RECOGNITION OF THE
2001 CSO MORTALITY TABLE
FOR USE IN DETERMINING
MINIMUM RESERVE LIABILITIES
AND NONFORFEITURE
BENEFITS MODEL REGULATION
Table of Contents
Section 1. Authority
Section 2. Purpose
Section 3. Definitions
Section 4. 2001 CSO Mortality Table
Section 5. Conditions
Section 6. Applicability
of the 2001 CSO Mortality Table to [insert applicable reference to the
Valuation of Life Insurance Policies Model Regulation]
Section 7. Gender-Blended Tables
Section 8. Separability
Section 9. Effective Date
Section 1. Authority
This
regulation is promulgated by the Commissioner of Insurance pursuant to Section
[insert applicable references to Section 4A(c) of the Standard Valuation Law
and Section 5cH(6) of the Standard Nonforfeiture
Law for Life Insurance] of the [insert state] Insurance Laws and Sections
[insert applicable references to Sections 5A and 5B of the Valuation of Life
Insurance Model Regulation] of the [insert state] Insurance Regulations.
Drafting Note: The reference to
the Valuation of Life Insurance Policies Model Regulation should be omitted by
states that have not adopted that model.
Section 2. Purpose
The purpose
of this regulation is to recognize, permit and prescribe the use of the 2001
Commissioners Standard Ordinary (CSO) Mortality Table in accordance with
[insert applicable references to Section 4A(c) of the Standard Valuation Law
and Section 5cH(6) of the Standard Nonforfeiture Law
for Life Insurance] of the [insert state] insurance laws and Sections [insert
applicable references to Sections 5A and 5B of the Valuation of Life Insurance
Model Regulation] of the [insert state] Insurance Regulations.
Section 3. Definitions
A. “2001 CSO Mortality Table” means that
mortality table, consisting of separate rates of mortality for male and female
lives, developed by the
B. “2001 CSO Mortality Table (F)” means
that mortality table consisting of the rates of mortality for female lives from
the 2001 CSO Mortality Table.
C. “2001 CSO Mortality Table (M)” means
that mortality table consisting of the rates of mortality for male lives from
the 2001 CSO Mortality Table.
D. “Composite mortality tables” means
mortality tables with rates of mortality that do not distinguish between
smokers and nonsmokers.
E. “Smoker and nonsmoker mortality tables”
means mortality tables with separate rates of mortality for smokers and
nonsmokers.
Section 4. 2001 CSO Mortality Table
A. At the election of the company for any
one or more specified plans of insurance and subject to the conditions stated
in this regulation, the 2001 CSO Mortality Table may be used as the minimum
standard for policies issued on or after January 1, 2001 [_] [insert January 1
of the year next following or coincident with the effective date of this
regulation] and before the date specified in subsection B to which [insert applicable references to
Section 4A(c) of the Standard Valuation Law, section 5cH(6) of the Standard Nonforfeiture Law for Life Insurance, and Sections 5A and
5B of the Valuation of Life Insurance Policies Model Regulation] are
applicable. If the company elects to use
the 2001 CSO Mortality Table, it shall do so for both valuation and nonforfeiture purposes.
B. Subject to the conditions stated in
this regulation, the 2001 CSO Mortality Table shall be used in determining
minimum standards for policies issued on and after January 1, 2009, to which
[insert applicable references to Section 4A(c) of the Standard Valuation Law,
Section 5cH(6) of the Standard Nonforfeiture
Law for Life Insurance, and Sections 5A and 5B of the Valuation of Life
Insurance Policies Model Regulation] are applicable.
Drafting
Notes: States should note that there is
no new Commissioner Extended Term (CET) Table being proposed to replace the
1980 CET Table. Therefore, the new
minimum basis for the computation of values related to extended term benefits will
be the 2001 CSO Mortality Table.
Section 5. Conditions
A. For each plan of insurance with
separate rates for smokers and nonsmokers an insurer may use:
(1) Composite mortality tables to determine
minimum reserve liabilities and minimum cash surrender values and amounts of
paid-up nonforfeiture benefits:
(2) Smoker and nonsmoker mortality tables to
determine the valuation net premiums and additional minimum reserves, if any,
required by Section [insert applicable reference corresponding to Section 8 of
the NAIC Model Standard Valuation Law] and use composite mortality tables to
determine the basic minimum reserves, minimum cash surrender values and amounts
of paid-up nonforfeiture benefits; or
(3) Smoker and nonsmoker mortality to
determine minimum reserve liabilities and minimum cash surrender values and
amounts of paid-up nonforfeiture benefits.
B. for plans of insurance without separate
rates for smoker and nonsmokers the composite mortality tables shall be used.
C. For the purpose of determining minimum
reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits, the 2001 CSO Mortality Table may,
at the option of the company for each plan of insurance, be used in its
ultimate or select and ultimate form, subject to the restrictions of Section 6
and [insert applicable reference to the Valuation of Life Insurance Policies
Model Regulation] relative to use of the select and ultimate form.
D. When the 2001 CSO Mortality Table is
the minimum reserve standard for any plan for a company, the actuarial opinion
in the annual statement filed with the commissioner shall be based on an asset
adequacy analysis as specified in sections [insert applicable references to
Section 5A of the Actuarial Opinion and Memorandum Regulation] of the [insert
state] Insurance Regulations. A
commissioner may exempt a company from this requirement if it only does
business in this state and in no other state.
Section 6. Applicability of the 2001 CSO Mortality
Table to [insert applicable reference to the Valuation of Life Insurance
Policies model Regulation]
A. The 2001 CSO Mortality Table may be
used in applying [insert applicable reference to the Valuation of Life
Insurance Policies Model Regulation] in the following manner, subject to the
transition dates for use of the 2001 CSO Mortality Table in Section 4 of this
regulation (unless otherwise noted, the references in this section are to the
[insert applicable reference to the Valuation of Life Insurance Policies Model
Regulation]):
(1) Section 3A(2)(b): The net level reserve premium is based on the
ultimate mortality rates in the 2001 CSO Mortality Table.
(2) Section 4B: All calculations are made using the 2001 CSO
Mortality Rate, and, if elected, the optional minimum mortality standard for
deficiency reserves stipulated in Section 6A(4) of
this regulation. The value of “qx+k+t+1”
is the valuation mortality rate for deficiency reserves in policy year k+t, but using the unmodified select mortality rates if
modified select mortality rates are used in the computation of deficiency
reserves.
(3) Section 5A: The 2001 CSO Mortality Table is the minimum
standard for basic reserves.
(4) Section 5B: The 2001 CSO Mortality Table is the minimum
standard for deficiency reserves. If
select mortality rates are used, they may be multiplied by X percent for
durations in the first segment, subject to the conditions specified in sections
5B(3)(a) to (i). In demonstrating compliance with those
conditions, the demonstrations may not combine the results of tests that
utilize the 1980 CSO Mortality Table with those tests that utilize the 2001 CSO
Mortality Table, unless the combination is explicitly required by regulation or
necessary to be in compliance with relevant Actuarial Standards of Practice.
(5) Section 6C: The valuation mortality table used in
determining the tabular cost of insurance shall be the ultimate mortality rates
in the 2001 CSO Mortality Table.
(6) Section 6E(4): The calculations specified in Section 6E
shall use the ultimate mortality rates in the 2001 Mortality Table.
(7) Section 6F(4): The calculations specified in Section 6F
shall use the ultimate mortality rates in the 2001 CSO Mortality Table.
(8) Section 6G(2): The calculations specified in Section 6G
shall use the ultimate mortality rates in the 2001 CSO Mortality Table.
(9) Section 7A(1)(b): The one-year valuation premium shall be
calculated using the ultimate mortality rates in the 2001 CSO Mortality Table.
B. Nothing in this section will be
construed to expand the applicability of [insert applicable reference to the
Valuation of Life Insurance Policies Model Regulation] to include life
insurance policies exempted under Section 3A of [insert applicable reference to
the Valuation of Life Insurance Policies Model Regulation].
Drafting Note: This section should
be omitted by states that have not adopted the Valuation of Life Insurance
Policies Model Regulation.
Section 7. Gender-Blended Tables
A. For any ordinary life insurance policy
delivered or issued for delivery in this state on and after January 1, 200[_]
[insert same date as in Section 4A], that utilizes the same premium rates and
charges for male and female lives or is issued in circumstances where
applicable law does not permit distinctions on the basis of gender, a mortality
table that is a blend of the 2001 CSO Mortality Table (M) and the 2001 CSO
Mortality Table (F) may, at the option of company for each plan of insurance,
be substituted for the 2001 CSO Mortality Table for use in determining minimum
cash surrender values and amounts of paid-up nonforfeiture
benefits. No change in minimum valuation
standards is implied by this subsection of the regulation.
B. The company may choose from among the
blended tables developed by the
C. It shall not, in and of itself, be a
violation of [insert applicable reference to unfair trade practices statute]
for an insurer to issue the same kind of policy of life insurance on both a
sex-distinct and sex-neutral basis.
Section 8. Separability
If any
provision of this regulation or its application to any person or circumstance
is for any reason held to be invalid, the remainder of the regulation and the
application of the provision to other persons or circumstances shall not be
affected.
Section 9. Effective Date
The
effective date of this regulation is [insert date].
Legislative History (all references
are to the Proceedings of the NAIC)
2002 Proc. 3rd Quarter
(adopted).