Conn. Agencies Regs. § 38a-459-17 - Actuarial opinion and memorandum
(a) An insurance
company that maintains any separate accounts governed by sections
38a-459-10
to
38a-459-20,
inclusive, of the Regulations of Connecticut State Agencies shall submit an
actuarial opinion rendered by the valuation actuary to the insurance
commissioner annually by March 1 showing the status of the accounts as of the
preceding December 31. The actuarial opinion shall be supported by a
confidential actuarial memorandum prepared by the valuation actuary rendering
the opinion. The valuation actuary may be either the appointed actuary of the
insurance company or, alternatively, a qualified actuary designated by the
appointed actuary to be the valuation actuary for the purpose of sections
38a-459-10
to
38a-459-20,
inclusive, of the Regulations of Connecticut State Agencies.
(b) The actuarial memorandum required by
subsection (a) of this section is a memorandum as set forth in subdivision (3)
of section
38a-78(c)
of the Connecticut General Statutes. The actuarial memorandum may include any
matter required by section
38a-78
of the Connecticut General Statutes and is subject to the confidentiality
protections of subdivision (7) of section
38a-78(c)
of the Connecticut General Statutes.
(c) The actuarial memorandum in support of
the opinion, and any other material provided by the insurance company to the
insurance commissioner in connection therewith, is deemed to be confidential to
the same extent, and under the same conditions, as the actuarial memorandum
required by section
38a-78
of the Connecticut General Statutes.
(d) The actuarial memorandum shall be made
available for examination by the insurance commissioner upon the commissioner's
request, but shall be returned to the insurance company after an examination
and shall not be considered a record of the insurance department or subject to
automatic filing with the insurance commissioner.
(e) Except in cases of fraud or willful
misconduct, the valuation actuary shall not be liable for damages to any person
(other than the insurance company or the insurance commissioner) for any act,
error, omission, decision, or conduct with respect to the actuary's
opinion.
(f) The statement of
actuarial opinion, submitted pursuant to subsection (a) of this section, shall
cover the applicable points set forth in sections
38a-78-1 to
38a-78-9,
inclusive, of the Regulations of Connecticut State Agencies and at a minimum
consist of:
(1) A paragraph identifying the
valuation actuary and the valuation actuary's qualifications;
(2) A scope paragraph identifying the
subjects on which the opinion is to be expressed and describing the scope of
the valuation actuary's work;
(3) A
reliance paragraph describing those areas, if any, where the valuation actuary
deferred to other experts in developing data, procedures, or assumptions (e.g.,
data, procedures or assumptions regarding anticipated cash flows from currently
owned assets, including variation in cash flows according to economic
scenarios), supported by a statement of each expert in the form prescribed by
section
38a-78-7
of the Regulations of Connecticut State Agencies; and
(4) An opinion paragraph expressing the
valuation actuary's opinion that, after taking into account any risk charge
payable from the separate account assets and the amount of any reserve
liability of the general account and amounts held in any supplemental account
with respect to the asset maintenance requirement, the account assets make
adequate provision for the contract liabilities.
(5) The opinion shall also state:
(A) That the level of risk charges, if any,
payable to the general account was appropriate in view of such factors as the
nature of the guaranteed contract liabilities and losses experienced in
connection with account contracts, and other pricing factors;
(B) That after taking account of any reserve
liability of the general account and amounts held in any supplemental account
with respect to the asset maintenance requirement, the amount of the account
assets satisfied the asset maintenance requirement;
(C) That the fixed-income asset portfolio
conformed to, and justified, the rates used to discount contract liabilities
for valuation pursuant to section
38a-459-14(f)
of the Regulations of Connecticut State Agencies, if applicable; and
(D) Whether any rates utilized, pursuant to
section
38a-459-14(f)
of the Regulations of Connecticut State Agencies, to discount guaranteed
contract liabilities and other items applicable to the separate account or any
supplemental account were modified from the rate or rates described in the plan
of operations filed pursuant to section
38a-459-12
of the Regulations of Connecticut State Agencies.
(6) One or more additional paragraphs may be
needed in individual insurance company cases as follows:
(A) If the valuation actuary considers it
necessary to state a qualification of his opinion;
(B) If the valuation actuary has to disclose
an inconsistency in the method of analysis used at the prior opinion date with
that used for this opinion; or
(C)
If the valuation actuary chooses to add a paragraph briefly describing the
assumptions which form the basis of the actuarial opinion.
(g) The opinion shall be
accompanied by a certificate of an officer of the insurance company responsible
for monitoring compliance with the asset maintenance requirements for the
separate accounts, describing the extent to and manner in which during the
preceding year:
(1) Actual benefit payments
conformed to the benefit payment estimated to be made as described in the plan
of operations;
(2) The
determination of the value of the separate account and any supplemental account
conformed to the valuation procedures described in the plan of operations,
including, but not limited to, a statement of the procedures and sources of
information used during the year; and
(3) Any assets were transferred to or from
the insurance company's general account, or any amounts were paid to the
insurance company by any contract holder to support the insurance company's
guarantee.
(h) The
actuarial memorandum shall:
(1) Substantially
conform with those portions of section
38a-78-9
of the Regulations of Connecticut State Agencies applicable to asset adequacy
testing and either:
(A) Demonstrate the
adequacy of account assets based upon cash flow analysis; or
(B) Explain why cash flow analysis is not
appropriate, describe the alternative methodology of asset adequacy testing
used, and demonstrate the adequacy of account assets under such
methodology;
(2)
Describe the assumptions the valuation actuary used in support of the actuarial
opinion, including any assumptions made in projecting cash flows under each
class of assets and any dynamic portfolio hedging techniques utilized and the
tests performed on the utilization of the techniques. As used in this section,
"dynamic portfolio hedging techniques" includes techniques whereby an
underlying portfolio of liabilities and their corresponding assets are hedged
through the purchase or sale (owned or not owned by the hedger) of a hedging
instrument, and such purchase or sale is managed so as to decrease the
probability or severity of loss of the underlying portfolio due to changes in
economic, market, insurable, or other events and the hedge is regularly
adjusted or re-balanced through additional purchases or sales of assets,
liabilities, or financial instruments (including options, futures, and
derivatives) at regular, small intervals as the risks and characteristics of
the underlying portfolio change, in a manner that incorporates recent
events;
(3) Describe how the
valuation actuary reflected the risk of default on obligations and mortgage
loans, including obligations and mortgage loans that are not investment
grade;
(4) Describe how the
valuation actuary has reflected withdrawal risks, if applicable, including a
discussion of the positioning of the contracts within the benefit withdrawal
priority order pertaining to the contracts, the impact of any dynamic lapse
assumption and the results of sensitivity testing the estimate of future plan
sponsor withdrawals pursuant to section
38a-459-14(g)(3)
of the Regulations of Connecticut State Agencies;
(5) If the plan of operations provides for
investments in separate account or supplemental account assets other than
United States government obligations, demonstrate that the rates used to
discount contract liabilities pursuant to section
38a-459-14(f)
of the Regulations of Connecticut State Agencies accurately reflect expected
investment returns (taking into account any foreign exchange risks);
(6) If the contracts provide that in certain
circumstances they would cease to be funded by a separate account and instead,
would become contracts funded by the general account, clearly describe how any
increased reserves would be provided for if and to the extent these
circumstances occurred;
(7) State
the amount of separate account assets that are not chargeable with liabilities
arising out of any other business of the insurance company;
(8) State the amount of reserves and
supporting assets as of December 31 and where the reserves and assets are shown
in the annual statement;
(9) State
the amount of any contingency reserve carried as part of surplus;
(10) For book value contracts, state the
market value of supporting assets; and
(11) Where separate account assets are not
chargeable with liabilities arising out of any other business of the insurance
company, describe how the level of risk charges payable to the general account
provider are appropriate compensation for the risk taken by the general
account.
Notes
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