2019 Alaska Statutes
Title 21. Insurance
Chapter 18. Assets and Liabilities
Sec. 21.18.112. Standard valuation for policies and contracts issued on or after the operative date of the valuation manual.

(a) The director shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every insurer issued on or after the operative date of the valuation manual. In lieu of the valuation of the reserves required of a foreign or alien insurer, the director may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this section.

(b) For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard described in the valuation manual is the minimum standard of valuation required under (a) of this section. For accident and health insurance contracts issued before the operative date of the valuation manual, the minimum standard of valuation is the standard required under AS 21.18.080 - 21.18.086.

(c) Every insurer with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in the state and subject to regulation by the director shall annually submit to the director an opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of a policy or contract are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with the applicable laws of the state. The valuation manual must prescribe the specifics of this opinion, including any items considered to be necessary to its scope, as follows:

(1) the actuarial opinion must

(A) be in form and substance as specified in the valuation manual and acceptable to the director;

(B) be submitted with the annual statement reflecting the valuation of the reserve liabilities on or after the operative date of the valuation manual;

(C) apply to policies and contracts subject to this section, plus other actuarial liabilities specified in the valuation manual;

(D) be based on standards adopted by the Actuarial Standards Board or its successor and on additional standards prescribed in the valuation manual; and

(E) include, unless exempted in the valuation manual, an assessment of whether the reserves and related actuarial items held in support of the policies and contracts specified in the valuation manual, when considered in light of the assets held by an insurer with respect to the reserves and related actuarial items, including investment earnings on the assets and considerations anticipated to be received and retained under policies and contracts, adequately provide for an insurer's obligations under policies or contracts, including the benefits under and expenses associated with the policies or contracts;

(2) in the case of an actuarial opinion submitted by a foreign or alien insurer, the director may accept an opinion filed by the insurer with the insurance supervisory official of another state that is accredited by the National Association of Insurance Commissioners if the director determines that the opinion meets the requirements applicable to an insurer domiciled in the state;

(3) an appointed actuary who submits an opinion under this subsection

(A) is not liable for damages to a person, other than the insurer and the director, for an act, an error, an omission, a decision, or conduct with respect to the appointed actuary's opinion, except in the case of fraud or wilful misconduct;

(B) is subject to disciplinary action by the director against the appointed actuary or the insurer; and

(C) shall prepare a memorandum, in form and substance acceptable to the director, to support the actuarial opinion;

(4) if an insurer fails to provide a supporting memorandum as requested by the director within a period specified in the valuation manual or the director determines that the supporting memorandum fails to meet the standards adopted by the valuation manual or is otherwise unacceptable to the director, the director may engage a qualified actuary, at the expense of the insurer, to review the opinion and the basis for the opinion and to prepare a supporting memorandum as required under (3)(C) of this subsection.

(d) Except as provided under (4) or (6) of this subsection, for policies and contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under (a) of this section, as follows:

(1) the operative date of the valuation manual is January 1 following the effective date of this section;

(2) unless a change in the valuation manual specifies a later effective date, changes to the valuation manual are effective on January 1 following the date when the change to the valuation manual has been adopted by the National Association of Insurance Commissioners by an affirmative vote representing

(A) at least three-fourths of the members of the National Association of Insurance Commissioners voting, but not less than a majority of the total membership; and

(B) members of the National Association of Insurance Commissioners representing jurisdictions totaling greater than 75 percent of the direct premiums written as reported in the following annual statements most recently available before the vote in this paragraph: life, accident and health annual statements, health annual statements, or fraternal annual statements;

(3) the valuation manual must specify all of the following:

(A) minimum valuation standards for and definitions of the policies or contracts subject to (a) of this section; the minimum valuation standards are

(i) the commissioners reserve valuation method for life insurance policies and contracts, other than annuity contracts, subject to (a) of this section;

(ii) the commissioners annuity reserve valuation method for annuity contracts subject to (a) of this section; and

(iii) minimum reserves for all other policies or contracts subject to (a) of this section;

(B) which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in (e) of this section and the minimum valuation standards consistent with those requirements;

(C) for policies and contracts subject to a principle-based valuation under (e) of this section,

(i) requirements for the format of reports to the director under (e)(5)(C) of this section that include information necessary to determine whether the valuation is appropriate and in compliance with this section;

(ii) assumptions for risks over which the insurer does not have significant control or influence;

(iii) procedures for corporate governance and oversight of the actuarial function and a process for appropriate waiver or modification of the procedures;

(D) for policies and contracts not subject to a principle-based valuation under (e) of this section, the minimum valuation standard

(i) must be consistent with the minimum standard of valuation in AS 21.18.110; or

(ii) if there is no applicable minimum standard in AS 21.18.110, must develop reserves that quantify the benefits, guarantees, and funding associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring;

(E) other requirements, including those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of insurer experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules and internal controls; and

(F) the data and form of the data required under (f) of this section, directions for submitting the data, and other requirements, including data analyses and reporting of analyses;

(4) in the absence of a specific valuation requirement or if the director determines that a specific valuation requirement in the valuation manual is not in compliance with this section, the insurer shall, with respect to those requirements, comply with minimum valuation standards in AS 21.18.110;

(5) the director may engage a qualified actuary, at the expense of the insurer, to perform an actuarial examination of the insurer, to determine the appropriateness of a reserve assumption or method used by the insurer, or to review and determine an insurer's compliance with a requirement of this section; the director may rely on the opinion of a qualified actuary engaged by the director of another state, district, or territory of the United States regarding provisions contained in this section; in this paragraph, “engage” includes employ and contract;

(6) the director may require an insurer to change an assumption or method if the director determines the change is necessary to comply with the requirements of the valuation manual or this section, and the insurer shall adjust the reserves as required by the director.

(e) An insurer shall establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:

(1) quantify the benefits, guarantees, and funding associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts and, for policies or contracts with significant tail risk, that reflect conditions appropriately adverse to quantify the tail risk;

(2) incorporate assumptions, risk analysis methods, and financial models and management techniques that are consistent with, but not necessarily identical to, those used in the insurer's overall risk assessment process while recognizing potential differences in financial reporting structures and prescribed assumptions or methods;

(3) incorporate assumptions that are derived in one of the following manners:

(A) the assumptions are prescribed in the valuation manual;

(B) for assumptions that are not prescribed, the assumptions shall be established using the insurer's available experience, to the extent it is relevant and statistically credible; to the extent that data is not available, relevant, or statistically credible, the assumptions shall be established using other relevant or statistically credible experience;

(4) provide margins for uncertainty, including adverse deviation and estimation error, so that the greater the uncertainty the larger the margin and resulting reserve;

(5) for an insurer using a principle-based valuation for one or more policies or contracts subject to this subsection as specified in the valuation manual,

(A) establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual;

(B) provide to the director an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation; the controls shall be designed to ensure that all material risks inherent in the liabilities and associated assets subject to the valuation are included in the valuation and that valuations are made in accordance with the valuation manual; the certification shall be based on the controls in place as of the end of the preceding calendar year;

(C) develop and file with the director upon request a principle-based valuation report that complies with standards prescribed in the valuation manual;

(6) a principle-based valuation may include a prescribed formulaic reserve component.

(f) An insurer shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the valuation manual.

(g) The use of information in this section is subject to the following provisions:

(1) except as provided in this subsection, an insurer's confidential information is not a public record under AS 40.25.100 - 40.25.295, except that, the director may use the confidential information in any regulatory or legal action brought against the insurer as a part of the director's official duties;

(2) the director or another person who received confidential information while acting under the authority of the director is not permitted or required to testify in any private civil action concerning the confidential information;

(3) to assist in the performance of the director's duties, the director may share confidential information

(A) with other state, federal, and international regulatory agencies and with the National Association of Insurance Commissioners and its affiliates and subsidiaries;

(B) in the case of confidential information specified in (i)(1)(A) and (D) of this section, with the Actuarial Board for Counseling and Discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal, and international law enforcement officials;

(C) under (A) and (B) of this paragraph only if the recipient agrees and has the legal authority to agree to maintain the confidentiality and privileged status of the documents, materials, data, and other information in the same manner and to the same extent required for the director;

(4) the director may receive documents, materials, data, and other information, including otherwise confidential and privileged documents, materials, data, or information from the National Association of Insurance Commissioners and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions, and from the Actuarial Board for Counseling and Discipline or its successor and shall maintain as confidential or privileged any document, material, data, or other information received with notice or the understanding that the document material, data, or information is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, data, or other information;

(5) the director may enter into agreements governing the sharing and use of information consistent with this section;

(6) a disclosure to the director under this section or sharing confidential information as authorized in (3) of this subsection does not constitute a waiver of a claim of confidentiality.

(h) Notwithstanding (g) of this section, confidential information specified in (i)(1)(A) and (D) of this section

(1) may be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under (c) of this section or principle-based valuation report developed under (e)(5)(C) of this section because of an action required by this section or by regulations adopted under this section;

(2) may otherwise be released by the director with the written consent of the insurer; and

(3) is not confidential after any portion of a memorandum in support of an opinion submitted under (c) of this section or a principle-based valuation report developed under (e)(5)(C) of this section is cited by the insurer in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the insurer to the news media.

(i) In this section,

(1) “confidential information” means

(A) a memorandum in support of an opinion submitted under (c) of this section and documents, materials, and other information, including working papers and copies of them, created, produced, or obtained by or disclosed to the director or another person in connection with the memorandum;

(B) documents, materials, and other information, including working papers and copies of them, created, produced, or obtained by or disclosed to the director or another person in the course of an examination made under (d)(5) of this section; however, if an examination report or other material prepared in connection with an examination made under AS 21.06.120 - 21.06.150 is not held as private and confidential information under AS 21.06.120 - 21.06.150, an examination report or other material prepared in connection with an examination made under (d)(5) of this section is not confidential information to the same extent as if the examination report or other material had been prepared under AS 21.06.120 - 21.06.150;

(C) reports, documents, materials, and other information developed by an insurer in support of or in connection with an annual certification by the insurer under (e)(5)(B) of this section evaluating the effectiveness of the insurer's internal controls with respect to a principle-based valuation and other documents, materials, and other information, including working papers and copies of them, created, produced, or obtained by or disclosed to the director or another person in connection with the reports, documents, materials, and other information;

(D) a principle-based valuation report developed under (e)(5)(C) of this section and other documents, materials, and other information, including working papers and copies of them, created, produced, or obtained by or disclosed to the director or another person in connection with the report; and

(E) documents, materials, data, and other information submitted by an insurer under (f) of this section, known as experience data and experience materials, other documents, materials, data, and other information, including working papers and copies of them, created or produced in connection with the experience data, or documents, materials, data, or other information that includes any potentially insurer-identifying or personally identifiable information that is provided to or obtained by the director together with experience data, experience materials, and other documents, materials, data, and other information, including working papers and copies of them, created, produced, or obtained by or disclosed to the director or another person in connection with the experience materials;

(2) “law enforcement agency,” “National Association of Insurance Commissioners,” and “regulatory agency,” includes an employee, agent, consultant, or contractor of the law enforcement agency, National Association of Insurance Commissioners, or regulatory agency.