The director may adopt regulations to implement this chapter.

Repealed or Renumbered

Repealed or Renumbered

Assets may be allowed as deductions from corresponding liabilities, and liabilities may be charged as deductions from assets, and deductions from assets may be charged as liabilities, in accordance with the form of annual statement applicable to the insurer as prescribed by the director, or otherwise in the discretion of the director.

If loss experience shows that an insurer's loss reserves or reserves for incurred but not reported losses, however computed or estimated, are inadequate, the director shall require the insurer to maintain loss reserves or reserves for incurred but not reported losses in the increased amount needed to make them adequate.

In addition to an adequate reserve as to outstanding losses as required under AS 21.18.050 , a title insurer shall establish, segregate, and maintain an unearned premium reserve as required by the director.

As to marine and transportation insurance, the entire amount of premiums on trip risks not terminated shall be considered unearned and the director may require the insurer to carry a reserve equal to 100 percent of premiums on trip risks written during the month ended as of the date of statement.

In place of the unearned premium reserve required on surety bonds under AS 21.18.060 , the department may require a surety insurer or limited surety insurer to set up and maintain a reserve on all bail bonds or other single premium bonds without a definite expiration date, furnished in judicial proceedings, equal to 25 percent of the total consideration charged for the bonds that are outstanding as of the date of a current financial statement of the insurer.

In addition to assets excluded by the application of AS 21.18.010 , all nonadmitted assets and all other assets of doubtful value or character included as ledger or nonledger assets in a statement by an insurer to the director, or in an examiner's report to the director, shall also be reported, to the extent of the value disallowed, as deductions from the gross assets of the insurer, unless the director permits a reserve to be carried among the liabilities of the insurer in place of a deduction.

For the purposes of this chapter, the value or amount of an investment acquired, held, or invested in or an investment practice engaged in under this title, unless otherwise specified in this title, must be the value at which assets of an insurer are required to be reported for accounting purposes under this title and as required under procedures prescribed in published accounting and valuation standards of the National Association of Insurance Commissioners, including the purposes and procedures manual of the securities valuation office, the valuation of securities manual, the accounting practices and procedures manual, and the annual statement instructions or valuation procedures officially adopted by the National Association of Insurance Commissioners.

(a) Except as otherwise provided in AS 21.18.070 , an insurer shall maintain an unearned premium reserve on all policies in force against loss or damage to property, including loss or damage under general casualty or surety insurance.

(b) The director may require that the reserves be equal to the unearned portions of the gross premiums in force after deducting applicable reinsurance in solvent insurers as computed on each respective risk from the policy's date of issue.

(c) An insurer shall compute all of the reserves on a monthly or more frequent pro rata basis.

(d) After adopting a method for computing the reserve, an insurer may not change methods without approval of the supervisory official of the insurer's state of domicile.

(e) This section does not apply to title insurance.

(a) The adequacy of health insurance reserves must be determined based on the sum of policy reserves determined under AS 21.18.082 , claim reserves determined under AS 21.18.084 , and premium reserves determined under AS 21.18.086 .

(b) Reserve adequacy must be determined by a prospective gross premium valuation. For policies in force, in a claims status, or in a continuation of benefits status on the valuation date, the gross premium valuation must take into account the present value of all expected benefits unpaid, all expected expenses unpaid, and all unearned or expected premiums, including expected future premium increases.

(c) A gross premium valuation must be performed whenever there is an indication that reserves and future premiums may be insufficient to cover future claims for a particular block of policies or for the entire health insurance block. If a reserve inadequacy is determined to exist, the loss must be immediately recognized and reserves increased to account for the inadequacy. The increased reserves will be considered minimum reserves.

In this chapter

(1) 'admitted asset' means an asset allowed by AS 21.18.010 to be included in the determination of the financial condition of a domestic or foreign insurer or the United States branch of an alien insurer;

(2) 'affiliate' has the meaning given in AS 21.22.200 ;

(3) 'controlling' or 'controlled' has the meaning given in AS 21.22.200 and includes a person that individually, or in combination with other persons, owes to the insurer an amount that exceeds 50 percent of the insurer's total premiums in the course of collection as stated on the insurer's financial statement;

(4) [Repealed, Sec. 20 ch 72 SLA 2000].

(5) 'ledger asset' means an asset recorded on the general ledger of an insurer;

(6) 'nonadmitted assets' means an asset recorded on the insurer's ledger that is not allowed by AS 21.18.010 to be included in the determination of the financial condition of a domestic or foreign insurer or the United States branch of an alien insurer;

(7) 'nonledger asset' means an asset not recorded on the general ledger of an insurer;

(8) 'solvent' means able to satisfy all current and future obligations and operate as an ongoing entity.

In a determination of the financial condition of an insurer, liabilities to be charged against its assets shall include

(1) the amount, estimated consistent with the provisions of this title, necessary to pay all of its unpaid losses and claims incurred on or before the date of statement, whether reported or unreported, together with the expenses of adjustment or settlement;

(2) with reference to life and health insurance and annuity contracts,

(A) the amount of reserves on life insurance policies and annuity contracts in force, valued according to the tables of mortality, rates of interest, and methods adopted under this title that are applicable;

(B) reserves for disability benefits, for both active and disabled lives;

(C) reserves for accidental death benefits;

(D) additional reserves that may be required by the director, consistent with practice formulated or approved by the National Association of Insurance Commissioners, on account of the insurance;

(3) with reference to health insurance, the amount of reserves required under AS 21.18.080 - 21.18.086;

(4) with reference to insurance other than specified in (2) and (3) of this section, and other than title insurance, the amount of reserves equal to the unearned portions of the gross premiums charged on policies in force, computed in accordance with this chapter;

(5) expenses and other obligations due or accrued at the date of the statement.

(a) The director shall disallow as an asset or as a credit against liabilities any reinsurance found by the director, after a hearing, to have been arranged for the purpose principally of deception as to the ceding insurer's financial condition as of the date of any financial statement of the insurer. Without limiting the general purport of this subsection, reinsurance of a substantial part of the insurer's outstanding risks contracted for in fact within four months before the date of any financial statement and cancelled in fact within four months after the date of the statement, or reinsurance under which the reinsurer bears no substantial insurance risk or substantial risk of net loss to itself, shall prima facie be considered to have been arranged for the purpose principally of deception within the intent of this subsection.

(b) The director shall disallow as an asset a deposit, fund, or other asset of the insurer determined after a hearing to be

(1) not in good faith the property of the insurer;

(2) not freely subject to withdrawal or liquidation by the insurer at any time for the payment or discharge of claims or other obligations arising under its policies;

(3) the result of arrangements made principally for the purpose of deception as to the insurer's financial condition as of the date of any financial statement of the insurer.

(c) A disallowance of assets or credits is not valid unless made by the director after a hearing of which notice was given the insurer within six months after the date the financial statement of the insurer in which the deception is claimed was filed with the director.

(d) The director may suspend or revoke the certificate of authority of an insurer that has knowingly been a party to a deception or an attempted deception.

(a) Unearned premium reserves must be established for the period of coverage for which premiums, other than premiums paid in advance, have been paid beyond the date of valuation.

(b) Due and unpaid premiums that are carried as an asset in the annual statement must be treated as premiums in force and are subject to the unearned premium reserve requirements of this section. Unpaid commissions, premium taxes, and costs of collection associated with due and unpaid premiums must be carried in the annual statement as an offsetting liability.

(c) Gross premiums paid in advance for a period of coverage starting after the next premium due date following the valuation date may be discounted to the valuation date and must be held as a separate liability in the annual statement or as an addition to the unearned premium reserve established in this section.

(d) The minimum unearned premium reserve for a policy is the pro rata unearned modal premium that applies to the valuation period beyond the date of valuation. If a policy reserve is required for a policy, the unearned modal premium is the valuation net modal premium on the policy reserve. If no policy reserve is required for a policy, the unearned modal premium is the gross modal premium for the policy.

(e) The sum of the unearned premium and policy reserves for all policies may not be less than the gross modal unearned premium reserve on all policies as of the date of valuation. The total unearned premium and policy reserves may not be less than the expected claims for the period after the valuation date represented by the unearned premium reserve.

(f) An insurer may use approximations and estimates in determining premium reserves, including groupings, averages, and aggregate estimates. The approximations or estimates must be tested periodically and not less frequently than triennially to determine adequacy.

(g) Premium reserves based on the 1964 or 1985 Commissioners' Individual Disability Tables must include policies on premium waiver as in-force contracts and establish a minimum reserve for a waiver of premium benefit equal to the unearned modal valuation net premium being waived.

In a determination of the financial condition of an insurer, the following assets are allowed:

(1) assets that are wholly and exclusively owned by the insurer and that are registered, recorded, or held under the insurer's name;

(2) premiums, not more than three months past due, excluding commissions payable on them, due from a controlling or controlled person, to the extent that

(A) the premiums collected by the controlling or controlled person and not remitted to the insurer are held in a trust account with a bank or other depository approved by the division and may not be commingled with other money of the controlling or controlled person; a disbursement from the trust account may be made only to the insurer, the insured, or, for the purpose of returning a premium, an entity that is entitled to returned premiums on behalf of the insured; however, the investment income derived from the trust may be allocated as the parties consider proper; a controlling or controlled person shall deposit premiums collected into the trust account within five working days after collection; the director shall disapprove a trust agreement that, in the director's judgment, does not assure the safety of the premiums collected;

(B) the controlling or controlled person has provided to the insurer, and the insurer has maintained in its possession, an unexpired, clean, irrevocable, and unconditional letter of credit, payable to the insurer, for a term of not less than one year with automatic extension for one year, unless the beneficiary has received in writing notification of intention not to renew 30 days before the original expiration date; the letter of credit must be issued in conformity with the requirements set out in this subparagraph, and the amount of the letter of credit must equal or exceed the liability of the controlling or controlled person to the insurer, at all times during the period that the letter of credit is in effect, for premiums collected by the controlling or controlled person; a letter of credit must be issued under arrangements satisfactory to the division and the letter must be issued by a banking institution that is a member of the Federal Reserve System and that has a financial standing satisfactory to the department; the director shall disapprove a letter of credit that, in the director's judgment, does not assure the safety of the premiums;

(C) the controlling or controlled person has provided to the insurer, and the insurer has maintained in its possession, evidence that the controlling or controlled person has purchased and has currently in effect a financial guaranty bond, payable to the insurer, issued for a continuous term, cancelable only on 30-day written notice to the beneficiary of intention to terminate with the bond continuing in effect for acts committed before the date of termination, and that is in conformity with the requirements set out in (B) of this paragraph; the amount of the bond must equal or exceed the liability of the controlling or controlled person to the insurer, at all times during which the financial guaranty bond is in effect, for the premium collected by the controlling or controlled person; a financial guaranty bond must be issued under an arrangement satisfactory to the division, by an insurer that is authorized to transact business in the state, that has financial standing satisfactory to the division, and that is neither controlled nor controlling in relation to either the insurer or the person for whom the bond is purchased; and

(D) a financial examination indicates that the controlling or controlled person is solvent and has the ability to pay the premiums as they become due; the financial examination, as scheduled by the director, shall be based on a review of the books and records of the controlling or controlled person;

(3) other assets considered by the director to be available for the payment of losses and claims, at values to be determined by the director, with any excess valuation reported as nonadmitted; and

(4) other assets that do not exceed limitations as given in AS 21.21; any excess shall be reported as nonadmitted assets.

(a) Claim reserves are required for all incurred and unpaid claims on all health insurance policies.

(b) Claim expense reserves are required for the estimated expense of settlement of all incurred and unpaid claims.

(c) Claim reserves for prior valuation years must be tested for adequacy and reasonableness using claim runoff schedules in accordance with the statutory annual statement, including consideration of any residual unpaid liability. Claim reserve adequacy must be determined in the aggregate.

(d) Claim reserves must be determined as follows:

(1) for policies that require policy reserves under AS 21.18.082 (a), based on a maximum interest rate equal to the maximum interest rate allowed under AS 21.18.110 for the valuation of whole life insurance issued on the same date as the date the claim was incurred;

(2) for policies that do not require policy reserves under AS 21.18.082(b), based on a maximum interest rate equal to the maximum interest rate allowed under AS 21.18.110 for the valuation of single premium immediate annuities issued on the same date as the date the claim was incurred less 100 basis points;

(3) except as provided in (4) and (5) of this subsection, a morbidity assumption for

(A) individual disability income insurance must be equal to the morbidity assumption used in determining policy reserves under AS 21.18.082(g)(5);

(B) group disability income insurance for policies issued

(i) after December 31, 1997, must be equal to the 1987 Commissioners Group Disability Table; and

(ii) before January 1, 1998, must be equal to the morbidity assumption in use by the insurer before January 1, 1998;

(C) accidental death benefits must be equal to the actual amount of claims incurred; and

(D) all other individual or group policy benefits must be equal to a morbidity table approved by the director and established for reserve determination by an actuary qualified to determine the morbidity table;

(4) for individual or group disability claims with a duration from disablement of less than two years, morbidity assumptions may be based on the insurer's experience if determined credible by the insurer or upon another basis designed to place a sound value on the liabilities as determined by the insurer;

(5) if approved by the director, reserves for group disability income claims with a duration from disablement of more than two years but less than five years may be based on the insurer's experience for which the insurer maintains control of underwriting and claim administration; request for approval to use this modified reserve basis must include

(A) an analysis of the credibility of the experience;

(B) a description of how all the insurer's experience is proposed to be used in setting the reserves;

(C) a description and quantification of the margins to be included;

(D) a summary of the financial impact that the proposed plan of modification would have on the insurer's last filed annual statement;

(E) a copy of the approval from the state of domicile; and

(F) all other information requested by the director;

(6) any generally accepted actuarial reserving method or other reasonable method approved by the director may be used; the method used to estimate liabilities may be an aggregate method; approximations based on groupings and averages may also be used.

(e) Claim reserves that are valued based on the 1964 or 1985 Commissioners' Individual Disability Tables must include a provision for a waiver of premium benefit with the minimum reserve for the benefit equal to the valuation net premium to be waived.

(a) Except as provided in (b) of this section, policy reserves are required for all individual and group health insurance policies or groups of policies

(1) with level premiums or with a gross premium pricing structure at time of issue that results in future benefits exceeding the corresponding future valuation net premiums at any time; or

(2) for which gross premiums are restricted by contract, regulation, or another reason that results in future gross premiums, reduced by expenses for administration, commissions, and taxes, being insufficient to cover future claims.

(b) Policy reserves are not required for health insurance policies that cannot be continued after one year from the date of issue.

(c) The structure of valuation net premiums used under a health insurance policy must be consistent with the structure of gross premiums on the date the policy is issued.

(d) For return of premium benefits, deferred cash benefits, policies with premium rates that are not guaranteed, and where the effects of insurer underwriting by policy duration are specifically used in the valuation morbidity standard, termination rates that exceed the mortality rates in the tables required in (g)(2) of this section may be used but may not exceed the lesser of

(1) 80 percent of the total termination rate used in the calculation of gross premiums; or

(2) eight percent.

(e) The methods and procedures used to determine health insurance policy reserves must be consistent with the methods and procedures used to determine claim reserves for a health insurance policy.

(f) Negative reserves on a benefit may be offset against positive reserves for other benefits in the same policy, but the total policy reserve with respect to all benefits combined may not be less than zero.

(g) Except as provided in (d) and (h) - (k) of this section, policy reserves for policies issued after July 1, 1997, must be determined based on

(1) a maximum interest rate equal to the maximum interest rate allowed under AS 21.18.110 for the valuation of whole life insurance issued on the same date as the health insurance policy;

(2) a termination assumption equal to the mortality table allowed under AS 21.18.110 for the valuation of whole life insurance issued on the same date as the health insurance policy or equal to a mortality table approved by the director for use in determining the policy reserves;

(3) for long-term care policies issued after July 1, 1997,

(A) a mortality assumption equal to the 1983 Group Annuity Mortality Table without projection;

(B) a lapse assumption for policy durations one through four equal to the lesser of 80 percent of the voluntary lapse rate used in the calculation of gross premiums or eight percent; and

(C) a lapse assumption for policy durations five and later of 100 percent of the voluntary lapse rate used in the calculation of the gross premiums or four percent;

(4) a two-year full preliminary term method under which the terminal reserve is zero on the first and second policy anniversary dates;

(5) a morbidity assumption for

(A) individual disability income insurance issued (i) after December 31, 1997, equal to Tables A or B of the 1985 Commissioners' Individual Disability Tables for policies; and (ii) before January 1, 1998, equal to the 1964 or 1985 Commissioners' Individual Disability Tables; the insurer shall indicate which morbidity table the insurer will use for all individual disability income policies issued in a calendar year;

(B) group disability income insurance issued

(i) after December 31, 1997, equal to the 1987 Commissioners' Group Disability Table; and

(ii) before January 1, 1998, equal to the morbidity assumption in use by the insurer before January 1, 1998;

(C) scheduled or fixed time period hospital, surgical, or maternity benefit policies issued

(i) after December 31, 1997, equal to the 1974 Medical Expense Table A from the Transactions of the Society of Actuaries, Volume XXX; and

(ii) before January 1, 1998, equal to the morbidity assumption in use by the insurer before January 1, 1998;

(D) cancer expense benefits for policies issued

(i) after December 31, 1997, equal to the 1985 National Association of Insurance Commissioners Cancer Claim Cost Tables; and

(ii) before January 1, 1998, equal to the morbidity assumption in use by the insurer before January 1, 1998;

(E) accidental death benefits for policies issued

(i) after December 31, 1997, equal to the 1959 accidental death benefit table; and

(ii) before January 1, 1998, equal to the morbidity assumption in use by the insurer before January 1, 1998; or

(F) all other individual or group policy benefits equal to a morbidity table established for reserve determination by an actuary qualified to determine the morbidity table and approved by the director; the morbidity table must contain a pattern of incurred claims cost that reflects the underlying morbidity and may not be constructed for the primary purpose of minimizing reserves.

(h) The reserve method for return of premium or other deferred cash benefits must be a preliminary term method that is applied only in relation to the issue date of the policy and is a

(1) one-year preliminary term method if benefits are provided before the 20th policy anniversary; or

(2) two-year preliminary term method if the benefits are provided only on or after the 20th policy anniversary.

(i) The reserve method for long-term care insurance must be calculated on a

(1) two-year full preliminary term method for a policy or certificate issued on or before July 1, 1997; and

(2) one-year full preliminary term method for a policy or certificate issued after July 1, 1997.

(j) Reserve adjustments due to rate changes, revised assumptions, or other reasons for return of premium or other deferred cash benefits must be applied on the effective date of the adoption of the reserve adjustment.

(k) An alternative method or basis of determining policy reserves may be used if the aggregate policy reserve is not less than the aggregate policy reserves determined under (c) - (j) of this section.

(l) An insurer shall annually review prospective policy liabilities on policies valued by tabular reserves to determine the continuing adequacy and reasonableness of the tabular reserves given future gross premiums. The insurer shall make adjustments to the tabular reserves if the tests indicate that the basis of the reserves is no longer adequate.

(m) Policy reserves that are valued based on the 1964 or 1985 Commissioners Individual Disability Tables must include a provision for a waiver of premium benefit with the minimum reserve for the benefit equal to the valuation net premium to be waived.

(n) Policy reserves for long-term care insurance may not be less than the net single premium for any nonforfeiture benefits provided by the policy or certificate.

(a) The director shall annually value, or cause to be valued, the reserve liabilities (hereinafter called reserves) for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurer doing business in this state, and may certify the amount of the reserves, specifying the mortality table or tables, rate or rates of interest, and methods (net level premium method or other) used in the calculation of the reserves. In calculating the reserves, the director may use group methods and approximate averages for fractions of a year or otherwise. For an alien insurer, the valuation shall be limited to its insurance transactions in the United States. For the purpose of making the valuation the director may employ a competent actuary who shall be paid by the insurer for which the service is rendered. For a foreign or alien insurer, the director may accept, in lieu of the valuation of the reserves required of a foreign or alien insurer, a valuation made, or caused to be made, by the insurance supervisory official of a state or other jurisdiction if the valuation complies with the minimum standard provided in this section and if the official of the state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the director when the certificate states the valuation was made in a specified manner in which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction. An insurer that at any time adopted a standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this section may, with the approval of the director, adopt a lower standard of valuation, but not lower than the minimum provided in this section.

(b) This subsection applies to only those policies and contracts issued on or after the operative date of AS 21.45.300 except as otherwise provided in (c) of this section and (5) of this subsection for group annuity and pure endowment contracts issued before that operative date:

(1) Except as otherwise provided in (c) of this section and (5) of this subsection, the minimum standard for the valuation of all these policies and contracts shall be the commissioner's reserve evaluation methods defined in (2), (4) and (7) of this subsection, three and one-half percent interest, or in the case of policies and contracts, other than annuity and pure endowment contracts, issued on or after July 1, 1978, five and one-half percent interest for single premium life insurance policies and four and one-half percent interest for all other policies, and the following tables:

(A) for all ordinary policies of life insurance issued on the standard basis, excluding disability and accidental death benefits in the policies - the Commissioner's 1958 Standard Ordinary Mortality Table, for policies issued before the operative date of AS 21.45.300(w), of the Standard Nonforfeiture Law for Life Insurance as amended, except that for a category of policies issued on female risks, all modified net premiums and present values, referred to in (2) of this subsection may be calculated according to an age not more than six years younger than the actual age of the insured; and for policies issued on or after the operative date of AS 21.45.300 (w) of the Standard Nonforfeiture Law for Life Insurance as amended

(i) the Commissioner's 1980 Standard Ordinary Mortality Table, or

(ii) at the election of the insurer for any one or more specified plans of life insurance, the Commissioner's 1980 Standard Ordinary Mortality Table with 10-year Select Mortality Factors, or

(iii) any ordinary mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the director for use in determining the minimum standard of valuation for the policies;

(B) for all industrial life insurance policies issued on the standard basis, excluding disability and accidental death benefits in the policies - the 1941 Standard Industrial Mortality Table for the policies issued before the operative date of AS 21.45.300 (l), of the Standard Nonforfeiture Law for Life Insurance as amended, and for the policies issued on or after April 7, 1984, the Commissioner's 1961 Standard Industrial Mortality Table or any industrial mortality table, adopted after 1980 by the National Association of Insurance Commissioners that is approved by regulation promulgated by the director for use in determining the minimum standard of valuation for such policies;

(C) for individual annuity and pure endowment contracts, excluding disability and accidental death benefits in the policies - the 1937 Standard Annuity Mortality Table, or, at the option of the insurer, the Annuity Mortality Table for 1949, ultimate, or any modification of either of these tables approved by the director;

(D) for group annuity and pure endowment contracts, excluding disability and accidental death benefits in the policies - the Group Annuity Mortality Table for 1951, any modification of the table approved by the director, or, at the option of the insurer, any of the tables or modification of tables specified for individual annuity and pure endowment contracts;

(E) for total and permanent disability benefits in or supplementary to ordinary policies or contracts - the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the society of actuaries, with due regard to the type of benefit or any table of disablement and termination rates adopted after 1980 by the National Association of Insurance Commissioners that are approved by regulation adopted by the director for use in determining the minimum standard of valuation for the policies; the table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies;

(F) for accidental death benefits in or supplementary to policies - the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the National Association of Insurance Commissioners that is approved by regulation adopted by the director for use in determining the minimum standard of valuation for the policies combined with a mortality table permitted for calculating the reserves for life insurance policies;

(G) for group life insurance, life insurance issued on the substandard basis and other special benefits - tables approved by the director.

(2) Except as otherwise provided in (4) and (7) of this subsection, reserves according to the commissioner's reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, shall be the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided for by the policies, over the then present value of any future modified net premiums; the modified net premiums for the policy shall be the uniform percentage of the respective contract premiums for the benefits that the present value, at the date of issue of the policy, of all the modified net premiums shall be equal to the sum of the then present value of the benefits provided for by the policy and the excess of (A) over (B), as follows:

(A) a net level annual premium equal to the present value, at the date of issue, of the benefits provided for after the first policy year, divided by the present value, at the date of issue of an annuity of one a year payable on the first and each subsequent anniversary of the policy on which a premium falls due; however, the net level annual premium may not exceed the net level annual premium on the 19-year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of the policy;

(B) a net one-year term premium for the benefits provided for in the first policy year; notwithstanding this paragraph, for a life insurance policy issued on or after January 1, 1987 for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess premium and that provides an endowment benefit or a cash surrender value or a combination of these in an amount greater than the excess premium, the reserve according to the commissioner's reserve valuation method as of a policy anniversary occurring on or before the assumed ending date, except as otherwise provided in (4) of this subsection, shall be the greater of the reserve as of the policy anniversary calculated as described in (2)(A) of this subsection and the reserve as of the policy anniversary; the reserve shall be calculated as described in (2)(A) of this subsection, except

(i) the present value shall be reduced by 15 percent of the amount of the excess first year premium,

(ii) all present values of benefits and premiums shall be determined without reference to premiums or benefits provided for by the policy after the assumed ending date,

(iii) the policy shall be assumed to mature on the assumed ending date as an endowment, and

(iv) the cash surrender value provided on the assumed date shall be considered as an endowment benefit; in making the comparison in this subparagraph the mortality and interest bases stated in paragraphs (4) and (6) of this subsection and subsection (c) shall be used; in this subparagraph the assumed ending date is the first policy anniversary on which the sum of the endowment benefit and cash surrender value then available is greater than the excess premium;

(C) reserves according to the commissioner's reserve valuation method for

(i) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums,

(ii) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under 26 U.S.C. 408 (Internal Revenue Code), as amended,

(iii) disability and accidental death benefits in all policies and contracts,

(iv) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of (2) of this subsection, except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums;

(3) Reserves for any category of policies, contracts or benefits as established by the director, may be calculated at the option of the insurer according to standards which produce greater aggregate reserves for the category than those calculated according to the minimum standard provided in this section, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, may not be higher than the corresponding rate or rates of interest used in calculating nonforfeiture benefits provided for in the policy or contract.

(4) If in any contract year the gross premium charged by a life insurer on a policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve on the policy or contract but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for that policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for the policy or contract, or the reserve calculated by the method actually used for the policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. In this paragraph, the minimum valuation standards of mortality and rate of interest are those standards referred to in (b) and (c) of this section. Notwithstanding this paragraph, for a life insurance policy issued on or after January 1, 1987, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess premium and that provides an endowment benefit or a cash surrender value or a combination of these in an amount greater than the excess premium, the provisions of this paragraph shall be applied as if the method used in calculating the reserve for such a policy were based on a net one-year term premium for the benefits provided for in the first policy year. The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated under (2)(B) of this subsection, and the minimum reserve calculated under this paragraph.

(5) Except as provided in (C) of this paragraph, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after the operative date of this paragraph as set out in (6) of this subsection and for all annuities and pure endowments purchased on or after that date under group annuity and pure endowment contracts, shall be the commissioner's reserve valuation methods defined in (2) and (7) of this subsection and the following tables and interest rates:

(A) for individual single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts - the 1971 individual annuity mortality table or an individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation adopted by the director for use in determining the minimum standard of valuation for the contracts, or any modification of these tables approved by the director and seven and one-half percent interest;

(B) for individual annuity and pure endowment contracts, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts - the 1971 individual annuity mortality table or an individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation adopted by the director for use in determining the minimum standard of valuation for the contracts, or any modification of these tables approved by the director and five and one-half percent interest for single premium deferred annuity and pure endowment contracts and four and one-half percent interest for all other such individual annuity and pure endowment contracts;

(C) for all annuities and pure endowments purchased under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts - 1971 group annuity mortality table or a group annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation adopted by the director for use in determining the minimum standard of valuation for the annuities and pure endowments, or any modification of these tables approved by the director, and seven and one-half percent interest.

(6) After July 1, 1978, an insurer may file with the director a written notice of its election to comply with the provisions of (5) of this subsection after a specified date before January 1, 1979, which shall be the operative date of that requirement for the insurer; however, an insurer may elect a different operative date for individual annuity and pure endowment contracts from that elected for group annuity and pure endowment contracts. If an insurer makes no election, the operative date of (5) of this subsection for the insurer is January 1, 1979.

(7) This paragraph applies to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement annuities under 26 U.S.C. 408 (Internal Revenue Code), as amended. Reserves according to the commissioner's annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in those contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by those contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable before the end of that respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of those contracts to determine nonforfeiture values.

(c) The calendar year statutory valuation interest rates defined in (d) of this section shall be the interest rates used in determining the minimum standard for the valuation of

(1) a life insurance policy issued in a particular calendar year, on or after the operative date of AS 21.45.300 (w);

(2) an individual annuity and pure endowment contract issued in a particular calendar year on or after January 1, 1984;

(3) an annuity and pure endowment purchased in a particular calendar year on or after January 1, 1984 under a group annuity and pure endowment contract; and

(4) the net increase, if any, in a particular calendar year after January 1, 1984, in an amount held under a guaranteed interest contract.

(d) The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearer one-quarter of one percent

(1) for life insurance,

I = .03 + W(R1 - .03) + W/2(R2 - .09);

(2) for a single premium immediate annuity and for an annuity benefit involving a life contingency arising from another annuity with a cash settlement option and from a guaranteed interest contract with a cash settlement option,

I = .03 + W(R - .03)

where R1 is the lesser of R and .09,

R2 is the greater of R and .09,

R is the reference interest rate defined in (j) of this section, and

W is the weighting factor defined in (f) of this section;

(3) for other annuities with cash settlement options and other guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in (2) above, the formula for life insurance in (1) of this subsection shall apply to an annuity or guaranteed interest contract with a guarantee duration in excess of 10 years and the formula for a single premium immediate annuity in (2) of this subsection shall apply to an annuity or guaranteed interest contract with a guarantee duration of 10 years or less;

(4) for other annuities with no cash settlement options and for other guaranteed interest contracts with no cash settlement options, the formula for a single premium immediate annuity in (2) of this subsection shall apply;

(5) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for a single premium immediate annuity in (2) of this subsection shall apply.

(e) Notwithstanding (d) of this section, if the calendar year statutory valuation interest rate for a life insurance policy differs from the corresponding actual rate for a similar policy issued in the immediately preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for the life insurance policy shall be equal to the corresponding actual rate for the immediately preceding calendar year. For the purpose of this subsection, the calendar year statutory valuation interest rate shall be determined for 1980 using the reference interest rate defined for 1979 and shall be determined for each following calendar year regardless of the operative date under AS 21.45.300 (w).

(f) The weighting factors referred to in (c) of this section are as follows:

(1) Weighting factors for Life Insurance:

Guarantee                                                              

Duration:                                                     Weighting

Years                                                          Factors 

10 or less                                                       .50   

more than 10, but not more than 20;                              .45   

more than 20;                                                    .35   

for life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guarantee in the policy or under an option to convert to a plan of life insurance with a premium rate or nonforfeiture value or both which are guaranteed in the original policy;

(2) notwithstanding (3) of this subsection the weighting factor for a single premium immediate annuity and for an annuity benefit involving in life contingency arising from another annuity with a cash settlement option and a guaranteed interest contract with a cash settlement option - .80;

(3) for annuities and guaranteed interest contracts valued on an issue year basis:

   Guarantee                                       Weighting Factor    

   Duration:                                         for Plan Type     

   Years                                                               

                                                      A    B    C      

  5 or less;                                         .80  .60  .50     

  more than 5, but not                                                 

  more than 10;                                      .75  .60  .50     

  more than 10, but not                                                

  more than 20;                                      .65  .50  .45     

  more than 20;                                      .45  .35  .35     

(4) for annuities and guaranteed interest contracts valued on a change in fund basis, the weighting factors shown in (3) of this subsection are increased by .15 for plan type A, .25 for plan type B, and .05 for plan type C;

(5) for annuities and guaranteed interest contracts valued on an issue year basis, other than those with no cash settlement options, which do not guarantee interest on considerations received more than one year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on considerations received more than 12 months beyond the valuation date, the weighting factors shown in (3) of this subsection or derived in of this subsection are increased by .05.

(g) The guarantee duration for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of 20 years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

(h) In this section, 'plan type' is defined as follows:

(1) plan type A: at any time policyholder may withdraw funds only

(A) with an adjustment to reflect a change in interest rates or asset values since receipt of the funds by the insurer;

(B) without such adjustment but in installments over five years or more;

(C) as an immediate life annuity; or

(D) no withdrawal permitted;

(2) plan type B: before expiration of the interest rate guarantee, policyholder may withdraw funds only

(A) with adjustment to reflect a change in interest rates or asset values since receipt of the funds by the insurer;

(B) without adjustment but in installments over five years or more; or

(C) no withdrawal permitted; at the end of interest rate guarantee, funds may be withdrawn without adjustment in a single sum or installments over less than five years;

(3) plan type C: policyholder may withdraw funds before expiration of an interest rate guarantee in a single sum or installments over less than five years either

(A) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer; or

(B) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(i) An insurer may elect to value a guaranteed interest contract with a cash settlement option and an annuity with a cash settlement option on either an issue year basis or on a change in fund basis. A guaranteed interest contract with no cash settlement option and an annuity with no cash settlement option must be valued on an issue year basis. In this subsection an issue year basis of valuation means a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract, and the change in fund basis of valuation means a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.

(j) The reference interest rates referred to in (c) of this section are as follows:

(1) for life insurance, the lesser of the average interest rate for a period of 36 months and the average interest rate for a period of 12 months, ending on June 30 of the calendar year next preceding the year of issue, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.;

(2) for a single premium immediate annuity and for an annuity benefit involving a life contingency arising from another annuity with a cash settlement option and a guaranteed interest contract with a cash settlement option, the average interest rate for a period of 12 months, ending on June 30 of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.;

(3) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as provided in (2) of this subsection, with a guarantee duration in excess of 10 years, the lesser of the average interest rate for a period of 36 months and the average interest rate for a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.;

(4) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as provided in (2) of this subsection, with a guarantee duration of 10 years or less, the average interest rate for a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.;

(5) for other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average interest rate for a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.;

(6) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as provided in (2) of this subsection, the average interest rate for a period of 12 months, ending on June 30 of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(k) In the event that Moody's Corporate Bond Yield Average - Monthly Average Corporates is no longer published by Moody's Investors Service, Inc., or in the event that the National Association of Insurance Commissioners determines that Moody's Corporate Bond Yield Average - Monthly Average Corporates as published by Moody's Investors Service, Inc. is no longer appropriate for the determination of the reference interest rate, an alternative method for determination of the reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by regulation adopted by the director, may be substituted.

(l) If a plan of life insurance that provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or if a plan of life insurance or annuity is of a nature that the minimum reserves cannot be determined by the methods described in (b)(2), (4), and (7) of this section, the reserves that are held shall be appropriate in relation to the benefits and the pattern of premiums for that plan, and be computed by a method that is consistent with the principles of this Standard Valuation Law, as determined by regulations adopted by the director.

(m) A life insurer doing business in the state shall annually submit to the director an opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of a policy or contract are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with the applicable laws of this state.

(n) The actuarial opinion must

(1) be submitted with the annual statement reflecting the valuation of the reserve liabilities;

(2) apply to all business in force, including individual and group health insurance plans;

(3) be based on standards adopted by the Actuarial Standards Board; and

(4) unless exempted by regulation, include an assessment as to whether the reserves and related actuarial items held in support of the policies and contracts, when considered in light of the assets held by an insurer with respect to the reserves and related actuarial items, including investment earnings on the assets and considerations anticipated to be received and retained under policies and contracts, make adequate provision for an insurer's obligations under a policy or contract including the benefits under and expenses associated with a policy or contract.

(o) In the case of an actuarial opinion submitted by a foreign or alien insurer, the director may accept an opinion filed by the insurer with the insurance supervisory official of another state that is accredited by the National Association of Insurance Commissioners if the director determines that the opinion meets the requirements applicable to an insurer domiciled in this state.

(p) The director may adopt regulations to provide a transition period for establishing higher reserves that a qualified actuary may consider necessary in order to render the opinion required under (n) of this section.

(q) A qualified actuary who submits an opinion under (m) of this section

(1) is not liable for damages to a person, other than the insurance company and the director, for an act, error, omission, decision, or conduct with respect to the actuary's opinion except in a case of fraud or wilful misconduct;

(2) is subject to disciplinary action by the director; and

(3) shall prepare a memorandum, in form and substance acceptable to the director, to support the actuarial opinion.

(r) If the insurer fails to provide a supporting memorandum as requested by the director within a period specified by regulation or the director determines that the supporting memorandum fails to meet the standards adopted by regulation or is otherwise unacceptable to the director, the director may engage a qualified actuary, at the expense of the insurer, to review the opinion and the basis for the opinion and to prepare a supporting memorandum as required under (q) of this section.

(s) A memorandum in support of an actuarial opinion and other supporting material provided by an insurer to the director is confidential and may not be made public by the director or another person and is not subject to a civil subpoena, except for the purpose of defending an action seeking damages from a person by reason of an action required by this section. The memorandum or other material may be released by the director with the written consent of the insurer or to the American Academy of Actuaries upon a request stating that the memorandum or other material is required for the purpose of a disciplinary proceeding and setting out procedures satisfactory to the director for preserving the confidentiality of the memorandum or other material. Once a portion of the memorandum or other material is cited by the insurer in its marketing, is cited before a governmental agency other than a state insurance department, or is released by the company to the news media, the remainder of the confidential memorandum or other material is no longer confidential.

(t) An insurer's aggregate reserves for

(1) all life insurance policies, excluding disability and accidental death benefits, issued on or after July 1, 1992, may not be less than the aggregate reserves calculated under (b)(2), (4), (7), and ( l ) of this section, and the mortality table and rates of interest used in calculating nonforfeiture benefits for the policies; and

(2) all policies, contracts, and benefits may not be less than the aggregate reserves determined by a qualified actuary to be necessary to render the opinion required under (m) of this section.

(u) An insurer who submits an actuarial opinion that the insurer knew or should have known was not in compliance with this section is subject to suspension or revocation of the insurer's certificate of authority under AS 21.09.150 (a).