Bulletin 2009-07 Regulation 69-57 3 Preneed Life Insurance Minimum Standards for Determining Reserve

TO: FROM: SUBJECT: DATE: South Carolina Department of Insurance Capitol Center 120 I \lain Street. Suite 1000 Columbia, South Carolina 29201 \lailin;: Addn·ss: P. 0. Box 100105. Columhia, SC 29202-:1105 Telephone: (803) 737-6150 BULLETIN NUMBER 2009-07 All Insurers Transacting Life Insurance Business in South Carolina Scott H. Richardson, CPCC /'A:JiJ / Director 7 11~ Regulation 69-57.3, Preneed Life Insurance Minimum Standards for Determining Reserve Liabilities and Nonforfeiture Values June 8. 2009 I. PURPOSE OF THIS BULLETIN :\lARK SA"'FORD Governor SCOTT RICIIARDSO"i Din:ctm· of ln.,uranct· The purpose of this Bulletin is to inform insurers of the adoption of South Carolina Regulation 69-57.3, Preneed Life Insurance Minimum Standards for Determining Reserve Liabilities and Nonforfeiture Values, prescribing minimum standards for determining reserves and nonforfeiture values on preneed insurance policies. This regulation \vas approved by Joint Resolution of the General Assembly and signed by the Governor (2009 R.20, H.3657) on April 8, 2009. The final regulation was published in the April 2009 edition of the 5'tate Register and applies to preneed insurance policies and certificates issued on or after January 1, 2009. Attached is a copy of the final regulation. For purposes of this bulletin, preneed insurance means any life insurance policy or certificate, vvhich has for its purpose the furnishing or performance of funeral services, or the furnishing or delivery of personal property. merchandise. services of any nature in connection with the final disposition of a dead human body. to be furnished or delivered at a time determinable by the death of the person \vhose body is to be d1sposed o[ but does not mean the furnishing of a cemetery lot, crypt, niche, mausoleum, marker or monument. II. :\HNIML:M STANDARD Subject to the transition rules below, for preneed insurance policies, Regulation 69-57.3 prescribes the Ultimate 1980 CSO as the minimum mortality standard for the valuation of reserve liabilities and nonf()rfeiture values for both female and male insureds. For purposes of this bulletin, the Ultimate 1980 Ordinarv Li T III. TRANSITION RULES For preneed insurance policies issued on or after January l, 2009, and before January 1, 2012, the 2001 CSO Mortality Table may be used as the minimum standard for reserves and nonforfeiture values for both male and female insureds. If an insurer elects to use the 200 I CSO on such policies, the insurer shall provide an annual \\ritten notification to the domiciliary commissioner as a part of the actuarial opinion memorandum submitted in support of the insurer's asset adequacy testing. The notification must include: ( 1) A complete list of all preneed policy forms using the 2001 CSO Mortality Table; (2) A certification signed by the appointed actuary stating that the reserve methodology employed by the insurer in determining reserves for such policies, unaggregated with other policies, develops adequate reserves; and (3) Supporting documentation and inlonnation regarding the adequacy of reserves for such policies. All preneed policies issued on or after January 1, 2012 must use the Ultimate 1980 CSO table as the minimum reserve and nonforfeiture standard. IV. QUESTIONS Any questions or concerns about this Bulletin should be addressed to the attention of: Andrew M. Dvorine Life Actuary South Carolina Department of Insurance 145 King Street, Suite 228 Charleston, SC 29401 Phone: (843) 577-3417 advorine~Lidoi.sc.gov FINAL REGULATIONS 45 Document No. 4035 DEPARTMENT OF INSURANCE CHAPTER69 . 1976 Code Sections 1-23- 10 et seq., 38-3-110,38-9-180 and 38-63-510 et seq. 69-57.3. Preneed Life Insurance Minimum Standards for Reserve Liabilities and Nonforfeiture Synopsis: The Preneed Life Insurance Minimum Standards for Reserve Liabilities and Nonforfeiture Values was the NAIC to for use of the 1980 Commissioners Standard Life Valuation Mortality Table for use in determining the minimum standard of valuation of reserves and the minimum standard nonforfeiture values for insurance products. The 2001 CSO Tables promulgated in S.C. Code of Regulations 69-57.1, Recognition of Mortality Tables for Use in Determining Minimum Reserve Liabilities, do not appropriately reflect the mortality experience of preneed life insurance and may inadequate reserves. Instructions: Add Regulation 69-57.3, Preneed Life Insurance Minimum Standards for Determining Reserve Liabilities and Nonforfeiture Values, as drafted below, to the South Carolina Code of Regulations. Text: 69-57.3. Preneed Life Insurance Minimum Standards for Determining Reserve Liabilities and Nonforfeiture Values. Section J. Authority Section 2. Scope Section 3. Purpose Section 4. Definitions Section 5. Minimum Valuation Mortality Standards Section 6. Minimum Valuation Interest Rate Standards Section 7. Minimum Valuation Method Standards Section 8. Transition Rules Section 9. EtTective Date Section I. This is the Director of Insurance to South Carolina Code Sections 38-9- 180 and 38-63-510 et seq. as well as 69-57. .t6 FINAL REGULA TlONS Section 2. Scope This rule applies to preneed insurance contracts. as defined 111 section 4 of this regulation. and to similar policies and certificates. Section 3. Purpose The purpose of this regulation is to establish for preneed insurance products minimum mortality standards f()r reserves and nont(xfeiture values. and to require the use of the 1980 Commissioners Standard Ordinary ( CSO) Lite Valuation Mortality Table f()r use in determining the minimum standard of valuation of reserves and the minimum standard nonforfeiture values t(Jr preneed insurance products. Section 4. Definitions A. "200 I CSO Mortality Table"' means that mortality table. consisting of separate rates of mortality t()r males 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 NAIC in December 2002. The 200 I CSO Mortality Table is included in the Proceedings of the NAIC: (2nd Quarter 2002). Unless the context indicates othemise. the ·'200 1 CSO Mortality Table" includes both the ultimate form of that 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-nearest-birthday and age-last-birthday bases ofthe mortality tables. B. "'Ultimate 1980 CSO" means the Commissioners' 1980 Standard Ordinary Life Valuation Mortality Tables ( 1980 CSO) without ten-year ( 1 0-year) selection factors. incorporated into the 1980 amendments to the NAIC: Standard Valuation Law approved in December 1983. C. .. Preneed insurance" means any lil'e insurance policy or certificate, which has tor its purpose the furnishing or performance of funeral services. or the furnishing or delivery of personal property. merchandise. services of any nature in connection vvith the final disposition of a dead human body. to be furnished or delivered at a time determinable by the death of the person whose body is to be disposed of. but does not mean the furnishing of a cemetery lot. crypt. niche. mausoleum. grave marker or monument Section 5. Minimum Valuation Mortality Standards For preneed insurance contracts. as defined in section 4C. and similar policies and contracts. the minimum mortality standard for determining reserve liabilities and nonforfeiture values f()r both male and female insureds shall be the Ultimate I 980 CSO. Section 6. Minimum Valuation Interest Rate Standards A. The interest rates used in determining the minimum standard for valuation of preneed insurance shall be the calendar year statutory valuation interest rates as defined in South Carolina Code Section 38-9-180. B. Thl' interest rates usl'd in dl'termining the minimum standard for nonf()rfeiture values for insurance shall be the calendar year nonJ()rfeiture interest rates as detlned in South Carolina Code Section 38-63-510 et seq. Section 7. Minimum Valuation i\1ethod Standards of FINAL REGULATIONS 47 B. The method used in the standard for mmmmm nonforfeiture values for insurance shall be the method defined in South Carolina Code Section 38-63-510 et seq. Section 8. Transition Rules A. For issued on or after the etTective date of this and before L 20 2, the 2001 CSO may be used as the minimum standard for reserves and minimum standard for nonforfeiture benefits both male and female insureds. B. If an insurer elects to use the 200 I CSO as minimum standard for any effective of this and before January L 2012, the insurer shall memorandum submitted in support of the asset notification to the domiciliary commissioner. The notification shall include: issued on or after the of the actuarial an annual written (1) A list of all policy forms that use the 2001 CSO as a minimum "'""r1""" A the appointed that the reserve employed the company in determining reserves for the preneed policies issued the effective date and the 200 I CSO as a minimum develops adequate reserves. (For the purpose of this certification, the preneed insurance policies using the 200 I CSO as a minimum standard cannot be with any other policies); and Supporting information regarding the adequacy of reserves for preneed insurance policies issued after the effective date of this regulation and using the 200 I CSO as a minimum standard for reserves. C. Preneed insurance policies issued on or after January 1, 2012, must use the Ultimate 1980 CSO in the calculation of minimum nonforfeiture values and minimum reserves. Section 9. Effective Date This regulation is applicable to preneed insurance policies and certificates and similar contracts and certificates, as specified in section 2, issued on or after January 1, 2009. Fiscal Impact Statement: There will be no increased costs to the state or its political subdivisions. Statement of Rationale: The proposed regulation is needed to appropriately reflect the mmiality experience of preneed life insurance and produce adequate reserves for preneed life insurance products. The regulation will benefit consumers by increasing necessary reserves to an appropriate level, promoting a responsible competitive environment by all companies are responsibly and value for consumers cash The use of the 1980 CSO tables will enhance of life insurance and the the and financial of insurance llr?'tnt>nt on