KRS 304.6-171: Requirement for actuarial opinion as to appropriate computation of

reserves and related items and compliance with state law -- Opinions to be

submitted annually -- Form and substance of opinions -- Administrative

regulations.

(1) Subsections (2) t o (5) of this section shall become operative at the end of the first

full calendar year following the year of enactment and shall be applicable prior to

the operative date of the valuation manual.

(2) Every life insurance company doing business in this sta te shall annually submit the

opinion of a qualified actuary as to whether the reserves and related actuarial items

held in support of the policies and contracts specified by the commissioner by

administrative regulation are computed appropriately, are base d on assumptions

which satisfy contractual provisions, are consistent with prior reported amounts, and

comply with applicable laws of this state. The commissioner by administrative

regulation shall define the specifics of this opinion and add any other ite ms deemed

to be necessary to its scope.

(3) (a) Every life insurance company, except as exempted by or pursuant to

administrative regulation, shall also annually include in the opinion required

by subsection (2) of this section, an opinion of the same qualified actuary as to

whether the reserves and related actuarial items held in support of the policies

and contracts specified by the commissioner by administrative regulation,

when considered in light of the assets held by the company with respect to the

reserves and related actuarial items, including but not limited to the

investment earnings on the assets and the considerations anticipated to be

received and retained under the policies and contracts, make adequate

provision for the company's obligations un der the policies and contracts,

including but not limited to the benefits under and expenses associated with

the policies and contracts.

(b) The commissioner may provide by administrative regulation for a transition

period for establishing any higher reser ves which the qualified actuary may

deem necessary in order to render the opinion required by this section.

(4) Each opinion required by subsection (2) of this section shall be governed by the

following provisions:

(a) A memorandum, in form and substance a cceptable to the commissioner as

specified by administrative regulation, shall be prepared to support each

actuarial opinion; and

(b) If the insurance company fails to provide a supporting memorandum at the

request of the commissioner within a period speci fied by administrative

regulation or the commissioner determines that the supporting memorandum

provided by the insurance company fails to meet the standards prescribed by

the administrative regulations or is otherwise unacceptable to the

commissioner, the commissioner may engage a qualified actuary at the

expense of the company to review the opinion and the basis for the opinion

and prepare the supporting memorandum as is required by the commissioner.

(5) Every opinion shall be governed by the following provisions:

(a) The opinion shall be submitted with the annual statement reflecting the

valuation of reserve liabilities for each year ending on or after December 31,

1996;

(b) The opinion shall apply to business in force including individual and group

health insurance plans, in form and substance acceptable to the commissioner

as specified by administrative regulation;

(c) The opinion shall be based on standards adopted from time to time by the

Actuarial Standards Board and on such additional standards as th e

commissioner may by administrative regulation prescribe;

(d) In the case of an opinion required to be submitted by a foreign or alien

company, the commissioner may accept the opinion filed by that company

with the insurance supervisory official of anothe r state if the commissioner

determines that the opinion reasonably meets the requirements applicable to a

company domiciled in this state;

(e) For the purposes of this section, "qualified actuary" means a member in good

standing of the American Academy of Actuaries who meets the requirements

set forth in administrative regulations;

(f) Except in cases of fraud or willful misconduct, the qualified actuary shall not

be liable for damages to any person, other than the insurance company and the

commissioner, for any act, error, omission, decision, or conduct with respect

to the actuary's opinion;

(g) Disciplinary action by the commissioner against the company or the qualified

actuary shall be defined in administrative regulations by the commissioner;

and

(h) Any memorandum in support of the opinion, and any other material provided

by the company to the commissioner in connection therewith, shall be kep t

confidential by the commissioner and shall not be made public and shall not

be subject to subpoena, other than for the purpose of defending an action

seeking damages from any person by reason of any action required by this

section or by administrative re gulations promulgated hereunder. The

memorandum or other material may otherwise be released by the

commissioner with the written consent of the company or to the American

Academy of Actuaries upon request stating that the memorandum or other

material is re quired for the purpose of professional disciplinary proceedings

and setting forth procedures satisfactory to the commissioner for preserving

the confidentiality of the memorandum or other material. Once any portion of

the confidential memorandum is cited b y the company in its marketing, or is

cited before any governmental agency other than a state insurance department

or office, or is released by the company to the news media, all portions of the

confidential memorandum shall be no longer confidential.

(6) Unless a company is exempt under KRS 304.6 -134, subsections (7) to (10) of this

section shall become operative after the operative date of the valuation manual.

(7) Every company with outstanding life insurance, accident and health insurance, or

deposit-type contracts in this state, subject to regulation by the commissioner, shall

annually submit the opinion of the appointed actuary stating whether the reserves

and related actuarial items held in support of the policies and contracts are

computed appropriat ely, are based on assumptions that satisfy contractual

provisions, are consistent with prior reported amounts, and comply with applicable

laws of this state. The valuation manual shall prescribe the specifics of this opinion,

including any items deemed necessary to its scope.

(8) Every company with outstanding life insurance, accident and health insurance, or

deposit-type contracts in this state, subject to regulation by the commissioner,

except as exempted in the valuation manual, shall also annually inclu de in the

opinion required by subsection (7) of this section an opinion of the same appointed

actuary stating whether the reserves and related actuarial items held in support of

the policies and contracts specified in the valuation manual, when considered with

respect to the assets held by the company, the reserves, and related actuarial items,

including but not limited to the investment earnings on the assets and the

considerations anticipated to be received and retained under the policies and

contracts, m aking adequate provision for the company's obligations under the

policies and contracts, including but not limited to the benefits under, and expenses

associated with, the policies and contracts.

(9) Each opinion required by subsection (8) of this section shall be governed by the

following provisions:

(a) A memorandum, in the form and substance specified in the valuation manual,

and acceptable to the commissioner, shall be prepared to support each

actuarial opinion; and

(b) If the insurance company fails to provide a supporting memorandum at the

request of the commissioner within a period specified in the valuation manual,

or the commissioner determines that the supporting memorandum provided by

the insurance company fails to meet the standards prescribed by the valuation

manual, or is otherwise unacceptable to the commissioner, the commissioner

may engage a qualified actuary, at the expense of the company, to review the

opinion and the basis for the opinion, and prepare the supporting

memorandum required by the commissioner.

(10) Every opinion required by subsections (7) and (8) of this section shall be governed

by the following provisions:

(a) The opinion shall be in the form and contain the substance specified in the

valuation manual and acceptable to the commissioner;

(b) The opinion shall be submitted with the annual statement reflecting the

valuation of the reserve liability for each year ending on or after the operative

date of the valuation manual;

(c) The opinion shall apply to all policies and contrac ts subject to subsection (8)

of this section, plus other actuarial liabilities as may be specified in the

valuation manual;

(d) The opinion shall be based on standards adopted from time to time by the

Actuarial Standards Board or its successor, and on such additional standards

as may be prescribed in the valuation manual;

(e) In the case of an opinion required to be submitted by a foreign or alien

company, the commissioner may accept the opinion filed by that company

with the insurance supervisory official of another state if the commissioner

determines that the opinion reasonably meets the requirements applicable to a

company domiciled in this state;

(f) Except in cases of fraud or willful misconduct, the appointed actuary shall not

be liable for damages to any person, other than the insurance company and the

commissioner, for any act, error, omission, decision, or conduct with respect

to the appointed actuary's opinion; and

(g) Disciplinary action by the commissioner against the company or the appointed

actuary shall be established by administrative regulation, promulgated by the

commissioner.