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| Montana Administrative Register Notice 6-222 | No. 20 10/28/2016 | |
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BEFORE THE COMMISSIONER OF SECURITIES AND INSURANCE MONTANA STATE AUDITOR
TO: All Concerned Persons
1. On November 17, 2016, at 1:00 p.m., the Commissioner of Securities and Insurance, Montana State Auditor (CSI), will hold a public hearing in the 2nd floor conference room, at the Office of the Commissioner of Securities and Insurance, Montana State Auditor, 840 Helena Ave., Helena, Montana, to consider the proposed adoption of the above-stated rules.
2. The CSI will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact the CSI no later than 5:00 p.m., November 10, 2016, to advise us of the nature of the accommodation that you need. Please contact Darla Sautter, CSI, 840 Helena Avenue, Helena, Montana, 59601; telephone (406) 444-2726; TDD (406) 444-3246; fax (406) 444-3499; or e-mail [email protected].
3. The new rules as proposed to be adopted provide as follows:
NEW RULE I PURPOSE (1) The purpose of these rules is to recognize the following mortality tables for use in determining the minimum standard of valuation for annuity and pure endowment contracts: (a) the 1983 Table "a"; (b) the 2012 IAR Mortality Table; and (c) the 1994 GAR Table.
IMP: 33-2-410, MCA
NEW RULE II DEFINITIONS (1) "1983 Table 'a'" means the individual annuity mortality table developed by the Society of Actuaries Committee to Recommend a New Mortality Basis for Individual Annuity Valuation and adopted as a recognized mortality table for annuities in June 1982 by the National Association of Insurance Commissioners. (2) "1994 GAR Table" means the group annuity mortality table developed by the Society of Actuaries Group Annuity Valuation Table Task Force and shown on pages 866-867 of Volume XLVII of the Transactions of the Society of Actuaries (1995). (3) "2012 IAM Period Table" means the individual annuity mortality period table containing loaded mortality rates for the calendar year 2012. This table contains rates, qx2012, developed by the Society of Actuaries Committee on Life Insurance Research and referenced in Appendices A and B. (4) "2012 IAR Mortality Table" means the generational mortality table developed by the Society of Actuaries Committee on Life Insurance Research and containing rates, qx2012+n, derived from a combination of the 2012 IAM Period Table and Projection Scale G2, using the methodology stated in [NEW RULE IV]. (5) "Generational mortality table" means a mortality table containing a set of mortality rates that decrease for a given age from one year to the next based on a combination of a period table and a projection scale containing rates of mortality improvement. (6) "Period table" means a table of mortality rates applicable to a given calendar year. (7) "Projection Scale G2" is a table of annual rates, G2x, of mortality improvement by age for projecting future mortality rates beyond calendar year 2012. This table was developed by the Society of Actuaries Committee on Life Insurance Research and referenced in Appendices C and D.
IMP: 33-2-410, MCA
NEW RULE III INDIVIDUAL ANNUITY AND PURE ENDOWMENT CONTRACTS (1) Except as provided in (2), the 2012 IAR Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 2017. (2) The 1983 Table "a" without projection shall be used for determining the minimum standards of valuation for an individual annuity or pure endowment contract issued on or after January 1, 2017, solely when the contract is based on life contingencies and is issued to fund periodic benefits arising from: (a) settlements of various forms of claims pertaining to court settlements or out of court settlements from tort actions; (b) settlements involving similar actions such as workers' compensation claims; or (c) settlements of long term disability claims where a temporary or life annuity has been used in lieu of continuing disability payments.
IMP: 33-2-410, MCA
NEW RULE IV APPLICATION OF THE 2012 IAR MORTALITY TABLE (1) In using the 2012 IAR Mortality Table, the mortality rate for a person age x in year (2012 + n) is calculated as follows: (a) qx2012+n = qx2012(1-G2x)n; (b) the resulting qx2012+n shall be rounded to three decimal places per 1,000, e.g., 0.741 deaths per 1,000; (c) also, the rounding shall occur according to the formula above, starting at the 2012 period table rate. For example: (i) for a male age 30, qx2012 = 0.741, qx2013 = 0.741 * (1-0.010) ^ 1 = 0.73359, which is rounded to 0.734. qx2014 = 0.741 * (1-0.010) ^ 1 = 0.7262541, which is rounded to 0.726. (ii) a method leading to incorrect rounding would be to calculate qx2014 as qx2013 * (1-0.010), or 0.734 * 0.99 = 0.727. (d) It is incorrect to use the already rounded qx2013 to calculate qx2014.
IMP: 33-2-410, MCA
NEW RULE V GROUP ANNUITY AND PURE ENDOWMENT CONTRACTS (1) The 1994 GAR Table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 2017, under a group annuity or pure endowment contract.
IMP: 33-2-410, MCA
NEW RULE VI APPLICATION OF THE 1994 GAR TABLE (1) In using the 1994 GAR Table, the mortality rate for a person age x in year (1994 + n) is calculated as follows: (a) qx1994+n = qx1994(1-AAx)n where the qx1994 and AAx are specified in the 1994 GAR Table.
IMP: 33-2-410, MCA
NEW RULE VII INCORPORATION BY REFERENCE OF THE 1983 TABLE "A," THE 2012 IAR MORTALITY TABLE, AND THE 1994 GAR TABLE (1) The Commissioner of Securities and Insurance, Office of the State Auditor, adopts and incorporates by reference the 1983 Table "a" adopted by the National Association of Insurance Commissioners (NAIC) in June 1982; the 1994 GAR Table was developed by the Society of Actuaries Group Valuation Task Force and published in 1995; and the 2012 IAR Mortality Table was adopted by the NAIC in December 2012. These tables set forth and specify rating data necessary for calculation of insurers' reserve requirements associated with applicable products. Copies of these tables are available for public inspection in the Rates and Forms Bureau of the Office of the Commissioner of Securities and Insurance, Montana State Auditor, Legal Department, 840 Helena Avenue, Helena, Montana 59601. Persons obtaining a copy of these forms must pay the cost of providing such copies.
IMP: 33-2-410, MCA
NEW RULE VIII EFFECTIVE DATE (1) The effective date of [New Rules I through VII] is January 1, 2017.
IMP: 33-2-410, MCA
4. STATEMENT OF REASONABLE NECESSITY: The Commissioner of Securities and Insurance, Montana State Auditor, Monica J. Lindeen, (commissioner) is the statewide elected official responsible for administering the Montana Insurance Code and regulating the business of insurance.
The commissioner is the former President of the National Association of Insurance Commissioners (NAIC). The NAIC is an organization of insurance regulators from the 50 states, the District of Columbia, and the U.S. Territories. The NAIC provides a forum for the development of uniform policy and regulation when uniformity is appropriate. These rules are derived from the NAIC Model Rule (Regulation) for Recognizing a New Annuity Mortality Table for Use in Determining Reserve Liabilities for Annuities (#821).
These rules are reasonably necessary in order to adopt the currently applicable NAIC mortality tables as contemplated in 33-2-410, MCA, and to ensure uniformity with other states. Section 33-2-410, MCA, provides for the commissioner's approval by rule of NAIC-adopted mortality tables for both individual and group annuity and pure endowment contracts. New Rules I through VI would adopt the mortality table regime currently adopted by the NAIC, and nearly every other state.
Mortality tables are utilized to calculate insurers' reserve requirements associated with certain insurance products. Uniformity of mortality table requirements among states allows insurers to operate more efficiently by applying the same rating principles in multiple jurisdictions. Additionally, mortality tables based upon more up-to-date actuarial analyses (such as the mortality tables adopted by these rules) allow insurers to more accurately project reserve requirements, which in turn enhances policyholder protection by ensuring the insurer has adequately accounted for its risks.
5. Concerned persons may submit their data, views, or arguments concerning the proposed actions either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to Nick Mazanec, Attorney, Office of the Commissioner of Securities and Insurance, Montana State Auditor, 840 Helena Ave., Helena, Montana, 59601; telephone (406) 444-0385; fax (406) 444-3499; or e-mail [email protected], and must be received no later than 5:00 p.m., November 25, 2016.
6. Nick Mazanec, Attorney, has been designated to preside over and conduct this hearing.
7. The CSI maintains a list of concerned persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list may sign up by clicking on the blue button on the CSI's web site at: http://csimt.gov/laws-rules/ to specify for which program the person wishes to receive notices. Notices will be sent by e-mail unless a mailing preference is noted in the request. Requests may also be sent to the CSI in writing. Such written request may be mailed or delivered to the contact information in 2 above, or may be made by completing a request form at any rules hearing held by the CSI.
8. An electronic copy of this proposal notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register. The Secretary of State strives to make the electronic copy of the notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.
9. Pursuant to 2-4-302, MCA, the bill sponsor contact requirements do not apply.
10. Pursuant to 2-4-111, MCA, the adoption of these rules does not significantly and directly impact small businesses.
/s/ Michael A. Kakuk /s/ Jesse Laslovich Michael A. Kakuk Jesse Laslovich Rule Reviewer Chief Legal Counsel
Certified to the Secretary of State October 17, 2016 |
A directory of state agencies is available online at http://www.mt.gov/govt/agencylisting.asp.
For questions about the organization of the ARM or this web site, contact [email protected].
