Recognition of the 2001 CSO Mortality Table for Use in Determining Minimum Reserve Liabilities and Nonforfeiture Benefits

PURPOSE: The purpose of this rule is to recognize, permit and prescribe the use of the 2001 Commissioners Standard Ordinary (CSO) Mortality Table in accordance with sections 376.380.1 and 376.670.9, RSMo, and 20 CSR 200-1.160(5)(A) and (B). (1) Definitions. (A) “2001 CSO Mortality Table” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the National Association of Insurance Commissioners (NAIC) in December 2002. The 2001 CSO Mortality Table is included in the Proceedings of the NAIC (2nd Quarter 2002). Unless the context indicates otherwise, the “2001 CSO Mortality Table” includes both the ultimate form of the table and the select and ultimate form of that table and includes both the smoker and nonsmoker mortality tables and the composite mortality tables. It also includes both the age-nearestbirthday and age-last-birthday bases of the mortality tables. (B) “2001 CSO Mortality Table (F)” means that mortality table consisting of the rates of mortality for female lives from the 2001 CSO Mortality Table. (C) “2001 CSO Mortality Table (M)” means that mortality table consisting of the rates of mortality for male lives from the 2001 CSO Mortality Table. (D) “Composite mortality tables” means mortality tables with rates of mortality that do not distinguish between smokers and nonsmokers. (E) “Smoker and nonsmoker mortality tables” means mortality tables with separate rates of mortality for smokers and nonsmokers. (2) 2001 CSO Mortality Table. (A) At the election of the company for any one (1) or more specified plans of insurance and subject to the conditions stated in this regulation, the 2001 CSO Mortality Table may be used as the minimum standard for policies issued on or after January 1, 2004, and before the date specified in subsection (2)(B) to which sections 376.380.1 and 376.670.9, RSMo, and 20 CSR 2001.160(5)(A) and (B) are applicable. If the company elects to use the 2001 CSO Mortality Table, it shall do so for both valuation and nonforfeiture purposes. (B) Subject to the conditions stated in this regulation, the 2001 CSO Mortality Table shall be used in determining minimum standards for policies issued on and after January 1, 2009, to which sections 376.380.1 and 376.670.9, RSMo, and 20 CSR 2001.160(5)(A) and (B) are applicable. (3) Conditions. (A) For each plan of insurance with separate rates for smokers and nonsmokers an insurer may use: 1. Composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits; 2. Smoker and nonsmoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by section 376.380.1(2)(h), RSMo, and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up nonforfeiture benefits; or 3. Smoker and nonsmoker mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits. (B) For plans of insurance without separate rates for smokers and nonsmokers the composite mortality tables shall be used. (C) For the purpose of determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits, the 2001 CSO Mortality Table may, at the option of the company for each plan of insurance, be used in its ultimate or select and ultimate form, subject to the restrictions of section (4) and 20 CSR 2001.160 relative to use of the select and ultimate form. (D) When the 2001 CSO Mortality Table is the minimum reserve standard for any plan for a company, the actuarial opinion in the annual statement filed with the commissioner shall be based on an asset adequacy analysis as specified in subsection 20 CSR 2001.116(3)(A). The director may exempt a company from this requirement if it only does business in this state and in no other state. (4) Applicability of the 2001 CSO Mortality Table to 20 CSR 200-1.160. (A) The 2001 CSO Mortality Table may be used in applying 20 CSR 200-1.160 in the following manner, subject to the transition dates for use of the 2001 CSO Mortality Table in section (2) of this rule (unless otherwise noted, the references in this section are to 20 CSR 200-1.160). 1. Subparagraph (1)(A)2.B.: The net level reserve premium is based on the ultimate mortality rates in the 2001 CSO Mortality Table. 2. Subsection (2)(B): All calculations are made using the 2001 CSO Mortality Rate, and, if elected, the optional minimum mortality standard for deficiency reserves stipulated in paragraph (4)(A)4. of this regulation. The value of “qx+k+t-1” is the valuation mortality rate for deficiency reserves in policy year k+t, but using the unmodified select mortality rates if modified select mortality rates are used in the computation of deficiency reserves. 3. Subsection (3)(A): The 2001 CSO Mortality Table is the minimum standard for basic reserves. 4. Subsection (3)(B): The 2001 CSO Mortality Table is the minimum standard for deficiency reserves. If select mortality rates are used, they may be multiplied by X percent for durations in the first segment, subject to the conditions specified in subparagraphs (3)(B)3.A. to I. In demonstrating compliance with those conditions, the demonstrations may not combine the results of tests that utilize the 1980 CSO Mortality Table with those tests that utilize the 2001 CSO Mortality Table, unless the combination is explicitly required by regulation or necessary to be in compliance with relevant Actuarial Standards of Practice. 5. Subsection (4)(C): The valuation mortality table used in determining the tabular cost of insurance shall be the ultimate mortality rates in the 2001 CSO Mortality Table. 6. Paragraph (4)(E)4: The calculations specified in subsection (4)(E) shall use the ultimate mortality rates in the 2001 CSO Mortality Table. 7. Paragraph (4)(F)4: The calculations specified in subsection (4)(F) shall use the ultimate mortality rates in the 2001 CSO Mortality Table. 8. Paragraph (4)(G)2: The calculations specified in subsection (4)(G) shall use the ultimate mortality rates in the 2001 CSO Mortality Table. 9. Subparagraph (5)(A)1.B.: The one (1)-year valuation premium shall be calculated using the ultimate mortality rates in the 2001 CSO Mortality Table. (B) Nothing in this section shall be construed to expand the applicability of 20 CSR 200-1.160 to include life insurance policies exempted under 20 CSR 200-1.160(1)(A). (5) Gender-Blended Tables. (A) For any ordinary life insurance policy delivered or issued for delivery in this state on and after January 1, 2004, that utilizes the same premium rates and charges for male and female lives or is issued in circumstances where applicable law does not permit distinctions on the basis of gender, a mortality table that is a blend of the 2001 CSO Mortality Table (M) and the 2001 CSO Mortality Table (F) may, at the option of the company for each plan of insurance, be substituted for the 2001 CSO Mortality Table for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits. No change in minimum valuation standards is implied by this subsection of the regulation. (B) The company may choose from among the blended tables developed by the American Academy of Actuaries CSO Task Force and adopted by the NAIC in December 2002. (C) It shall not, in and of itself, be a violation of the Unfair Trade Practices Act for an insurer to issue the same kind of policy of life insurance on both a sex-distinct and sex-neutral basis. (6) Separability. If any provision of this regulation or its application to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of the provision to other persons or circumstances shall not be affected. AUTHORITY: sections 374.045, 376.380, 376.670, and 376.676, RSMo 2000.* Original rule filed Feb. 27, 2004, effective Aug. 30, 2004. *Original authority: 374.045, RSMo 1967, amended 1993, 1995; 376.380, RSMo 1939, amended 1943, 1947, 1959, 1961, 1965, 1971, 1975, 1979, 1982, 1993; 376.670, RSMo 1943, amended 1959, 1961, 1965, 1975, 1979, 1982; 376.676, RSMo 2000.