Contact Us Search
CA Department of Insurance

Bulletin 96-09

(Superceded by Bulletin 2000-2)

November 1, 1996

TO: All Admitted Life and Disability Insurers and Other Interested Persons

SUBJECTS: (1) Tables of Select Mortality Factors

(2) Valuation of Plans with Non level Premiums or Benefits

(3) Valuation of Plans with Secondary Guarantees

The Model Regulation entitled "Valuation of Life Insurance Policies," also known as Regulation XXX (referred to herein as "the XXX Model" ) was adopted by the National Association of Insurance Commissioners (NAIC) in March of 1995. The Regulation and its Appendix (containing new select mortality factors) are published in the NAIC Proceedings, 1994, 4th Quarter, pages 1126-1159.

The purpose of this Bulletin is to inform affected insurers of the California Insurance Department's policy with regard to the XXX Model, and otherwise to describe minimum standards for the valuation of certain plans of insurance.

Business Issued January 1, 1997 and later

1. This Bulletin applies to all ordinary life plans of insurance, whether written directly or acquired through assumption reinsurance or coinsurance, except:

(a) Plans excepted under Section 3.A of the XXX Model;

(b) Universal life plans with no secondary guarantee period exceeding five years;

(c) Level premium plans for which the benefits decrease uniformly, starting with the second policy year, or for which the annual benefit decrease corresponds to the reduction in outstanding principal of an amortizing mortgage; and

(d) Plans under which the payment of minimum contracted premiums will develop material cash values by the end of the sixth duration. (In this context, "material" cash values are cash values at least equal to 2.5% of face amount.)


(a) The provisions of the XXX Model are hereby accepted as an appropriate valuation standard for purposes of the Department's annual valuation under California Insurance Code (CIC) Section 10479.

(b) The select mortality factors reflected in the appendix to the XXX Model may be used for all ordinary life plans of insurance according to the provisions of the XXX Model.

3. As an alternative, for the block of policies written on the plans described in item (1) above, the Department will accept as satisfying minimum statutory requirements, reserves which are:

(a) Computed in a manner consistent with the principles of the Standard Valuation Law; and

(b) Tested for adequacy by the use of a gross premium valuation or by other asset adequacy analysis.

4. For requisite reliability, tests performed by insurers electing to apply the provisions of (3) above should:

(a) Reflect all risks, costs and characteristics of the plans being valued;

(b) Be based on the scale of gross premiums in effect on the date of the valuation;

(c) Incorporate sensitivity testing of all assumptions which could materially affect the level of reserves; and

(d) Include only business described in item (1) above.

5. For an insurer electing to apply the provisions of item (3) above, an actuarial memorandum shall discuss and describe the methodology and assumptions used to determine and test the reserves. This information may be included in the Actuarial Memorandum prepared in support of the Statement of Actuarial Opinion.

Business Issued Prior to January 1, 1997

For plans of insurance with non-level premiums or benefits issued prior to January 1, 1997, the Department will accept reserves calculated in a manner consistent with Department Bulletin No.74-11. If an insurer elects to use another basis still consistent with the principles of the Standard Valuation Law, the provisions of items (3), (4) and (5) above apply. In this latter case, an insurer which also elects to value business issued on and after January 1, 1997 in the same manner may combine the policies issued both before and after January 1, 1997 for testing purposes.

Statutory References:

CIC 925: Supplemental actuarial information.
CIC 925.4: Powers of commissioner to examine insurers.
CIC 10479: Annual valuation of reserve liabilities by commissioner.
CIC 10480: Domestic insurer obligation to furnish valuation data.
CIC 10481: Furnishing of data by foreign insurer.
CIC 10489.15: Annual opinion of actuary.
CIC 10489.5: Reserves according to commissioners reserve valuation method.

Questions about this Bulletin may be referred to:

Sheldon Summers, Supervising Life Actuary
California Department of Insurance
300 South Spring Street,
Los Angeles, CA 90013
Telephone: (213) 346-6151


Font Size: Translate: Español