Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 421 (2016GS)

Sponsor

Rep. Dunnigan, J.

Final action

Governor Signed 3/22/2016

Outcome

Became law — signed by Gov. Gary R. Herbert

Summary

What it does

• This bill:
• addresses confidentiality of information obtained by the commissioner;
• defines terms;
• modifies provisions related to reserve valuation;
• addresses actuarial opinion of reserves;
• modifies computation of minimum standard under various circumstances;
• addresses minimum reserves;
• addresses the reserve calculation under various circumstances;
• modifies minimum standards for accident and health insurance;
• addresses adoption and use of a valuation manual;
• enacts requirements of principle-based valuation;
• enacts provisions related to experience reporting;
• addresses confidentiality of information;
• enacts a single state and small company exemption;

Every vote on this bill

Bill text

INSURANCE CHANGES
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: James A. Dunnigan
Senate Sponsor: 
Curtis S. Bramble
LONG TITLE
General Description:
This bill modifies the Insurance Code.
Highlighted Provisions:
This bill:
▸ addresses confidentiality of information obtained by the commissioner;
▸ defines terms;
▸ modifies provisions related to reserve valuation;
▸ addresses actuarial opinion of reserves;
▸ modifies computation of minimum standard under various circumstances;
▸ addresses minimum reserves;
▸ addresses the reserve calculation under various circumstances;
▸ modifies minimum standards for accident and health insurance;
▸ addresses adoption and use of a valuation manual;
▸ enacts requirements of principle-based valuation;
▸ enacts provisions related to experience reporting;
▸ addresses confidentiality of information;
▸ enacts a single state and small company exemption;
▸ modifies Standard Nonforfeiture Law for Life Insurance; and
▸ makes technical and conforming amendments.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
31A-16-109
, as last amended by Laws of Utah 2015, Chapter 244
31A-17-501
, as enacted by Laws of Utah 1993, Chapter 305
31A-17-502
, as enacted by Laws of Utah 1993, Chapter 305
31A-17-503
, as last amended by Laws of Utah 2015, Chapter 258
31A-17-504
, as last amended by Laws of Utah 2001, Chapter 116
31A-17-505
, as last amended by Laws of Utah 2002, Chapter 308
31A-17-506
, as last amended by Laws of Utah 2011, Chapter 297
31A-17-507
, as last amended by Laws of Utah 2011, Chapter 297
31A-17-509
, as last amended by Laws of Utah 2001, Chapter 116
31A-17-510
, as last amended by Laws of Utah 2011, Chapter 297
31A-17-511
, as enacted by Laws of Utah 1993, Chapter 305
31A-22-408
, as last amended by Laws of Utah 2015, Chapter 258
ENACTS:
31A-17-514
, Utah Code Annotated 1953
31A-17-515
, Utah Code Annotated 1953
31A-17-516
, Utah Code Annotated 1953
31A-17-517
, Utah Code Annotated 1953
31A-17-518
, Utah Code Annotated 1953
31A-17-519
, Utah Code Annotated 1953
REPEALS AND REENACTS:
31A-17-513
, as last amended by Laws of Utah 2001, Chapter 116
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
31A-16-109
 is amended to read:
31A-16-109.
Confidentiality of information obtained by commissioner.
(1) Information, documents, and copies of these that are obtained by or disclosed to the
commissioner or any other person in the course of an examination or investigation made under
Section 
31A-16-107.5
, and all information reported under Section 
31A-16-105
, is confidential. 
It is not subject to subpoena and may not be made public by the commissioner or any other
person 
without the permission of the insurer
, except it may be provided to the insurance
departments of other states, without the prior written consent of the insurer to which it pertains.
[
The confidentiality of this section does not apply if the commissioner, after giving the insurer
and its affiliates who would be affected by the disclosure, proper notice and an opportunity to
be heard, and determines that the interests of policyholders, shareholders, or the public will be
served by the publication of the information. In this situation, the commissioner may publish
all or any part of the information in any manner the commissioner considers appropriate.
]
(2) The commissioner and any person who received documents, materials, or other
information while acting under the authority of the commissioner or with whom the
documents, materials, or other information are shared pursuant to this chapter shall keep
confidential any confidential documents, materials, or information subject to Subsection (1).
(3) (a) To assist in the performance of the commissioner's duties, the commissioner:
(i) may share documents, materials, or other information, including the confidential
documents, materials, or information subject to Subsection (1), with the following if the
recipient agrees in writing to maintain the confidentiality status of the document, material, or
other information, and has verified in writing the legal authority to maintain confidentiality:
(A) other state, federal, and international regulatory agencies;
(B) the National Association of Insurance Commissioners and its affiliates and
subsidiaries; and
(C) state, federal, and international law enforcement authorities, including members of
a supervisory college described in Section 
31A-16-108.5
;
(ii) notwithstanding Subsection (1), may only share confidential documents, material,
or information reported pursuant to Section 
31A-16-105
 with commissioners of states having
statutes or regulations substantially similar to Subsection (1) and who have agreed in writing
not to disclose the documents, material, or information;
(iii) may receive documents, materials, or information, including otherwise
confidential documents, materials, or information from the National Association of Insurance
Commissioners and its affiliates and subsidiaries and from regulatory and law enforcement
officials of other foreign or domestic jurisdictions, and shall maintain as confidential any
document, material, or information received with notice or the understanding that it is
confidential under the laws of the jurisdiction that is the source of the document, material, or
information; and
(iv) shall enter into written agreements with the National Association of Insurance
Commissioners governing sharing and use of information provided pursuant to this chapter
consistent with this Subsection (3) that shall:
(A) specify procedures and protocols regarding the confidentiality and security of
information shared with the National Association of Insurance Commissioners and its affiliates
and subsidiaries pursuant to this chapter, including procedures and protocols for sharing by the
National Association of Insurance Commissioners with other state, federal, or international
regulators;
(B) specify that ownership of information shared with the National Association of
Insurance Commissioners and its affiliates and subsidiaries pursuant to this chapter remains
with the commissioner and the National Association of Insurance Commissioner's use of the
information is subject to the direction of the commissioner;
(C) require prompt notice to be given to an insurer whose confidential information in
the possession of the National Association of Insurance Commissioners pursuant to this chapter
is subject to a request or subpoena to the National Association of Insurance Commissioners for
disclosure or production; and
(D) require the National Association of Insurance Commissioners and its affiliates and
subsidiaries to consent to intervention by an insurer in any judicial or administrative action in
which the National Association of Insurance Commissioners and its affiliates and subsidiaries
may be required to disclose confidential information about the insurer shared with the National
Association of Insurance Commissioners and its affiliates and subsidiaries pursuant to this
chapter.
(4) The sharing of information by the commissioner pursuant to this chapter does not
constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely
responsible for the administration, execution, and enforcement of this chapter.
(5) A waiver of any applicable claim of confidentiality in the documents, materials, or
information does not occur as a result of disclosure to the commissioner under this section or
as a result of sharing as authorized in Subsection (3).
(6) Documents, materials, or other information in the possession or control of the
National Association of Insurance Commissioners pursuant to this chapter are:
(a) confidential, not public records, and not open to public inspection; and
(b) not subject to Title 63G, Chapter 2, Government Records Access and Management
Act.
Section 2. Section 
31A-17-501
 is amended to read:
31A-17-501.
Standard Valuation Law -- Definitions.
(1)
 This part is known as the "Standard Valuation Law."
(2) As used in this part, the following definitions apply on or after the operative date of
the valuation manual:
(a) Notwithstanding Section 
31A-1-301
, "accident and health insurance" means a
contract that incorporates morbidity risk and provides protection against economic loss
resulting from accident, sickness, or medical conditions and as may be specified in the
valuation manual.
(b) "Appointed actuary" means a qualified actuary who is appointed in accordance with
the valuation manual to prepare the actuarial opinion required in Subsection 
31A-17-503
(2).
(c) "Company" means an entity that:
(i) has written, issued, or reinsured a life insurance contract, accident and health
insurance contract, or deposit-type contract in this state and has at least one such policy in force
or on claim; or
(ii) has written, issued, or reinsured a life insurance contract, accident and health
insurance contract, or deposit-type contract in any state and is required to hold a certificate of
authority to write life insurance, accident and health insurance, or deposit-type contracts in this
state.
(d) "Deposit-type contract" means a contract that does not incorporate mortality or
morbidity risks and as may be specified in the valuation manual.
(e) Notwithstanding Section 
31A-1-301
, "life insurance" means a contract that
incorporates mortality risk, including annuity and pure endowment contracts, and as may be
specified in the valuation manual.
(f) "Policyholder behavior" means an action that a policyholder, contract holder, or any
other person with the right to elect options, such as a certificate holder, may take under a policy
or contract subject to this part, including lapse, withdrawal, transfer, deposit, premium
payment, loan, annuitization, or benefit elections prescribed by the policy or contract, but
excluding events of mortality or morbidity that result in benefits prescribed in their essential
aspects by the terms of the policy or contract.
(g) "Principle-based valuation" means a reserve valuation that uses one or more
methods or one or more assumptions determined by the insurer and is required to comply with
Section 
31A-17-515
 as specified in the valuation manual.
(h) "Qualified actuary" means an individual who is qualified to sign the applicable
statement of actuarial opinion in accordance with the American Academy of Actuaries
qualification standards for actuaries signing the statements and who meets the requirements
specified in the valuation manual.
(i) "Tail risk" means a risk that occurs either when the frequency of low probability
events is higher than expected under a normal probability distribution or when there are
observed events of very significant size or magnitude.
(j) "Valuation manual" means the manual of valuation instructions adopted in
accordance with Section 
31A-17-514
.
Section 3. Section 
31A-17-502
 is amended to read:
31A-17-502.
Reserve valuation.
(1) The following apply to a policy or contract issued before the operative date of the
valuation manual:
(a)
 The commissioner shall annually value, or cause to be valued, the reserve liabilities
[
(
]
,
 also called "reserves" in this part[
)
]
,
 for [
all
] outstanding life insurance policies and annuity
and pure endowment contracts
,
 of every life insurance company doing business in this state,
[
and may certify the amount of any such reserves, specifying the mortality table or tables, rate
or rates of interest, and methods (net level premium method or other) used in the calculation of
such reserves
] 
issued before the operative date of the valuation manual
. In calculating [
such
]
the
 reserves, [
he
] 
the commissioner
 may use group methods and approximate averages for
fractions of a year or otherwise. In lieu of the valuation of the reserves required in this part of
any foreign or alien company, [
he
] 
the commissioner
 may accept any valuation made, or caused
to be made, by the insurance supervisory official of any state or other jurisdiction when such
valuation complies with the minimum standard provided in this part[
, and if the official of such
state or jurisdiction accepts as sufficient and for all valid legal purposes the certificate of
valuation of the commissioner when such certificate states the valuation to have been made in a
specified manner according to which the aggregate reserves would be at least as large as if they
had been computed in the manner prescribed by the law of that state or jurisdiction
].
(b) (i) Sections 
31A-17-504
, 
31A-17-505
, 
31A-17-506
, 
31A-17-507
, 
31A-17-508
,
31A-17-509
, 
31A-17-510
, 
31A-17-511
, 
31A-17-512
, and 
31A-17-513
 apply to a policy or
contract, as appropriate, subject to this part issued before the operative date of the valuation
manual.
(ii) Sections 
31A-17-514
 and 
31A-17-515
 do not apply to a policy or contract
described in Subsection (1)(b)(i).
(2) The following apply to a policy or contract issued on or after the operative date of
the valuation manual:
(a) The commissioner shall annually value, or cause to be valued, the reserve liabilities,
also called "reserves" in this part, for an outstanding life insurance contract, annuity and pure
endowment contract, accident and health contract, and deposit-type contract of every company
issued on or after the operative date of the valuation manual. In lieu of the valuation of the
reserve liabilities required of a foreign or alien company, the commissioner may accept a
valuation made, or caused to be made, by the insurance supervisory official of any state or
other jurisdiction when the valuation complies with the minimum standard provided in this
part.
(b) Sections 
31A-17-514
 and 
31A-17-515
 apply to a policy or contract issued on or
after the operative date of the valuation manual.
Section 4. Section 
31A-17-503
 is amended to read:
31A-17-503.
Actuarial opinion of reserves.
[
(1) This section becomes operative on December 31, 1993.
]
[
(2) General: Every
] 
(1) (a) For an actuarial opinion before the operative date of the
valuation manual, a
 life insurance company doing business in this state shall annually submit
the opinion of a qualified actuary as to whether the reserves and related actuarial items held in
support of the policies and contracts specified by the commissioner by rule are computed
appropriately, are based on assumptions which satisfy contractual provisions, are consistent
with prior reported amounts, and comply with applicable laws of this state. The commissioner
by rule shall define the specifics of this opinion and add any other items considered to be
necessary to its scope.
[
(3) Actuarial
] 
(b) The following apply to the actuarial
 analysis of reserves and assets
supporting reserves:
[
(a) Every
] 
(i) A
 life insurance company, except as exempted by or pursuant to rule,
shall also annually include in the opinion required by Subsection [
(2)
] 
(1)(a)
, an opinion of the
same qualified actuary as to whether the reserves and related actuarial items held in support of
the policies and contracts specified by the commissioner by rule, when considered in light of
the assets held by the company with respect to the reserves and related actuarial items,
including the investment earnings on the assets and the considerations anticipated to be
received and retained under the policies and contracts, make adequate provision for the
company's obligations under the policies and contracts, including the benefits under the
expenses associated with the policies and contracts.
[
(b)
] 
(ii)
 The commissioner may provide by rule for a transition period for establishing
any higher reserves which the qualified actuary may consider necessary in order to render the
opinion required by this section.
[
(4) Requirement for opinion under Subsection (3): Each
]
(c) An
 opinion required by Subsection [
(3)
] 
(1)(b)
 shall be governed by the following
provisions:
[
(a)
] 
(i)
 A memorandum, in form and substance acceptable to the commissioner as
specified by rule, shall be prepared to support each actuarial opinion.
[
(b)
] 
(ii)
 If the insurance company fails to provide a supporting memorandum at the
request of the commissioner within a period specified by rule or the commissioner determines
that the supporting memorandum provided by the insurance company fails to meet the
standards prescribed by the rule or is otherwise unacceptable to the commissioner, the
commissioner may engage a qualified actuary at the expense of the company to review the
opinion and the basis for the opinion and prepare such supporting memorandum as is required
by the commissioner.
[
(5) Requirement for all opinions: Every
]
(d) An
 opinion 
subject to this Subsection (1)
 shall be governed by the following
provisions:
[
(a)
] 
(i)
 The opinion shall be submitted with the annual statement reflecting the
valuation of the reserve liabilities for each year ending on or after December 31, 1993.
[
(b)
] 
(ii)
 The opinion shall apply to [
all
] 
the
 business in force including individual and
group health insurance plans, in form and substance acceptable to the commissioner as
specified by rule.
[
(c)
] 
(iii)
 The opinion shall be based on standards adopted from time to time by the
Actuarial Standards Board and on such additional standards as the commissioner may by rule
prescribe.
[
(d)
] 
(iv)
 In the case of an opinion required to be submitted by a foreign or alien
company, the commissioner may accept the opinion filed by that company with the insurance
supervisory official of another state if the commissioner determines that the opinion reasonably
meets the requirements applicable to a company domiciled in this state.
[
(e)
] 
(v)
 For the purposes of this section, "qualified actuary" means a member in good
standing of the American Academy of Actuaries who meets the requirements set forth by
department rule.
[
(f)
] 
(vi)
 Except in cases of fraud or willful misconduct, the qualified actuary is not
liable for damages to any person, other than the insurance company and the commissioner, for
any act, error, omission, decision, or conduct with respect to the actuary's opinion.
[
(g)
] 
(vii)
 Disciplinary action by the commissioner against the company or the qualified
actuary shall be defined in rules by the commissioner 
consistent with Section 
31A-2-308
 and
Title 63G, Chapter 4, Administrative Procedures Act
.
[
(h) (i)
] 
(viii) (A)
 Any memorandum in support of the opinion, and any other material
provided by the company to the commissioner in connection [
therewith
] 
with the opinion
, are
considered protected records under Section 
63G-2-305
 and may not be made public and are not
subject to subpoena under Subsection 
63G-2-202
(7), other than for the purpose of defending an
action seeking damages from any person by reason of any action required by this section or
rules [
promulgated
] 
made
 under this section.
[
(ii)
] 
(B)
 However, the memorandum or other material may otherwise be released by
the commissioner[
: (A)
] with the written consent of the company[
;
]
,
 or [
(B)
] to the American
Academy of Actuaries upon request stating that the memorandum or other material is required
for the purpose of professional disciplinary proceedings and setting forth procedures
satisfactory to the commissioner for preserving the confidentiality of the memorandum or other
material.
[
(iii)
] 
(C)
 Once any portion of the confidential memorandum is cited in its marketing
or is cited before any governmental agency other than the department or is released to the news
media, all portions of the memorandum are no longer confidential.
(2) The following apply to an actuarial opinion of reserves after the operative date of
the valuation manual:
(a) A company with an outstanding life insurance contract, accident and health
insurance contract, or deposit-type contract in this state and subject to rule made by the
commissioner shall annually submit the opinion of the appointed actuary as to whether the
reserves and related actuarial items held in support of the policies and contracts are computed
appropriately, are based on assumptions that satisfy contractual provisions, are consistent with
prior reported amounts, and comply with applicable laws of this state. The valuation manual
will prescribe the specifics of this opinion including any items considered to be necessary to its
scope.
(b) A company with an outstanding life insurance contract, accident and health
insurance contract, or deposit-type contract in this state and subject to rule made by the
commissioner, except as exempted in the valuation manual, shall also annually include in the
opinion required by Subsection (2)(a) an opinion of the same appointed actuary as to whether
the reserves and related actuarial items held in support of the policies and contracts specified in
the valuation manual, when considered in light of the assets held by the company with respect
to the reserves and related actuarial items, including the investment earnings on the assets and
the considerations anticipated to be received and retained under the policies and contracts,
make adequate provision for the company's obligations under the policies and contracts,
including the benefits under and expenses associated with the policies and contracts.
(c) An opinion required by Subsection (2)(b) shall be governed by the following
provisions:
(i) A memorandum, in form and substance as specified in the valuation manual, and
acceptable to the commissioner, shall be prepared to support each actuarial opinion.
(ii) If the insurance company fails to provide a supporting memorandum at the request
of the commissioner within a period specified in the valuation manual or the commissioner
determines that the supporting memorandum provided by the insurance company fails to meet
the standards prescribed by the valuation manual or is otherwise unacceptable to the
commissioner, the commissioner may engage a qualified actuary at the expense of the company
to review the opinion and the basis for the opinion and prepare the supporting memorandum
required by the commissioner.
(d) An opinion subject to this Subsection (2) shall be governed by the following
provisions:
(i) The opinion shall be in form and substance as specified in the valuation manual and
acceptable to the commissioner.
(ii) The opinion shall be submitted with the annual statement reflecting the valuation of
such reserve liabilities for each year ending on or after the operative date of the valuation
manual.
(iii) The opinion shall apply to the policies and contracts subject to Subsection (2)(b),
plus other actuarial liabilities as may be specified in the valuation manual.
(iv) The opinion shall be based on standards adopted from time to time by the
Actuarial Standards Board or its successor, and on such additional standards as may be
prescribed in the valuation manual.
(v) In the case of an opinion required to be submitted by a foreign or alien company,
the commissioner may accept the opinion filed by that company with the insurance supervisory
official of another state if the commissioner determines that the opinion reasonably meets the
requirements applicable to a company domiciled in this state.
(vi) Except in cases of fraud or willful misconduct, the appointed actuary may not be
liable for damages to any person, other than the insurance company and the commissioner, for
any act, error, omission, decision, or conduct with respect to the appointed actuary's opinion.
(vii) Disciplinary action by the commissioner against the company or the appointed
actuary shall be defined in rules by the commissioner consistent with Section 
31A-2-308
 and
Title 63G, Chapter 4, Administrative Procedures Act.
Section 5. Section 
31A-17-504
 is amended to read:
31A-17-504.
Computation of minimum standard.
Except as [
otherwise
] provided in Sections 
31A-17-505
, 
31A-17-506
, and 
31A-17-513
,
the minimum standard for the valuation of [
all
] 
the
 life insurance policies and annuity and pure
endowment contracts issued [
prior to
] 
before
 January 1, 1994, shall be that provided by the
laws in effect immediately [
prior to
] 
before
 that date. Except as otherwise provided in Sections
31A-17-505
, 
31A-17-506
, and 
31A-17-513
, the minimum standard for the valuation of [
all
]
such policies and contracts issued on or after January 1, 1994, shall be the commissioner's
reserve valuation methods defined in Sections 
31A-17-507
, 
31A-17-508
, 
31A-17-511
, and
31A-17-513
, 3.5% interest, or in the case of life insurance policies and contracts, other than
annuity and pure endowment contracts, issued on or after June 1, 1973, 4% interest for such
policies issued [
prior to
] 
before
 April 2, 1980, 5.5% interest for single premium life insurance
policies, and 4.5% interest for all other such policies issued on and after April 2, 1980, and the
following tables:
(1) For [
all
] 
an
 ordinary [
policies
] 
policy
 of life insurance issued on the standard basis,
excluding any accident and health and accidental death benefits in [
such policies: the National
Association of Insurance Commissioners
] 
the policy, the Commissioner's
Standard
Ordinary Mortality Table for such policies issued [
prior to
] 
before
 the operative date of
Subsection 
31A-22-408
(6)(a) [
(that is, the Standard Nonforfeiture Law for Life Insurance)
], the
[
National Association of Insurance Commissioners
] 
Commissioner's
Standard Ordinary
Mortality Table for such policies issued on or after the operative date of Subsection
31A-22-408
(6)(a) and [
prior to
] 
before
 the operative date of Subsection 
31A-22-408
(6)(d),
provided that for any category of such policies issued on female risks, all modified net
premiums and present values referred to in this section may be calculated according to an age
not more than six years younger than the actual age of the insured[
;
]
,
 and for such policies
issued on or after the operative date of Subsection 
31A-22-408
(6)(d):
(a) the [
National Association of Insurance Commissioners
] 
Commissioner's
Standard Ordinary Mortality Table;
(b) at the election of the company for any one or more specified plans of life insurance,
the [
National Association of Insurance Commissioners
] 
Commissioner's
Standard
Ordinary Mortality Table with Ten-Year Select Mortality Factors; or
(c) any ordinary mortality table, adopted after 1980 by the National Association of
Insurance Commissioners, that is approved by rule [
promulgated
] 
made
 by the commissioner
for use in determining the minimum standard of valuation for such policies.
(2) For [
all
] 
an
 industrial life insurance [
policies
] 
policy
 issued on the standard basis,
excluding any accident and health and accidental death benefits in [
such policies:
] 
the policy,
the 1941 Standard Industrial Mortality Table for [
such policies
] 
the policy
 issued [
prior to
]
before
 the operative date of Subsection 
31A-22-408
(6)(c), and for such policies issued on or
after such operative date, the [
National Association of Insurance Commissioners
]
Commissioner's
Standard Industrial Mortality Table or any industrial mortality table,
adopted after 1980 by the National Association of Insurance Commissioners, that is approved
by rule [
promulgated
] 
made
 by the commissioner for use in determining the minimum standard
of valuation for such policies.
(3) For individual annuity and pure endowment contracts, excluding any disability and
accidental death benefits in such policies:
(a) the 1937 Standard Annuity Mortality Table;
(b) at the option of the company, the Annuity Mortality Table for 1949, Ultimate; or
(c) any modification of either of these tables approved by the commissioner.
(4) For group annuity and pure endowment contracts, excluding any accident and
health and accidental death benefits in such policies:
(a) the Group Annuity Mortality Table for 1951, any modification of such table
approved by the commissioner; or
(b) at the option of the company, any of the tables or modifications of tables specified
for individual annuity and pure endowment contracts.
(5) For total and permanent disability benefits in or supplementary to ordinary policies
or contracts:
(a) (i)
 for [
policies or contracts
] 
a policy or contract
 issued on or after January 1, 1966,
the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952
Disability Study of the Society of Actuaries, with due regard to the type of benefit or any tables
of disablement rates and termination rates adopted after 1980 by the National Association of
Insurance Commissioners, that are approved by rule [
promulgated
] 
made
 by the commissioner
for use in determining the minimum standard of valuation for [
such policies
] 
the policy
;
(ii)
 for [
policies or contracts
] 
a policy or contract
 issued on or after January 1, 1961,
and [
prior to
] 
before
 January 1, 1966, either such tables or, at the option of the company, the
Class (3) Disability Table (1926); and
(iii)
 for [
policies
] 
a policy
 issued [
prior to
] 
before
 January 1, 1961, the Class (3)
Disability Table (1926). [
Any such
]
(b) A
 table 
described in this Subsection (5)
 shall, for active lives, be combined with a
mortality table permitted for calculating the reserves for life insurance policies.
(6) For accidental death benefits in or supplementary to policies issued on or after
January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental death benefits
table adopted after 1980 by the National Association of Insurance Commissioners, that is
approved by rule [
promulgated
] 
made
 by the commissioner for use in determining the
minimum standard of valuation for such policies, for policies issued on or after January 1,
1961, and [
prior to
] 
before
 January 1, 1966, either such table or, at the option of the company,
the Inter-Company Double Indemnity Mortality Table[
;
]
,
 and for policies issued [
prior to
]
before
 January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table
shall be combined with a mortality table for calculating the reserves for life insurance policies.
(7) For group life insurance, life insurance issued on the substandard basis and other
special benefits: such tables as may be approved by the commissioner.
Section 6. Section 
31A-17-505
 is amended to read:
31A-17-505.
Computation of minimum standard for annuities.
(1) Except as provided in Section 
31A-17-506
, the minimum standard [
for the
] 
of
valuation [
of all
] 
for
 individual annuity and pure endowment contracts issued on or after the
operative date of this section, as defined in Subsection (2), and for [
all
] annuities and pure
endowments purchased on or after such operative date under group annuity and pure
endowment contracts, shall be the commissioner's reserve valuation methods defined in
Sections 
31A-17-507
 and 
31A-17-508
 and the following tables and interest rates:
(a) for individual annuity and pure endowment contracts issued [
prior to
] 
before
 April
2, 1980, excluding any accident and health and accidental death benefits in the contracts:
(i) (A) the 1971 Individual Annuity Mortality Table; or
(B) any modification of the 1971 Individual Annuity Mortality Table approved by the
commissioner;
(ii) 6% interest for single premium immediate annuity contracts; and
(iii) 4% interest for all other individual annuity and pure endowment contracts;
(b) for individual single premium immediate annuity contracts issued on or after April
2, 1980, excluding any accident and health and accidental death benefits in the contracts:
(i) (A) any individual annuity mortality table that is approved by rule 
made
 by the
commissioner for use in determining the minimum standard of valuation for such contracts; or
(B) any modification of a table described in Subsection (1)(b)(i)(A) approved by the
commissioner; and
(ii) 7.5% interest;
(c) for individual annuity and pure endowment contracts issued on or after April 2,
1980, other than single premium immediate annuity contracts, excluding any accident and
health and accidental death benefits in the contracts:
(i) (A) any individual annuity mortality table that is approved by rule 
made
 by the
commissioner for use in determining the minimum standard of valuation for such contracts; or
(B) any modification of a table described in Subsection (1)(c)(i)(A) approved by the
commissioner;
(ii) 5.5% interest for single premium deferred annuity and pure endowment contracts;
and
(iii) 4.5% interest for all other such individual annuity and pure endowment contracts;
(d) for [
all
] 
the
 annuities and pure endowments purchased [
prior to
] 
before
 April 2,
1980, under group annuity and pure endowment contracts, excluding any accident and health
and accidental death benefits purchased under the contracts:
(i) (A) the 1971 Group Annuity Mortality Table; or
(B) any modification of the 1971 Group Annuity Mortality Table approved by the
commissioner; and
(ii) 6.5% interest; and
(e) for [
all
] 
the
 annuities and pure endowments purchased on or after April 2, 1980,
under group annuity and pure endowment contracts, excluding any accident and health and
accidental death benefits purchased under the contracts:
(i) (A) any group annuity mortality table that is approved by rule 
made
 by the
commissioner for use in determining the minimum standard of valuation for such annuities and
pure endowments; or
(B) any modification of a table described in Subsection (1)(e)(i)(A) approved by the
commissioner; and
(ii) 7.5% interest.
(2) (a) After June 1, 1973, any company may file with the commissioner a written
notice of its election to comply with this section after a specified date before January 1, 1979,
which shall be the operative date of this section for the company.
(b) If a company does not make an election under Subsection (2)(a), the operative date
of this section for the company shall be January 1, 1979.
Section 7. Section 
31A-17-506
 is amended to read:
31A-17-506.
Computation of minimum standard by calendar year of issue.
(1) [
Applicability of Section 
31A-17-506
:
] The interest rates used in determining the
minimum standard for the valuation shall be the calendar year statutory valuation interest rates
as defined in this section for:
(a) [
all
] life insurance policies issued in a particular calendar year, on or after the
operative date of Subsection 
31A-22-408
(6)(d);
(b) [
all
] individual annuity and pure endowment contracts issued in a particular
calendar year on or after January 1, 1982;
(c) [
all
] annuities and pure endowments purchased in a particular calendar year on or
after January 1, 1982, under group annuity and pure endowment contracts; and
(d) the net increase, if any, in a particular calendar year after January 1, 1982, in
amounts held under guaranteed interest contracts.
(2) Calendar year statutory valuation interest rates:
(a) The calendar year statutory valuation interest rates, "I," shall be determined as
follows and the results rounded to the nearer 1/4 of 1%:
(i) for life insurance:
I = .03 + W(R1 - .03) + (W/2)(R2 - .09);
(ii) for single premium immediate annuities and for annuity benefits involving life
contingencies arising from other annuities with cash settlement options and from guaranteed
interest contracts with cash settlement options:
I = .03 + W(R - .03),
where R1 is the lesser of R and .09,
R2 is the greater of R and .09,
R is the reference interest rate defined in Subsection (4), and
W is the weighting factor defined in this section;
(iii) for other annuities with cash settlement options and guaranteed interest contracts
with cash settlement options, valued on an issue year basis, except as stated in Subsection
(2)(a)(ii), the formula for life insurance stated in Subsection (2)(a)(i) shall apply to annuities
and guaranteed interest contracts with guarantee durations in excess of 10 years, and the
formula for single premium immediate annuities stated in Subsection (2)(a)(ii) shall apply to
annuities and guaranteed interest contracts with guarantee duration of 10 years or less;
(iv) for other annuities with no cash settlement options and for guaranteed interest
contracts with no cash settlement options, the formula for single premium immediate annuities
stated in Subsection (2)(a)(ii) shall apply; and
(v) for other annuities with cash settlement options and guaranteed interest contracts
with cash settlement options, valued on a change in fund basis, the formula for single premium
immediate annuities stated in Subsection (2)(a)(ii) shall apply.
(b) However, if the calendar year statutory valuation interest rate for any life insurance
policies issued in any calendar year determined without reference to this sentence differs from
the corresponding actual rate for similar policies issued in the immediately preceding calendar
year by less than one-half of 1% the calendar year statutory valuation interest rate for such life
insurance policies shall be equal to the corresponding actual rate for the immediately preceding
calendar year. For purposes of applying the immediately preceding sentence, the calendar year
statutory valuation interest rate for life insurance policies issued in a calendar year shall be
determined for 1980, using the reference interest rate defined in 1979, and shall be determined
for each subsequent calendar year regardless of when Subsection 
31A-22-408
(6)(d) becomes
operative.
(3) Weighting factors:
(a) The weighting factors referred to in the formulas stated in Subsection (2) are given
in the following tables:
(i) (A) Weighting factors for life insurance:
Guarantee Duration (Years)
Weighting Factors
or less:
.50
More than 10, but less than 20:
.45
More than 20:
.35
.
(B) For life insurance, the guarantee duration is the maximum number of years the life
insurance can remain in force on a basis guaranteed in the policy or under options to convert to
plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed
in the original policy;
(ii) Weighting factor for single premium immediate annuities and for annuity benefits
involving life contingencies arising from other annuities with cash settlement options and
guaranteed interest contracts with cash settlement options: .80
(iii) Weighting factors for other annuities and for guaranteed interest contracts, except
as stated in Subsection (3)(a)(ii), shall be as specified in the tables in Subsections (3)(a)(iii)(A),
(B), and (C), according to the rules and definitions in Subsection (3)(b):
(A) For annuities and guaranteed interest contracts valued on an issue year basis:
Guarantee Duration (Years)
Weighting Factors for Plan Type
A
 B
 C
or less:
.80
.60
.50
More than 5, but not more than 10:
.75
.60
.50
More than 10, but not more than 20:
.65
.50
.45
More than 20:
.45
.35
.35
 Plan Type
A
B
C
(B) For annuities and guaranteed interest
contracts valued on a change in fund basis, the
factors shown in Subsection (3)(a)(iii)(A)
increased by:
.15
.25
.05
 Plan Type
 A
 B
 C
(C) For annuities and guaranteed interest
contracts valued on an issue year basis, other than
those with no cash settlement options, which do
not guarantee interest on considerations received
more than one year after issue or purchase and for
annuities and guaranteed interest contracts valued
on a change in fund basis which do not guarantee
interest rates on considerations received more
than 12 months beyond the valuation date, the
factors shown in Subsection (3)(a)(iii)(A) or
derived in Subsection (3)(a)(iii)(B) increased by: .05 .05 .05.
(b) (i) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, the guarantee duration is the number of years for which
the contract guarantees interest rates in excess of the calendar year statutory valuation interest
rate for life insurance policies with guarantee duration in excess of 20 years. For other
annuities with no cash settlement options and for guaranteed interest contracts with no cash
settlement options, the guaranteed duration is the number of years from the date of issue or date
of purchase to the date annuity benefits are scheduled to commence.
(ii) Plan type as used in the [
above
] tables 
in this Subsection (3)
 is defined as follows:
(A) Plan Type A: At any time policyholder may withdraw funds only:
(I) with an adjustment to reflect changes in interest rates or asset values since receipt of
the funds by the insurance company;
(II) without such adjustment but 
in
 installments over five years or more;
(III) as an immediate life annuity; or
(IV) no withdrawal permitted.
(B) (I) Plan Type B: Before expiration of the interest rate guarantee, policyholder
withdraw funds only:
(Aa) with an adjustment to reflect changes in interest rates or asset values since receipt
of the funds by the insurance company;
(Bb) without such adjustment but in installments over five years or more; or
(Cc) no withdrawal permitted.
(II) At the end of interest rate guarantee, funds may be withdrawn without such
adjustment in a single sum or installments over less than five years.
(C) Plan Type C: Policyholder may withdraw funds before expiration of interest rate
guarantee in a single sum or installments over less than five years either:
(I) without adjustment to reflect changes in interest rates or asset values since receipt of
the funds by the insurance company; or
(II) subject only to a fixed surrender charge stipulated in the contract as a percentage of
the fund.
(iii) A company may elect to value guaranteed interest contracts with cash settlement
options and annuities with cash settlement options on either an issue year basis or on a change
in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities
with no cash settlement options shall be valued on an issue year basis. As used in this section,
an issue year basis of valuation refers to a valuation basis under which the interest rate used to
determine the minimum valuation standard for the entire duration of the annuity or guaranteed
interest contract is the calendar year valuation interest rate for the year of issue or year of
purchase of the annuity or guaranteed interest contract, and the change in fund basis of
valuation refers to a valuation basis under which the interest rate used to determine the
minimum valuation standard applicable to each change in the fund held under the annuity or
guaranteed interest contract is the calendar year valuation interest rate for the year of the
change in the fund.
(4) Reference interest rate: "Reference interest rate" referred to in Subsection (2)(a) is
defined as follows:
(a) For [
all
] life insurance, the lesser of the average over a period of 36 months and the
average over a period of 12 months, ending on June 30 of the calendar year next preceding the
year of issue, of the Monthly Average of the composite Yield on Seasoned Corporate Bonds, as
published by Moody's Investors Service, Inc.
(b) For single premium immediate annuities and for annuity benefits involving life
contingencies arising from other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, the average over a period of 12 months, ending on June
30 of the calendar year of issue or year of purchase, of the Monthly Average of the Composite
Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.
(c) For other annuities with cash settlement options and guaranteed interest contracts
with cash settlement options, valued on a year of issue basis, except as stated in Subsection
(4)(b), with guarantee duration in excess of 10 years, the lesser of the average over a period of
36 months and the average over a period of 12 months, ending on June 30 of the calendar year
of issue or purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate
Bonds, as published by Moody's Investors Service, Inc.
(d) For other annuities with cash settlement options and guaranteed interest contracts
with cash settlement options, valued on a year of issue basis, except as stated in Subsection
(4)(b), with guarantee duration of 10 years or less, the average over a period of 12 months,
ending on June 30 of the calendar year of issue or purchase, of the Monthly Average of the
Composite Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service,
Inc.
(e) For other annuities with no cash settlement options and for guaranteed interest
contracts with no cash settlement options, the average over a period of 12 months, ending on
June 30 of the calendar year of issue or purchase, of the Monthly Average of the Composite
Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.
(f) For other annuities with cash settlement options and guaranteed interest contracts
with cash settlement options, valued on a change in fund basis, except as stated in Subsection
(4)(b), the average over a period of 12 months, ending on June 30 of the calendar year of the
change in the fund, of the Monthly Average of the Composite Yield on Seasoned Corporate
Bonds, as published by Moody's Investors Service, Inc.
(5) Alternative method for determining reference interest rates: In the event that the
Monthly Average of the Composite Yield on Seasoned Corporate Bonds is no longer published
by Moody's Investors Service, Inc. or in the event that the National Association of Insurance
Commissioners determines that the Monthly Average of the Composite Yield on Seasoned
Corporate Bonds as published by Moody's Investors Service, Inc. is no longer appropriate for
the determination of the reference interest rate, then an alternative method for determination of
the reference interest rate, which is adopted by the National Association of Insurance
Commissioners and approved by rule [
promulgated
] 
made
 by the commissioner, may be
substituted.
Section 8. Section 
31A-17-507
 is amended to read:
31A-17-507.
Reserve valuation method -- Life insurance and endowment benefits.
(1) Except as otherwise provided in Sections 
31A-17-508
, 
31A-17-511
, and
31A-17-513
, reserves according to the commissioner's reserve valuation method, for the life
insurance and endowment benefits of policies providing for a uniform amount of insurance and
requiring the payment of uniform premiums shall be the excess, if any, of the present value, at
the date of valuation, of such future guaranteed benefits provided for by such policies, over the
then present value of any future modified net premiums therefor. The modified net premiums
for any such policy shall be such uniform percentage of the respective contract premiums for
such benefits that the present value, at the date of issue of the policy, of all such modified net
premiums shall be equal to the sum of the then present value of such benefits provided for by
the policy and the excess of Subsection (1)(a) over Subsection (1)(b), as follows:
(a) A net level annual premium equal to the present value, at the date of issue, of such
benefits provided for after the first policy year, divided by the present value, at the date of
issue, of an annuity of one per annum payable on the first and each subsequent anniversary of
such policy on which a premium falls due; provided, however, that such net level annual
premium may not exceed the net level annual premium on the 19 year premium whole life plan
for insurance of the same amount at an age one year higher than the age at issue of such policy.
(b) A net one year term premium for such benefits provided for in the first policy year.
(2) 
(a)
 Provided that for any life insurance policy issued on or after January 1, 1997, for
which the contract premium in the first policy year exceeds that of the second year and for
which no comparable additional benefit is provided in the first year for such excess and which
provides an endowment benefit or a cash surrender value or a combination thereof in an
amount greater than such excess premium, the reserve according to the commissioner's reserve
valuation method as of any policy anniversary occurring on or before the assumed ending date
defined [
herein
] 
in this Subsection (2)
 as the first policy anniversary on which the sum of any
endowment benefit and any cash surrender value then available is greater than such excess
premium shall, except as otherwise provided in Section 
31A-17-511
, be the greater of the
reserve as of such policy anniversary calculated as described in Subsection (1) and the reserve
as of such policy anniversary calculated as described in that subsection, but with:
[
(a)
] 
(i)
 the value defined in Subsection (1)(a) being reduced by 15% of the amount of
such excess first year premium;
[
(b) all
] 
(ii) the
 present values of benefits and premiums being determined without
reference to premiums or benefits provided for by the policy after the assumed ending date;
[
(c)
] 
(iii)
 the policy being assumed to mature on such date as an endowment; and
[
(d)
] 
(iv)
 the cash surrender value provided on such date being considered as an
endowment benefit.
(b)
 In making the [
above
] comparison 
described in Subsection (2)(a),
 the mortality and
interest bases stated in Sections 
31A-17-504
 and 
31A-17-506
 shall be used.
(3) Reserves according to the commissioner's reserve valuation method for:
(a) life insurance policies providing for a varying amount of insurance or requiring the
payment of varying premiums;
(b) group annuity and pure endowment contracts purchased under a retirement plan or
plan of deferred compensation, established or maintained by an employer, including a
partnership or sole proprietorship, or by an employee organization, or by both, other than a plan
providing individual retirement accounts or individual retirement annuities under Section 408,
Internal Revenue Code;
(c) accident and health and accidental death benefits in all policies and contracts; and
(d) [
all
] other benefits, except life insurance and endowment benefits in life insurance
policies and benefits provided by [
all
] other annuity and pure endowment contracts, shall be
calculated by a method consistent with the principles of Subsections (1) and (2).
Section 9. Section 
31A-17-509
 is amended to read:
31A-17-509.
Minimum reserves.
(1) In no event shall a company's aggregate reserves for [
all
] life insurance policies,
excluding accident and health and accidental death benefits, issued on or after January 1, 1994,
be less than the aggregate reserves calculated in accordance with the methods set forth in
Sections 
31A-17-507
, 
31A-17-508
, 
31A-17-511
, and 
31A-17-512
 and the mortality table or
tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies.
(2) In no event shall the aggregate reserves for [
all
] policies, contracts, and benefits be
less than the aggregate reserves determined by the [
qualified
] 
appointed
 actuary to be necessary
to render the opinion required by Section 
31A-17-503
.
Section 10. Section 
31A-17-510
 is amended to read:
31A-17-510.
Optional reserve calculation.
(1) Reserves for [
all
] policies and contracts issued [
prior to
] 
before
 January 1, 1994,
may be calculated, at the option of the company, according to any standards which produce
greater aggregate reserves for [
all
] such policies and contracts than the minimum reserves
required by the laws in effect immediately [
prior to
] 
before
 that date. Reserves for any
category of policies, contracts, or benefits as established by the commissioner, issued on or
after January 1, 1994, may be calculated, at the option of the company, according to any
standards which produce greater aggregate reserves for such category than those calculated
according to the minimum standard [
herein
] provided 
in this part
, but the rate or rates of
interest used for policies and contracts, other than annuity and pure endowment contracts, may
not be [
higher
] 
greater
 than the corresponding rate or rates of interest used in calculating any
nonforfeiture benefits provided [
therein
] 
in the policy or contract
.
(2) Any such company which at any time shall have adopted any standard of valuation
producing greater aggregate reserves than those calculated according to the minimum standard
[
herein
] provided 
in this part
 may, with the approval of the commissioner, adopt any lower
standard of valuation, but not lower than the minimum [
herein
] provided[
; provided, however,
]
in this part, except
 that, for the purposes of this section, the holding of additional reserves
previously determined by [
a qualified
] 
the appointed
 actuary to be necessary to render the
opinion required by Section [
31A-17-502
] 
31A-17-503
 may not be considered to be the
adoption of a higher standard of valuation.
Section 11. Section 
31A-17-511
 is amended to read:
31A-17-511.
Reserve calculation -- Valuation net premium exceeding the gross
premium charged.
(1) If in any contract year the gross premium charged by any [
life insurance
] company
on any policy or contract is less than the valuation net premium for the policy or contract
calculated by the method used in calculating the reserve thereon but using the minimum
valuation standards of mortality and rate of interest, the minimum reserve required for such
policy or contract shall be the greater of either the reserve calculated according to the mortality
table, rate of interest, and method actually used for such policy or contract, or the reserve
calculated by the method actually used for such policy or contract but using the minimum
valuation standards of mortality and rate of interest and replacing the valuation net premium by
the actual gross premium in each contract year for which the valuation net premium exceeds
the actual gross premium. The minimum valuation standards of mortality and rate of interest
referred to in this section are those standards stated in Sections 
31A-17-504
 and 
31A-17-506
.
(2) Provided that for any life insurance policy issued on or after January 1, 1997, for
which the gross premium in the first policy year exceeds that of the second year and for which
no comparable additional benefit is provided in the first year for such excess and which
provides an endowment benefit or a cash surrender value or a combination [
thereof
] 
of an
endowment benefit and cash surrender value
 in an amount greater than such excess premium,
[
the foregoing provisions of
] this section shall be applied as if the method actually used in
calculating the reserve for such policy were the method described in Section 
31A-17-507
,
ignoring Subsection 
31A-17-507
(2). The minimum reserve at each policy anniversary of such a
policy shall be the greater of the minimum reserve calculated in accordance with Section
31A-17-507
, including Subsection 
31A-17-507
(2), and the minimum reserve calculated in
accordance with this section.
Section 12. Section 
31A-17-513
 is repealed and reenacted to read:
 31A-17-513.
Minimum standards for accident and health insurance contracts.
(1) For an accident and health insurance contract issued before the operative date of the
valuation manual, the minimum standard of valuation is the standard adopted by the
commissioner by rule.
(2) For an accident and health insurance contract issued on or after the operative date
of the valuation manual, the standard prescribed in the valuation manual is the minimum
standard of valuation required under Subsection 
31A-17-502
(2).
Section 13. Section 
31A-17-514
 is enacted to read:
 31A-17-514.
Valuation manual for policies issued on or after the operative date of
the valuation manual.
(1) For a policy issued on or after the operative date of the valuation manual, the
standard prescribed in the valuation manual is the minimum standard of valuation required
under Subsection 
31A-17-502
(2), except as provided under Subsection (5) or (6).
(2) The operative date of the valuation manual is January 1 of the first calendar year
following the first July 1 as of which all of the following have occurred:
(a) the valuation manual is adopted by the National Association of Insurance
Commissioners by an affirmative vote of at least 42 members, or three-fourths of the members
voting, whichever is greater;
(b) the Standard Valuation Law, as amended by the National Association of Insurance
Commissioners in 2009, or legislation including substantially similar terms and provisions, has
been enacted by states representing greater than 75% of the direct premiums written as reported
in the following annual statements submitted for 2008:
(i) life;
(ii) accident and health annual statements;
(iii) health annual statements; or
(iv) fraternal annual statements; and
(c) the Standard Valuation Law, as amended by the National Association of Insurance
Commissioners in 2009, or legislation including substantially similar terms and provisions, has
been enacted by at least 42 of the following 55 jurisdictions:
(i) the 50 states of the United States;
(ii) American Samoa;
(iii) the American Virgin Islands;
(iv) the District of Columbia;
(v) Guam; and
(vi) Puerto Rico.
(3) Unless a change in the valuation manual specifies a later effective date, changes to
the valuation manual shall be effective on January 1 following the date when the change to the
valuation manual has been adopted by the National Association of Insurance Commissioners
by an affirmative vote representing:
(a) at least three-fourths of the members of the National Association of Insurance
Commissioners voting, but not less than a majority of the total membership; and
(b) members of the National Association of Insurance Commissioners representing
jurisdictions totaling greater than 75% of the direct premiums written as reported in the
following annual statements most recently available before the vote in Subsection (3)(a):
(i) life;
(ii) accident and health annual statements;
(iii) health annual statements; or
(iv) fraternal annual statements.
(4) The valuation manual shall specify all of the following:
(a) minimum valuation standards for and definitions of a policy or contract subject to
Subsection 
31A-17-502
(2), except such minimum valuation standards shall be:
(i) the commissioner's reserve valuation method for life insurance contracts, other than
annuity contracts, subject to Subsection 
31A-17-502
(2);
(ii) the commissioner's annuity reserve valuation method for annuity contracts subject
to Subsection 
31A-17-502
(2); and
(iii) minimum reserves for other policies or contracts subject to Subsection
31A-17-502
(2);
(b) which policies or contracts or types of policies or contracts are subject to the
requirements of a principle-based valuation in Subsection 
31A-17-515
(1) and the minimum
valuation standards consistent with those requirements;
(c) for policies and contracts subject to a principle-based valuation under Section
31A-17-515
:
(i) requirements for the format of reports to the commissioner under Subsection
31A-17-515
(2)(c), which shall include information necessary to determine if the valuation is
appropriate in compliance with this part;
(ii) prescribed assumptions for risks over which the company does not have significant
control; and
(iii) procedures for corporate governance and oversight of the actuarial function, and a
process for appropriate waiver or modification of such procedures;
(d) for policies not subject to a principle-based valuation under Section 
31A-17-515
the minimum valuation standard shall either:
(i) be consistent with the minimum standard of valuation before the operative date of
the valuation manual; or
(ii) develop reserves that quantify the benefits and guarantees, and the funding,
associated with the contracts and their risks at a level of conservatism that reflects conditions
that include unfavorable events that have a reasonable probability of occurring;
(e) other requirements, including those relating to reserve methods, models for
measuring risk, generation of economic scenarios, assumptions, margins, use of company
experience, risk measurement, disclosure, certifications, reports, actuarial opinions and
memorandums, transition rules, and internal controls; and
(f) the data and form of the data required under Section 
31A-17-516
, with whom the
data must be submitted, and may specify other requirements including data analyses and
reporting of analyses.
(5) In the absence of a specific valuation requirement or if a specific valuation
requirement in the valuation manual is not, in the opinion of the commissioner, in compliance
with this part, then the company shall, with respect to the requirement, comply with minimum
valuation standards prescribed by the commissioner by rule.
(6) The commissioner may engage a qualified actuary, at the expense of the company,
to perform an actuarial examination of the company and opine on the appropriateness of any
reserve assumption or method used by the company, or to review and opine on a company's
compliance with any requirement set forth in this part. The commissioner may rely upon the
opinion, regarding provisions contained within this part, of a qualified actuary engaged by the
commissioner of another state, district, or territory of the United States. As used in this
Subsection (6), "engage" includes employment and contracting.
(7) The commissioner may require a company to change any assumption or method
that in the opinion of the commissioner is necessary in order to comply with the requirements
of the valuation manual or this part, and the company shall adjust the reserves as required by
the commissioner. The commissioner may take other disciplinary action as permitted pursuant
to Section 
31A-2-308
 and Title 63G, Chapter 4, Administrative Procedures Act.
Section 14. Section 
31A-17-515
 is enacted to read:
 31A-17-515.
Requirements of a principle-based valuation.
(1) A company shall establish reserves using a principle-based valuation that meets the
following conditions for a policy or contract as specified in the valuation manual:
(a) A company shall quantify the benefits and guarantees, and the funding, associated
with the policy or contract and the policy's or contract's risks at a level of conservatism that
reflects:
(i) conditions that include unfavorable events that have a reasonable probability of
occurring during the lifetime of the policies or contracts; and
(ii) for polices or contracts with significant tail risk, conditions appropriately adverse to
quantify the tail risk.
(b) The company shall incorporate assumptions, risk analysis methods, and financial
models and management techniques that are consistent with, but not necessarily identical to,
those used within the company's overall risk assessment process, while recognizing potential
differences in financial reporting structures and any prescribed assumptions or methods.
(c) The company shall incorporate assumptions that are derived in one of the following
manners:
(i) the assumption is prescribed in the valuation manual; and
(ii) for assumptions that are not prescribed, the assumptions shall:
(A) be established using the company's available experience, to the extent it is relevant
and statistically credible; or
(B) to the extent that company data is not available, relevant, or statistically credible,
be established using other relevant, statistically credible experience.
(d) The company shall provide margins for uncertainty including adverse deviation and
estimation error, such that the greater the uncertainty the larger the margin and resulting
reserve.
(2) A company using a principle-based valuation for one or more policies or contracts
subject to this section as specified in the valuation manual shall:
(a) establish procedures for corporate governance and oversight of the actuarial
valuation function consistent with those described in the valuation manual;
(b) provide to the commissioner and the board of directors an annual certification of
the effectiveness of the internal controls with respect to the principle-based valuation:
(i) which controls shall be designed to assure that all material risks inherent in the
liabilities and associated assets subject to such valuation are included in the valuation, and that
valuations are made in accordance with the valuation manual; and
(ii) the certification shall be based on the controls in place as of the end of the
preceding calendar year; and
(c) develop, and file with the commissioner upon request, a principle-based valuation
report that complies with standards prescribed in the valuation manual.
(3) A principle-based valuation may include a prescribed formulaic reserve component.
Section 15. Section 
31A-17-516
 is enacted to read:
 31A-17-516.
Experience reporting for policies in force on or after the operative
date of the valuation manual.
A company shall submit mortality, morbidity, policyholder behavior, or expense
experience and other data as prescribed in the valuation manual.
Section 16. Section 
31A-17-517
 is enacted to read:
 31A-17-517.
Confidentiality.
(1) For purposes of this section, "confidential information" means:
(a) a memorandum in support of an opinion submitted under Section 
31A-17-503
 and
any other document, material, and other information, including working papers, and copies of a
document, material, and other information, created, produced, or obtained by or disclosed to
the commissioner or any other person in connection with the memorandum;
(b) a document, material, and other information, including working papers, and copies
of a document, material, and other information created, produced, or obtained by or disclosed
to the commissioner or any other person in the course of an examination made under
Subsection 
31A-17-514
(6), except that if an examination report or other material prepared in
connection with an examination made under Sections 
31A-2-203
 through 
31A-2-205
 is not
held as private and confidential information under Sections 
31A-2-203
 through 
31A-2-205
, an
examination report or other material prepared in connection with an examination made under
Subsection 
31A-17-514
(6) may not be confidential information to the same extent as if the
examination report or other material had been prepared under Sections 
31A-2-203
 through
31A-2-205
;
(c) a report, document, material, or other information developed by a company in
support of, or in connection with, an annual certification by the company under Subsection
31A-17-515
(2)(b) evaluating the effectiveness of the company's internal controls with respect
to a principle-based valuation and any other document, material, and other information,
including working papers, and copies of the document, material, and other information,
created, produced, or obtained by or disclosed to the commissioner or any other person in
connection with such reports, documents, materials, and other information;
(d) any principle-based valuation report developed under Subsection 
31A-17-515
(2)(c)
and any other document, material, and other information, including working papers, and copies 
of the document, material, and other information, created, produced, or obtained by or
disclosed to the commissioner or any other person in connection with such report; and
(e) any document, material, data, and other information submitted by a company under
Section 
31A-17-516
, collectively, "experience data," and any other document, material, data, or
other information, including working papers, and copies of the document, material, data, and
information created or produced in connection with such experience data, in each case that
include any potentially company-identifying or personally identifiable information, that is
provided to or obtained by the commissioner, together with any "experience data," the
"experience materials," and any other document, material, data, and other information,
including working papers, and copies of the document, material, data, and other information
created, produced, or obtained by or disclosed to the commissioner or any other person in
connection with such experience materials.
(2) (a) Except as provided in this section, a company's confidential information is
confidential, not public records, not open to public inspection, and not subject to Title 63G,
Chapter 2, Government Records Access and Management Act.
(b) The commissioner is authorized to use the confidential information in the
furtherance of any regulatory or legal action brought against the company as a part of the
commissioner's official duties.
(c) In order to assist in the performance of the commissioner's duties, the commissioner
may share confidential information:
(i) with other state, federal, and international regulatory agencies and with the National
Association of Insurance Commissioners and its affiliates and subsidiaries;
(ii) in the case of confidential information specified in Subsections (1)(a) and (1)(d)
only, with the Actuarial Board for Counseling and Discipline or its successor, upon request,
stating that the confidential information is required for the purpose of professional disciplinary
proceedings and with state, federal, and international law enforcement officials; and
(iii) in the case of Subsections (2)(c)(i) and (ii), provided that the recipient agrees, and
has the legal authority to agree, to maintain the confidentiality of a document, material, data,
and other information in the same manner and to the same extent as required for the
commissioner.
(d) The commissioner may receive a document, material, data, and other information,
including an otherwise confidential document, material, data, or information, from the National
Association of Insurance Commissioners and its affiliates and subsidiaries, from regulatory or
law enforcement officials of other foreign or domestic jurisdictions and from the Actuarial
Board for Counseling and Discipline or its successor and shall maintain as confidential any
document, material, data, or other information received with notice or the understanding that it
is confidential or privileged under the laws of the jurisdiction that is the source of the
document, material, or other information.
(e) The commissioner may enter into agreements governing sharing and use of
information consistent with this Subsection (2).
(f) No waiver of an applicable privilege or claim of confidentiality in the confidential
information shall occur as a result of disclosure to the commissioner under this section or as a
result of sharing as authorized in Subsection (2)(c).
(g) A privilege established under the law of any state or jurisdiction that is substantially
similar to the confidentiality established under this Subsection (2) shall be available and
enforced in any proceeding in, and in any court of, this state.
(h) In this section "regulatory agency," "law enforcement agency," and the "National
Association of Insurance Commissioners" include their employees, agents, consultants, and
contractors.
(3) Notwithstanding Subsection (2), confidential information specified in Subsections
(1)(a) and (1)(d):
(a) may be subject to subpoena for the purpose of defending an action seeking damages
from the appointed actuary who submitted the related memorandum in support of an opinion
submitted under Section 
31A-17-503
 or principle-based valuation report developed under
Subsection 
31A-17-515
(2)(c) by reason of an action required by this part or by rules made
under this part;
(b) may otherwise be released by the commissioner with the written consent of the
company; and
(c) once any portion of a memorandum in support of an opinion submitted under
Section 
31A-17-503
 or a principle-based valuation report developed under Subsection
31A-17-515
(2)(c) is cited by the company in its marketing or is publicly volunteered to or
before a governmental agency other than a state insurance department or is released by the
company to the news media, all portions of the memorandum or report shall no longer be
confidential.
Section 17. Section 
31A-17-518
 is enacted to read:
 31A-17-518.
Single state exemption.
(1) The commissioner may exempt specific product forms or product lines of a
domestic company that is licensed and doing business only in Utah from the requirements of
Section 
31A-17-514
 provided:
(a) the commissioner has issued an exemption in writing to the company and has not
subsequently revoked the exemption in writing; and
(b) the company computes reserves using assumptions and methods used before the
operative date of the valuation manual in addition to any requirements established by the
commissioner and made by rule.
(2) For any company granted an exemption under this section, Sections 
31A-17-503
,
31A-17-504
, 
31A-17-505
, 
31A-17-506
, 
31A-17-507
, 
31A-17-508
, 
31A-17-509
, 
31A-17-510
,
31A-17-511
, 
31A-17-512
, and 
31A-17-513
 are applicable. With respect to any company
applying this exemption, any reference to Section 
31A-17-514
 found in Sections 
31A-17-503
,
31A-17-504
, 
31A-17-505
, 
31A-17-506
, 
31A-17-507
, 
31A-17-508
, 
31A-17-509
, 
31A-17-510
,
31A-17-511
, 
31A-17-512
, and 
31A-17-513
 is not applicable.
Section 18. Section 
31A-17-519
 is enacted to read:
 31A-17-519.
Small company exemption.
(1) A company that is licensed and doing business in Utah, and whose reserves are
computed subject to the requirements of Subsection 
31A-17-502
(2), may hold reserves for life
insurance policies based on the mortality tables and interest rates defined by the valuation
manual for net premium reserves and using the methodology defined in Sections 
31A-17-507
through 
31A-17-512
 as they apply to ordinary life insurance in lieu of the reserves required by
Sections 
31A-17-514
 and 
31A-17-515
, provided that all of the following conditions have been
met:
(a) the company has less than $300,000,000 of ordinary life premium;
(b) if the company is a member of a group of life insurers, the group has combined
ordinary life premiums of less than $600,000,000;
(c) the company reported total adjusted capital of at least 450% of Authorized Control
Level Risk Based Capital in the risk-based capital report for the prior calendar year;
(d) the appointed actuary has provided an unqualified opinion on the reserves in
accordance with Subsection 
31A-17-503
(2) for the prior calendar year;
(e) the company has provided a certification by a qualified actuary that any universal
life policy with a secondary guarantee issued after the operative date of the valuation manual
meets the definition of a non-material secondary guarantee universal life product as defined in
the valuation manual;
(f) the company has filed by July 1 of the calendar year for which valuation under
Subsection 
31A-17-502
(2) is required a statement with its domiciliary commissioner certifying
that these conditions are met and that the company intends to calculate reserves as described in
this section; and
(g) the company's domiciliary commissioner has not informed the company in writing
before September 1 of the calendar year for which valuation under Subsection 
31A-17-502
(2)
is required that the company must comply with the valuation manual requirements for life
insurance reserves.
(2) For purposes of Subsections (1)(a) and (b), ordinary life premiums are measured as
direct premium plus reinsurance assumed from an unaffiliated company, as reported in the
prior calendar year annual statement.
Section 19. Section 
31A-22-408
 is amended to read:
31A-22-408.
Standard Nonforfeiture Law for Life Insurance.
(1) 
(a)
 This section is known as the "Standard Nonforfeiture Law for Life Insurance."
[
It
]
(b) This section
 does not apply to group life insurance.
(c) As used in this section, "operative date of the valuation manual" means the same as
that term is described in Subsection 
31A-17-514
(2).
(2) In the case of policies issued on or after July 1, 1961, no policy of life insurance,
except as stated in Subsection (8), may be delivered or issued for delivery in this state unless it
contains in substance the following provisions, or corresponding provisions which in the
opinion of the commissioner are at least as favorable to the defaulting or surrendering
policyholder as are the minimum requirements [
hereinafter
] specified 
in this section
, and are
essentially in compliance with Subsection (8):
(a) That, in the event of default in any premium payment, after premiums have been
paid for at least one full year the company will grant, upon proper request not later than 60 days
after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated
in the policy, effective as of such due date, of such amount as is specified in this section. In
lieu of that stipulated paid-up nonforfeiture benefit, the company may substitute, upon proper
request not later than 60 days after the due date of the premium in default, an actuarially
equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer
period of death benefits or, if applicable, a greater amount or earlier payment of endowment
benefits.
(b) That, upon surrender of the policy within 60 days after the due date of any premium
payment in default after premiums have been paid for at least three full years in the case of
ordinary insurance or five full years in the case of industrial insurance, the company will pay,
in lieu of any paid-up nonforfeiture benefit, a cash surrender value of such amount as is
specified in this section.
(c) That a specified paid-up nonforfeiture benefit shall become effective as specified in
the policy unless the person entitled to make such election elects another available option not
later than 60 days after the due date of the premium in default.
(d) That, if the policy shall have been paid by the completion of all premium payments
or if it is continued under any paid-up nonforfeiture benefit which became effective on or after
the third policy anniversary in the case of ordinary insurance or the fifth policy anniversary in
the case of industrial insurance, the company will pay upon surrender of the policy within 30
days after any policy anniversary, a cash surrender value in the amount specified in this section.
(e) In the case of policies which cause, on a basis guaranteed in the policy, unscheduled
changes in benefits or premiums, or which provide an option for changes in benefits or
premiums other than a change to a new policy, a statement of the mortality table, interest rate,
and method used in calculating cash surrender values and the paid-up nonforfeiture benefits
available under the policy. In the case of [
all
] other policies, a statement of the mortality table
and interest rate used in calculating the cash surrender values and the paid-up nonforfeiture
benefit, if any, available under the policy on each policy anniversary either during the first 20
policy years or during the term of the policy, whichever is shorter, such values and benefits to
be calculated upon the assumption that there are no dividends or paid-up additions credited to
the policy and that there is no indebtedness to the company on the policy.
(f) A statement that the cash surrender values and the paid-up nonforfeiture benefits
available under the policy are not less than the minimum values and benefits required by or
pursuant to the insurance law of the state in which the policy is delivered; an explanation of the
manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by
the existence of any paid-up additions credited to the policy or any indebtedness to the
company on the policy; if a detailed statement of the method of computation of the values and
benefits shown in the policy is not stated [
therein
] 
in the policy
, a statement that such method
of computation has been filed with the insurance supervisory official of the state in which the
policy is delivered; and a statement of the method to be used in calculating the cash surrender
value and paid-up nonforfeiture benefit available under the policy on any policy anniversary
beyond the last anniversary for which such values and benefits are consecutively shown in the
policy.
(g) Any of the foregoing provisions or portions thereof not applicable by reason of the
plan of insurance may, to the extent inapplicable, be omitted from the policy.
(h) The company shall reserve the right to defer the payment of any cash surrender
value for a period of six months after demand therefor with surrender of the policy with the
consent of the commissioner; provided, however, that the policy shall remain in full force and
effect until the insurer has made the payment.
(3) (a) Any cash surrender value available under the policy in the event of default in a
premium payment due on any policy anniversary, whether or not required by Subsection (2),
shall be an amount not less than the excess, if any, of the present value, on such anniversary, of
the future guaranteed benefits which would have been provided for by the policy, including any
existing paid-up additions, if there had been no default, over the sum of:
(i) the then present value of the adjusted premiums as defined in Subsections (5) and
(6), corresponding to premiums which would have fallen due on and after such anniversary;
and
(ii) the amount of any indebtedness to the company on the policy.
(b) Provided, however, that for any policy issued on or after the operative date of
Subsection (6)(d) as defined [
therein
] 
in Subsection (6)(d)
, which provides supplemental life
insurance or annuity benefits at the option of the insured and for an identifiable additional
premium by rider or supplemental policy provision, the cash surrender value referred to in
Subsection (3)(a) shall be an amount not less than the sum of the cash surrender value as
defined in Subsection (3)(a) for an otherwise similar policy issued at the same age without such
rider or supplemental policy provision and the cash surrender value as defined in Subsection
(3)(a) for a policy which provides only the benefits otherwise provided by such rider or
supplemental policy provision.
(c) Provided, further, that for any family policy issued on or after the operative date of
Subsection (6)(d) as defined [
therein
] 
in Subsection (6)(d)
, which defines a primary insured
and provides term insurance on the life of the spouse of the primary insured expiring before the
spouse's age 71, the cash surrender value referred to in Subsection (3)(a) shall be an amount not
less than the sum of the cash surrender value as defined in Subsection (3)(a) for an otherwise
similar policy issued at the same age without such term insurance on the life of the spouse and
the cash surrender value as defined in Subsection (3)(a) for a policy which provides only the
benefits otherwise provided by such term insurance on the life of the spouse.
(d) Any cash surrender value available within 30 days after any policy anniversary
under any policy paid-up by completion of all premium payments or any policy continued
under any paid-up nonforfeiture benefit, whether or not required by Subsection (2) shall be an
amount not less than the present value, on such anniversary, of the future guaranteed benefits
provided for by the policy, including any existing paid-up additions, decreased by any
indebtedness to the company on the policy.
(4) Any paid-up nonforfeiture benefit available under the policy in the event of default
in a premium payment due on any policy anniversary shall be such that its present value as of
such anniversary shall be at least equal to the cash surrender value then provided for by the
policy or, if none is provided for, that cash surrender value which would have been required by
this section in the absence of the condition that premiums shall have been paid for at least a
specified period.
(5) (a) (i) This Subsection (5) does not apply to policies issued on or after the operative
date of Subsection (6)(d) as defined [
therein
] 
in Subsection (6)(d)
.
(ii) Except as provided in Subsection (5)(c), the adjusted premiums for any policy shall
be calculated on an annual basis and shall be such uniform percentage of the respective
premiums specified in the policy for each policy year, excluding any extra premiums charged
because of impairments or special hazards, that the present value, at the date of issue of the
policy, of all such adjusted premiums shall be equal to the sum of:
(A) the then present value of the future guaranteed benefits provided for by the policy;
(B) 2% of the amount of insurance, if the insurance be uniform in amount, or of the
equivalent uniform amount if the amount of insurance varies with duration of the policy;
(C) 40% of the adjusted premium for the first policy year; and
(D) 25% of either the adjusted premium for the first policy year or the adjusted
premium for a whole life policy of the same uniform or equivalent uniform amount with
uniform premiums for the whole of life issued at the same age for the same amount of
insurance, whichever is less.
(iii) Provided, however, that in applying the percentages specified in Subsections
(5)(a)(ii)(C) and (D), no adjusted premium shall be considered to exceed 4% of the amount of
insurance or uniform amount equivalent thereto. The date of issue of a policy for the purpose
of this Subsection (5) shall be the date as of which the rated age of the insured is determined.
(b) In the case of a policy providing an amount of insurance varying with duration of
the policy, the equivalent uniform amount thereof for the purpose of this Subsection (5) shall
be considered to be the uniform amount of insurance provided by an otherwise similar policy,
containing the same endowment benefit or benefits, if any, issued at the same age and for the
same term, the amount of which does not vary with duration and the benefits under which have
the same present value at the date of issue as the benefits under the policy; provided, however,
that in the case of a policy providing a varying amount of insurance issued on the life of a child
under age 10, the equivalent uniform amount may be computed as though the amount of
insurance provided by the policy [
prior to
] 
before
 the attainment of age 10 were the amount
provided by such policy at age 10.
(c) (i) The adjusted premiums for any policy providing term insurance benefits by rider
or supplemental policy provision shall be equal to the sum of:
(A) the adjusted premiums for an otherwise similar policy issued at the same age
without such term insurance benefits[
, increased
]; and
(B) during the period for which premiums for such term insurance benefits are payable,
the adjusted premiums for such term insurance.
(ii) The foregoing items (A) and (B) of Subsection (5)(c)(i) being calculated separately
and as specified in Subsections (5)(a) and (b) except that, for the purposes of (B), (C), and (D)
of Subsection (5)(a)(ii), the amount of insurance or equivalent uniform amount of insurance
used in calculation of the adjusted premiums referred to in (B) of Subsection (5)[
(c)(i)
]
(a)(ii)
shall be equal to the excess of the corresponding amount determined for the entire policy over
the amount used in the calculation of the adjusted premiums in (A) of [
this
] Subsection
(5)(c)(i).
(d) Except as otherwise provided in Subsection (6), all adjusted premiums and present
values referred to in this section shall for all policies of ordinary insurance be calculated on the
basis of the Commissioner's 1941 Standard Ordinary Mortality Table, provided that for any
category of ordinary insurance issued on female risks, adjusted premiums and present values
may be calculated according to an age not more than three years younger than the actual age of
the insured and such calculations for all policies of industrial insurance shall be made on the
basis of the 1941 Standard Industrial Mortality Table. All calculations shall be made on the
basis of the rate of interest, not exceeding 3-1/2% per annum, specified in the policy for
calculating cash surrender values and paid-up nonforfeiture benefits. Provided, however, that
in calculating the present value of any paid-up term insurance with accompanying pure
endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be
not more than 130% of the rates of mortality according to such applicable table. Provided,
further, that for insurance issued on a substandard basis, the calculation of any such adjusted
premiums and present values may be based on such other table of mortality as may be specified
by the company and approved by the commissioner.
(6) (a) This Subsection (6)(a) does not apply to ordinary policies issued on or after the
operative date of Subsection (6)(d) as defined [
therein
] 
in Subsection (6)(d)
. In the case of
ordinary policies issued on or after the operative date of Subsection (6)(a) as defined in
Subsection (6)(b), all adjusted premiums and present values referred to in this section shall be
calculated on the basis of the Commissioner's 1958 Standard Ordinary Mortality Table and the
rate of interest as specified in the policy for calculating cash surrender values and paid-up
nonforfeiture benefits, provided that such rate of interest may not exceed 3-1/2% per annum for
policies issued before June 1, 1973, 4% per annum for policies issued on or after May 31,
1973, and before April 2, 1980, and the rate of interest may not exceed 5-1/2% per annum for
policies issued after April 2, 1980, except that for any single premium whole life or endowment
insurance policy a rate of interest not exceeding 6-1/2% per annum may be used, and provided
that for any category of ordinary insurance issued on female risks, adjusted premiums and
present values may be calculated according to an age not more than six years younger than the
actual age of the insured. Provided, however, that in calculating the present value of any
paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than those shown in the
Commissioner's 1958 Extended Term Insurance Table. Provided, further, that for insurance
issued on a substandard basis, the calculation of any such adjusted premiums and present
values may be based on such other table of mortality as may be specified by the company and
approved by the commissioner.
(b) Any company may file with the commissioner a written notice of its election to
comply with the provisions of Subsection (6)(a) after a specified date before January 1, 1966. 
After filing such notice, then upon such specified date, which is the operative date of
Subsection (6)(a) for such company, this Subsection (6)(a) shall become operative with respect
to the ordinary policies thereafter issued by such company. If a company makes no such
election, the operative date of Subsection (6)(a) for such company is January 1, 1966.
(c) (i) This Subsection (6)(c) does not apply to industrial policies issued after the
operative date of Subsection (6)(d) as defined [
therein
] 
in Subsection (6)(d)
. In the case of
industrial policies issued on or after the operative date of this Subsection (6)(c) as defined
[
herein
] 
in this Subsection (6)(c)
, all adjusted premiums and present values referred to in this
section shall be calculated on the basis of the Commissioner's 1961 Standard Industrial
Mortality Table and the rate of interest specified in the policy for calculating cash surrender
values and paid-up nonforfeiture benefits, provided that such rate of interest may not exceed
3-1/2% per annum for policies issued before June 1, 1973, 4% per annum for policies issued
after May 31, 1973, and before April 2, 1980, and 5-1/2% per annum for policies issued after
April 2, 1980, except that for any single premium whole life or endowment insurance policy
issued after April 2, 1980, a rate of interest not exceeding 6-1/2% per annum may be used. 
Provided, however, that in calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality
assumed may be not more than those shown in the Commissioner's 1961 Industrial Extended
Term Insurance Table. Provided, further, that for insurance issued on a substandard basis, the
calculation of any such adjusted premiums and present values may be based on such other table
of mortality as may be specified by the company and approved by the commissioner.
(ii) Any company may file with the commissioner a written notice of its election to
comply with the provisions of this Subsection (6)(c) after a specified date before January 1,
1968. After filing such notice, then upon that specified date, which is the operative date of this
Subsection (6)(c) for such company, this Subsection (6)(c) shall become operative with respect
to the industrial policies thereafter issued by such company. If a company makes no such
election, the operative date of this Subsection (6)(c) for such company shall be January 1, 1968.
(d) (i) This Subsection (6)(d) applies to all policies issued on or after the operative date
of this Subsection (6)(d) as defined [
herein
] 
in this Subsection (6)(d)
. Except as provided in
Subsection (6)(d)(vii), the adjusted premiums for any policy shall be calculated on an annual
basis and shall be such uniform percentage of the respective premiums specified in the policy
for each policy year, excluding amounts payable as extra premiums to cover impairments or
special hazards and also excluding any uniform annual contract charge or policy fee specified
in the policy in a statement of the method to be used in calculating the cash surrender values
and paid-up nonforfeiture benefits, that the present value, at the date of issue of policy, of all
adjusted premiums shall be equal to the sum of:
(A) the then present value of the future guaranteed benefits provided for by the policy;
(B) 1% of either the amount of insurance, if the insurance be uniform in amount, or the
average amount of insurance at the beginning of each of the first 10 policy years; and
(C) 125% of the nonforfeiture net level premium as [
hereinafter
] defined[
. Provided,
however,
] 
in Subsection (6)(d)(iii), except
 that in applying the percentage specified in 
this
Subsection (6)(d)(i)
(C), no nonforfeiture net level premium shall be considered to exceed 4%
of either the amount of insurance, if the insurance be uniform in amount, or the average amount
of insurance at the beginning of each of the first 10 policy years.
(ii)
 The date of issue of a policy for the purpose of this Subsection (6)(d) shall be the
date as of which the rated age of the insured is determined.
[
(ii)
] 
(iii)
 The nonforfeiture net level premium shall be equal to the present value, at the
date of issue of the policy, of the guaranteed benefits provided for by the policy divided by the
present value, at the date of issue of the policy, of an annuity of one per annum payable on the
date of issue of the policy and on each anniversary of such policy on which a premium falls
due.
[
(iii)
] 
(iv)
 In the case of policies which cause on a basis guaranteed in the policy
unscheduled changes in benefits or premiums, or which provide an option for changes in
benefits or premiums other than change to a new policy, the adjusted premiums and present
values shall initially be calculated on the assumption that future benefits and premiums do not
change from those stipulated at the date of issue of the policy. At the time of any such change
in the benefits or premiums the future adjusted premiums, nonforfeiture net level premiums,
and present values shall be recalculated on the assumption that future benefits and premiums
do not change from those stipulated by the policy immediately after the change.
[
(iv)
] 
(v)
 Except as otherwise provided in Subsection (6)(d)[
(vii)
]
(viii)
, the
recalculated future adjusted premiums for any such policy shall be such uniform percentage of
the respective future premiums specified in the policy for each policy year, excluding amounts
specified in the policy for each policy year, excluding amounts payable as extra premiums to
cover impairments and special hazards, and also excluding any uniform annual contract charge
or policy fee specified in the policy in a statement of the method to be used in calculating the
cash surrender values and paid-up nonforfeiture benefits, that the present value, at the time of
change to the newly defined benefits or premiums, of all such future adjusted premiums shall
be equal to the excess of:
(A) the sum of:
(I) the then present value of the then future guaranteed benefits provided for by the
policy; and
(II) the additional expense allowance, if any; over
(B) the then cash surrender value, if any, or present value of any paid-up nonforfeiture
benefit under the policy.
[
(v)
] 
(vi)
 The additional expense allowance, at the time of the change to the newly
defined benefits or premiums, shall be the sum of:
(A) 1% of the excess, if positive, of the average amount of insurance at the beginning
of each of the first 10 policy years subsequent to the change over the average amount of
insurance [
prior to
] 
before
 the change at the beginning of each of the first 10 policy years
subsequent to the time of the most recent previous change, or, if there has been no previous
change, the date of issue of the policy; and
(B) 125% of the increase, if positive, in the nonforfeiture net level premium.
[
(vi)
] 
(vii)
 The recalculated nonforfeiture net level premium shall be equal to:
(A) the sum of:
(I) the nonforfeiture net level premium applicable [
prior to
] 
before
 the change times the
present value of an annuity of one per annum payable on each anniversary of the policy on or
subsequent to the date of the change on which a premium would have fallen due had the
change not occurred; and
(II) the present value of the increase in future guaranteed benefits provided for by the
policy; divided by
(B) the present value of an annuity of one per annum payable on each anniversary of the
policy on or subsequent to the date of change on which a premium falls due.
[
(vii)
] 
(viii)
 Notwithstanding any other provision of this Subsection (6)(d) to the
contrary, in the case of a policy issued on a substandard basis which provides reduced graded
amounts of insurance so that, in each policy year, such policy has the same tabular mortality
cost as an otherwise similar policy issued on the standard basis which provides higher uniform
amounts of insurance, adjusted premiums and present values for such substandard policy may
be calculated as if it were issued to provide such higher uniform amounts of insurance on the
standard basis.
[
(viii) All
] 
(ix) Any
 adjusted premiums and present values referred to in this section
shall:
(A) for [
all
] policies of ordinary insurance be calculated on the basis of:
(I) the Commissioner's 1980 Standard Ordinary Mortality Table; or
(II) at the election of the company for any one or more specified plans of life insurance,
the Commissioner's 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality
Factors;
(B) for all policies of industrial insurance be calculated on the basis of the
Commissioner's 1961 Standard Industrial Mortality Table; and
(C) for all policies issued in a particular calendar year be calculated on the basis of a
rate of interest not exceeding the nonforfeiture interest rate as defined in Subsection
(6)(d)[
(x)
]
(xi)
, for policies issued in that calendar year.
[
(ix)
] 
(x)
 Notwithstanding Subsection (6)(d)[
(viii)
]
(ix)
:
(A) At the option of the company, calculations for all policies issued in a particular
calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture
interest rate, as defined in Subsection (6)(d)[
(x)
]
(xi)
, for policies issued in the immediately
preceding calendar year.
(B) Under any paid-up nonforfeiture benefit, including any paid-up dividend additions,
any cash surrender value available, whether or not required by Subsection (2), shall be
calculated on the basis of the mortality table and rate of interest used in determining the
amount of such paid-up nonforfeiture benefit and paid-up dividend additions, if any.
(C) A company may calculate the amount of any guaranteed paid-up nonforfeiture
benefit, including paid-up additions under the policy, on the basis of an interest rate no lower
than that specified in the policy for calculating cash surrender values.
(D) In calculating the present value of any paid-up term insurance with accompanying
pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may
be not more than those shown in the Commissioner's 1980 Extended Term Insurance Table for
policies of ordinary insurance and not more than the Commissioner's 1961 Industrial Extended
Term Insurance Table for policies of industrial insurance.
(E) For insurance issued on a substandard basis, the calculation of any such adjusted
premiums and present values may be based on appropriate modifications of the aforementioned
tables.
(F) [
Any ordinary mortality tables
] 
For a policy issued before the operative date of the
valuation manual, a Commissioner's Standard Ordinary Mortality Tables
, adopted after 1980
by the National Association of Insurance Commissioners, that are approved by rules adopted by
the commissioner for use in determining the minimum nonforfeiture standard, may be
substituted for the Commissioner's 1980 Standard Ordinary Mortality Table with or without
Ten-Year Select Mortality Factors or for the Commissioner's 1980 Extended Term Insurance
Table. 
For a policy issued on or after the operative date of the valuation manual, the valuation
manual shall provide the Commissioner's Standard Mortality Table for use in determining the
minimum nonforfeiture standard that may be substituted for the Commissioner's 1980 Standard
Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the
Commissioner's 1980 Extended Term Insurance Table. If the commissioner approves by rule
any Commissioner's Standard Ordinary Mortality Table adopted by the National Association of
Insurance Commissioners for use in determining the minimum nonforfeiture standard for
policies issued on or after the operative date of the valuation manual, then that minimum
nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the
valuation manual.
(G) [
Any industrial mortality tables
] 
For a policy issued before the operative date of the
valuation manual, any Commissioner's Standard Industrial Mortality Tables
, adopted after 1980
by the National Association of Insurance Commissioners, that are approved by rules adopted by
the commissioner for use in determining the minimum nonforfeiture standard may be
substituted for the Commissioner's 1961 Industrial Extended Term Insurance Table. 
For a
policy issued on or after the operative date of the valuation manual, the valuation manual shall
provide the Commissioner's Standard Mortality Table for use in determining the minimum
nonforfeiture standard that may be substituted for the Commissioner's 1961 Standard Industrial
Mortality Table or the Commissioner's 1961 Industrial Extended Term Insurance Table. If the
commissioner approves by rule any Commissioner's Standard Industrial Mortality Table
adopted by the National Association of Insurance Commissioners for use in determining the
minimum nonforfeiture standard for policies issued on or after the operative date of the
valuation manual, then that minimum nonforfeiture standard supersedes the minimum
nonforfeiture standard provided by the valuation manual.
[
(x)
] 
(xi)
 The nonforfeiture interest rate 
is defined in this Subsection (6)(d)(xi):
(A) for a policy issued before the operative date of the valuation manual, the
nonforteiture interest rate
 per annum for any policy issued in a particular calendar year shall be
equal to 125% of the calendar year statutory valuation interest rate for such policy as defined in
the Standard Valuation Law, rounded to the nearest one-fourth of 1%[
.
]
, except that the
nonforfeiture interest rate may not be less than 4%; and
(B) for a policy issued on and after the operative date of the valuation manual, the
nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be
provided by the valuation manual.
[
(xi)
] 
(xii)
 Notwithstanding any other provision in this title to the contrary, any refiling
of nonforfeiture values or their methods of computation for any previously approved policy
form which involves only a change in the interest rate or mortality table used to compute
nonforfeiture values does not require refiling of any other provisions of that policy form.
[
(xii)
] 
(xiii)
 After the effective date of this Subsection (6)(d), any company may, at any
time before January 1, 1989, file with the commissioner a written notice of its election to
comply with the provisions of this subsection with regard to any number of plans of insurance
after a specified date before January 1, 1989, which specified date shall be the operative date of
this Subsection (6)(d) for the plan or plans, but if a company elects to make the provisions of
this subsection operative before January 1, 1989, for fewer than all plans, the company shall
comply with rules adopted by the commissioner. There is no limit to the number of times this
election may be made. If the company makes no such election, the operative date of this
subsection for such company shall be January 1, 1989.
(7) In the case of any plan of life insurance which provides for future premium
determination, the amounts of which are to be determined by the insurance company based on
the estimates of future experience, or in the case of any plan of life insurance which is of such
nature that minimum values cannot be determined by the methods described in Subsection (2),
(3), (4), (5), (6)(a), (6)(b), (6)(c), or (6)(d) [
herein
], then:
(a) the insurer shall demonstrate to the satisfaction of the commissioner that the
benefits provided under the plan are substantially as favorable to policyholders and insureds as
the minimum benefits otherwise required by Subsection (2), (3), (4), (5), (6)(a), (6)(b), (6)(c),
or (6)(d);
(b) the plan of life insurance shall satisfy the commissioner that the benefits and the
pattern of premiums of that plan are not such as to mislead prospective policyholders or
insureds; and
(c) the cash surrender values and paid-up nonforfeiture benefits provided by the plan
may not be less than the minimum values and benefits required for the plan computed by a
method consistent with the principles of this Standard Nonforfeiture Law for Life Insurance, as
determined by rules adopted by the commissioner.
(8) (a) (i) Any cash surrender value and any paid-up nonforfeiture benefit, available
under the policy in the event of default in a premium payment due at any time other than on the
policy anniversary, shall be calculated with allowance for the lapse of time and the payment of
fractional premiums beyond the last preceding policy anniversary.
(ii) All values referred to in Subsections (3), (4), (5), and (6) may be calculated upon
the assumption that any death benefit is payable at the end of the policy year of death.
(iii) The net value of any paid-up additions, other than paid-up term additions, may not
be less than the amounts used to provide such additions.
(b) Notwithstanding the provisions of Subsection (3), additional benefits specified in
Subsection (8)(c) and premiums for all such additional benefits shall be disregarded in
ascertaining cash surrender values and nonforfeiture benefits required by this section, and no
such additional benefits shall be required to be included in any paid-up nonforfeiture benefits.
(c) Additional benefits referred to in Subsection (8)(b) include benefits payable:
(i) in the event of death or dismemberment by accident or accidental means;
(ii) in the event of total and permanent disability;
(iii) as reversionary annuity or deferred reversionary annuity benefits;
(iv) as term insurance benefits provided by a rider or supplemental policy provision to
which, if issued as a separate policy, this section would not apply;
(v) as term insurance on the life of a child or on the lives of children provided in a
policy on the life of a parent of the child, if such term insurance expires before the child's age is
26, if uniform in amount after the child's age is one, and has not become paid-up by reason of
the death of a parent of the child; and
(vi) as other policy benefits additional to life insurance endowment benefits.
(9) (a) This Subsection (9), in addition to all other applicable subsections of this
section, applies to all policies issued on or after January 1, 1985. Any cash surrender value
available under the policy in the event of default in a premium payment due on any policy
anniversary shall be in an amount which does not differ by more than 2/10 of 1% of either the
amount of insurance, if the insurance be uniform in amount, or the average amount of
insurance at the beginning of each of the first 10 policy years, from the sum of:
(i) the greater of zero and the basic cash value [
hereinafter
] specified 
in Subsection
(9)(b)
; and
(ii) the present value of any existing paid-up additions less the amount of any
indebtedness to the company under the policy.
(b) The basic cash value shall be equal to the present value, on such anniversary of the
future guaranteed benefits which would have been provided for by the policy, excluding any
existing paid-up additions and before deduction of any indebtedness to the company, if there
had been no default, less the then present value of the nonforfeiture factors, as [
hereinafter
]
defined 
in Subsection (9)(c)
, corresponding to premiums which would have fallen due on and
after such anniversary. Provided, however, that the effects on the basic cash value of
supplemental life insurance or annuity benefits or of family coverage, as described in
Subsection (3) or (5), whichever is applicable, shall be the same as are the effects specified in
Subsection (3) or (5), whichever is applicable, on the cash surrender values defined in that
subsection.
(c) The nonforfeiture factor for each policy year shall be an amount equal to a
percentage of the adjusted premium for the policy year, as defined in Subsection (5) or (6)(d),
whichever is applicable. Except as is required by the next succeeding sentence of this
paragraph, such percentage:
(i) shall be the same percentage for each policy year between the second policy
anniversary and the later of:
(A) the fifth policy anniversary; and
(B) the first policy anniversary at which there is available under the policy a cash
surrender value in an amount, before including any paid-up additions and before deducting any
indebtedness, of at least 2/10 of 1% of either the amount of insurance, if the insurance be
uniform in amount, or the average amount of insurance at the beginning of each of the first 10
policy years; and
(ii) shall be such that no percentage after the later of the two policy anniversaries
specified in Subsection (9)(a) may apply to fewer than five consecutive policy years.
(d) Provided, that no basic cash value may be less than the value which would be
obtained if the adjusted premiums for the policy, as defined in Subsection (5) or Subsection
(6)(d), whichever is applicable, were substituted for the nonforfeiture factors in the calculation
of the basic value.
(e) All adjusted premiums and present values referred to in this Subsection (9) shall for
a particular policy be calculated on the same mortality and interest bases as are used in
demonstrating the policy's compliance with the other subsections of this nonforfeiture law. 
The cash surrender values referred to in this Subsection (9) shall include any endowment
benefits provided for by the policy.
(f) Any cash surrender value available other than in the event of default in a premium
payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit
available under the policy in the event of default in a premium payment shall be determined in
manners consistent with the manners specified for determining the analogous minimum
amounts in Subsections (2), (3), (4), (5), (6), and (8). The amounts of any cash surrender
values and of any paid-up nonforfeiture benefits granted in connection with additional benefits
such as those listed as Subsection (8)(c) shall conform with the principles of this Subsection
(9).
(10) (a) This section does not apply to any of the following:
(i) reinsurance;
(ii) group insurance;
(iii) pure endowment;
(iv) an annuity or reversionary annuity contract;
(v) a term policy of uniform amount, which provides no guaranteed nonforfeiture or
endowment benefits, or renewal thereof, of 20 years or less expiring before age 71, for which
uniform premiums are payable during the entire term of the policy;
(vi) a term policy of decreasing amount, which provides no guaranteed nonforfeiture or
endowment benefits, on which each adjusted premium, calculated as specified in Subsections
(5) and (6), is less than the adjusted premium so calculated, on a term policy of uniform
amount, or renewal thereof, which provides no guaranteed nonforfeiture or endowment
benefits, issued at the same age and for the same initial amount of insurance, and for a term of
20 years or less expiring before age 71, for which uniform premiums are payable during the
entire term of the policy;
(vii) a policy, which provides no guaranteed nonforfeiture or endowment benefits, for
which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at
the beginning of any policy year, calculated as specified in Subsections (3), (4), (5), and (6)
exceeds 2-1/2% of the amount of insurance at the beginning of the same policy year; or
(viii) a policy which shall be delivered outside this state through an agent or other
representative of the company issuing the policy.
(b) For purposes of determining the applicability of this section, the age of expiry for a
joint term insurance policy shall be the age of expiry of the oldest life.
(11) The commissioner may adopt rules interpreting, describing, and clarifying the
application of this nonforfeiture law to any form of life insurance for which the interpretation,
description, or clarification is considered necessary by the commissioner, including unusual
and new forms of life insurance.