KRS 304.6-143: Policies issued on or after the operative date of the valuation manual --

Application of KRS 304.6-130(2) minimum standard of valuation.

(1) For policies issued on or after the operative date of the valuation manual, the

standard prescribed in the valuation manual shall be the minimum standard of

valuation required under KRS 304.6-130(2), except as provided by subsection (5) or

(7) of this section.

(2) The operative date of the valuation manual shall be January 1 of the first calendar

year following the first July 1, at which time all of the following have occurred:

(a) The valuation manual has been adopted by the NAIC by an affirmative vote of

at least forty-two (42) members, or three -fourths (3/4) of the members voting,

whichever is greater;

(b) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation

including substantially similar terms and provisions, has been enacted by

states representing greater than seventy -five percent (75%) of the direct

premiums written as reported in the following annual statements submitted for

2008:

1. Life, accident and health insurance;

2. Health insurance; or

3. Fraternal benefit societies, as defined in KRS 304.29 -011, insurance;

and

(c) The Standard Valuation Law, as amended by the NAIC in 2009, o r legislation

including substantially similar terms and provisions, has been enacted in by at

least forty-two (42) of the fifty-five (55) jurisdictions, including:

1. The fifty (50) states of the United States;

2. American Samoa;

3. The American Virgin Islands;

4. The District of Columbia;

5. Guam; and

6. Puerto Rico.

(3) (a) Unless a change in the valuation manual specifies a later effective date,

changes to the valuation manual shall be effective on January 1 following the

date when all of the following have occurred:

1. The change to the valuation manual has been adopted by the NAIC by an

affirmative vote representing:

a. At least three -fourths (3/4) of the members of the NAIC voting,

but not less than a majority of the total membership; and

b. Members of the NAIC representing jurisdictions totaling greater

than seventy-five percent (75%) of the direct premiums written as

reported in the following annual statements most recently available

prior to the vote required by subparagraph 1. of this paragraph:

i. Life, accident and health insurance;

ii. Health insurance; or

iii. Fraternal benefit societies, as defined in KRS 304.29 -011,

insurance; or

(b) The valuation manual becomes effective pursuant to an order by the

commissioner.

(4) The valuation manual shall specify the following:

(a) Minimum valuation standards for and definitio ns of the policies or contracts

subject to KRS 304.6-130(2). The minimum valuation standards shall be:

1. The commissioner's reserve valuation method for life insurance

contracts, other than annuity contracts;

2. The commissioner's annuity valuation method for annuity contracts; and

3. Minimum reserves for all other policies or contracts.

(b) Which policies or contracts or types of policies or contracts that are subject to

the requirements of a principle -based valuation, required by KRS 304.6 -

151(1), and th e minimum valuation standards consistent with those

requirements;

(c) For policies and contracts subject to a principle -based valuation under KRS

304.6-151(2)(c):

1. Requirements for the format of the reports to the commissioner,

including information nece ssary to determine if the valuation is

appropriate and in compliance with KRS 304.6-130 to 304.6-180;

2. Assumptions to be prescribed for risks over which the company does not

have significant control or influence; and

3. Procedures for corporate governanc e and oversight of the actuarial

function, and a process for appropriate waiver or modification of the

procedures;

(d) For policies not subject to a principle -based valuation under KRS 304.6 -151,

the minimum valuation standard shall either:

1. Be consisten t with the minimum standard of valuation prior to the

operative date of the valuation manual; or

2. Develop reserves that quantify the benefits and guarantees, and the

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 but not limited to:

1. Those relating to reserve methods;

2. Models for measuring risk;

3. Generation of economic scenarios;

4. Assumptions;

5. Margins;

6. Use of company experience;

7. Risk measurement;

8. Disclosure;

9. Certifications;

10. Reports;

11. Actuarial opinions and memorandums;

12. Transition rules; and

13. Internal controls; and

(f) The data and form of the data required by KRS 304.6 -133 and with whom the

data shall be submitted, and may specify other requirements including data

analyses and reporting of analyses.

(5) In the absence of a specific valuation requirement or if a specifi c valuation

requirement in the valuation manual is not, in the opinion of the commissioner, in

compliance with KRS 304.6 -151, the company shall, with respect to the

requirements, comply with minimum valuation standards prescribed by the

commissioner by administrative regulation.

(6) The commissioner may engage a qualified actuary, at the expense of the company,

to perform an actuarial examination of the company and to opine on the

appropriateness of a reserve assumption or method used by the company, or to

review and opine on a company's compliance with any requirement set forth in KRS

304.6-130 to 304.6-180. The commissioner may rely upon the opinion of a qualified

actuary, regarding KRS 304.6 -130 to 304.6 -180, who is engaged by the

commissioner of another state, district, or territory of the United States. As used in

this subsection, the term "engage" includes employment or contracting.

(7) The commissioner may require a company to change any assumption or method that

in the opinion of the commissioner is n ecessary to comply with the requirement of

the valuation manual or KRS 304.6-130 to 304.6-180. The company shall adjust the

reserves as required by the commissioner. The commissioner may take other

disciplinary action as permitted under this subtitle.