IDAPA 18.07.09
This rule applies to all life insurance companies and fraternal benefit societies and those authorized to reinsure life insurance, annuities, or accident and health insurance in the state of Idaho.
The purpose of this rule allows the appointed actuary to use professional judgement and opinion in asset analysis and supporting communication. Also, the rule provides the Director with authority to specify methods and assumptions of actuarial analysis in order to render adequacy of reserves and related items.
This rule implements the following statute passed by the Idaho Legislature:
Insurance -
Department of Insurance:
Department of Insurance
700 W. State Street, 3rd Floor
Boise, ID 83720-0043
P.O. Box 83720
Boise, ID 83720-0043
Phone: 1(800) 721-3272 or (208) 334-4250
Fax: (208) 334-4398
Email: rulesreview@doi.idaho.gov
Web: https://doi.idaho.gov/
This rule chapter will be reviewed in compliance with Section 67-5292, Idaho Code, and in accordance with the 8-year rule review schedule linked here.
18.07.09 – Life and Health Actuarial Opinion and Memorandum Rule
000. Legal Authority. ... 3
001. Scope. ... 3
002. -- 009. (Reserved) ... 3
010. Definitions. ... 3
011. -- 020. (Reserved) ... 3
021. General Requirements. ... 3
022. Statement Of Actuarial Opinion Based On An Asset Adequacy Analysis. ... 5
023. Alternate Option. ... 6
024. Description Of Actuarial Memorandum Including An Asset Adequacy Analysis And Regulatory Asset Adequacy Issues Summary. ... 7
025. -- 999. (Reserved) ... 10
Title 41, Chapter 2, Idaho Code.
(4-6-23)
01. Application of Rule. This rule applies to all life insurance companies and fraternal benefit societies doing business in Idaho and to all life insurance companies and fraternal benefit societies that are authorized to reinsure life insurance, annuities or accident and health insurance business in Idaho. This regulation will be applied to allow the appointed actuary to use their professional judgment in performing the asset analysis and developing the actuarial opinion and supporting memoranda, consistent with actuarial standards of practice. But the Director may specify methods of actuarial analysis and actuarial assumptions that the Director deems necessary for an acceptable opinion to be rendered on the adequacy of reserves and related items. (4-6-23)
02. Application to All Annual Statements. This rule applies to all annual statements filed with the Director. A statement of opinion on the adequacy of reserves and related actuarial items based on an asset adequacy analysis per Section 022, and a supporting memorandum per Section 023, will be needed each year. (4-6-23)
03. Purpose. This rule prescribes:
(4-6-23)
a. Guidelines and standards for statements of actuarial opinion which are to be submitted per Section 41-612(12), Idaho Code, and for supporting memoranda; (4-6-23)
b. Rules for appointing an appointed actuary; and
(4-6-23)
c. Guidelines on the meaning of adequacy of reserves.
(4-6-23)
01. Actuarial Opinion. An Appointed Actuary's opinion on reserve adequacy and related actuarial items based on an asset adequacy test per Section 022 and presently accepted actuarial standards. (4-6-23)
02. Actuarial Standards Board. The board established by the American Academy of Actuaries to develop standards of actuarial practice. (4-6-23)
03. Asset Adequacy Analysis. An analysis that meets the standards and requirements in Subsection 021.04. (4-6-23)
04. Company. A life insurance company, fraternal benefit society or reinsurer subject to this rule. (4-6-23)
01. Submitting Statement of Actuarial Opinion.
(4-6-23)
a. For each year, starting with the year in which this rule takes effect, the annual statement's first page will include or attach the statement of an appointed actuary, entitled 'Statement of Actuarial Opinion,' setting forth an opinion on reserves and related actuarial items held in support of policies and contracts, per Section 022. (4-6-23)
b. Upon written request by the company, the Director may grant an extension to submit the statement of actuarial opinion. (4-6-23)
02. Qualified Actuary. An individual who:
(4-6-23)
a. Is a member in good standing of the American Academy of Actuaries; and
(4-6-23)
b. Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements per the American Academy of Actuaries qualification standards; and (4-6-23)
03. Appointed Actuary. A qualified actuary who is appointed or retained to prepare the Statement of Actuarial Opinion prescribed by this rule; either directly by or by the authority of the board of directors through an executive officer of the company. The company will timely notify the Director in writing of the name, title (and, in the case of a consulting actuary, the name of the firm) and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary. The notice will state that the person meets the requirements of Subsection 021.02. The company will timely notify the Director if the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements of Subsection 021.02. If any person appointed or retained as an appointed actuary replaces a previously appointed actuary, the notice will so state and give the reasons for replacement. (4-6-23)
04. Standards for Asset Adequacy Analysis. The asset adequacy analysis prescribed by this rule: (4-6-23)
a. Will conform to the standards of practice promulgated by the Actuarial Standards Board and to any additional standards under this rule, which standards are to form the basis of the statement of actuarial opinion per Section 021; and (4-6-23)
b. Will be based on methods of analysis as are deemed appropriate for such purposes by the Actuarial Standards Board. (4-6-23)
05. Liabilities to Be Covered. (4-6-23)
a. Under authority of Section 41-612(12), Idaho Code, the statement of actuarial opinion will apply to all in force business on the statement date regardless of when or where issued, e.g., Aggregate Reserve for Life Contracts, Aggregate Reserve for Accident and Health Contracts, reserves for Deposit Type Contracts, and Claims for Life and Health Contracts as reported in Exhibits of the annual statement, and equivalent items in the separate account statement or statements of the annual statement. (4-6-23)
b. If the appointed actuary determines from asset adequacy analysis that the company should hold a reserve in addition to the company’s aggregate reserve and calculated as described in Section 41-612(12), Idaho Code, the company will establish such additional reserve. (4-6-23)
c. Additional reserves established under this Subsection and deemed unnecessary in later years may be released. Released amounts need to be disclosed in the actuarial opinion for the applicable year. The Director will not deem the release of such reserves to reflect a lower standard of valuation. (4-6-23)
01. General Description. The statement of actuarial opinion submitted under this section will consist of; (4-6-23)
a. A paragraph identifying the appointed actuary and qualifications; (4-6-23)
b. A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary’s work, including a tabulation delineating the reserves and related actuarial items that have been analyzed for asset adequacy and the analysis method, and identifying the reserves and related actuarial items covered by the opinion that have not been so analyzed; (4-6-23)
c. A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, (e.g., anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios. Supported by a statement of each such expert in the form prescribed by Subsection 022.05; and (4-6-23)
d. An opinion paragraph expressing the appointed actuary’s opinion on the adequacy of the supporting assets to mature the liabilities. (4-6-23)
e. One (1) or more additional paragraphs will be needed in these cases; (4-6-23)
i. If the appointed actuary considers it necessary to state a qualification of his opinion; (4-6-23)
ii. If the appointed actuary needs to disclose an inconsistency between the analysis method or basis of asset allocation used on the prior opinion date and those used for this opinion; (4-6-23)
iii. If the appointed actuary needs to disclose whether additional reserves of the prior opinion date are released as of this opinion date, and the extent of the release; or (4-6-23)
iv. If the appointed actuary chooses to add a paragraph briefly describing the assumptions forming the basis for the actuarial opinion. (4-6-23)
02. Recommended Language. The Department has adopted recommended language, available on the Department’s website, which in typical circumstances should be in the statement of actuarial opinion. The language may be modified to meet the circumstances of a particular case, but the appointed actuary should use language that clearly expresses their professional judgment. The opinion will, in any event, retain all pertinent aspects of the language provided. (4-6-23)
03. Assumptions for New Issues. Changing an actuarial assumption for new issues, claims, or other liabilities that used for prior new issues, claims, or other liabilities is not a change in actuarial assumptions within the meaning of this Section. (4-6-23)
04. Adverse Opinions. If the appointed actuary cannot form an opinion, then they will refuse to issue a statement of actuarial opinion. If the appointed actuary’s opinion is adverse or qualified, then they will issue an adverse or qualified actuarial opinion expressing the reason(s) for such opinion. This statement should follow the scope paragraph and precede the opinion paragraph. (4-6-23)
05. Reliance on Data Furnished by Other Persons. If the appointed actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the actuarial opinion, or the appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, then the actuarial opinion should identify the persons the actuary relies upon and precisely identify the items subject to
reliance. The persons on whom the appointed actuary relies will also certify precisely what items the person provided information on and the extent to which those items are accurate, complete, or reasonable. The certification will include the person’s signature, title, company, address and telephone number and the date on which it is signed.
(4-6-23)
01. Standard Valuation Law. The Standard Valuation Law broadly authorizes the Director to accept a foreign insurer’s valuation that meets the requirements for an Idaho-domiciled company. As an alternative to meeting the minimum aggregate amounts for Idaho, the Director may make one (1) or more of these approaches available to the opening actuary:
(4-6-23)
a. A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and the formal written standards and conditions of this state for filing an opinion based on the law of the state of domicile.” If the Director chooses to allow this alternative, a formal written list of standards and conditions will be made available. If a company chooses to use this alternative, the standards and conditions in effect on July 1 of a calendar year will apply to statements for that calendar year, and they will remain in effect until they are revised or revoked. If no list is available, this alternative is not available.
(4-6-23)
b. A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have verified that the company’s request to file an opinion based on the law of the state of domicile has been approved and that any conditions prescribed by the Director for approval of that request have been met.” If the Director chooses to allow this alternative, a formal written statement of such allowance will be issued no later than March 31 of the year it is first effective. It will remain valid until rescinded or modified by the Director. The rescission or modifications will be issued no later than March 31 of the year they are first effective. After that statement has issued, if a company chooses to use this alternative, the company will file a request to do so, along with justification for its use, no later than April 30 of the year of the opinion to be filed. The request is deemed approved on October 1 of that year if the Director has not denied it.
(4-6-23)
c. A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have submitted the prescribed comparison as specified by this state.”
(4-6-23)
i. If the Director chooses to allow this alternative, a formal written list of products (to be added to the table in Item (ii) below) for which the prescribed comparison will be provided will be published. If a company chooses to use this alternative, the list in effect on July 1 of a calendar year will apply to statements for that calendar year, and it will remain in effect until revised or revoked. If no list is available, this alternative is not available.
(4-6-23)
ii. If a company desires to use this alternative, the appointed actuary will provide a comparison of the gross nationwide reserves held to the gross nationwide reserves that would be held under NAIC codification standards. Gross nationwide reserves are the total reserves calculated for the total company in force business directly sold and assumed, indifferent to the state in which the risk resides, without reduction for reinsurance ceded. The information provided will be at least:
| (1) Product Type | (2) Death Benefit or Account Value | (3) Reserves Held | (4) Codification Reserves | (5) Codification Standard |
|---|---|---|---|---|
(4-6-23)
iii. The information listed will include all products identified by either the state of filing or any other states subscribing to this alternative.
(4-6-23)
iv. If there is no codification standard for the type of product or risk in force, or if the codification standard does not directly address the type of product or risk in force, the appointed actuary will detail the specific method and assumptions used to determine the reserves held. (4-6-23)
v. The comparison provided by the company is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum. (4-6-23)
d. Notwithstanding the above, the Director may reject an opinion based on the laws and regulations of the state of domicile and require an opinion based on Idaho law. If a company does not provide the opinion within sixty (60) days of the request or such other time period set by the Director after consulting with the company, the Director may hire an independent actuary at the company’s expense to prepare and file the opinion. (4-6-23)
a. Per Section 41-612(12), Idaho Code, the appointed actuary will prepare a memorandum to the company describing the analysis done to support their opinion on the reserves. The memorandum will be made available for the Director’s examination upon request, but it will be returned to the company after the examination and cannot be considered a record of the insurance Department or subject to automatic filing with the Director. (4-6-23)
b. In preparing the memorandum, the appointed actuary may rely on, and include as a part of their own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of Subsection 021.02, with respect to the areas covered in such memoranda, and so state in their memorandum. (4-6-23)
c. If the Director requests a memorandum that does not exist, or if the Director finds the memorandum’s analysis violates the standards of the Actuarial Standards Board or the standards and requirements of this rule, the Director may designate a qualified actuary to review the opinion and prepare supporting memorandum. The company will pay, subject to the Director’s direction and control, the reasonable and necessary expense of the independent review. (4-6-23)
d. The reviewing actuary will have the same status as an examiner for purposes of obtaining data from the company, and the Director will retain the reviewing actuary’s work papers and documentation. But any information provided by the company to the reviewing actuary and included in the work papers will be considered as examination workpapers and will be kept confidential to the same extent as prescribed by Section 41-227, Idaho Code. The reviewing actuary cannot be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer under this rule for the current year or any of the preceding three (3) years. (4-6-23)
e. Per Section 41-612(12), Idaho Code, the appointed actuary will prepare a regulatory asset adequacy issues summary, the contents of which are specified in Subsection 024.03. This summary will be submitted by March 15 of the year after the year for which a statement of actuarial opinion based on asset adequacy is mandatory. The summary is confidential and exempt from public disclosure under Sections 41-612(12) and 74-107(5), Idaho Code. (4-6-23)
f. Per Section 41-612(12)(d)(iv), the Director will accept a foreign or alien company’s regulatory asset adequacy issues summary, on file with the insurance supervisory official of another state, if the Director determines the summary reasonably meets the requirements for a company domiciled in Idaho. Thus, foreign or alien insurers that had to file the regulatory asset adequacy issues summary in their home state are exempt from filing in Idaho, except upon Director request, if the other state has substantially similar reporting requirements and the summary is timely filed with the other state’s commissioner. (4-6-23)
02. Details of the Memorandum Section Documenting Asset Adequacy Analysis (Section 022). When an actuarial opinion under Section 022 is provided, the memorandum will show the analysis has been done per
the asset-adequacy standards in Subsection 021.04 and any additional standards under this rule. It will specify; (4-6-23)
ii. Bond call function; (4-6-23)
iii. Mortgage prepayment function; (4-6-23)
j. The regulatory asset adequacy issues summary will name the company for which the regulatory asset adequacy issues summary is being supplied and be signed and dated by the appointed actuary rendering the actuarial opinion. (4-6-23)
04. Conformity to Standards of Practice. The memorandum will state: “Actuarial methods, considerations and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum.” (4-6-23)
05. Use of Assets Supporting the Interest Maintenance Reserve and the Asset Valuation Reserve. An appropriate allocation of assets in the amount of the Interest Maintenance Reserve (IMR), whether positive or negative, needs to be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the Asset Valuation Reserve (AVR); these AVR assets cannot be applied for other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support. The Table of Reserves and Liabilities of the opinion and in the memorandum will disclose the amount of the assets used for the AVR. The memorandum will also disclose the method for selecting particular assets or allocated portions of assets. (4-6-23)
06. Documentation. The appointed actuary will retain, for at least seven (7) years, sufficient documentation from which to determine the procedures followed, the analyses performed, the bases for assumptions and the results obtained. (4-6-23)
025. -- 999. (RESERVED)