If an actuarial opinion is provided, the memorandum must demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in § 20:06:37:07 and any additional standards under this chapter. It must specify the following:

1. (1) For reserves:

   1. (a) Product descriptions, including a market description, underwriting and other aspects of a risk profile, and the specific risks the appointed actuary considers significant;
   2. (b) Source of liability in force;
   3. (c) Reserve method and basis;
   4. (d) Investment reserves;
   5. (e) Reinsurance arrangements;
   6. (f) Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis;

   7. (g) Documentation of assumptions to test reserves for the following:

      1. (i) Lapse rates (bothbaseandexcess);
      2. (ii) Interest crediting rate strategy;
      3. (iii) Mortality;
      4. (iv) Policyholder dividend strategy;
      5. (v) Competitor or market interest rate;
      6. (vi) Annuitization rates;
      7. (vii) Commissions and expenses; and

      8. (viii) Morbidity.

         The documentation of the assumption shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions;

2. (2) For assets:

   1. (a) Portfolio descriptions, including a risk profile disclosing the quality, distribution, and types of assets;
   2. (b) Investment and disinvestment assumptions;
   3. (c) Source of asset data;
   4. (d) Asset valuation bases;

   5. (e) Documentation of assumptions made for:

      1. (i) Default costs;
      2. (ii) Bond call function;
      3. (iii) Mortgage prepayment function;
      4. (iv) Determining market value for assets sold due to disinvestment strategy; and

      5. (v) Determining yield on assets acquired through the investment strategy.

         The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions;

3. (3) For the analysis basis:

   1. (a) Methodology;
   2. (b) The rationale for the inclusion or the exclusion of different blocks of business and how pertinent risks were analyzed;
   3. (c) The rationale for the degree of rigor in analyzing different blocks of business (includeintherationalethelevelofmaterialitythatwasusedindetermininghowrigorouslytoanalyzedifferentblocksofbusiness);
   4. (d) The criteria for determining asset adequacy (includeinthecriteriatheprecisebasisfordeterminingifassetsareadequatetocoverreservesundermoderatelyadverseconditionsorotherconditionsasspecifiedinrelevantactuarialstandardsofpractice); and
   5. (e) Whether the impact of federal income taxes was considered and the method of treating reinsurance in the asset adequacy analysis;
4. (4) Summary of material changes in methods, procedures, or assumptions from prior year's asset adequacy analysis;
5. (5) A summary of results; and
6. (6) Conclusion.

Source: 23 SDR 236, effective July 16, 1997; 34 SDR 297, effective June 2, 2008.

General Authority: SDCL 58-26-49.

Law Implemented: SDCL 58-26-46 , 58-26-47.