1. (1) Purpose - The purpose of this subchapter is to recognize, permit and prescribe the use of the 2001 Commissioners Standard Ordinary (CSO) Mortality Table for use in determining the minimum standard of valuation and non-forfeiture benefits for life insurance policies.

2. (2) Definitions. The following words and terms, when used in this regulation, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (a) As used in rule 0780-01-52-.04 “2001 CSO Mortality Table” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the National Association of Insurance Commissioners in December 2002. Unless the context indicates otherwise, the 2001 CSO Mortality Table includes both the ultimate form of that table and the select and ultimate form of that table and includes both the smoker and non-smoker mortality tables and the composite mortality tables. It also includes both the age-nearest- birthday and age-last-birthday bases of the mortality tables.
   2. (b) As used in rule 0780-01-52-.04 “2001 CSO Mortality Table (F)” means that mortality table consisting of the rates of mortality for female lives from the 2001 CSO Mortality Table.
   3. (c) As used in rule 0780-01-52-.04 “2001 CSO Mortality Table (M)” means that mortality table consisting of the rates of mortality for male lives from the 2001 CSO Mortality Table.
   4. (d) As used in rule 0780-01-52-.04 “Composite mortality tables” means mortality tables with rates of mortality that do not distinguish between smokers and non-smokers.
   5. (e) As used in rule 0780-01-52-.04 “Smoker and non-smoker” mortality tables means those mortality tables with separate rates of mortality for smokers and non-smokers.

3. (3) Application.

   1. (a) At the election of the company for any one or more specified plans of insurance and subject to the conditions stated in this subchapter, the 2001 CSO Mortality Table may be used as the minimum standard for policies issued on or after January 1, 2004, and before the date specified in subsection (b) of this section to which Tennessee Code Annotated Section 56-1-403 is applicable. If the company elects to use the 2001 CSO Mortality Table, it shall do so for both valuation and non-forfeiture purposes.
   2. (b) Subject to the conditions stated in this regulation, the 2001 CSO Mortality Table shall be used in determining minimum standards for policies issued on and after January 1, 2009, to which Tennessee Code Annotated Section 56-1-403 is applicable.
   3. (c) The minimum basis for computation of values related to extended term benefits will be the 2001 CSO Mortality Table pursuant to the requirements of this subchapter.
   4. (d) The Commissioner of Commerce and Insurance adopts by reference the 2001 CSO Mortality Table. The table is available from the Actuarial Section, Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Nashville, Tennessee 37243, or on the internet by accessing the department’s website at www.state.tn.us/commerce/.

4. (4) Conditions.

   1. (a) For each plan of insurance with separate rates for smokers and non-smokers an insurer may use:

      1. 1. Composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits;
      2. 2. Smoker and non-smoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by T.C.A. §56-1- 403(d)(5) and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up non-forfeiture benefits; or
      3. 3. Smoker and non-smoker mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits.
   2. (b) For plans of insurance without separate rates for smokers and non-smokers the composite mortality tables shall be used.
   3. (c) For the purpose of determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits, the 2001 CSO Mortality Table may, at the option of the company for each plan of insurance, be used in its ultimate or select and ultimate form.
   4. (d) When the 2001 CSO Mortality Table is the minimum reserve standard for any plan of a company, the actuarial opinion in the annual statement filed with the commissioner shall be based on an asset adequacy analysis as specified in the Actuarial Opinion and Memorandum Regulation of the Tennessee Insurance Regulations, rule 0780-01-64. A company shall be exempt from this requirement if it only does business in this state and in no other state to the extent such company has not elected to use the 2001 CSO Mortality Table.

5. (5) Applicability of the 2001 CSO Mortality Table to the Valuation of Life Insurance Policies Appendix A-830 of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual (the “Appendix”).

   1. (a) Subject to the transition dates set forth in this rule, for any report due after effectiveness hereof and in which the National Association of Insurance Commissioners Accounting Practices and Procedures Manual shall not have been amended to conform the Appendix to the 2001 CSO Mortality Table, the following principles shall apply to use of such Appendix:

      1. 1. Paragraph 3(a)(ii)(b) of the Appendix. The net level reserve premium shall be based on the ultimate mortality rates in the 2001 CSO Mortality Table.
      2. 2. Paragraph 5 of the Appendix. All calculations shall be made using the 2001 CSO Mortality Rate, and, if elected, the optimal minimum mortality standard for deficiency reserves stipulated in subsection (5)(a).4 of this regulation. The value of “qx+k+t-1” shall be the valuation mortality rate for deficiency reserves in policy year k+t, but using the unmodified select mortality rates if modified select mortality rates are used in the computation of deficiency reserves.
      3. 3. Paragraph 16 of the Appendix. The 2001 CSO Mortality Table shall be the minimum standard for basic reserves.
      4. 4. Paragraph 17 of the Appendix. The 2001 CSO Mortality Table shall be the minimum standard for deficiency reserves. If select mortality rates are used, they shall be multiplied by X percent for durations in the first segment, subject to the conditions specified in Paragraph 17(c)(i) through (viii) of the Appendix. In demonstrating compliance with those conditions, the demonstrations may not combine the results of tests that utilize the 1980 CSO Mortality Table with those tests that utilize the 2001 CSO Mortality Table, unless the combination is explicitly required by regulation or necessary to be in compliance with relevant Actuarial Standards of Practice.
      5. 5. Paragraph 25(a) of the Appendix. The valuation mortality table used in determining the tabular cost of insurance shall be the ultimate mortality rates in the 2001 CSO Mortality Table.
      6. 6. Paragraph 25(d) of the Appendix. The calculations specified in Paragraph 25 of the Appendix shall use the ultimate mortality rates in the 2001 CSO Mortality Table.
      7. 7. Paragraph 26(d) of the Appendix. The calculations specified in Paragraph 26 of the Appendix shall use the ultimate mortality rates in the 2001 CSO Mortality Table.
      8. 8. Paragraph 27(b) of the Appendix. The calculations specified in Paragraph 27 of the Appendix shall use the ultimate mortality rates in the 2001 CSO Mortality Table.
      9. 9. Paragraph 29(a)(ii) of the Appendix. The one-year valuation premium shall be calculated using the ultimate mortality rates in the 2001 CSO Mortality Table.
   2. (b) Nothing in this section shall be construed to expand the applicability of the Valuation of Life Insurance Policies Model Regulation to include life insurance policies exempted under Paragraph 3(a) of the Appendix.

6. (6) Gender-Blended Tables.

   1. (a) For any ordinary life insurance policy delivered or issued for delivery in this state on and after January 1, 2004, that utilizes the same premium rates and charges for male and female lives or is issued in circumstances where applicable law does not permit distinctions on the basis of gender, a mortality table that is a blend of the 2001 CSO Mortality Table (M) and the 2001 CSO Mortality Table (f) may, at the option of the company for each plan of insurance, be substituted for the 2001 CSO Mortality Table for use in determining minimum cash surrender values and amounts of paid-up non- forfeiture benefits. No change in minimum valuation standards is implied by this subsection.
   2. (b) The company may choose from among the blended tables developed by the American Academy of Actuaries CSO Task Force and adopted by the National Association of Insurance Commissioners in December 2002. These blended tables are available from the Actuarial Section, Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Nashville, Tennessee 37243, or the internet by accessing the department’s website at www.state.tn.us/commerce/.
   3. (c) It shall not, in and of itself, be a violation of Tennessee Code Annotated Section 56-8- 104 for an insurer to issue the same kind of policy of life insurance on both a sex- distinct and sex-neutral basis.

Authority: T.C.A. §§56-1-403, 56-1-403(b)(1)(A)(iii), 56-7-401, 56-7-401(h)(8)(B)(vi), and 56-2-301. Administrative History: Original rule filed March 29, 1985; effective July 1, 1985. Amendment filed October 17, 2003; effective December 31, 2003. RULE 0780-01-52-.05 PRENEED MORTALITY TABLES. (1) Purpose. The purpose of this Rule is to establish for preneed insurance products minimum mortality standards for reserves and nonforfeiture values, and to require the use of the 1980 Commissioners Standard Ordinary (CSO) Life Valuation Mortality Table for use in determining the minimum standard of valuation of reserves and the minimum standard nonforfeiture values for preneed insurance products. (2) Definitions. (a) “2001 CSO Mortality Table” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the NAIC in December 2002. The 2001 CSO Mortality Table is included in the Proceedings of the NAIC (2nd Quarter 2002). Unless the context indicates otherwise, the “2001 CSO Mortality Table” includes both the ultimate form of that table and the select and ultimate form of that table and includes both the smoker and nonsmoker mortality tables and the composite mortality tables. It also includes both the age- nearest-birthday and age-last-birthday bases of the mortality tables. (b) “Ultimate 1980 CSO” means the Commissioners’ 1980 Standard Ordinary Life Valuation Mortality Tables (1980 CSO) without ten-year (10-year) selection factors, incorporated into the 1980 amendments to the NAIC Standard Valuation Law approved in December 1983. (c) “Preneed Insurance” shall mean any policy that falls within the definition of a “prearrangement insurance policy”, defined in T.C.A. §62-5-403(7) as “a life insurance policy, annuity contract, or other insurance contract, or any series of contracts or agreements in any form or manner, issued by an insurance company, that, whether by assignment or otherwise, funds a pre-need funeral contract, the insured, or annuitant being the person for whose funeral service the funds were paid”. (3) Minimum Valuation Mortality Standards. For preneed insurance contracts, as defined in Rule 0780-01-52-.05(2)(c), the minimum mortality standard for determining reserve liabilities and non-forfeiture values for both male and female insureds shall be the Ultimate 1980 CSO. (4) Minimum Valuation Interest Rate Standards. (a) The interest rates used in determining the minimum standard for valuation of preneed insurance shall be the calendar year statutory valuation interest rates as defined in T.C.A. §56-1-403. (b) The interest rates used in determining the minimum standard for nonforfeiture values for preneed insurance shall be the calendar year statutory nonforfeiture interest rates as defined in T.C.A. §56-7-401. (5) Minimum Valuation Method Standards. (a) The method used in determining the standard for the minimum valuation of reserves of preneed insurance shall be the method defined in T.C.A. §56-1-403. (b) The method used in determining the standard for the minimum nonforfeiture values for preneed insurance shall be the method defined in T.C.A. §56-7-401. (6) Transitional Rules. (a) For preneed insurance policies issued on or after the effective date of this Rule and before January 1, 2012, the 2001 CSO may be used as the minimum standard for reserves and minimum standard for non-forfeiture benefits for both male and female insurances. (b) If an insurer elects to use the 2001 CSO as a minimum standard any policy issued on or after the effective date of this Rule and before January 1, 2012, the insurer shall provide, as part of the actuarial opinion memorandum submitted in support of the company’s asset adequacy testing, an annual written notification to the domiciliary commissioner. The notification shall include: 1. A complete list of all preneed policy forms that use the 2001 CSO as a minimum standard; 2. A certification signed by the appointed actuary stating that the reserve methodology employed by the company in determining reserves for the preneed policies issued after the effective date and using the 2001 CSO as a minimum standard, develops adequate reserves (For the purposes of this certification, the preneed insurance policies using the 2001 CSO as a minimum standard cannot be aggregated with any other policies.); and 3. Supporting information regarding the adequacy of reserves for preneed insurance policies issued after the effective date of this regulation and using the 2001 CSO as a minimum standard for reserves. (c) Preneed insurance policies issued on or after January 1, 2012, must use the Ultimate 1980 CSO in the calculation of minimum nonforfeiture values and minimum reserves. Authority: T.C.A. §§56-1-403, 56-2-301, 56-7-401, 62-5-403(7) and 62-5-413(b). Administrative History: Original rule filed March 29, 1985; effective July 1, 1985. Amendment filed October 17, 2003; effective December 31, 2003. Amendment filed April 15, 2009 and new rule renumbered; effective June 29, 2009.