(a) Selection of a table within the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table.

1. (1) The election of the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table is on a policy form and calendar year of issue basis. Once a calendar year cohort of policy forms is placed on the 2001 CSO Preferred Class Structure Mortality Table basis or the 2017 CSO Preferred Class Structure Mortality Table basis, it shall not subsequently revert back to the respective standard mortality table basis without the prior approval of the superintendent. Such change would be considered a basis change for annual statement reporting purposes. For those calendar years of issue in which an insurer chooses to use the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table, it shall use the entire 2001 CSO Preferred Class Structure Mortality Table or the entire 2017 CSO Preferred Class Structure Mortality Table, respectively, for the chosen policy forms, i.e., an insurer shall not use the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table for the preferred classes and use the respective standard mortality table for the non-preferred class(es). Additionally, if the insurer sells two similar policy forms in the same market, the appointed actuary shall use the same version of the table for both forms and shall not use the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table on one policy form and the respective standard mortality table on the other policy form. For example, it would be unacceptable to put preferred lives under one policy form and non-preferred lives under the other policy form.

2. (2) In order to choose the proper table of mortality rates within the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table and to develop the preferred class actuarial certification required by section 100.9 of this Part, the following requirements apply:

   1. (i) Creation of classes:

      1. (a) The appointed actuary shall reflect the composition and characteristics of the policies issued under a plan of insurance in the determination of the appropriate classes that will be applicable under that plan. The policies that comprise classes shall have similar underwriting or mortality experience characteristics. When classes are similar across various plans of insurance, these classes may be combined into a single aggregate class. Multiple underwriting classes on a policy form can be mapped into the same table within the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table, if, in aggregate, the underwriting classes can be shown to have anticipated mortality no greater than the Valuation Basic Table associated with the table selected. However, the appointed actuary shall not combine classes that are expected to have dissimilar anticipated mortality as a means to produce reserves that are materially lower than those developed if the classes were not combined.
      2. (b) With respect to reinsurance, anticipated mortality shall be assessed and classes shall be created on a gross basis. To the extent that anticipated mortality on reinsurance ceded or assumed is dissimilar from that on direct business, the appointed actuary shall create separate class to properly reflect the anticipated mortality.
      3. (c) If, due to differences in actual experience by policy form and underwriting class, groupings of classes are changed from those used in the prior valuation, the change and the effect of the change shall be disclosed to the superintendent in the actuarial certification.
      4. (d) Separate classes shall be established for a single policy form if there are significant anticipated mortality differences for different cohorts of insured lives, such as age groups or policy sizes. For instance, if an insurer has different underwriting thresholds for policies with face amounts of $1 million or more, it may be appropriate to have a class for policies with face amounts of less than $1 million and a separate class for policies with face amounts greater than or equal to $1 million.
      5. (e) If a class of business is assigned to a different table within the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table from that used in the prior valuation, the change is not considered a basis change, and the reserve change must be accounted for in the calculation of gain from operations.

   2. (ii) Deriving anticipated mortality:

      1. (a) If relevant insurer experience for a particular class is available and has full credibility, the appointed actuary shall use that experience as the basis for deriving anticipated mortality.
      2. (b) In situations where relevant insurer experience for a particular class is available but does not have full credibility, the appointed actuary shall derive the anticipated mortality by blending the relevant insurer experience for the class with actual relevant, credible experience and past trends in experience of other similar classes, either in the same insurer, in other insurers (including reinsurers), or from other sources, generally in that order of preference, provided that the appointed actuary submits underwriting-based justification as part of the annual actuarial report required by this Part. The blending process shall be based on a credibility methodology that is recognized by the actuarial profession and is acceptable to the superintendent.
      3. (c) In situations where relevant insurer experience for a particular class is not available (e.g. a new product), the appointed actuary shall derive the anticipated mortality using actual relevant credible experience and past trends in experience of other similar classes either in the same insurer, in other insurers (including reinsurers), or from other sources, generally in that order of preference, provided that the appointed actuary submits to the superintendent underwriting-based justification.
      4. (d) Underwriting-based justification shall include an analysis of the relationship between the underwriting-based criteria for the class where no experience data is available or does not have full credibility and the underwriting-based criteria that underlie the actual relevant credible experience data.
      5. (e) If no sufficient underwriting-based nor experienced-based justification is made to derive anticipated mortality for a class, the insurer shall not use the 2001 CSO Preferred Class Structure Mortality Table nor the 2017 CSO Preferred Class Structure Mortality Table for valuation.
   3. (iii) Periodic assessment of anticipated mortality. The appointed actuary shall annually review relevant emerging experience and underwriting methods for the purpose of assessing the appropriateness of anticipated mortality for each class and, in aggregate, for all classes combined. If the results of statistical or other testing indicate that previously anticipated mortality for a given class is inadequate, then the appointed actuary shall set a new anticipated mortality for each class, the appointed actuary shall analyze the appropriateness of the anticipated mortality assumptions at the aggregate level. If the analysis at the aggregate level indicates that aggregate anticipated mortality is inadequate, then the appointed actuary shall adjust the anticipated mortality assumption for one or more of the classes until the appointed actuary is satisfied that the anticipated mortality assumptions are adequate at the aggregate level.

   4. (iv) The superintendent may require an insurer to change the valuation mortality table if it is determined by the superintendent that inadequate justification of anticipated mortality is provided by the insurer.

      (b) Communications and disclosures.

3. (1) The appointed actuary shall annually file with the superintendent an actuarial certification that, as of the valuation date, the anticipated mortality experience for each class of business, other than the residual standard class, meets the criteria described in section 100.9 of this Part.

4. (2) Additionally, the appointed actuary shall prepare an annual actuarial report in support of the actuarial certification, subject to appropriate Actuarial Standards of Practice promulgated by the Actuarial Standards Board of the American Academy of Actuaries. The actuarial report shall include the following items:

   1. (i) the specified plans of insurance for which the insurer has elected to use the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table. A brief description of each plan and the amount of in force business, including the policy count, face amount, and associated reserves, shall be provided as of the valuation date;
   2. (ii) demonstration of compliance with the tests of sufficiency;
   3. (iii) description of sources of information used as a basis for determining anticipated mortality, including a description of the underwriting-based criteria used;
   4. (iv) analysis performed to evaluate the credibility of relevant historical insurer experience when establishing anticipated mortality for each class;
   5. (v) analysis performed to evaluate the relationship between the underwriting-based criteria and the anticipated mortality established in each class;
   6. (vi) statistical or other quantitative analyses performed in assessing the continued appropriateness of the anticipated mortality assumption for each class and for all classes in aggregate, and a summary of changes made as a result of the analyses;
   7. (vii) anticipated mortality, without recognition of mortality improvement beyond the date of valuation, for each class and for all classes in aggregate;
   8. (viii) for each class, the ratio of anticipated mortality to the valuation mortality table in the Valuation Basic Table corresponding to the table being used for that class;
   9. (ix) any changes made in the approach or parameters applied to the statistical analyses or tests performed compared to those performed at the last annual valuation; and
   10. (x) disclosure of the financial impact of any change in the chosen valuation mortality table.
5. (3) Each insurer subject to this Part shall submit the required actuarial certification and annual actuarial report to the superintendent each year contemporaneously with its annual statement pursuant to section 307 of the Insurance Law.