AZ Regulatory Bulletin 2016-03: January 1, 2017 Operative Date of Principle-Based Valuation Manual

[LOGO] Office of the Director Arizona Department of Insurance 2910 North 44th Street, Suite 210, Phoenix, Arizona 85018-7269 Phone: (602) 364-3100 Web: https://insurance.az.gov Douglas A. Ducey, Governor Leslie R. Hess, Interim Director # REGULATORY BULLETIN 2016-03¹ To: All Life and Health Insurers From: Leslie R. Hess Interim Director Date: October 21, 2016 # Re: January 1, 2017 Operative Date of Principle-Based Valuation Manual The Arizona Standard Valuation Law (SVL)² establishes a principle-based valuation methodology that is applicable, subject to specified exceptions, to life, health and annuity business written after the “operative date” of the uniform valuation manual adopted by the National Association of Insurance Commissioners (NAIC). To enable uniform and simultaneous implementation by participating states, the SVL provides that the valuation manual will only become operative when a sufficient number of states have adopted substantially similar laws before July 1 of the preceding year. Specifically, the operative date is established as the first day of January of the first calendar year beginning at least 6 months after all of the following events have occurred: A. The valuation manual has been adopted by the NAIC by an affirmative vote of at least 42 members or ¾ of the members voting, whichever is greater; B. The NAIC’s model 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% of the direct ¹ This Substantive Policy Statement is advisory only. A Substantive Policy Statement does not include internal procedural documents that only affect the internal procedures of the Agency, and does not impose additional requirements or penalties on regulated parties or include confidential information or rules made in accordance with the Arizona Administrative Procedure Act. If you believe that this Substantive Policy Statement does impose additional requirements or penalties on regulated parties you may petition the agency under Arizona Revised Statutes Section 41-1033 for a review of the Statement. ² A.R.S. § 20-510. premiums written as reported in the following for 2008: life, accident and health annual statements, health annual statements or fraternal annual statements; and C. The NAIC's model 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 District of Columbia, Guam, the Commonwealth of Puerto Rico and the United States Virgin Islands."³ On December 2, 2012, the NAIC adopted the valuation manual, with 43 members voting in the affirmative. This year, the number of states adopting principle-based valuation at the state level has also reached the specified supermajority. As of this date, 46 states, including Arizona, have advised the NAIC that they have enacted laws substantially similar to the model SVL, including language using the same three triggers to define the operative date, and these states represent more than 79% of the applicable premium volume. After conducting an extensive analysis of these states' laws, the NAIC voted unanimously to recognize that all three triggers defining the operative date have been satisfied. Therefore, the operative date of the uniform valuation manual, for purposes of the Arizona Standard Valuation Law, A.R.S. § 20-510, is January 1, 2017. Please direct any questions related to this Regulatory Bulletin to: Bob Kell (602) 364-3248 or rkell@azinsurance.gov Life & Health Actuary ³ A.R.S. § 20-510(R)(2). - 2 -