Mo. Code Regs. Ann. tit. 20, § 200-1.116
PURPOSE: This rule prescribes—a) guidelines and standards for statements of actuarial opinion which are to be submitted in accordance with sections 376.370, 376.380, RSMo and 20 CSR 200-1.115; b) guidelines and standards for statements of actuarial opinion which are to be submitted when a company is exempt from 20 CSR 200-1.115(2) and c) rules applicable to the appointment of an appointed actuary.
(1) Scope.
(2) Definitions.
(A) Actuarial opinion means—
the opinion of an appointed actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy test in accordance with section (6) of this rule and with presently accepted Actuarial Standards; and
ion of an appointed actuary regarding the calculation of reserves and related items, in accordance with section (5) of this rule and with those presently accepted Actuarial Standards which specifically relate to this opinion.
(3) General Requirements.
(A) Submission of Statement of Actuarial Opinion.
to page 1 of the annual statement for each year beginning with the year in which this rule becomes effective the statement of an appointed actuary, entitled “Statement of Actuarial Opinion,” setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with section (6) of this rule; provided, however, that any company exempted pursuant to section (4) of this rule from submitting a statement of actuarial opinion in accordance with section (6) of this rule shall include on or attach to page 1 of the annual statement a statement of actuarial opinion rendered by an appointed actuary in accordance with section (5) of this rule.
provided a statement of actuarial opinion in accordance with section (5) of this rule, and in the current year fails the exemption criteria of paragraphs (4)(C)1., 2. or 5. to again provide an actuarial opinion in accordance with section (5), the statement of actuarial opinion in accordance with section (6) shall not be required until August 1 following the date of the annual statement. In this instance, the company shall provide a statement of actuarial opinion in accordance with section (5) with appropriate qualification noting the intent to subsequently provide a statement of actuarial opinion in accordance with section (6).
opinion required to be submitted by a foreign or alien company, the director may accept the statement of actuarial opinion filed by the company with the insurance supervisory regulator of another state if the director determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.
the director may grant an extension of the date for submission of the statement of actuarial opinion.
(B) Qualified actuary. A qualified actuary is an individual who—
American Academy of Actuaries;
arial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing those statements;
ments applicable to life and health insurance companies;
(or if so found has subsequently been reinstated as a qualified actuary), following appropriate notice and hearing to have—
obligation imposed by, the insurance law or other law in the course of his/her dealings as a qualified actuary;
dishonest practices;
cy, lack of cooperation or untrustworthiness to act as a qualified actuary;
the past five (5) years, pursuant to this rule, an actuarial opinion or memorandum that the director rejected because it did not meet the provisions of this rule including standards set by the Actuarial Standards Board; or
actuary within the past five (5) years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; and
any action taken by any director of another state similar to that under paragraph (3)(B)4.
(D) Standards for Asset Adequacy Analysis. The asset adequacy analysis required by this rule—
Practice as promulgated from-time to-time by the Actuarial Standards Board and on any additional standards under this rule, which standards are to form the basis of the statement of actuarial opinion in accordance with section (6) of this rule; and
as are deemed appropriate for those purposes by the Actuarial Standards Board.
(E) Liabilities to Be Covered.
and sections 376.370 and 376.380, RSMo, the statement of actuarial opinion shall apply to all in force business on the statement date regardless of when or where issued, for example, reserves of Exhibits 8, 9 and 10, and claim liabilities in Exhibit 11, Part I and equivalent items in the separate account statement(s).
the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods set forth in sections 376.370 and 376.380, RSMo, the company shall establish an additional reserve.
31, 1994, the company, in lieu of establishing the full amount of the additional reserve in the annual statement for that year, may set up an additional reserve in an amount not less than the following:
tional reserve divided by three (3); and
times the additional reserve divided by three (3).
paragraph (3)(E)2. or 3. and deemed not necessary in subsequent years may be released. Any amounts released must be disclosed in the actuarial opinion for the applicable year. The release of these reserves would not be deemed an adoption of a lower standard of valuation.
(4) Required Opinions.
(B) Company Categories. For purposes of this rule, companies shall be classified as follows based on the admitted assets as of the end of the calendar year for which the actuarial opinion is applicable:
companies whose admitted assets do not exceed twenty (20) million dollars;
companies whose admitted assets exceed twenty (20) million dollars but do not exceed one hundred (100) million dollars;
companies whose admitted assets exceed one hundred (100) million dollars but do not exceed five hundred (500) million dollars; and 20 CSR 200-1
companies whose admitted assets exceed five hundred (500) million dollars.
(C) Exemption Eligibility Tests.
any year beginning with the year in which this rule becomes effective, meets all of the following criteria shall be eligible for exemption from submission of a statement of actuarial opinion in accordance with section (6) of this rule for the year in which these criteria are met. The ratios in subparagraphs (4)(C)1.A.—C. shall be calculated as follows based on amounts as of the end of the calendar year for which the actuarial opinion is applicable:
surplus to the sum of cash and invested assets is at least equal to one-tenth (.10);
and liabilities for annuities and deposits to the total admitted assets is less than three-tenths (.30);
noninvestment grade bonds to the sum of capital and surplus is less than one-half (.50); and
has not designated the company as a first priority company in any of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or a second priority company in each of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or the company has resolved the first or second priority status to the satisfaction of the director of the state of domicile and the director has so notified the chair of the NAIC Life and Health Actuarial Task Force and the NAIC Support and Services Office.
any year beginning with the year in which this rule becomes effective, meets all of the following criteria shall be eligible for exemption from submission of a statement of actuarial opinion in accordance with section (6) of this rule for the year in which these criteria are met. The ratios in subparagraphs (4)(C)2.A.—C. shall be calculated as follows based on amounts as of the end of the calendar year for which the actuarial opinion is applicable:
surplus to the sum of cash and invested assets is at least equal to seven-hundredths (.07);
and liabilities for annuities and deposits to the total admitted assets is less than four-tenths (.40);
noninvestment grade bonds to the sum of capital and surplus is less than one-half (.50); and
has not designated the company as a first priority company in any of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or a second priority company in each of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or the company has resolved the first or second priority status to the satisfaction of the director of the state of domicile and the director has so notified the chair of the NAIC Life and Health Actuarial Task Force and the NAIC Support and Services Office.
pany that meets all of the criteria set forth in paragraph (4)(C)1. or 2., whichever is applicable, is exempted from submission of a statement of actuarial opinion in accordance with section (6) of this rule unless the director specifically indicates to the company that the exemption is not to be taken.
pany that, for any year beginning with the year in which this rule becomes effective, is not exempted under paragraph (4)(C)3. shall be required to submit a statement of actuarial opinion in accordance with section (6) of this rule for the year for which it is not exempt.
submitting an opinion in accordance with section (6) of this rule, meets all of the following criteria shall not be required, unless required in accordance with paragraph (4)(C)6. to submit a statement of actuarial opinion in accordance with section (6) of this rule more frequently than every third year. Any Category C company which fails to meet all of the following criteria for any year shall submit a statement of actuarial opinion in accordance with section (6) of this rule for that year. The ratios in (4)(C)5.A.—C. shall be calculated as follows based on amounts as of the end of the calendar year for which the actuarial opinion is applicable:
surplus to the sum of cash and invested assets is at least equal to five-hundredths (.05);
and liabilities for annuities and deposits to the total admitted assets is less than one-half (.50);
noninvestment grade bonds to the sum of the capital and surplus is less than one-half (.50); and
has not designated the company as a first priority company in any of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or a second priority company in each of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or the company has resolved the first or second priority status to the satisfaction of the director of the state of domicile and the director has so notified the chair of the NAIC Life and Health Actuarial Task Force and the NAIC Support and Services Office.
by this section to submit a statement of actuarial opinion in accordance with section (6) of this rule for any year shall submit a statement of actuarial opinion in accordance with section (5) of this rule for that year unless as provided for by subsection (1)(B) of this rule the director requires a statement of actuarial opinion in accordance with section (6) of this rule.
(5) Statement of Actuarial Opinion Not Including an Asset Adequacy Analysis.
(B) Recommended Language. The following language provided is that which in typical circumstances would be included in a statement of actuarial opinion in accordance with this section. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary should use language which clearly expresses his/her professional judgment. However, in any event the opinion shall retain all pertinent aspects of the language provided in section (5):
cate the appointed actuary’s relationship to the company. For a company actuary, the opening paragraph of the actuarial opinion should read as follows: “I, (name of actuary), am (title) of (name of company) and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the board of directors of this insurer to render this opinion as stated in the letter to the director dated (insert date). I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health companies.” For a consulting actuary, the opening paragraph of the actuarial opinion should contain a sentence such as: “I, (name and title of actuary), a member of the American Academy of Actuaries, am associated with the firm of (insert name of consulting firm). I have been appointed by, or by the authority of, the board of directors of (name of company) to render this opinion as stated in the letter to the director dated (insert date). I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”;
should include a statement such as the following: “This company is exempt pursuant to regulation (insert designation) of the (name of state) insurance department from submitting a statement of actuarial opinion based on an asset adequacy analysis. This opinion, which is not based on an asset adequacy analysis, is rendered in accordance with section (5) of the regulation.”;
sentence such as the following: “I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed here, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, ( . . . . ).” The paragraph should list items and amounts with respect to which the appointed actuary is expressing an opinion. The list should include, but not be necessarily limited to:
funds for policies and contracts included in Exhibit 8;
funds for policies and contracts included in Exhibit 9;
dend and coupon accumulations, and supplementary contracts not involving life contingencies included in Exhibit 10; and
end of current year included in Exhibit 11, Part I;
the underlying records, the scope paragraph should also include the following: “My examination included a review of the actuarial assumptions and actuarial methods and of the underlying basic records and tests of the actuarial calculations as I considered necessary.”;
examined the underlying records, but has relied upon listings and summaries of policies in force prepared by the company or a third party, the scope paragraph should include a sentence such as one of the following:
summaries of policies and contracts and other liabilities in force prepared by (name and title of company officer certifying in-force records) as certified in the attached statement. (See accompanying affidavit by a company officer.) In other respects my examination included review of the actuarial assumptions and actuarial methods and tests of the actuarial calculations as I considered necessary”; or
accounting firm) for the substantial accuracy of the in-force records inventory and information concerning other liabilities, as certified in the attached statement. In other respects my examination included review of the actuarial assumptions and actuarial methods and tests of the actuarial calculations as I considered necessary.” The statement of the person certifying shall follow the form indicated by paragraph (5)(B)10.;
the following: “In my opinion the amounts carried in the balance sheet on account of the actuarial items identified here:
presently accepted actuarial standards consistently applied and are fairly stated in accordance with sound actuarial principles;
tions which produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;
insurance law and regulations of the state of (state of domicile) and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;
assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end with an exception as noted here; and
reserves and related statement items which ought to be established. The actuarial methods, considerations and analyses used informing my opinion conform to the appropriate Compliance Guidelines as promulgated by the Actuarial Standards Board, which guidelines form the basis of this statement of opinion.”;
document the eligibility for the company to provide an opinion as provided by section (5). It shall include the following: “This opinion is provided in accordance with section (5). As such it does not include an opinion regarding the adequacy of reserves and related actuarial items when considered in light of the assets which support them. Eligibility for section (5) is confirmed as follows:
and surplus to the sum of cash and invested assets is (insert amount), which equals or exceeds the applicable criterion based on the admitted assets of the company;
reserves and liabilities for annuities and deposits to the total admitted assets is (insert amount), which is less than the applicable criterion based on the admitted assets of the company;
noninvestment grade bonds to the sum of capital and surplus is (insert amount), which is less than the applicable criterion of one-half (.50);
examiner team has not designated the company as a first priority company in any of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable, or a second priority company in each of the two (2) calendar years preceding the calendar year for which the actuarial opinion is applicable or the company has resolved the first or second priority status to the satisfaction of the insurance supervisory regulatory official of the state of domicile”; and
specific request from any director requiring an asset adequacy analysis opinion.”
___________________________________ (Signature of Appointed Actuary)
____________________________________ (Address of Appointed Actuary)
____________________________________ (Telephone Number of Appointed Actuary) 20 CSR 200-1
actuarial assumptions from those previously employed, that change should be described in the annual statement or in a paragraph of the statement of actuarial opinion, and the reference in subparagraph (5)(B)6.D. to be consistent should read as follows: “. . . with the exception of the change described on Page (..) of the annual statement (or in the preceding paragraph).” The adoption for new issues or new claims or other new liabilities of an actuarial assumption which differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of this paragraph;
to form an opinion, s/he shall refuse to issue a statement of actuarial opinion. If the appointed actuary’s opinion is adverse or qualified, s/he shall issue an adverse or qualified actuarial opinion explicitly stating the reason(s) for this opinion. This statement should follow the scope paragraph and precede the opinion paragraph; and
express an opinion as to the accuracy and completeness of the listings and summaries of policies in force, there should be attached to the opinion, the statement of a company officer or accounting firm who prepared the underlying data similar to the following: “I (name of officer), (title) of (name and address of company or accounting firm), affirm that the listings and summaries of policies and contracts in force as of December 31, (____), prepared for and submitted to (name of appointed actuary), were prepared under my direction and, to the best of my knowledge and belief, are substantially accurate and complete.” ____________________________________ (Signature of the Officer of the Company or Accounting Firm)
____________________________________ (Address of the Officer of the Company or Accounting Firm)
____________________________________ (Telephone Number of the Officer of the Company or Accounting Firm)
(6) Statement of Actuarial Opinion Based On an Asset Adequacy Analysis.
(A) General Description. The statement of actuarial opinion submitted in accordance with this section shall consist of—
ed actuary and his/her qualifications (see paragraph (6)(B)1.);
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 which have been analyzed for asset adequacy and the method of analysis, (see paragraph (6)(B)2.) and identifying the reserves and related actuarial items covered by the opinion which have not been so analyzed;
areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions (for example, anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios (see paragraph (6)(B)3.) supported by a statement of each expert in the form prescribed by subsection (6)(E);
appointed actuary’s opinion with respect to the adequacy of the supporting assets to mature the liabilities (see paragraph (6)(B)6.); and
graphs will be needed in individual company cases as follows:
it necessary to state a qualification of his/her opinion;
close the method of aggregation for reserves of different products or lines of business for asset adequacy analysis;
close reliance upon any portion of the assets supporting the Interest Maintenance Reserve (IMR) and the Asset Valuation Reserve (AVR) or other mandatory or voluntary statement reserves for asset adequacy analysis;
close an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for this opinion;
close whether additional reserves of the prior opinion date are released as of this opinion date and the extent of the release; and
add a paragraph briefly describing the assumptions which form the basis for the actuarial opinion.
(B) Recommended Language. The following paragraphs are to be included in the statement of actuarial opinion in accordance with this section. Language is that which in typical circumstances should be included in a statement of actuarial opinion. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary should use language which clearly expresses his/her professional judgment. However, in any event the opinion shall retain all pertinent aspects of the language provided in this section:
ally indicate the appointed actuary’s relationship to the company and his/her qualifications to sign the opinion. For a company actuary, the opening paragraph of the actuarial opinion should read as follows: “I, (name), am (title) of (insurance company name) and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the board of directors of this insurer to render this opinion as stated in the letter to the director dated (insert date). I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.” For a consulting actuary, the opening paragraph should contain a sentence such as: “I, (name), a member of the American Academy of Actuaries, am associated with the firm of (name of consulting firm). I have been appointed by, or by the authority of, the board of directors of (name of company) to render this opinion as stated in the letter to the director dated (insert date), I meet the Academy qualification standards for rendering this opinion and am familiar with the valuation requirements, relating to life and health companies.”;
statement such as the following: “I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed here, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, 19(___). Tabulated as follows are those reserves and related actuarial items which have been subjected to asset adequacy analysis”: Statement Item Exhibit 8 A Life Insurance B Annuities C Supplementary Contracts Involving Life Contingencies D Accidental Death Benefit E Disability—Active F Disability—Disabled G Miscellaneous Total (Exhibit 8 Item 1, Page 3) Exhibit 9 A Active Life Reserve B Claim Reserve Total (Exhibit 9 Item 2, Page 3) Exhibit 10 1 Premiums and Other Deposit Funds 1.1 Policyholder Premiums (Page 3, Line 10.1) 1.2 Guaranteed Interest Contracts (Page 3, Line 10.2) 1.3 Other Contract Deposit Funds (Page 3, Line 10.3) 2 Supplementary Contracts Not Involving Life Contingencies (Page 3, Line 3) 3 Dividend and Coupon Accumulations (Page 3, Line 5) Total Exhibit 10 Exhibit 11 Part 1 1 Life (Page 3, Line 4.1) 2 Health (Page 3, Line 4.2) Total Exhibit 11, Part 1 Separate Accounts (Page 3, Line 27) TOTAL RESERVES IMR (Page _____ Line _____) AVR (Page _____ Line _____) (a) *Note: The additional actuarial reserves are the reserves established under paragraphs (3)(E)2. or 3. (b) *Note: The appointed actuary should indicate the method of analysis, determined in accordance with the standards for asset adequacy analysis referred to in subsection (3)(D) of this regulation, by means of symbols which should be defined in footnotes to the table.” Reserves And Liabilities Asset Adequacy Tested Amounts
Formula Reserves (1)
___________
___________
___________
___________
___________ ___________ ___________ ___________ Additional Actuarial Analysis Reserves (a) Method (b) (2)
_____________
_____________
______________
_____________
_____________ _____________ 20 CSR 200-1
Other Amount (1)+(2)+(3) (3)
______________
______________
______________
______________
______________ ______________ Total Amount
(4)
____________
____________
____________
____________
____________ ____________
other experts to develop certain portions of the analysis, the reliance paragraph should include a statement such as the following:
(for example, anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios) and, as certified in the attached statement,. . .”; or
in the supporting memorandum for certain critical aspects of the analysis in reference to the accompanying statement.” This statement of reliance on other experts should be accompanied by a statement by each of these experts of the form prescribed by subsection (6)(E);
the underlying asset and liability records, the reliance paragraph should also include the following: “My examination included a review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and tests of the actuarial calculations as I considered necessary.”;
examined the underlying records, but has relied upon listings and summaries of policies in force or asset records, prepared by the company or a third party, or a combination of these, the reliance paragraph should include a sentence such as: “I have relied upon listings and summaries (of policies and contracts, of asset records) prepared by (name and title of company officer certifying in-force records) as certified in the attached statement. In other respects my examination included a review of the actuarial assumptions and actuarial methods and tests of the actuarial calculations as I considered necessary.” or “I have relied upon (name of accounting firm) for the substantial accuracy of the in-force records inventory and information concerning other liabilities, as certified in the attached statement. In other respects my examination included review of the actuarial assumptions and actuarial methods and tests of the actuarial calculations as I considered necessary.” This section must be accompanied by a statement by each person relied upon of the form prescribed by subsection (6)(E); and
the following: “In my opinion the reserves and related actuarial values concerning the statement items identified here:
presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;
tions which produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;
insurance law and regulation of the state of (state of domicile) and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;
assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end (with any exceptions noted here);
reserves and related statement items which ought to be established. The reserves and related items, when considered in light of the assets held by the company with respect to these reserves and related actuarial items including, but not limited to, the investment earnings on these assets, and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company. The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion. This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion” or “The following material change(s) which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: (Describe the change(s).) Note: Choose one of the preceding two paragraphs, whichever is applicable. The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company’s future experience may not follow all the assumptions used in the analysis.”
____________________________________ (Signature of Appointed Actuary)
____________________________________ (Address of Appointed Actuary)
____________________________________ (Telephone Number of Appointed Actuary)
____________________________________ (Signature of the Officer of the Company or Accounting Firm)
____________________________________ (Address of the Officer of the Company or Accounting Firm)
____________________________________ (Telephone Number of the Officer of the Company or Accounting Firm)
Or “I, (name of officer), (title) of (name of
company, accounting firm or security analyst), affirm that the listings, summaries and analyses relating to data prepared for and submitted to (name of appointed actuary) in support of the asset-oriented aspects of the opinion were prepared under my direction and, to the best of my knowledge and belief, are substantially accurate and complete.”
____________________________________ (Signature of the Officer of the Company, Accounting Firm or the Security Analyst) ____________________________________ (Address of the Officer of the Company, Accounting Firm or the Security Analyst)
____________________________________ (Telephone Number of the Officer of the Company, Accounting Firm or the Security Analyst, or both)
(7) Description of Actuarial Memorandum Including an Asset Adequacy Analysis.
(A) General.
1.115 and sections 376.370 and 376.380, RSMo, the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of his/her opinion regarding the reserves under a section (6) opinion. The memorandum shall be made available for examination by the director upon his/her request but shall be returned to the company after the examination and shall not be considered a record of the insurance department or subject to automatic filing with the director.
appointed actuary may rely on, and include as a part of his/her own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of subsection (3)(B) of this rule, with respect to the areas covered in those memoranda, and so state in the memoranda.
dum and no memorandum exists or if the director finds that the analysis described in the memorandum fails to meet 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 the supporting memorandum as is required for review. The reasonable and necessary expense of the independent review shall be paid by the company but shall be directed and controlled by the director.
same status as an examiner for purposes of obtaining data from the company and the work papers and documentation of the reviewing actuary shall be retained by the director; provided, however, that any information provided by the company to the reviewing actuary and included in the work papers shall be considered as material provided by the company to the director and shall be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the director pursuant to the statute governing this rule. The reviewing actuary shall not be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer pursuant to this rule for any one (1) of the current year or the preceding three (3) years.
(B) Details of the Memorandum Section Documenting Asset Adequacy Analysis (section (6)). When an actuarial opinion under section (6) is provided, the memorandum shall demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in subsection (3)(D) of this rule and any additional standards under this rule. It shall specify—
1. For reserves—
market description, underwriting and other aspects of a risk profile and the specific risks the appointed actuary deems significant;
2. For assets—
risk profile disclosing the quality, distribution and types of assets;
assumptions;
3. Analysis basis—
of different blocks of business and how pertinent risks were analyzed;
analyzing different blocks of business;
quacy; and
reinsurance and other relevant factors;
(8) Additional Considerations for Analysis.
(A) Aggregation. For the asset adequacy analysis for the statement of actuarial opinion provided in accordance with section (6) of this rule, reserves and assets may be aggregated by either of the following methods:
actuarial items, and the supporting assets, for different products or lines of business, before 20 CSR 200-1
analyzing the adequacy of the combined assets to mature the combined liabilities. The appointed actuary must be satisfied that the assets held in support of the reserves and related actuarial items so aggregated are managed in such a manner that the cash flows from the aggregated assets are available to help mature the liabilities from the blocks of business that have been aggregated; or
cy analysis of one (1) or more products or lines of business, the reserves for which prove through analysis to be redundant, with the results of one (1) or more products or lines of business, the reserves for which prove through analysis to be deficient. The appointed actuary must be satisfied that the asset adequacy results for the various products or lines of business for which the results are so aggregated—
economic scenarios; or
dent risks, that is, the likelihood of events impacting the adequacy of the assets supporting the redundant reserves is completely unrelated to the likelihood of events impacting the adequacy of the assets supporting the deficient reserves. In the event of any aggregation, the actuary must disclose in his/her opinion that reserves were aggregated on the basis of the method described in paragraph (8)(A)1., or subparagraphs (8)(A)2.A. or B., whichever is applicable, and describe the aggregation in the supporting memorandum.
(C) Use of Assets Supporting the Interest Maintenance Reserve and the Asset Valuation Reserve:
the amount of the IMR, whether positive or negative, must be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the AVR; these AVR assets may not be applied for any 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.
AVR must be disclosed in the Table of Reserves and Liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets must be disclosed in the memorandum.
(D) Required Interest Scenarios. For the purpose of performing the asset adequacy analysis required by this rule, the qualified actuary is expected to follow standards adopted by the Actuarial Standards Board; nevertheless, the appointed actuary must consider in the analysis the effect of at least the following interest rate scenarios:
years at one-half percent (.5%) per year and then level;
(1%) per year over five (5) years and then uniformly decreasing at one percent (1%) per year to the original level at the end of ten (10) years and then level;
cent (3%) and then level;
years at one-half percent (.5%) per year and then level;
(1%) per year over five (5) years and then uniformly increasing at one percent (1%) per year to the original level at the end of ten (10) years and then level; and
cent (3%) and then level. For these and other scenarios which may be used, projected interest rates for a five (5)-year Treasury Note need not be reduced beyond the point where the five (5)-year Treasury Note yield would be at fifty percent (50%) of its initial level. The beginning interest rates may be based on interest rates for new investments as of the valuation date similar to recent investments allocated to support the product being tested or be based on an outside index, such as Treasury yields, of assets of the appropriate length on a date close to the valuation date. Whatever method is used to determine the beginning yield curve and associated interest rates should be specifically defined. The beginning yield curve and associated interest rates should be consistent for all interest rate scenarios.
AUTHORITY: sections 374.045 and 376.380, RSMo Supp. 1993 and 376.370, RSMo 1986.* Original rule filed Dec. 28, 1992, effective Sept. 9, 1993.
*Original authority: 374.045 RSMo 1987, amended 1993; 376.370, RSMo 1939, amended 1943, 1947, 1961; and 376.380, RSMo 1939, amended 1943, 1947, 1959, 1961, 1971, 1975, 1979, 1982, 1993.