RULES AND REGULATIONS
Title 31—INSURANCE
INSURANCE DEPARTMENT
[ 31 PA. CODE CH. 84 ]
Tables Approved for Use in Determining Minimum Nonforfeiture Standards and Minimum Standards for Valuation
[46 Pa.B. 3645]
[Saturday, July 9, 2016]The Insurance Department (Department) amends Chapter 84 (relating to tables approved for use in determining minimum nonforfeiture standards and minimum standards for valuation). This final-form rulemaking is adopted under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P.S. §§ 66, 186, 411 and 412), regarding the general rulemaking authority of the Department, sections 301 and 303 of The Insurance Department Act of 1921 (40 P.S. §§ 71 and 73), regarding computation of reserve liability and minimum reserve requirements of companies charging less than net premiums computed on mortality tables, and section 410A of The Insurance Company Law of 1921 (40 P.S. § 510.1), regarding standard nonforfeiture law for life insurance.
Purpose
The purpose of this final-form rulemaking is to adopt new mortality tables for use in determining the minimum reserves that insurers must maintain for annuities. These new minimum standards apply to annuities issued on or after August 8, 2016, the effective date of this final-form rulemaking. The amendments are based upon changes to National Association of Insurance Commissioners (NAIC) Model Regulation 821, which was adopted by the NAIC in 2012. The 2012 Individual Annuity Mortality Table was developed by the Society of Actuaries and the American Academy of Actuaries in cooperation with the Life Actuarial (A) Task Force and reflects improved mortality experience resulting from increased life expectancies. The new table is a generational table that incorporates projections for future mortality improvements. In other words, because people are living longer, mortality tables must be updated so that insurers can maintain accurate reserves. Increased reserving will strengthen insurer solvency and thereby protect consumers by ensuring reliable payment of benefits when due.
The Department's adoption of the mortality tables will help to assure the solvency of insurance companies by requiring adequate and accurate reserves based on the most recent mortality tables. Additionally, this final-form rulemaking promotes consistency with other states.
Comments and Responses
Notice of proposed rulemaking was published at 46 Pa.B. 460 (January 23, 2016) with a 30-day public comment period. A comment was received from the Insurance Federation of Pennsylvania in support of the proposed rulemaking and recommending an immediate effective date.
The Independent Regulatory Review Commission (IRRC) did not have objections, comments or recommendations regarding the proposed rulemaking.
Affected Parties
The final-form rulemaking applies to life insurance companies and fraternal benefit societies issuing annuity and pure endowment contracts in this Commonwealth.
Fiscal Impact
State government
There will not be an increase in cost to the Department due to the adoption of new annuity tables since this final-form rulemaking does not impose additional requirements on the insurance industry.
General public
It is unlikely that there will be adverse fiscal impact on the consumers who purchase annuity contracts. The general public will be purchasing annuity contracts from more financially stable insurers.
Political subdivisions
The final-form rulemaking will not impose additional costs on political subdivisions.
Private sector
The final-form rulemaking may have some fiscal impact on insurance companies marketing annuity contracts. Insurers will be required to expend the time necessary to determine if their current annuity reserve standards meet the new requirements. To the extent that the standards do not comply with the new requirements, an insurance company must increase the reserves for contracts issued on or after August 8, 2016. However, negative fiscal impact would be minimized by requiring the new tables be used only for contracts issued after August 8, 2016.
Paperwork
The final-form rulemaking will not impose additional paperwork on the Department. The final-form rulemaking will not change an insurer's existing reporting, recordkeeping or other paperwork requirements.
Effectiveness Date and Sunset Date
The final-form rulemaking will become effective August 8, 2016, 30 days after final adoption and publication in the Pennsylvania Bulletin. The Department continues to monitor the effectiveness of regulations on a triennial basis. Therefore, a sunset date has not been assigned.
Contact Person
Questions or comments concerning this final-form rulemaking may be addressed in writing to Bridget E. Burke, Regulatory Coordinator, 1341 Strawberry Square, Harrisburg, PA 17120, fax (717) 772-1969, briburke@pa.gov.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P.S. § 745.5(a)), on January 11, 2016, the Department submitted a copy of the notice of proposed rulemaking, published at 46 Pa.B. 460, to IRRC and the Chairpersons of the House Insurance Committee and the Senate Banking and Insurance Committee for review and comment.
Under section 5(c) of the Regulatory Review Act, the Department shall submit to IRRC and the House and Senate Committees copies of comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Department has considered comments from the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P.S. § 745.5a(j.2)), on June 8, 2016, the final-form rulemaking was deemed approved by the House and Senate Committees. Under section 5(g) of the Regulatory Review Act, the final-form rulemaking was deemed approved by IRRC effective June 8, 2016.
Findings
The Commissioner finds that:
(1) Public notice of intention to adopt this final-form rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P.L. 769, No. 240) (45 P.S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The adoption of this final-form rulemaking in the manner provided in this order is necessary and appropriate for the administration and enforcement of the authorizing statutes.
Order
The Commissioner, acting under the authorizing statutes, orders that:
(a) The regulations of the Department, 31 Pa. Code Chapter 84, are amended by adding § 84.3a and Appendices I—IV and amending § 84.2 to read as set forth at 46 Pa.B. 460 and amending § 84.3 to read as set forth in Annex A.
(b) The Department shall submit this order, 46 Pa.B. 460 and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(c) This order shall take effect on August 8, 2016.
TERESA D. MILLER,
Insurance Commissioner(Editor's Note: See 46 Pa.B. 3161 (June 18, 2016) for IRRC's approval order.)
Fiscal Note: Fiscal Note 11-255 remains valid for the final adoption of the subject regulations.
Annex A
TITLE 31. INSURANCE
PART IV. LIFE INSURANCE
CHAPTER 84. TABLES APPROVED FOR USE IN DETERMINING MINIMUM NONFORFEITURE STANDARDS AND MINIMUM STANDARDS FOR VALUATION § 84.3. 1983 Table ''a,'' Annuity 2000 Mortality Table, 1983 GAM Table, 1994 GAR Table and 2012 IAR Mortality Table.
(a) The 1983 Table ''a,'' the Annuity 2000 Mortality Table excluding mortality rates independent of sex, the 1983 GAM Table, the 1994 GAR Table and the 2012 IAR Mortality Table are approved by the Commissioner as annuity mortality tables for valuation.
(b) At the option of the company, the 1983 Table ''a'' may be used in determining the minimum standard of valuation for an individual annuity or pure endowment contract issued prior to January 1, 1986, and for an annuity or pure endowment purchased prior to January 1, 1986, under a group annuity or pure endowment contract.
(c) The 1983 Table ''a,'' or the Annuity 2000 Mortality Table excluding mortality rates independent of sex shall be used in determining the minimum standard of valuation for an individual annuity or pure endowment contract issued on or after January 1, 1986, and prior to June 26, 1999.
(d) The Annuity 2000 Mortality Table excluding mortality rates independent of sex shall be used, except as provided by subsections (e) and (f), in determining the minimum standard of valuation for an individual annuity or pure endowment contract issued on or after June 26, 1999.
(e) Except as provided in subsection (f), the 2012 IAR Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after August 8, 2016.
(f) The 1983 Table ''a'' shall be used in determining the minimum standard of valuation for an individual annuity or pure endowment contract issued on or after June 26, 1999, when the contract is based on life contingencies and is issued to fund periodic benefits arising from:
(1) Settlements of claims pertaining to court settlements or out of court settlements from tort actions.
(2) Settlements of claims, such as worker's compensation claims.
(3) Settlements of long term disability claims when a temporary or life annuity has been used instead of continuing disability payments.
(g) At the option of the company, the 1983 GAM Table or the 1994 GAR Table may be used in determining the minimum standard of valuation for an annuity or pure endowment purchased prior to January 1, 1986, under a group annuity or pure endowment contract.
(h) The 1983 GAM Table or the 1994 GAR Table shall be used in determining the minimum standard of valuation for an annuity or pure endowment purchased on or after January 1, 1986, and prior to June 26, 1999, under a group annuity or pure endowment contract.
(i) 1994 GAR Table.
(1) The 1994 GAR Table shall be used in determining the minimum standard of valuation for an annuity or pure endowment purchased on or after June 26, 1999, under a group annuity or pure endowment contract.
(2) In using the 1994 GAR Table, the mortality rate for a person age x in year (1994 + n) shall be calculated as follows:
qx1994+n = qx1994 (1-AAx)n where the values of qx1994 and AAx are as specified in the 1994 GAR Table.
[Pa.B. Doc. No. 16-1166. Filed for public inspection July 8, 2016, 9:00 a.m.]
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