA 442, MCL 15.231 to 15.246.
21 (5) Each An authorized insurer that fails to does not make
or
22 deposit the annual statement required by this section, or fails to
23 does not reply within 30
days to an inquiry of the commissioner,
24 director, is subject to a civil penalty of not less than $1,000.00
25 or more than $5,000.00, and an additional $50.00 for every day that
26 the insurer fails to does
not make and deposit the annual
statement
27 or reply to the inquiry. In addition, each an insurer
that fails to
1 does not make and deposit an
annual statement, or fails to does
not
2 make a satisfactory reply to an inquiry of the commissioner,
3 director, concerning the
insurer's affairs shall be is
subject to
4 proceedings under section 436.
5 (6) The annual statement of an alien insurer shall must relate
6 only to the insurer's assets, transactions, and affairs in the
7 United States unless the commissioner director requires
otherwise.
8 (7) As used in this section, "U.S. branch" means that term as
9 defined in section 431.
10 Sec. 834. (1) Except as otherwise provided in sections 835,
11 835a, 836, and 837, the minimum standard for the valuation of
12 policies and contracts described in subsection (8) is the
13 commissioner's reserve valuation methods defined in subsections
14 (2), (3), and (6), 5% interest for group annuity and pure endowment
15 contracts if prior notice of any revaluation of reserves with
16 respect to group annuity and pure endowment contracts is given to
17 the director in the same manner as is required before a revaluation
18 of reserves under section 832(2), and 3-1/2% interest for all other
19 of those policies and contracts; or for policies and contracts,
20 other than annuity and pure endowment contracts, issued after
21 October 20, 1974, 4% interest for those policies issued before
22 October 1, 1980, and 4-1/2% interest for those policies issued
23 after September 30, 1980, or for life insurance contracts, other
24 than annuity and pure endowment contracts, issued after December
25 31, 1994, 5-1/2% interest for single premium life insurance
26 policies and 4-1/2% interest for all other policies, and the
27 following tables:
1 (a) For all ordinary policies of life insurance issued on the
2 standard basis, excluding any disability and accidental death
3 benefits in those policies: the commissioner's Commissioner's 1941
4 standard ordinary mortality table, Standard Ordinary Mortality
5 Table, for policies issued before the operative date of paragraph 5
6 of section 4060(5); and the commissioner's Commissioner's 1958
7 standard ordinary mortality table Standard Ordinary Mortality Table
8 for policies issued on or after that operative date and before the
9 operative date of paragraphs 9 to 18 of section 4060(5). For any
10 category of those policies issued on female risks, all modified net
11 premiums and present values referred to in this section may be
12 calculated according to an age not more than 6 years younger than
13 the actual age of the insured; and, for those policies issued on or
14 after the operative date of paragraphs 9 to 18 of section 4060(5),
15 the commissioner's Commissioner's
1980 standard ordinary mortality
16 table Standard Ordinary
Mortality Table or, at the election of
the
17 company for any 1 or more specified plans of life insurance, the
18 commissioner's Commissioner's
1980 standard ordinary mortality
19 table Standard Ordinary
Mortality Table with 10-year select
20 mortality factors or any ordinary mortality table adopted after
21 1980 by the national association National Association of insurance
22 commissioners Insurance
Commissioners that is approved by a
rule
23 promulgated by the director for use in determining the minimum
24 standard of valuation for those policies or the 2001 CSO mortality
25 table under section 838.
26 (b) For all industrial life insurance policies issued on the
27 standard basis, excluding any disability and accidental death
1 benefits in those policies: the 1941 standard industrial mortality
2 table Standard
Industrial Mortality Table for those
policies issued
3 before the operative date of paragraph 7 of section 4060(5); and
4 for those policies issued on or after that operative date, the
5 commissioner's Commissioner's
1961 standard industrial mortality
6 table Standard
Industrial Mortality Table or any
industrial
7 mortality table adopted after 1980 by the national association
8 National Association of insurance
commissioners Insurance
9 Commissioners that is approved by a rule promulgated by the
10 director for use in determining the minimum standard of valuation
11 for those policies.
12 (c) For individual annuity and pure endowment contracts,
13 excluding any disability and accidental death benefits in those
14 policies: the 1937 standard annuity mortality table Standard
15 Annuity Mortality Table or, at the option of the company, the
16 annuity mortality table for 1949, ultimate, or any modification of
17 either of those tables approved by the director.
18 (d) For group annuity and pure endowment contracts, excluding
19 any disability and accidental death benefits in those policies: the
20 group annuity mortality table Group Annuity Mortality Table for
21 1951, any modification of that table approved by the director, or,
22 at the option of the company, any of the tables or modifications of
23 tables specified for individual annuity and pure endowment
24 contracts.
25 (e) For total and permanent disability benefits in or
26 supplementary to ordinary policies or contracts: for policies or
27 contracts issued after December 31, 1965, the tables of period 2
1 disablement rates and the 1930 to 1950 termination rates of the
2 1952 disability study Disability
Study of the society Society of
3 actuaries, Actuaries,
with due regard to the type of benefit
or any
4 tables of disablement rates and termination rates adopted after
5 1980 by the national association National Association of insurance
6 commissioners Insurance
Commissioners that are approved by a
rule
7 promulgated by the director for use in determining the minimum
8 standard of valuation for those policies; for policies or contracts
9 issued after December 31, 1960, and before January 1, 1966, either
10 those tables or, at the option of the company, the class (3)
11 disability table, 1926; and for policies issued before January 1,
12 1961, the class (3) disability table, 1926. For active lives, a
13 table must be combined with a mortality table permitted for
14 calculating the reserves for life insurance policies.
15 (f) For accidental death benefits in or supplementary to
16 policies: for policies issued after December 31, 1965, the 1959
17 accidental death benefits table Accidental Death Benefits Table or
18 any accidental death benefits table adopted after 1980 by the
19 national association National
Association of insurance
20 commissioners Insurance
Commissioners that is approved by a
rule
21 promulgated by the director for use in determining the minimum
22 standard of valuation for those policies; for policies issued after
23 December 31, 1960, and before January 1, 1966, 1 of the above
24 tables or at the option of the insurer the intercompany double
25 indemnity mortality table. A table must be combined with a
26 mortality table permitted for calculating the reserves for life
27 insurance policies.
1 (g) For group life insurance, life insurance issued on the
2 substandard basis, and other special benefits: any table approved
3 by the director.
4 (2) Except as otherwise provided in subsections (3) and (6),
5 reserves according to the commissioner's reserve valuation method,
6 Commissioner's Reserve Valuation Method, for the life insurance and
7 endowment benefits of policies providing for a uniform amount of
8 insurance and requiring the payment of uniform premiums, is the
9 excess, if any, of the present value, at the date of valuation, of
10 the future guaranteed benefits provided for by those policies over
11 the then present value of any future modified net premiums for the
12 policies. The modified net premiums for the policy is a uniform
13 percentage of the respective contract premiums for the future
14 guaranteed benefits so that the present value of all modified net
15 premiums equals, at the date of issue of the policy, the sum of the
16 then present value of these benefits provided for by the policy and
17 the excess of subdivision (a) over subdivision (b), as follows:
18 (a) A net level annual premium equal to the present value, at
19 the date of issue, of the future guaranteed benefits provided for
20 after the first policy year divided by the present value, at the
21 date of issue, of an annuity of 1 per annum payable on the first
22 and each subsequent anniversary of the policy on which a premium
23 falls due. However, the net level annual premium must not exceed
24 the net level annual premium on the 19-year premium whole life plan
25 for insurance of the same amount at an age 1 year higher than the
26 age at issue of the policy.
27 (b) A net 1-year term premium for the future guaranteed
1 benefits provided for in the first policy year.
2 However, for any life insurance policy issued after December
3 31, 1985 for which the contract premium in the first policy year
4 exceeds that of the second year and for which no comparable
5 additional benefit is provided in the first year for that excess
6 and that provides an endowment benefit or a cash surrender value or
7 a combination of endowment benefit and cash surrender value in an
8 amount greater than the excess premium, the reserve according to
9 the commissioner's reserve valuation method Commissioner's Reserve
10 Valuation Method as of any policy anniversary occurring on or
11 before the assumed ending date, defined as the first policy
12 anniversary on which the sum of any endowment benefit and any cash
13 surrender value then available is greater than the excess premium,
14 is, except as otherwise provided in subsection (6), the greater of
15 the reserve as of that policy anniversary calculated as described
16 in paragraph 1 of this subsection and the reserve as of that policy
17 anniversary calculated as described in that paragraph, but with the
18 value defined in subdivision (a) being reduced by 15% of the amount
19 of the excess first year premium; all present values of benefits
20 and premiums being determined without reference to premiums or
21 benefits provided for by the policy after the assumed ending date;
22 the policy being assumed to mature on that date as an endowment;
23 and the cash surrender value provided on that date being considered
24 as an endowment benefit. In making the above comparison, the
25 mortality and interest bases stated in subsection (1) and section
26 836 must be used.
27 Reserves according to the commissioner's reserve valuation
1 method Commissioner's
Reserve Valuation Method for life
insurance
2 policies providing for a varying amount of insurance or requiring
3 the payment of varying premiums; group annuity and pure endowment
4 contracts purchased under a retirement plan or plan of deferred
5 compensation, established or maintained by an employer, including a
6 partnership or sole proprietorship, or by an employee organization,
7 or by both, other than a plan providing individual retirement
8 accounts or individual retirement annuities under section 408 of
9 the internal revenue code of 1986, 26 USC 408; disability and
10 accidental death benefits in all policies and contracts; and all
11 other benefits, except life insurance and endowment benefits in
12 life insurance policies and benefits provided by all other annuity
13 and pure endowment contracts, must be calculated by a method
14 consistent with the principles of this subsection.
15 (3) This subsection applies to all annuity and pure endowment
16 contracts other than group annuity and pure endowment contracts
17 purchased under a retirement plan or plan of deferred compensation,
18 established or maintained by an employer, including a partnership
19 or sole proprietorship, or by an employee organization, or by both,
20 other than a plan providing individual retirement accounts or
21 individual retirement annuities under section 408 of the internal
22 revenue code of 1986, 26 USC 408. Without action by the Michigan
23 Legislature to adopt actuarial guideline Actuarial Guideline 35,
24 reserves according to the commissioner's annuity reserve method
25 Commissioner's Annuity Reserve Method for benefits under annuity or
26 pure endowment contracts, excluding any disability and accidental
27 death benefits in those contracts, must be the greatest of the
1 respective excesses of the present values, at the date of
2 valuation, of the future guaranteed benefits, including guaranteed
3 nonforfeiture benefits, provided for by those contracts at the end
4 of each respective contract year, over the present value, at the
5 date of valuation, of any future valuation considerations derived
6 from future gross considerations, required by the terms of the
7 contract, that become payable before the end of that respective
8 contract year. The future guaranteed benefits must be determined by
9 using the mortality table, if any, and the interest rate specified
10 in those contracts for determining guaranteed benefits. The
11 valuation considerations are the portions of the respective gross
12 considerations applied under the terms of the contracts to
13 determine nonforfeiture values.
14 (4) An insurer's aggregate reserves for all life insurance
15 policies, excluding disability and accidental death benefits, shall
16 must not be less than the aggregate reserves calculated in
17 accordance with the methods described in subsections (2), (3), (6),
18 and (7), and the mortality table or tables and rate or rates of
19 interest used in calculating nonforfeiture benefits for the
20 policies. The aggregate reserves for all policies, contracts, and
21 benefits shall must
not be less than the aggregate reserves
22 determined by the appointed actuary to be necessary to render the
23 opinion required by section 830a.
24 (5) Reserves for all policies and contracts issued before June
25 27, 1994 may be calculated, at the option of the insurer, according
26 to any standards that produce greater aggregate reserves for all
27 those policies and contracts than the minimum reserves required by
1 the laws in effect immediately before June 27, 1994. Reserves for a
2 category of policies, contracts, or benefits as established by the
3 director, issued after June 26, 1994, may be calculated at the
4 option of the insurer according to any standards that produce
5 greater aggregate reserves than those calculated according to the
6 minimum standard provided in this act. However, the rate or rates
7 of interest used for policies and contracts, other than annuity and
8 pure endowment contracts, must not be greater than the
9 corresponding rate or rates of interest used in calculating any
10 nonforfeiture benefits provided for in those policies and
11 contracts. An insurer that had previously adopted any standard of
12 valuation producing greater aggregate reserves than those
13 calculated according to the minimum standard provided in this
14 section and section sections
835 and 835a may, with the
director's
15 approval, adopt any lower standard of valuation, but not lower than
16 the minimum standard provided by this section and section sections
17 835 and 835a. However, for the purposes of this section, the
18 holding of additional reserves previously determined by an
19 appointed actuary to be necessary to render the opinion required by
20 section 830a is not considered to be the adoption of a higher
21 standard of valuation.
22 (6) If in any contract year the gross premium charged by an
23 insurer on a policy or contract is less than the valuation net
24 premium for the policy or contract calculated by the method used in
25 calculating the reserve on the policy or contract, the insurer may
26 use the minimum valuation standards of mortality, either at the
27 time of issue or the time of valuation of the policy or contract
1 and the minimum valuation rate of interest at time of issue or the
2 time of valuation of the policy or contract, if the minimum reserve
3 required for the policy or contract is the greater of either the
4 reserve calculated according to the mortality table, rate of
5 interest, and method actually used for the policy or contract, or
6 the reserve calculated by the method actually used for the policy
7 or contract using the minimum valuation standards of mortality and
8 rate of interest and replacing the valuation net premium by the
9 actual gross premium in each contract year for which the valuation
10 net premium exceeds the actual gross premium. The minimum valuation
11 standards of mortality and rate of interest referred to in this
12 subsection are those standards stated in subsection (1) and section
13 836. However, for any life insurance policy issued after December
14 31, 1985 for which the gross premium in the first policy year
15 exceeds that of the second year and for which no comparable
16 additional benefit is provided in the first year for that excess
17 and that provides an endowment benefit or a cash surrender value or
18 a combination of endowment benefit and cash surrender value in an
19 amount greater than the excess premium, this subsection applies as
20 if the method actually used in calculating the reserve for that
21 policy were the method described in subsection (2), ignoring
22 paragraph 2 of that subsection. The minimum reserve at each policy
23 anniversary of that policy must be the greater of the minimum
24 reserve calculated in accordance with subsection (2), including
25 paragraph 2 of that subsection, and the minimum reserve calculated
26 in accordance with this subsection.
27 (7) For any plan of life insurance that provides for future
1 premium determination, the amounts of which are to be determined by
2 the insurance company based on then estimates of future experience,
3 or, for any plan of life insurance or annuity that the minimum
4 reserves cannot be determined by the methods described in
5 subsections (2), (3), and (6), the reserves that are held under
6 those plans must be appropriate in relation to the benefits and the
7 pattern of premiums for that plan and computed by a method that is
8 consistent with the principles of this standard valuation law, as
9 determined by rules promulgated by the director.
10 (8) This section applies to only life insurance policies and
11 contracts issued on and after the operative date of section 4060,
12 the standard nonforfeiture law, except as otherwise provided in
13 sections 835 and 836 for group annuity and pure endowment contracts
14 issued on or after the operative date of section 4060 and except as
15 otherwise provided in section 837 for universal life contracts.
16 (9) As used in this section:
17 (a) "Appointed actuary" means a qualified actuary who is
18 appointed in accordance with the valuation manual to prepare the
19 actuarial opinion required in section 830a(9).
20 (b) "NAIC" means the national association National Association
21 of insurance commissioners.Insurance Commissioners.
22 (c) "Qualified actuary" means an individual who is qualified
23 to sign the applicable statement of actuarial opinion in accordance
24 with the American academy Academy of actuaries Actuaries
25 qualification standards for actuaries signing statements of
26 actuarial opinions and who meets the requirements specified in the
27 valuation manual.
1 (d) "Valuation manual" means the manual of valuation
2 instructions adopted by the NAIC as specified in section 836b.
3 Sec. 835. (1) Except as provided in section sections 835a and
4 836, the minimum standard for the valuation of all individual
5 annuity and pure endowment contracts issued on or after the
6 operative date of this section, as defined described in subsection
7 (2), and for all annuities and pure endowments purchased on or
8 after that operative date under group annuity and pure endowment
9 contracts, shall must
be the commissioners reserve valuation
method
10 defined Commissioners
Reserve Valuation Method described in
section
11 834(2) and (3), and the following tables and interest rates:
12 (a) For individual annuity and pure endowment contracts issued
13 before October 1, 1980, excluding any disability and accidental
14 death benefits in these contracts, the standard shall must be
the
15 1971 individual annuity mortality table, Individual Annuity
16 Mortality Table, or a modification of this table approved by the
17 commissioner, director,
and 6% interest for single premium
18 immediate annuity contracts, and 4% interest for all other
19 individual annuity and pure endowment contracts.
20 (b) For Except
as otherwise provided in this subdivision, for
21 individual single premium immediate annuity contracts issued on or
22 after October 1, September
30, 1980, excluding any disability and
23 accidental death benefits in these contracts, the standard shall
24 must be the 1971 individual
annuity mortality table Individual
25 Annuity Mortality Table or any individual annuity mortality table
26 adopted after 1980 by the national association of insurance
27 commissioners National
Association of Insurance Commissioners that
1 is approved by a rule promulgated by the commissioner director for
2 use in determining the minimum standard of valuation for such the
3 contracts, or a modification of these tables approved by the
4 commissioner, director,
and 7-1/2% interest. At the election of the
5 insurer, the following tables may be used as the standard for
6 individual single premium immediate annuity contracts, as
7 applicable:
8 (i) For contracts issued after December 31, 1985, the 1983
9 Table a.
10 (ii) For contracts issued after December 31, 1998, the Annuity
11 2000 Table.
12 (iii) For contracts issued after December 31, 2014, the 2012
13 IAR Table.
14 (c) For Except
as otherwise provided in this subdivision, for
15 individual annuity and pure endowment contracts issued on or after
16 October 1, September
30, 1980 and before January 1, 2015,
other
17 than single premium immediate annuity contracts, excluding any
18 disability and accidental death benefits in the contracts, the
19 standard shall must
be the 1971 individual annuity
mortality table
20 Individual Annuity Mortality Table or any individual annuity
21 mortality table adopted after 1980 by the national association
22 National Association of insurance
commissioners Insurance
23 Commissioners that is approved by a rule promulgated by the
24 commissioner director
for use in determining the minimum
standard
25 of valuation for such contracts, or a modification of these tables
26 approved by the commissioner, director, and 5-1/2%
interest for
27 single premium deferred annuity and pure endowment contracts, and
1 4-1/2% interest for all other such individual annuity and pure
2 endowment contracts. At the election of the insurer, the following
3 tables may be used as the standard for individual annuity and pure
4 endowment contracts, other than single premium immediate annuities,
5 as applicable:
6 (i) For contracts issued after December 31, 1985, the 1983
7 Table a.
8 (ii) For contracts issued after December 31, 1998, the Annuity
9 2000 Table.
10 (iii) For contracts issued after December 31, 2014, the 2012
11 IAR Table.
12 (d) For all annuities and pure endowments purchased before
13 October 1, 1980, under group annuity and pure endowment contracts,
14 excluding any disability and accidental death benefits purchased
15 under these contracts, the standard shall must be
the 1971 group
16 annuity mortality table, Group
Annuity Mortality Table, or a
17 modification of these tables approved by the commissioner,
18 director, and 6% interest.
19 (e) For Except
as otherwise provided in this subdivision, For
20 all annuities and pure endowments purchased on or after October
1,
21 September 30, 1980 and before January 1, 2015, under group annuity
22 and pure endowment contracts, excluding any disability and
23 accidental death benefits purchased under these contracts, the
24 standard shall must
be the 1971 group annuity mortality
table Group
25 Annuity Mortality Table or any group annuity mortality table
26 adopted after 1980 by the national association National Association
27 of insurance commissioners Insurance Commissioners that
is approved
1 by a rule promulgated by the commissioner director for
use in
2 determining the minimum standard of valuation for such annuities
3 and pure endowments, or a modification of these tables approved by
4 the commissioner, director,
and 7-1/2% interest. At the election of
5 the insurer, the following tables may be used as the standard for
6 all annuities and pure endowments under group annuity and pure
7 endowment contracts, as applicable:
8 (i) For annuities and pure endowments purchased after December
9 31, 1985, the 1983 GAM Table.
10 (ii) For annuities and pure endowments purchased after
11 December 31, 1998, the 1994 GAR Table.
12 (2) After October 21, 1974, a company may file with the
13 commissioner director
a written notice of its election to
invoke
14 this section after a specified date before January 1, 1981, which
15 shall must be the operative date of this section for that the
16 company. A company may elect a different operative date of this
17 section for individual annuity and pure endowment contracts from
18 that elected for group annuity and pure endowment contracts. If a
19 company does not make an election, the operative date of this
20 section for that the
company shall must be
January 1, 1981.
21 (3) As used in this section:
22 (a) "Annuity 2000 Table" means that term as defined in section
23 835a.
24 (b) "1983 GAM Table" means that term as defined in section
25 835a.
26 (c) "1983 Table a" means that term as defined in section 835a.
27 (d) "1994 GAR Table" means that term as defined in section
1 835a.
2 (e) "2012 IAR Table" means that term as defined in section
3 835a.
4 Sec. 835a. (1) Except as otherwise provided in section 836,
5 the minimum standard for the valuation of all individual annuity
6 and pure endowment contracts issued after December 31, 2014 and for
7 all annuities and pure endowments purchased after December 31, 2014
8 under group annuity and pure endowment contracts must be the
9 Commissioner's Reserve Valuation Method described in section 834(2)
10 and (3), and the following tables and interest rates:
11 (a) For individual single premium immediate annuity contracts,
12 excluding any disability and accidental death benefits in these
13 contracts, the standard must be the 2012 IAR Table or any
14 individual annuity mortality table adopted after 2015 by the
15 National Association of Insurance Commissioners that is approved by
16 a rule promulgated by the director for use in determining the
17 minimum standard of valuation for such contracts, or a modification
18 of these tables approved by the director, and an interest rate as
19 determined by the methodology described in section 836.
20 (b) For individual annuity and pure endowment contracts, other
21 than single premium immediate annuity contracts, excluding any
22 disability and accidental death benefits in the contracts, the
23 standard must be the 2012 Individual Annuity Mortality Table or any
24 individual annuity mortality table adopted after 2017 by the
25 National Association of Insurance Commissioners that is approved by
26 a rule promulgated by the director for use in determining the
27 minimum standard of valuation for such contracts, or a modification
1 of these tables approved by the director, and an interest rate as
2 determined by the methodology described in section 836 for single
3 premium deferred annuity and pure endowment contracts, and an
4 interest rate as determined by the methodology described in section
5 836 for all other such individual annuity and pure endowment
6 contracts.
7 (c) For all annuities and pure endowments purchased under
8 group annuity and pure endowment contracts, excluding any
9 disability and accidental death benefits purchased under these
10 contracts, the standard must be the 1994 GAR Table, or any group
11 annuity mortality table adopted after 2017 by the National
12 Association of Insurance Commissioners that is approved by a rule
13 promulgated by the director for use in determining the minimum
14 standard of valuation for such annuities and pure endowments, or a
15 modification of these tables approved by the director, and an
16 interest rate as determined by the methodology described in section
17 836.
18 (2) As used in this section:
19 (a) "Annuity 2000 Table" means the mortality table developed
20 by the Society of Actuaries Committee on Life Insurance Research
21 and shown on page 240 of volume XLVII of the Transactions of the
22 Society of Actuaries.
23 (b) "Generational Mortality Table" means a mortality table
24 containing a set of mortality rates that decrease for a given age
25 from 1 year to the next based on a combination of a period table
26 and a projection scale containing rates of mortality improvement.
27 (c) "Period table" means a table of mortality rates applicable
1 to a given calendar year.
2 (d) "Projection Scale G2" means the table of annual rates,
3 G2x, of mortality improvement by age for projecting future
4 mortality rates beyond calendar year 2012 developed by the Society
5 of Actuaries Committee on Life Insurance Research.
6 (e) "1983 GAM Table" means that mortality table developed by
7 the Society of Actuaries committee on annuities and adopted as a
8 recognized mortality table for annuities in December 1983 by the
9 National Association of Insurance Commissioners.
10 (f) "1983 Table a" means the mortality table developed by the
11 Society of Actuaries committee to recommend a new mortality basis
12 for individual annuity valuation and adopted as a recognized
13 mortality table for annuities in June 1982 by the National
14 Association of Insurance Commissioners.
15 (g) "1994 GAR Table" means the mortality table developed by
16 the Society of Actuaries group annuity valuation table task force
17 and published on pages 866-867 of volume XLVII of the Transactions
18 of the Society of Actuaries, where the mortality rate for an
19 individual of age x in year 1994+n, QX1994+N, is determined as
20 follows:
21 QX1994+N = QX1994(1-AAX)N
22 where QX1994 is as specified in the 1994 GAR Table, n is the number
23 of years that have elapsed since 1994, and AAX is as specified in
24 the 1994 GAR Table.
25 (h) "2012 IAM Period Table" means the period table developed
1 by the Society of Actuaries Committee on Life Insurance Research
2 that contains loaded mortality rates for calendar year 2012.
3 (i) "2012 IAR Table" means the generational mortality table
4 developed by the Society of Actuaries Committee on Life Insurance
5 Research that contains rates derived from a combination of the 2012
6 IAM Period Table and Projection Scale G2, where mortality rates for
7 an individual of age x in year 2012+n, QX2012+N, are determined as
8 follows, and the results rounded to the nearest one-thousandth:
9 QX2012+N = QX2012(1-G2X)N
10 where QX2012 is as specified in the 2012 IAM Period Table, n is the
11 number of years that have elapsed since 2012, and G2X is as
12 specified in Projection Scale G2.
13 Sec. 836b. (1) All of the following apply to the valuation
14 manual:
15 (a) Except as otherwise provided under subdivision (e) or (g),
16 for policies issued on or after the operative date of the valuation
17 manual and, at a company's option for policies or individual blocks
18 of policies acquired by the company through a business acquisition
19 or reinsurance transaction after the effective date of the
20 amendatory act that added this section, March 31, 2015, regardless
21 of when the policies were issued, the standard prescribed in the
22 valuation manual is the minimum standard of valuation required
23 under section 830(2).
24 (b) The operative date of the valuation manual is January 1 of
25 the first calendar year following the first July 1 as of which all
1 of the following have occurred:
2 (i) The NAIC has adopted the valuation manual by a vote of at
3 least 42 members, or 3/4 of the members voting, whichever is
4 greater.
5 (ii) The standard valuation law, as amended by the NAIC in
6 2009, or legislation including substantially similar terms and
7 provisions, has been enacted by states representing greater than
8 75% of the direct premiums written as reported in the following
9 annual statements submitted for 2008: life, accident, and health
10 annual statements; health annual statements; or fraternal annual
11 statements.
12 (iii) The standard valuation law, as amended by the NAIC in
13 2009, or legislation including substantially similar terms and
14 provisions, has been enacted by at least 42 of the following 55
15 jurisdictions: the 50 states of the United States, American Samoa,
16 the American Virgin Islands, the District of Columbia, Guam, and
17 Puerto Rico.
18 (c) Unless a change in the valuation manual specifies a later
19 effective date, a change to the valuation manual is effective on
20 January 1 after the date the NAIC adopts the change to the
21 valuation manual by a vote representing both of the following:
22 (i) At least 3/4 of the members of the NAIC, but not less than
23 a majority of the total membership.
24 (ii) Members of the NAIC representing jurisdictions that
25 amount to greater than 75% of the direct premiums written as
26 reported in the following annual statements most recently available
27 before the vote in subparagraph (i): life, accident, and health
1 annual statements; health annual statements; or fraternal annual
2 statements.
3 (d) The valuation manual must specify all of the following:
4 (i) Minimum valuation standards for and definitions of the
5 policies or contracts subject to section 830(2). The minimum
6 valuation standards are all of the following:
7 (A) The director's reserve valuation method for life insurance
8 contracts, other than annuity contracts, subject to section 830(2).
9 (B) The director's annuity reserve valuation method for
10 annuity contracts subject to section 830(2).
11 (C) Minimum reserves for all other policies or contracts
12 subject to section 830(2).
13 (ii) The policies or contracts or types of policies or
14 contracts that are subject to the requirements of a principle-based
15 valuation in under
subsection (2) and the minimum
valuation
16 standards consistent with those requirements.
17 (iii) For policies and contracts subject to a principle-based
18 valuation under subsection (2), all of the following apply:
19 (A) Requirements for the format of reports to the director
20 under subsection (3)(c) and that must include information necessary
21 to determine if the valuation is appropriate and in compliance with
22 this section.
23 (B) Assumptions must be prescribed for risks over which the
24 company does not have significant control or influence.
25 (C) Procedures for corporate governance and oversight of the
26 actuarial function, and a process for appropriate waiver or
27 modification of the procedures.
1 (iv) For policies that are not subject to a principle-based
2 valuation under subsections (2), (3), and (4), the minimum
3 valuation standard is 1 of the following:
4 (A) The standard is consistent with the minimum standard of
5 valuation before the operative date of the valuation manual.
6 (B) The standard develops reserves that quantify the benefits
7 and guarantees, and the funding, associated with the contracts and
8 their risks at a level of conservatism that reflects conditions
9 that include unfavorable events that have a reasonable probability
10 of occurring.
11 (v) Other requirements, including, but not limited to, those
12 relating to reserve methods, models for measuring risk, generation
13 of economic scenarios, assumptions, margins, use of company
14 experience, risk measurement, disclosure, certifications, reports,
15 actuarial opinions and memorandums, transition rules, and internal
16 controls.
17 (vi) The data and form of the data required under subsection
18 (5), to whom the data must be submitted, and may specify other
19 requirements including data analyses and reporting of analyses.
20 (e) If there is not a specific valuation requirement or if the
21 director determines that a specific valuation requirement in the
22 valuation manual does not comply with this section, the company
23 shall, with respect to the requirement, comply with minimum
24 valuation standards prescribed by the director by rule.
25 (f) The director may engage a qualified actuary, at the
26 expense of the company, to perform an actuarial examination of the
27 company and opine on the appropriateness of any reserve assumption
1 or method used by the company, or to review and opine on a
2 company's compliance with any requirement of this section. The
3 director may rely upon on
the opinion, regarding this section, of
a
4 qualified actuary engaged by the commissioner of another state,
5 district, or territory of the United States. As used in this
6 subdivision, "engage" includes employment and contracting.
7 (g) The director may require a company to change any
8 assumption or method that the director considers necessary to
9 comply with the requirements of the valuation manual or this
10 section, and the company shall adjust the reserves as required by
11 the director.
12 (2) A company shall establish reserves using a principle-based
13 valuation that meets all of the following conditions for policies
14 or contracts as specified in the valuation manual:
15 (a) Quantify the benefits and guarantees, and the funding,
16 associated with the contracts and their risks at a level of
17 conservatism that reflects conditions that include unfavorable
18 events that have a reasonable probability of occurring during the
19 lifetime of the contracts. For polices or contracts with
20 significant tail risk, reflects conditions appropriately adverse to
21 quantify the tail risk.
22 (b) Incorporate assumptions, risk analysis methods, financial
23 models, and management techniques that are consistent with, but not
24 necessarily identical to, those used within the company's overall
25 risk assessment process, while recognizing potential differences in
26 financial reporting structures and any prescribed assumptions or
27 methods.
1 (c) Incorporate assumptions that are derived in 1 of the
2 following manners:
3 (i) The assumption is prescribed in the valuation manual.
4 (ii) For assumptions that are not prescribed in the valuation
5 manual, the assumptions must do the following, as applicable:
6 (A) Use the company's available experience, to the extent it
7 is relevant and statistically credible.
8 (B) To the extent that company data are not available,
9 relevant, or statistically credible, use other relevant and
10 statistically credible experience.
11 (d) Provide margins for uncertainty, including adverse
12 deviation and estimation error, such that the greater the
13 uncertainty, the larger the margin and resulting reserve.
14 (3) A company that uses principle-based valuation for 1 or
15 more policies or contracts subject to this section as specified in
16 the valuation manual shall do all of the following:
17 (a) Establish procedures for corporate governance and
18 oversight of the actuarial valuation function consistent with those
19 described in the valuation manual.
20 (b) Provide to the director and the board of directors an
21 annual certification of the effectiveness of the internal controls
22 with respect to the principle-based valuation. The internal
23 controls must be designed to assure that all material risks
24 inherent in the liabilities and associated assets subject to the
25 valuation are included in the valuation, and that valuations are
26 made in accordance with the valuation manual. The certification
27 must be based on the controls in place at the end of the preceding
1 calendar year.
2 (c) Develop, and file with the director on request, a
3 principle-based valuation report that complies with standards
4 prescribed in the valuation manual.
5 (4) A principle-based valuation may include a prescribed
6 formulaic reserve component.
7 (5) A company shall submit mortality, morbidity, policyholder
8 behavior, or expense experience and other data as prescribed in the
9 valuation manual.
10 (6) Except as otherwise provided in this section, confidential
11 information is confidential and privileged, is not subject to
12 disclosure under the freedom of information act, 1976 PA 442, MCL
13 15.231 to 15.246, is not subject to subpoena, and is not subject to
14 discovery or admissible in evidence in a private civil action.
15 However, the director may use the confidential information in the
16 furtherance of any regulatory or legal action brought as a part of
17 the director's official duties.
18 (7) The director or any person who received confidential
19 information while acting under the authority of the director shall
20 not testify in a private civil action concerning confidential
21 information.
22 (8) The director may do all of the following:
23 (a) Except as otherwise provided in this subdivision, share
24 confidential information with other state, federal, and
25 international regulatory agencies and with the NAIC and its
26 affiliates and subsidiaries. The director may also share
27 confidential information described in subsection (18)(c)(i) and
1 (iv) only with the actuarial board for counseling and discipline or
2 its successor on request for the purpose of professional
3 disciplinary proceedings and with state, federal, and international
4 law enforcement officials. The director shall not share
5 confidential information unless the recipient agrees in writing to
6 maintain the confidentiality and privileged status of the
7 confidential information and has verified in writing the legal
8 authority to maintain confidentiality.
9 (b) Subject to this subdivision, receive documents, materials,
10 data, or information from regulatory or law enforcement officials
11 of other foreign or domestic jurisdictions, the actuarial board for
12 counseling and discipline or its successor, and the NAIC and its
13 affiliates and subsidiaries. The director shall maintain as
14 confidential or privileged any documents, materials, or information
15 received with notice or the understanding that it is confidential
16 or privileged under the laws of the jurisdiction that is the source
17 of the document, material, or information.
18 (9) The director may enter into written agreements governing
19 sharing and use of information provided under this section.
20 (10) The disclosure or sharing of confidential information to
21 the director under this section is not a waiver of an applicable
22 privilege or claim of confidentiality.
23 (11) A privilege established under the law of any state or
24 jurisdiction that is substantially similar to the privilege
25 established under this section applies in any proceeding in, and in
26 any court of, this state.
27 (12) As used in subsections (6) to (10), "regulatory agency",
1 "law enforcement agency", and "NAIC" include, but are not limited
2 to, their employees, agents, consultants, and contractors.
3 (13) Notwithstanding anything in this section to the contrary,
4 any confidential information described in subsection (18)(c)(i) and
5 (iv) is subject to all of the following:
6 (a) The confidential information is subject to subpoena for
7 the purpose of defending an action seeking damages from the
8 appointed actuary submitting the related memorandum in support of
9 an opinion submitted under section 830a or principle-based
10 valuation report developed under subsection (3)(c) by reason of an
11 action required by section 830a or subsection (3)(c) or by rules
12 promulgated under this section.
13 (b) The director may release the confidential information with
14 the written consent of the company.
15 (c) If any portion of a memorandum in support of an opinion
16 submitted under section 830a or a principle-based valuation report
17 developed under subsection (3)(c) is cited by the company in its
18 marketing, is cited before a governmental agency other than a state
19 insurance department, or is released by the company to the news
20 media, the memorandum or report is not confidential.
21 (14) Except as provided in subsection (15), a domestic company
22 is exempt from the requirements under subsections (1) to (5) if the
23 domestic company meets both of the following requirements:
24 (a) The domestic company has less than $500,000,000.00 of
25 ordinary life premiums and, if the domestic company is a member of
26 a group of life insurers, the group has combined ordinary life
27 premiums of less than $1,000,000,000.00.
1 (b) The domestic company reported total adjusted capital of at
2 least 450% of the authorized control level risk-based capital in
3 the most recent risk-based capital report and the appointed actuary
4 has provided an unqualified opinion on the reserves.
5 (15) A domestic company that meets the requirements under
6 subsection (14)(a) and (b) may elect to be bound by the
7 requirements of subsections (1) to (5) for a calendar year. The
8 election must be in writing and filed with the director by February
9 1 of the year following the calendar year in which the company
10 makes the election.
11 (16) For purposes of subsection (14), ordinary life premiums
12 are measured as direct plus reinsurance assumed from an
13 unaffiliated company from the prior calendar year annual statement.
14 (17) Except for a domestic company that makes an election
15 under subsection (15), for a domestic company that is exempt from
16 the requirements of subsections (1) to (5) under subsection (14),
17 sections 830a, 832, 834, 835, 835a, 836, and 836a are applicable,
18 and a reference to this section in sections 830a, 834, and 836a is
19 not applicable.
20 (18) As used in this section:
21 (a) "Accident and health insurance" means contracts that
22 incorporate morbidity risk and provide protection against economic
23 loss resulting from accident, sickness, or medical conditions and
24 as may be specified in the valuation manual.
25 (b) "Company" means an entity that has written, issued, or
26 reinsured life insurance contracts, accident and health insurance
27 contracts, or deposit-type contracts in this state and has at least
1 1 policy in force or on claim or that has written, issued, or
2 reinsured life insurance contracts, accident and health insurance
3 contracts, or deposit-type contracts in any state and is required
4 to hold a certificate of authority to write life insurance,
5 accident and health insurance, or deposit-type contracts in this
6 state.
7 (c) "Confidential information" means all of the following:
8 (i) A memorandum in support of an opinion submitted under
9 section 830a and any other documents, materials, and other
10 information, including, but not limited to, all working papers, and
11 copies of working papers, created, produced, or obtained by or
12 disclosed to the director or any other person in connection with
13 the memorandum.
14 (ii) All documents, materials, and other information,
15 including, but not limited to, all working papers, and copies of
16 working papers, created, produced, or obtained by or disclosed to
17 the director or any other person in the course of an examination
18 made under subsection (1)(f) if an examination report or other
19 material prepared in connection with an examination made under
20 section 222 is not held as private and confidential information
21 under section 222, an examination report or other material prepared
22 in connection with an examination made under subsection (1)(f) is
23 not "confidential information" to the same extent as if the
24 examination report or other material had been prepared under
25 section 222.
26 (iii) Any reports, documents, materials, and other information
27 developed by a company in support of, or in connection with, an
1 annual certification by the company under subsection (3)(b)
2 evaluating the effectiveness of the company's internal controls
3 with respect to a principle-based valuation and any other
4 documents, materials, and other information, including, but not
5 limited to, all working papers, and copies of working papers,
6 created, produced, or obtained by or disclosed to the director or
7 any other person in connection with such reports, documents,
8 materials, and other information.
9 (iv) Any principle-based valuation report developed under
10 subsection (3)(c) and any other documents, materials, and other
11 information, including, but not limited to, all working papers, and
12 copies of working papers, created, produced, or obtained by or
13 disclosed to the director or any other person in connection with
14 the report.
15 (v) Any documents, materials, data, and other information
16 submitted by a company under subsection (5), collectively,
17 experience data, and any other documents, materials, data, and
18 other information, including, but not limited to, all working
19 papers, and copies of working papers, created or produced in
20 connection with the experience data, in each case that include any
21 potentially company-identifying or personally identifiable
22 information, that is provided to or obtained by the director,
23 together with any experience data, the experience materials and any
24 other documents, materials, data, and other information, including,
25 but not limited to, all working papers, and copies of working
26 papers, created, produced, or obtained by or disclosed to the
27 director or any other person in connection with the experience
1 materials.
2 (d) "Deposit-type contract" means contracts that do not
3 incorporate mortality or morbidity risks and as may be specified in
4 the valuation manual.
5 (e) "Life insurance" means contracts that incorporate
6 mortality risk, including annuity and pure endowment contracts, and
7 as may be specified in the valuation manual.
8 (f) "NAIC" means the national association of
insurance
9 commissioners.National
Association of Insurance Commissioners.
10 (g) "Policyholder behavior" means any action a policyholder,
11 contract holder, or any other person with the right to elect
12 options, such as a certificate holder, may take under a policy or
13 contract subject to this section, including, but not limited to,
14 lapse, withdrawal, transfer, deposit, premium payment, loan,
15 annuitization, or benefit elections prescribed by the policy or
16 contract but excluding events of mortality or morbidity that result
17 in benefits prescribed in their essential aspects by the terms of
18 the policy or contract.
19 (h) "Principle-based valuation" means a reserve valuation that
20 uses 1 or more methods or 1 or more assumptions determined by the
21 insurer and is required to comply with this section as specified in
22 the valuation manual.
23 (i) "Qualified actuary" means an individual who is qualified
24 to sign the applicable statement of actuarial opinion in accordance
25 with the American academy of actuaries Academy of Actuaries
26 qualification standards for actuaries signing such statements and
27 who meets the requirements specified in the valuation manual.
1 (j) "Tail risk" means a risk that occurs either where the
2 frequency of low probability events is higher than expected under a
3 normal probability distribution or where there are observed events
4 of very significant size or magnitude.
5 (k) "Valuation manual" means the manual of valuation
6 instructions adopted by the NAIC as specified in this section.
7 Enacting section 1. This amendatory act takes effect 90 days
8 after the date it is enacted into law.