Codified Law 58-26 | South Dakota Legislature

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58-26 VALUATION OF ASSETS, LIABILITIES AND RESERVES

CHAPTER 58-26

VALUATION OF ASSETS, LIABILITIES AND RESERVES

58-26-1      Assets allowed in determination of financial condition.
58-26-2      Valuation of bonds or other evidences of debt--Method of calculation.
58-26-3      Valuation of securities other than evidences of debt.
58-26-4      Preferred or guaranteed stocks--Method of computing value approved by director.
58-26-5      Real property acquired pursuant to mortgage loan or contract for sale--Restriction as to valuation.
58-26-6      Purchase money mortgage on real property--Restriction as to valuation.
58-26-7      Appraisal for valuation of other real property.
58-26-8      Personal property acquired pursuant to chattel mortgage--Restriction as to valuation.
58-26-9      Valuation not to be inconsistent with approved method.
58-26-10      Assets not allowed in determining financial condition.
58-26-10.1      Radio and television facilities allowable as assets.
58-26-11      Capital stock and liabilities chargeable against assets.
58-26-12      Assets allowed as deductions from corresponding liabilities.
58-26-13      Repealed.
58-26-13.1      Actuarial opinion of property, casualty, and health insurers.
58-26-13.2      Time limit for compliance with actuary opinion requirements.
58-26-14 to 58-26-29.      Repealed.
58-26-30      Reserve requirements for health insurance.
58-26-31      Reserve for outstanding losses under liability insurance and workers' compensation.
58-26-32      Reserve for workers' compensation claims under policies written in three years preceding.
58-26-33      Reserve for workers' compensation claims under policies written more than three years preceding.
58-26-34      Reserve for liability policies written during three years preceding.
58-26-35      Maintaining a reserve for outstanding losses under credit insurance policies.
58-26-36      Unearned premium reserve--Insurers required to maintain.
58-26-37      Unearned premium reserve--Computation--Use of table.
58-26-38      Unearned premium reserve--Computation on a prorata basis.
58-26-39      Change in method of computation of unearned premium reserve--Approval of director required.
58-26-40      Unearned premium reserve provisions inapplicable to title insurance.
58-26-41      Unearned premium reserve on marine and transportation insurance.
58-26-42      Repealed.
58-26-43      Increase of inadequate reserves.
58-26-44      Application of chapter.
58-26-44.1      Definition of terms in §§ 58-26-45 to 58-26-105.
58-26-45      Valuation of reserve liabilities for policies and contracts issued before operative date of valuation manual--Calculating reserves.
58-26-45.1      Adoption of NAIC valuation manual of instruction--Valuation of reserve liabilities for contracts issued after operative date of valuation manual.
58-26-46      Annual opinion of qualified actuary required--Promulgation of rules.
58-26-47      Opinion required as to adequacy of reserves to provide for company's obligations.

58-26-48      Promulgation of rules for establishing higher reserves.
58-26-49      Form and substance of actuary's opinion.
58-26-50      Provisions governing submission of actuary's opinion.
58-26-51      Opinion submitted by foreign or alien company.
58-26-52      Qualified actuary defined.
58-26-53      Liability of qualified actuary.
58-26-54      Promulgation of rules defining disciplinary action against company or qualified actuary.
58-26-55      Confidentiality of material supporting opinion of qualified actuary.
58-26-55.1      Opinion of actuary on reserves and related actuarial items to be in accordance with valuation manual.
58-26-56      Minimum standard for valuation of policies and contracts.
58-26-57      Mortality tables used for ordinary life insurance policies.
58-26-58      Mortality tables used for industrial life insurance policies.
58-26-59      Mortality tables used for individual annuity and pure endowment contracts.
58-26-60      Mortality tables used for group annuity and pure endowment contracts.
58-26-61      Disability tables used for total and permanent disability.
58-26-62      Tables used for accidental death benefits.
58-26-63      Tables to be approved by director.
58-26-64      Minimum standard of valuation for individual annuity and pure endowment contracts and group annuity and pure endowment contracts on or after July 1, 1995.
58-26-65      Tables used for individual annuity and pure endowment contracts issued prior to July 1, 1978--Interest.
58-26-66      Tables used for individual single premium immediate annuity contracts issued on or after July 1, 1978--Interest.
58-26-67      Tables used for individual annuity and pure endowment contracts issued on or after July 1, 1978--Interest.
58-26-68      Tables used for annuities and pure endowments purchased under group contracts prior to July 1, 1978--Interest.
58-26-69      Tables used for annuities and pure endowments purchased under group contracts after July 1, 1978--Interest.
58-26-70      Written notice of election to comply with provisions of §§ 58-26-64 to 58-26-69, inclusive--Operative date.
58-26-71      Calendar year statutory valuation interest rates defined.
58-26-72      Weighting factors.
58-26-73      Reference interest rate defined.
58-26-74      Alternative method for determination of reference interest rate.
58-26-75      Valuation of reserves--Policies providing for uniform amount of insurance and requiring payment of uniform premiums--Policies providing varying amounts of insurance or varying premiums--Certain group annuity and pure endowment contracts maintained by employers--Disability and accidental death benefits--Other benefits.
58-26-76      Valuation of reserves for certain annuity or pure endowment contracts.
58-26-77      Minimum aggregate reserves for life insurance policies.
58-26-78      Standards for calculating reserves for policies and contracts issued prior to July 1, 1995.
58-26-79      Standards for calculating reserves for policies, contracts or benefits issued on or after July 1, 1995.
58-26-80      Company's greater standard of valuation may be lowered with director approval.
58-26-81      Determining minimum reserve when gross premium charged is less than the valuation net premium.
58-26-82      Application of §§ 58-26-75 and 58-26-81 to certain life insurance policies issued on or after January 1, 1986.
58-26-83      Requirements for reserves for life insurance providing for future premium determination or for reserves undeterminable under methods in § 58-26-75, 58-26-76, 58-26-81, or 58-26-82.
58-26-84      Promulgation of rules for minimum standards applicable to health plans issued on or after July 1, 1995 and before operative date of valuation manual.
58-26-85      Repealed.
58-26-86      Actuarial opinion summary to be filed with property, casualty, and health insurers' annual statement.
58-26-87      Actuarial report and workpapers to support actuarial opinion.
58-26-88      Preparation of supporting actuarial report or workpapers upon insurer's failure to provide acceptable supporting documents.
58-26-89      Statement of actuarial opinion to be filed with annual statement--Public document.
58-26-90      Confidentiality of actuarial report, workpapers, or actuarial opinion summary provided in support of opinion.
58-26-91      Minimum standard of valuation for policies issued on or after operative date of valuation manual.
58-26-92      Prerequisites for adoption of NAIC valuation manual of instruction.
58-26-93      Adoption of change to valuation manual.
58-26-94      Specifications required for adoption of valuation manual.
58-26-95      Exceptions to valuation manual requirements.
58-26-96      Qualified actuary engaged by director or by official of another state.
58-26-97      Required change in assumption or method and adjustment of reserves.
58-26-98      Reserves to be established using principle-based valuation--Conditions.
58-26-99      Procedures, controls and report regarding principle-based valuation.
58-26-100      Prescribed formulaic reserve component.
58-26-101      Data to be submitted as prescribed in valuation manual.
58-26-102      Confidential information defined.
58-26-103      Confidential information privileged--Use and sharing.
58-26-104      Exceptions to confidentiality of information.
58-26-105      Exemption of certain forms or product lines of domestic insurer.

58-26-1. Assets allowed in determination of financial condition.

In any determination of the financial condition of an insurer, there shall be allowed as assets only such assets as are owned by the insurer and which consist of:

(1) Cash in the possession of the insurer, or in transit under its control, and including the true balance of any deposit in a solvent bank or trust company;

(2) Investments, securities, properties, and loans acquired or held in accordance with this title and in connection therewith the following items:

(a) Interest due or accrued on any bond or evidence of indebtedness which is not in default and which is not valued on a basis including accrued interest;

(b) Declared and unpaid dividends on shares of stock, unless such amount has otherwise been allowed as an asset;

(d) Interest due or accrued on deposits in solvent banks and trust companies, and interest due or accrued on other assets, if such interest is in the judgment of the director a collectible asset;

(e) Interest due or accrued on a mortgage loan, in an amount not exceeding in any event the amount, if any, of the excess of the value of the property less delinquent taxes thereon over the unpaid principal; but in no event may interest accrued for a period in excess of eighteen months be allowed as an asset;

(f) Rent due or accrued on real property if such rent is not in arrears for more than three months, and rent more than three months in arrears if the payment of such rent be adequately secured by property held in the name of the tenant and conveyed to the insurer as collateral;

(g) The unaccrued portion of taxes paid prior to the due date on real property;

(3) Premium notes, policy loans, and other policy assets and liens on policies and certificates of life insurance and annuity contracts and accrued interest thereon, in an amount not exceeding the legal reserve and other policy liabilities carried on each individual policy;

(4) The net amount of uncollected and deferred premiums and annuity considerations in the case of a life insurer;

(5) Premiums in the course of collection, other than for life insurance, not more than three months past due, less commissions payable thereon. The foregoing limitation does not apply to premiums payable directly or indirectly by the United States government or by any of its instrumentalities;

(6) Installment premiums other than life insurance premiums to the extent of the unearned premium reserve carried on the policy to which premiums apply;

(7) Notes and like written obligations not past due, taken for premiums other than life insurance premiums, on policies permitted to be issued on such basis, to the extent of the unearned premium reserves carried thereon;

(8) The full amount of reinsurance recoverable by a ceding insurer from a solvent reinsurer and which reinsurance is authorized under this title;

(9) Amounts receivable by an assuming insurer representing funds withheld by a solvent ceding insurer under a reinsurance treaty;

(10) Deposits or equities recoverable from underwriting associations, syndicates, and reinsurance funds, or from any suspended banking institution, to the extent deemed by the director available for the payment of losses and claims and at values to be determined by the director;

(11) Data and word processing machines used in the insurer's business. However, the original cost of the system shall be at least one thousand dollars but may not be more than three percent of the admitted assets of the insurer. Such cost shall be amortized over a period not to exceed five years;

(12) All assets, whether or not consistent with the provisions of this section, as may be allowed pursuant to the annual statement form approved by the director for the kinds of insurance to be reported upon therein;

(13) Goodwill arising from acquisitions and mergers occurring after January 1, 2001;

(14) Other assets, not inconsistent with the provisions of this section, deemed by the director to be available for the payment of losses and claims at values to be determined by the director.

Source: SL 1966, ch 111, ch 5, § 1; SL 1978, ch 364; SL 1983, ch 376, § 1; SL 2001, ch 283, § 1; SL 2004, ch 308, § 1.

58-26-2. Valuation of bonds or other evidences of debt--Method of calculation.

All bonds or other evidences of debt having a fixed term and rate of interest held by an insurer may, if amply secured and not in default as to principal or interest, be valued as follows:

(1) If purchased at par, at the par value;

(2) If purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime the effective rate of interest at which the purchase was made, or in lieu of such method, according to such accepted method of valuation as is approved by the director;

(3) Purchase price shall in no case be taken at a higher figure than the actual market value at the time of purchase, plus actual brokerage, transfer, postage, or express charges paid in the acquisition of such securities;

(4) Unless otherwise provided by valuation established or approved by the director, no such security shall be carried at above the call price for the entire issue during any period within which the security may be so called.

The director shall have full discretion in determining the method of calculating values according to the rules set forth in this section.

Source: SL 1966, ch 111, ch 5, § 12.

58-26-3. Valuation of securities other than evidences of debt.

Securities, other than those referred to in § 58-26-2, held by an insurer, shall be valued, in the discretion of the director, at their market value, or at their appraised value, or at prices determined by him as representing their fair market value.

Source: SL 1966, ch 111, ch 5, § 13 (1).

58-26-4. Preferred or guaranteed stocks--Method of computing value approved by director.

Preferred or guaranteed stocks or shares while paying full dividends may be carried at a fixed value in lieu of market value, at the discretion of the director and in accordance with such method of computation as he may approve.

Source: SL 1966, ch 111, ch 5, § 13 (2).

58-26-5. Real property acquired pursuant to mortgage loan or contract for sale--Restriction as to valuation.

Real property acquired pursuant to a mortgage loan or contract for sale, in the absence of a recent appraisal deemed by the director to be reliable, shall not be valued at an amount greater than the unpaid principal of the defaulted loan or contract at the date of such acquisition, together with any taxes and expenses paid or incurred in connection with such acquisition, and the cost of improvements thereafter made by the insurer and any amounts thereafter paid by the insurer on assessments levied for improvements in connection with the property.

Source: SL 1966, ch 111, ch 5, § 14 (1).

58-26-6. Purchase money mortgage on real property--Restriction as to valuation.

Purchase money mortgages on real property referred to in § 58-26-5 shall be valued in an amount not exceeding the acquisition cost of the real property covered thereby or ninety per cent of the fair value of such real property, whichever is less.

Source: SL 1966, ch 111, ch 5, § 15.

58-26-7. Appraisal for valuation of other real property.

Real property held by an insurer, other than that described in § 58-26-5, shall not be valued at an amount in excess of fair value as determined by recent appraisal. If valuation is based on an appraisal more than three years old, the director may at his discretion call for and require a new appraisal in order to determine fair value.

Source: SL 1966, ch 111, ch 5, § 14 (2).

58-26-8. Personal property acquired pursuant to chattel mortgage--Restriction as to valuation.

Personal property acquired pursuant to chattel mortgages made in accordance with §§ 58-27-45 to 58-27-47, inclusive, shall not be valued at an amount greater than the unpaid balance of principal on the defaulted loan at the date of acquisition, together with taxes and expenses incurred in connection with such acquisition, or the fair value of such property, whichever amount is the lesser.

Source: SL 1966, ch 111, ch 5, § 14 (3).

58-26-9. Valuation not to be inconsistent with approved method.

No valuations under §§ 58-26-2 to 58-26-8, inclusive, shall be inconsistent with any applicable valuation or method then currently formulated or approved by the national association of insurance commissioners or its successor organization.

Source: SL 1966, ch 111, ch 5, § 16.

58-26-10. Assets not allowed in determining financial condition.

In addition to assets impliedly excluded by other provisions of this title, the following expressly may not be allowed as assets in any determination of the financial condition of an insurer:

(1) Goodwill, except goodwill permitted by § 58-26-1, trade names, and other like intangible assets;

(2) Advances to officers, other than policy loans, whether secured or not, and advances to employees, representatives, insurance producers, and other persons on personal security only;

(3) Stock of such insurer, owned by it, or any material equity therein or loans secured thereby, or any material proportionate interest in such stock acquired or held through the ownership by such insurer of an interest in another firm, corporation, or business unit;

(4) Furniture, fixtures, furnishings, safes, vehicles, libraries, stationery, literature, and supplies, except in the case of title insurers such materials and plants as the insurer is expressly authorized to invest in under this title and except, in the case of any insurer, such personal property as the insurer is permitted to hold pursuant to this title, or which is acquired through foreclosure of chattel mortgages or which is reasonably necessary for the maintenance and operation of real estate lawfully acquired and held by the insurer other than real estate used by it for home office, branch office, and similar purposes;

(5) The amount, if any, by which the aggregate book value of investments as carried in the ledger assets of the insurer exceeds the aggregate value thereof as determined under this title.

Source: SL 1966, ch 111, ch 5, § 3; SL 2001, ch 286, § 134; SL 2004, ch 308, § 2.

58-26-10.1. Radio and television facilities allowable as assets.

If an investment pursuant to § 58-27-51 is in the assets of a separate business of ownership and operation of a radio station, television station, or community antenna television system, duly licensed by the federal communications commission and in which the insurer is authorized to engage under the provisions of its articles of incorporation, whether such assets or property are real, personal, or mixed, then in determining the value of such investments the actual value, but not exceeding the cost thereof, reduced by reasonable depreciation allowances, of the towers, and transmission cables equipment, used exclusively in such separate business and accounts receivable not over thirty days old, generated therein, shall be counted notwithstanding the provisions of subdivision 58-26-10(4).

Source: SDCL, § 58-27-51 as added by SL 1974, ch 317.

58-26-11. Capital stock and liabilities chargeable against assets.

In any determination of the financial condition of an insurer, capital stock and liabilities to be charged against its assets shall include:

(1) The amount of its capital stock outstanding, if any;

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

(3) With reference to life insurance, annuity contracts, and disability and accidental death benefits:

(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 pursuant to this title which are applicable thereto;

(b) Reserves for disability benefits, for both active and disabled lives;

(d) Any additional reserves which may be required by the director consistent with practice formulated or approved by the national association of insurance commissioners, on account of such insurance;

(4) With reference to health insurance, the amount of reserves required pursuant to § 58-26-30;

(5) With reference to insurance other than that specified in subdivisions (3) and (4), 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;

(6) Taxes, expenses, and other obligations due or accrued at the date of the statement.

Source: SL 1966, ch 111, ch 5, § 4.

58-26-12. Assets allowed as deductions from corresponding liabilities.

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 his discretion.

Source: SL 1966, ch 111, ch 5, § 2.

58-26-13

58-26-13. Repealed by SL 1995, ch 284, § 42

58-26-13.1. Actuarial opinion of property, casualty, and health insurers.

Every property and casualty and health insurer doing business in this state shall file with its annual statement an actuarial opinion which complies with the standards and procedures in the National Association of Insurance Commissioners Annual Statement Instructions: Property and Casualty, Title, Life/Accident/Health, Health Maintenance Organizations and Hospital Medical and Dental Service or Indemnity Corporations as adopted by rule promulgated by the director pursuant to chapter 1-26.

Source: SL 1992, ch 349, § 2; SL 1993, ch 357, § 5; SL 1994, ch 375, § 3; SL 1997, ch 293, § 1.

58-26-13.2. Time limit for compliance with actuary opinion requirements.

Each domestic insurer shall comply with §§ 58-26-13.1 and 58-26-44 for the year ending December 31, 1993, and each year thereafter, unless the director permits otherwise.

Each foreign insurer shall comply with §§ 58-26-13.1 and 58-26-44 for the year ending December 31, 1994, and each year thereafter, unless the director permits otherwise.

Source: SL 1992, ch 349, § 4.

58-26-14

58-26-14 to 58-26-29. Repealed by SL 1995, ch 284, § 43

58-26-30. Reserve requirements for health insurance.

For all health insurance policies the insurer shall maintain an active life reserve which shall place a sound value on its liabilities under such policies and be not less than the reserve according to appropriate standards set forth in regulations issued by the director and, in no event, less in the aggregate than the prorata gross unearned premiums for such policies.

Source: SL 1966, ch 111, ch 5, § 7.

58-26-31. Reserve for outstanding losses under liability insurance and workers' compensation.

An insurer shall maintain a reserve for outstanding losses under insurance against loss or damage from accident to or injuries suffered by an employee or other person and for which the insured is liable and which shall be computed as provided by §§ 58-26-32 to 58-26-35, inclusive.

Source: SL 1966, ch 111, ch 5, § 8.

58-26-32. Reserve for workers' compensation claims under policies written in three years preceding.

For all workers' compensation claims under policies written in the three years immediately preceding the date as of which the statement is made, the reserve required by § 58-26-31 shall be calculated in accordance with the Annual Statement Instructions Manual prescribed by the National Association of Insurance Commissioners as adopted by rule by the director pursuant to chapter 1-26. But in any event, the reserve may not be less than the present value at four percent interest of the determined and the estimated unpaid compensation claims under policies written during the three-year period.

Source: SL 1966, ch 111, ch 5, § 8 (4); SL 1995, ch 284, § 44.

58-26-33. Reserve for workers' compensation claims under policies written more than three years preceding.

For all workers' compensation claims under policies written more than three years prior to the date as of which the statement is made, the reserve required by § 58-26-31 shall be the present value at four per cent interest of the determined and the estimated future payments.

Source: SL 1966, ch 111, ch 5, § 8 (3).

58-26-34. Reserve for liability policies written during three years preceding.

For all liability policies written during the three years immediately preceding the date as of which the statement is made, the reserve required by § 58-26-31 shall be calculated in accordance with the Annual Statement Instructions Manual prescribed by the National Association of Insurance Commissioners as adopted by rule by the director pursuant to chapter 1-26. But in any event, the reserve may not be less than the determined and estimated unpaid claims under policies written during the three-year period. For all liability policies written more than three years prior to the date as of which the statement is made, the reserves required by § 58-26-31 shall be determined and estimated unpaid claims.

Source: SL 1966, ch 111, ch 5, § 8 (2); SL 1995, ch 284, § 45.

58-26-35. Maintaining a reserve for outstanding losses under credit insurance policies.

An insurer shall maintain a reserve for outstanding losses under credit insurance policies in accordance with the Annual Statement Instructions Manual prescribed by the National Association of Insurance Commissioners as adopted by rule by the director pursuant to chapter 1-26. But in any event, the reserve may not be less than the determined and estimated unpaid claims on all policies.

Source: SL 1966, ch 111, ch 5, § 8 (1); SL 1995, ch 284, § 46.

58-26-36. Unearned premium reserve--Insurers required to maintain.

As to insurance against loss or damage to property, except as provided in § 58-26-41, and as to all general casualty insurance and surety insurance, every insurer shall maintain an unearned premium reserve on all policies in force.

Source: SL 1966, ch 111, ch 5, § 5 (1).

58-26-37. Unearned premium reserve--Computation--Use of table.

The director may require that reserves required by § 58-26-36 shall 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. If the director does not so require, the portions of the gross premium in force, less applicable reinsurance in solvent insurers, to be held as an unearned premium reserve, shall be computed according to the following table:

Term for which policy was written

Reserve for unearned premium

1 Year or less

1/2

2 Years

1st Year

3/4

2nd Year

1/4

3 Years

1st Year

5/6

2nd Year

1/2

3rd Year

1/6

4 Years

1st Year

7/8

2nd Year

5/8

3rd Year

3/8

4th Year

1/8

5 Years

1st Year

9/10

2nd Year

7/10

3rd Year

1/2

4th Year

3/10

5th Year

1/10

Over 5 Years

Pro Rata

Source: SL 1966, ch 111, ch 5, § 5 (2).

58-26-38. Unearned premium reserve--Computation on a prorata basis.

In lieu of computation according to the table in § 58-26-37, the insurer at its option may compute all of the reserves required by § 58-26-36 on a monthly or more frequent prorata basis.

Source: SL 1966, ch 111, ch 5, § 5 (3).

58-26-39. Change in method of computation of unearned premium reserve--Approval of director required.

After adopting a method for computing the reserve required by § 58-26-36, an insurer shall not change methods without approval of the director.

Source: SL 1966, ch 111, ch 5, § 5 (4).

58-26-40. Unearned premium reserve provisions inapplicable to title insurance.

Sections 58-26-36 to 58-26-39, inclusive, do not apply to title insurance.

Source: SL 1966, ch 111, ch 5, § 5 (5).

58-26-41. Unearned premium reserve on marine and transportation insurance.

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

Source: SL 1966, ch 111, ch 5, § 6.

58-26-42

58-26-42. Repealed by SL 2002, ch 239, § 7

58-26-43. Increase of inadequate reserves.

If loss experience shows that an insurer's loss reserves, however computed or estimated, are inadequate, the director shall require the insurer to maintain loss reserves in such increased amount as is needed to make them adequate.

Source: SL 1966, ch 111, ch 5, § 9.

58-26-44. Application of chapter.

This chapter applies to all persons doing an insurance business notwithstanding any provision in this title exempting them from the insurance laws of this state.

Source: SL 1992, ch 349, § 3.

58-26-44.1. Definition of terms in §§ 58-26-45 to 58-26-105.

Terms used in §§ 58-26-45 to 58-26-105, inclusive, apply on or after the operative date of the valuation manual and mean:

(1) "Accident and health insurance," a contract that incorporates morbidity risk and provides protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the valuation manual;

(2) "Appointed actuary," a qualified actuary who is appointed in accordance with the valuation manual to prepare the actuarial opinion required pursuant to § 58-26-55.1;

(3) "Company," an entity, which:

(a) Has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and has at least one policy in force or on claim; or

(b) Has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in any state and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this state;

(4) "Deposit-type contract," a contract that does not incorporate mortality or morbidity risks and as may be specified in the valuation manual;

(5) "Life insurance," a contract that incorporates mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual;

(6) "NAIC," the National Association of Insurance Commissioners;

(7) "Policyholder behavior," any action a policyholder, contract holder, or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this chapter including, lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization, or benefit elections prescribed by the policy or contract but excluding events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract;

(8) "Principle-based valuation," a reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and is required to comply with §§ 58-26-98 to 58-26-100, inclusive, as specified in the valuation manual;

(9) "Qualified actuary," an individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements and who meets the requirements specified in the valuation manual;

(10) "Tail risk," a risk that occurs either where the frequency of low probability events is higher than expected under a normal probability distribution or where there are observed events of very significant size or magnitude;

(11) "Valuation manual," the manual of valuation instructions adopted by the NAIC as specified in this chapter and as approved by the director pursuant to rules promulgated pursuant to chapter 1-26.

Source: SL 2015, ch 254, § 1.

58-26-45. Valuation of reserve liabilities for policies and contracts issued before operative date of valuation manual--Calculating reserves.

The director shall annually value the reserve liabilities for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in this state issued on or after July 1, 1995, and prior to the operative date of the valuation manual. In calculating the reserves, the director may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves required of any foreign or alien company, the director may accept any valuation made by the insurance supervisory official of any state or other jurisdiction if the valuation complies with the minimum standard provided by this chapter.

The provisions in §§ 58-26-56 to 58-26-84, inclusive, apply to all policies and contracts, as appropriate, subject to this chapter issued on or after July 1, 1995, and prior to the operative date of the valuation manual. The provisions set forth in §§ 58-26-91 to 58-26-100, inclusive, do not apply to any such policies and contracts.

The minimum standard for the valuation of policies and contracts issued prior to July 1, 1995, is that provided by the laws in effect immediately prior to that date.

Source: SL 1995, ch 284, § 1; SL 2015, ch 254, § 2.

58-26-45.1. Adoption of NAIC valuation manual of instruction--Valuation of reserve liabilities for contracts issued after operative date of valuation manual.

The director may, by rules promulgated pursuant to chapter 1-26, adopt the manual of valuation instruction adopted by the NAIC after the NAIC notifies the director that the valuation manual is operative. After the director adopts the NAIC valuation manual of instruction, the director shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every company issued on or after the operative date of the valuation manual. In lieu of the valuation of the reserves required of a foreign or alien company, the director may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided pursuant to this chapter.

The provisions in §§ 58-26-91 to 58-26-100, inclusive, shall apply to all policies and contracts issued on or after the operative date of the valuation manual.

Source: SL 2015, ch 254, § 3.

58-26-46. Annual opinion of qualified actuary required--Promulgation of rules.

Any life insurance company doing business in this state 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 director are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this state. The director shall promulgate rules pursuant to chapter 1-26 to specify the policies and contracts for which an opinion is required and to define the specifics of this opinion and add any other items deemed to be necessary to its scope.

Source: SL 1995, ch 284, § 2.

58-26-47. Opinion required as to adequacy of reserves to provide for company's obligations.

Any life insurance company shall also annually include in the opinion required by §§ 58-26-46 to 58-26-50, inclusive, 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 director by rules promulgated pursuant to chapter 1-26, if considered in light of the assets held by the company with respect to the reserves and related actuarial items, including 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 under the policies and contracts, including the benefits under and expenses associated with the policies and contracts.

Source: SL 1995, ch 284, § 3.

58-26-48. Promulgation of rules for establishing higher reserves.

The director may provide by rules promulgated pursuant to chapter 1-26 for a transition period for establishing any higher reserves which the qualified actuary considers necessary in order to render the opinion required by §§ 58-26-46 to 58-26-50, inclusive.

Source: SL 1995, ch 284, § 4.

58-26-49. Form and substance of actuary's opinion.

Each opinion required by §§ 58-26-47 and 58-26-48 shall be governed by the following provisions:

(1) A memorandum, in form and substance acceptable to the director as specified by rules promulgated pursuant to chapter 1-26, shall be prepared to support each actuarial opinion;

(2) If the insurance company fails to provide a supporting memorandum at the request of the director within a period specified or the director determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the rules or is otherwise unacceptable to the director, the director 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 director.

Source: SL 1995, ch 284, § 5.

58-26-50. Provisions governing submission of actuary's opinion.

Any opinion required by §§ 58-26-46 to 58-26-49, inclusive, shall be governed by the following provisions:

(1) The opinion shall be submitted with the annual statement reflecting the valuation of the reserve liabilities for each year ending on or after December 31, 1995;

(2) The opinion shall apply to any business in force including individual and group health insurance plans, in form and substance acceptable to the director specified by rules promulgated pursuant to chapter 1-26;

(3) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board and on additional standards as the director may by rules prescribe.

Source: SL 1995, ch 284, § 6.

58-26-51. Opinion submitted by foreign or alien company.

In the case of an opinion required to be submitted pursuant to §§ 58-26-46 to 58-26-49, inclusive, by a foreign or alien company, the director may accept the opinion filed by that company with the insurance supervisory official of another state if the director determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

Source: SL 1995, ch 284, § 7.

58-26-52. Qualified actuary defined.

For the purposes of the opinion required by §§ 58-26-46 to 58-26-50, inclusive, qualified actuary means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in rules promulgated pursuant to chapter 1-26.

Source: SL 1995, ch 284, § 8; SL 2015, ch 254, § 4.

58-26-53. Liability of qualified actuary.

Except in cases of fraud or willful misconduct, the qualified actuary is not liable for damages to any person, other than the insurance company and the director, for any act, error, omission, decision, or conduct with respect to the actuary's opinion.

Source: SL 1995, ch 284, § 9.

58-26-54. Promulgation of rules defining disciplinary action against company or qualified actuary.

The director shall promulgate rules pursuant to chapter 1-26 to define disciplinary action that may be taken by the director against the company or the qualified actuary.

Source: SL 1995, ch 284, § 10.

58-26-55. Confidentiality of material supporting opinion of qualified actuary.

Any memorandum in support of the opinion, required pursuant to §§ 58-26-46 to 58-26-49, inclusive, and any other material provided by the company to the director in connection with the opinion, shall be kept confidential by the director, other than for the purpose of defending an action seeking damages from any person by reason of any action required by this chapter or by rules promulgated pursuant to this chapter. However, the memorandum or other material may otherwise be released by the director with the written consent of the company or to the American Academy of Actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the director for preserving the confidentiality of the memorandum or other material. If any portion of the confidential memorandum is cited by the company in its marketing or is cited before any governmental agency other than a state insurance department or division or is released by the company to the news media, all portions of the confidential memorandum are no longer confidential.

Source: SL 1995, ch 284, § 11.

58-26-55.1. Opinion of actuary on reserves and related actuarial items to be in accordance with valuation manual.

(1) Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and subject to regulation by the director shall annually submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, 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 will prescribe the specifics of this opinion including any items deemed to be necessary to its scope.

(2) Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and subject to regulation by the director, except as exempted in the valuation manual, shall also annually include in the opinion required pursuant to subdivision (1), an opinion of the same appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified in the valuation manual, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including 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 under the policies and contracts, including the benefits under and expenses associated with the policies and contracts.

(3) Each opinion required by subdivision (2) is governed by the following provisions:

(a) A memorandum, in form and substance as specified in the valuation manual, and acceptable to the director, 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 director within a period specified in the valuation manual or the director 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 director, the director 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 director.

(4) Every opinion is governed by the following provisions:

(a) The opinion is in form and substance as specified in the valuation manual and acceptable to the director;

(b) The opinion is submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after the operative date of the valuation manual;

(c) The opinion applies to all policies and contracts subject to subdivision (2), plus other actuarial liabilities as may be specified in the valuation manual;

(d) The opinion is 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 director may accept the opinion filed by that company with the insurance supervisory official of another state if the director 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 is not liable for damages to any person, other than the insurance company and the director, for any act, error, omission, decision, or conduct with respect to the appointed actuary's opinion;

(g) Disciplinary action by the director against the company or the appointed actuary shall be defined in rules promulgated by the director, pursuant to chapter 1-26.

Source: SL 2015, ch 254, § 5.

58-26-56. Minimum standard for valuation of policies and contracts.

Except as provided in §§ 58-26-64 to 58-26-74, inclusive, and § 58-26-84, the minimum standard for the valuation of policies and contracts issued prior to July 1, 1995, shall be that provided by the laws in effect immediately prior to July 1, 1995. Except as otherwise provided in §§ 58-26-64 to 58-26-74, inclusive, and § 58-26-84, the minimum standard for the valuation of all policies and contracts issued on or after July 1, 1995, shall be the commissioners' reserve valuation methods defined in §§ 58-26-75, 58-26-76, 58-26-81, 58-26-82, and 58-26-84, three and one-half percent interest, or in the case of life insurance policies and contracts, other than annuity and pure endowment contracts, issued on or after July 1, 1973, four percent interest for such policies issued prior to 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 issued on and after July 1, 1978, and the tables provided for in §§ 58-26-57 to 58-26-63, inclusive.

Source: SL 1995, ch 284, § 12; SL 2015, ch 254, § 6.

58-26-57. Mortality tables used for ordinary life insurance policies.

The tables that shall be used for ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in the policies are: the Commissioners 1941 Standard Ordinary Mortality Table for policies issued prior to the operative date of §§ 58-15-38 and 58-15-42, the Commissioners 1958 Standard Ordinary Mortality Table for policies issued on or after the operative date of §§ 58-15-38 and 58-15-42, and prior to the operative date of §§ 58-15-43.1 to 58-15-43.11, inclusive, provided that for any category of policies issued on female risks, all modified net premiums and present values referred to in this chapter may be calculated according to an age not more than six years younger than the actual age of the insured; and for such policies issued on or after the operative date of §§ 58-15-43.1 to 58-15-43.11, inclusive, (i) the Commissioners 1980 Standard Ordinary Mortality Table, or (ii) at the election of the company for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with ten-year select mortality factors, or (iii) any ordinary mortality table, adopted after 1980 by the NAIC, which is approved by rules promulgated pursuant to chapter 1-26 by the director for use in determining the minimum standard of valuation for the policies.

Source: SL 1995, ch 284, § 13; SL 2015, ch 254, § 7.

58-26-58. Mortality tables used for industrial life insurance policies.

The tables that shall be used for all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in the policies are: the 1941 Standard Industrial Mortality Table for policies issued prior to the operative date of § 58-15-38, and for policies issued on or after the operative date, the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table, adopted after 1980 by the NAIC, that is approved by rules promulgated pursuant to chapter 1-26 by the director for use in determining the minimum standard of valuation for the policies.

Source: SL 1995, ch 284, § 14; SL 2015, ch 254, § 8.

58-26-59. Mortality tables used for individual annuity and pure endowment contracts.

The tables that shall be used for individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies are: the 1937 Standard Annuity Mortality Table, or at the option of the company, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the director.

Source: SL 1995, ch 284, § 15.

58-26-60. Mortality tables used for group annuity and pure endowment contracts.

The tables that shall be used for group annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies are: the Group Annuity Mortality Table for 1951, any modification of the table approved by the director or at the option of the company, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts.

Source: SL 1995, ch 284, § 16.

58-26-61. Disability tables used for total and permanent disability.

The tables that shall be used for total and permanent disability benefits in or supplementary to ordinary policies or contracts are: for policies or contracts issued on or after January 1, 1966, 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 tables of disablement rates and termination rates adopted after 1980 by the NAIC, that are approved by rules promulgated pursuant to chapter 1-26 by the director for use in determining the minimum standard of valuation for the policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either of the tables or, at the option of the company, the Class (3) Disability Table (1926) and for policies issued prior to January 1, 1961, the Class (3) Disability Table (1926). Any table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies.

Source: SL 1995, ch 284, § 17; SL 2015, ch 254, § 9.

58-26-62. Tables used for accidental death benefits.

The tables that shall be used for accidental death benefits in or supplementary to policies issued on or after January 1, 1966, are: the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the NAIC, that is approved by rules promulgated pursuant to chapter 1-26 by the director for use in determining the minimum standard of valuation for the policies; for policies issued on or after January 1, 1961, and prior to January 1, 1966, either table or, at the option of the company, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table shall be combined with a mortality table for calculating the reserves for life insurance policies.

Source: SL 1995, ch 284, § 18; SL 2015, ch 254, § 10.

58-26-63. Tables to be approved by director.

The tables for group life insurance, life insurance issued on the substandard basis, and other special benefits shall be approved by the director.

Source: SL 1995, ch 284, § 19.

58-26-64. Minimum standard of valuation for individual annuity and pure endowment contracts and group annuity and pure endowment contracts on or after July 1, 1995.

Except as provided in §§ 58-26-71 to 58-26-74, inclusive, the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after July 1, 1995, and for annuities and pure endowments purchased on or after July 1, 1995, under group annuity and pure endowment contracts, are the commissioners' reserve valuation methods defined in §§ 58-26-75 and 58-26-76 and the tables and interest rates set forth in §§ 58-26-65 to 58-26-69, inclusive.

Source: SL 1995, ch 284, § 20; SL 2015, ch 254, § 11.

58-26-65. Tables used for individual annuity and pure endowment contracts issued prior to July 1, 1978--Interest.

The tables that shall be used for individual annuity and pure endowment contracts issued prior to July 1, 1978, excluding any disability and accidental death benefits in the contracts are: the 1971 Individual Annuity Mortality Table or any modification of this table approved by the director, and six percent interest for single premium immediate annuity contracts, and four percent interest for all other individual annuity and pure endowment contracts.

Source: SL 1995, ch 284, § 21.

58-26-66. Tables used for individual single premium immediate annuity contracts issued on or after July 1, 1978--Interest.

The tables that shall be used for individual single premium immediate annuity contracts issued on or after July 1, 1978, excluding any disability and accidental death benefits in the contracts are: the 1971 Individual Annuity Mortality Table or any individual annuity mortality table, adopted after 1980 by the NAIC that is approved by rules promulgated pursuant to chapter 1-26 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.

Source: SL 1995, ch 284, § 22; SL 2015, ch 254, § 12.

58-26-67. Tables used for individual annuity and pure endowment contracts issued on or after July 1, 1978--Interest.

The tables that shall be used for individual annuity and pure endowment contracts issued on or after July 1, 1978, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in the contracts are: the 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted after 1980 by the NAIC, that is approved by rules promulgated pursuant to chapter 1-26 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 individual annuity and pure endowment contracts.

Source: SL 1995, ch 284, § 23; SL 2015, ch 254, § 13.

58-26-68. Tables used for annuities and pure endowments purchased under group contracts prior to July 1, 1978--Interest.

The tables that shall be used for all annuities and pure endowments purchased prior to July 1, 1978, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts are: the 1971 Group Annuity Mortality Table or any modification of this table approved by the director, and six percent interest.

Source: SL 1995, ch 284, § 24.

58-26-69. Tables used for annuities and pure endowments purchased under group contracts after July 1, 1978--Interest.

The tables that shall be used for all annuities and pure endowments purchased on or after July 1, 1978, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts are: the 1971 Group Annuity Mortality Table, or any group annuity mortality table adopted after 1980 by the NAIC, that is approved by rules promulgated pursuant to chapter 1-26 by the director for use in determining the minimum standard of valuation for annuities and pure endowments, or any modification of these tables approved by the director, and seven and one-half percent interest.

Source: SL 1995, ch 284, § 25; SL 2015, ch 254, § 14.

58-26-70. Written notice of election to comply with provisions of §§ 58-26-64 to 58-26-69, inclusive--Operative date.

After July 1, 1973, any company may file with the director a written notice of its election to comply with the provisions of §§ 58-26-64 to 58-26-69, inclusive, after a specified date before January 1, 1979, which is the operative date of §§ 58-26-64 to 58-26-69, inclusive, for the company. However, if a company does not elect to comply, the operative date of §§ 58-26-64 to 58-26-69, inclusive, for the company is January 1, 1979.

Source: SL 1995, ch 284, § 26.

58-26-71. Calendar year statutory valuation interest rates defined.

The interest rates used in determining the minimum standard for the valuation of life insurance policies issued in a particular calendar year, on or after the operative date of §§ 58-15-43.1 to 58-15-43.11, inclusive; individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1983; annuities and pure endowments purchased in a particular calendar year on or after January 1, 1983, under group annuity and pure endowment contracts; and the net increase, if any, in a particular calendar year after January 1, 1983, in amounts held under guaranteed interest contracts; shall be the calendar year statutory valuation interest rates as defined in this section.

(1) 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:

(a) For life insurance,

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

(b) For single premiums immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options,

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 §§ 58-26-71 to 58-26-74, inclusive, and W is the weighting factor defined in §§ 58-26-71 to 58-26-74, inclusive;

(c) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in subdivision (b), the formula for life insurance stated in subdivision (a) applies to annuities and guaranteed interest contracts with guarantee durations in excess of ten years and the formula for single premium immediate annuities stated in subdivision (b) applies to annuities and guaranteed interest contracts with guarantee duration of ten years or less;

(d) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in subdivision (b) applies;

(e) 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 single premium immediate annuities stated in subdivision (b) applies.

(2) However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for life insurance policies is equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980, using the reference interest rate defined in 1979, and shall be determined for each subsequent calendar year regardless of when §§ 58-15-43.1 to 58-15-43.11, inclusive, became operative.

Source: SL 1995, ch 284, § 27; SL 2015, ch 254, § 15.

58-26-72. Weighting factors.

The weighting factors referred to in the formulas stated in § 58-26-71 are given in the following tables:

(1) Weighting factors for life insurance:

Guarantee, Duration (Years)

Weighting 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 guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy;

(2) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options: .80

(3) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in subdivision (2) above, shall be as specified in tables (a), (b), and (c) below, according to the rules and definitions in (d), (e), and (f) below:

(a) For annuities and guaranteed interest contracts valued on an issue year basis:

Guarantee Duration (Years)

Weighting Factor for Plan Type

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

(b) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in (a) above increased by:

Plan Type

.15

.25

.05

(c) 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 twelve months beyond the valuation date, the factors shown in table (a) or derived in table (b) increased by:

Plan Type

.05

(d) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration 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 twenty years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guaranteed duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

(e) Plan type as used in the above tables is defined as follows:

(i) Plan Type A: At any time policyholder may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) without adjustment but in installments over five years or more, or (3) as an immediate life annuity, or (4) no withdrawal permitted.

(ii) Plan Type B: Before expiration of the interest rate guarantee, policyholder may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) without adjustment but in installments over five years or more or (3) 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.

(iii) Plan Type C: Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five years either (1) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(f) A company may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in §§ 58-26-71 to 58-26-74, inclusive, an issue year basis of valuation refers to 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 refers to 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.

Source: SL 1995, ch 284, § 28.

58-26-73. Reference interest rate defined.

Reference interest rate referred to in § 58-26-71 is defined as follows:

(1) For all life insurance, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year next preceding the year of issue, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.;

(2) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or year of purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, 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 stated in subdivision (2), with guarantee duration in excess of ten years, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, 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 stated in subdivision (2), with guarantee duration of ten years or less, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, 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 over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, 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 stated in subdivision (2), the average over a period of twelve months, ending on June thirtieth of the calendar year of the change in the fund, of the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as published by Moody's Investors Service, Inc.

Source: SL 1995, ch 284, § 29.

58-26-74. Alternative method for determination of reference interest rate.

If the Monthly Average of the Composite Yield on Seasoned Corporate Bonds is no longer published by Moody's Investors Service, Inc., or if the NAIC determines that the Monthly Average of the Composite Yield on Seasoned Corporate Bonds as published by Moody's Investors Service, Inc., is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, which is adopted by the NAIC and approved by rules promulgated pursuant to chapter 1-26 by the director, may be substituted.

Source: SL 1995, ch 284, § 30; SL 2015, ch 254, § 16.

58-26-75. Valuation of reserves--Policies providing for uniform amount of insurance and requiring payment of uniform premiums--Policies providing varying amounts of insurance or varying premiums--Certain group annuity and pure endowment contracts maintained by employers--Disability and accidental death benefits--Other benefits.

Except as otherwise provided in §§ 58-26-76, 58-26-81, 58-26-82, and 58-26-84, reserves according to the commissioners' 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 future guaranteed benefits provided for by the policies, over the then present value of any future modified net premiums of the policies. The modified net premiums for any policy shall be the uniform percentage of the respective contract premiums for the benefits such 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 subdivision (1) over subdivision (2) as follows:

(1) 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 per annum payable on the first and each subsequent anniversary of a policy on which a premium falls due. However, the net level annual premium may not exceed the net level annual premium on the nineteen 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;

(2) A net one year term premium for the benefits provided for in the first policy year.

Any life insurance policy issued on or after January 1, 1986, 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 and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than the excess premium, the reserve according to the commissioners' reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined in this chapter as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than the excess premium shall, except as otherwise provided in §§ 58-26-81 and 58-26-82, be the greater of the reserve as of the policy anniversary calculated as described in the preceding paragraph and the reserve as of the policy anniversary calculated as described in that paragraph, but with (i) the value defined in subdivision (1) of that paragraph being reduced by fifteen percent of the amount of excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on the date as an endowment, and (iv) the cash surrender value provided on the date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in §§ 58-26-56 to 58-26-63, inclusive, and §§ 58-26-71 to 58-26-74, inclusive, shall be used.

Reserves according to the commissioners' reserve valuation method for: (i) life insurance policies providing for 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 section 408 of the Internal Revenue Code, as of January 1, 1995; (iii) disability and accidental death benefits in all policies and contracts; and (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 the preceding paragraphs of this section.

Source: SL 1995, ch 284, § 31; SL 2015, ch 254, § 17.

58-26-76. Valuation of reserves for certain annuity or pure endowment contracts.

This section 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 accounts or individual retirement annuities under section 408 of the Internal Revenue Code, as of January 1, 1995.

Reserves according to the commissioners' annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in the contracts, are 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 the 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 the future gross considerations, required by the terms of the contract, that become payable prior to the end of the 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 the contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contract to determine nonforfeiture values.

Source: SL 1995, ch 284, § 32.

58-26-77. Minimum aggregate reserves for life insurance policies.

No company's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after July 1, 1995, may be less than the aggregate reserves calculated in accordance with the methods set forth in §§ 58-26-75, 58-26-76, 58-26-81, 58-26-82, and 58-26-83 and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for the policies. The aggregate reserves for all policies, contracts, and benefits may not be less than the aggregate reserves determined by the appointed actuary to be necessary to give the opinion required by §§ 58-26-46 to 58-26-55, inclusive.

Source: SL 1995, ch 284, § 33; SL 2015, ch 254, § 18.

58-26-78. Standards for calculating reserves for policies and contracts issued prior to July 1, 1995.

Reserves for policies and contracts issued prior to July 1, 1995, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for all the policies and contracts than the minimum reserves required by the laws in effect immediately prior to July 1, 1995.

Source: SL 1995, ch 284, § 34; SL 2015, ch 254, § 19.

58-26-79. Standards for calculating reserves for policies, contracts or benefits issued on or after July 1, 1995.

Reserves for any category of policies, contracts, or benefits as established by the director, issued on or after July 1, 1995, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for any category than those calculated according to the minimum standard provided in this chapter, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, may not be greater than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided in the policies or contracts.

Source: SL 1995, ch 284, § 35; SL 2015, ch 254, § 20.

58-26-80. Company's greater standard of valuation may be lowered with director approval.

Any company which adopts any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this chapter may, with the approval of the director, adopt any lower standard of valuation, but not lower than the minimum provided by this chapter. However, for the purposes of this section and §§ 58-26-78 and 58-26-79, the holding of additional reserves previously determined by the appointed actuary to be necessary to render the opinion required by §§ 58-26-46 to 58-26-55, inclusive, is not considered to be the adoption of a higher standard of valuation.

Source: SL 1995, ch 284, § 36; SL 2015, ch 254, § 21.

58-26-81. Determining minimum reserve when gross premium charged is less than the valuation net premium.

If in any contract year the gross premium charged by any company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for the policy or contract is 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. The minimum valuation standards of mortality and rate of interest referred to in this section and § 58-26-82 are those standards stated in §§ 58-26-56 to 58-26-63, inclusive, and §§ 58-26-71 to 58-26-74, inclusive.

Source: SL 1995, ch 284, § 37; SL 2015, ch 254, § 22.

58-26-82. Application of §§ 58-26-75 and 58-26-81 to certain life insurance policies issued on or after January 1, 1986.

If for any life insurance policy issued on or after January 1, 1986, 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 and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than the excess premium, the foregoing provisions of § 58-26-81 and this section shall be applied as if the method actually used in calculating the reserve for the policy were the method described in § 58-26-75, ignoring the second paragraph of § 58-26-75. The minimum reserve at each policy anniversary of a policy shall be the greater of the minimum reserve calculated in accordance with § 58-26-75, including the second paragraph of that section, and the minimum reserve calculated in accordance with § 58-26-81 and this section.

Source: SL 1995, ch 284, § 38.

58-26-83. Requirements for reserves for life insurance providing for future premium determination or for reserves undeterminable under methods in § 58-26-75, 58-26-76, 58-26-81, or 58-26-82.

Any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of a nature that the minimum reserves cannot be determined by the methods described in §§ 58-26-75, 58-26-76, 58-26-81, and 58-26-82, the reserves which are held under any plan must:

(1) Be appropriate in relation to the benefits and the pattern of premiums for that plan; and

(2) Be computed by a method which is consistent with the principles of this Standard Valuation Law, as determined by rules promulgated by the director pursuant to chapter 1-26.

Source: SL 1995, ch 284, § 39.

58-26-84. Promulgation of rules for minimum standards applicable to health plans issued on or after July 1, 1995 and before operative date of valuation manual.

The director shall promulgate rules pursuant to chapter 1-26 for containing the minimum standards applicable to the valuation of health plans, including disability, sickness, and accident, issued on or after July 1, 1995, and prior to the operative date of the valuation manual. For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required pursuant to § 58-26-45.1.

Source: SL 1995, ch 284, § 40; SL 2015, ch 254, § 23.

58-26-85

58-26-85. Repealed by SL 2015, ch 254, § 24.

58-26-86. Actuarial opinion summary to be filed with property, casualty, and health insurers' annual statement.

Each property and casualty and health insurer domiciled in this state shall file with the insurer's annual statement an actuarial opinion summary written by the company's appointed actuary which complies with the National Association of Insurance Commissioners annual statement instructions: property and casualty, title, life/accident/health, health maintenance organizations, and hospital medical and dental service or indemnity corporations as adopted by rules promulgated by the director pursuant to chapter 1-26.

A company licensed, but not domiciled in this state, shall provide the actuarial opinion summary upon request.

Source: SL 2009, ch 271, § 41.

58-26-87. Actuarial report and workpapers to support actuarial opinion.

The actuarial report and underlying workpapers as required by the National Association of Insurance Commissioners annual statement instructions, as adopted by rules promulgated by the director pursuant to chapter 1-26, shall be prepared to support each actuarial opinion.

Source: SL 2009, ch 271, § 42.

58-26-88. Preparation of supporting actuarial report or workpapers upon insurer's failure to provide acceptable supporting documents.

If the insurance company fails to provide a supporting actuarial report or workpapers at the request of the director or the director determines that the supporting actuarial report or workpapers provided by the insurance company is otherwise unacceptable, the director 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 actuarial report or workpapers.

Source: SL 2009, ch 271, § 43.

58-26-89. Statement of actuarial opinion to be filed with annual statement--Public document.

The statement of actuarial opinion shall be provided with the annual statement in accordance with the appropriate National Association of Insurance Commissioners Property and Casualty annual statement instructions: property and casualty, title, life/accident/health, health maintenance organizations and hospital medical and dental service or indemnity corporations as adopted by rules promulgated by the director pursuant to chapter 1-26, and shall be treated as a public document.

Source: SL 2009, ch 271, § 44.

58-26-90. Confidentiality of actuarial report, workpapers, or actuarial opinion summary provided in support of opinion.

Documents, materials, or other information in the possession or control of the Division of Insurance that are considered an actuarial report, workpapers, or actuarial opinion summary provided in support of the opinion, and any other material provided by the company to the director in connection with the actuarial report, workpapers, or actuarial opinion summary, are confidential and privileged, are not subject to § 1-26-2, 1-27-1, or 58-2-26, are not subject to subpoena, and are not subject to discovery or admissible in evidence in any private civil action.

This section does not limit the director's authority to release the documents to the Actuarial Board for Counseling and Discipline (ABCD) so long as the material is required for the purpose of professional disciplinary proceedings and that the ABCD establishes procedures satisfactory to the director for preserving the confidentiality of the documents, nor does this section limit the director's authority to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as part of the director's official duties.

Source: SL 2009, ch 271, § 45.

58-26-91. Minimum standard of valuation for policies issued on or after operative date of valuation manual.

For policies issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required pursuant to § 58-26-45.1, except as provided pursuant to § 58-26-95 or 58-26-97.

Source: SL 2015, ch 254, § 25.

58-26-92. Prerequisites for adoption of NAIC valuation manual of instruction.

The director may not adopt the NAIC valuation manual of instruction until all of the following have occurred:

(1) The valuation manual is adopted by the NAIC by an affirmative vote of at least forty-two members, or three-fourths of the members voting, whichever is greater;

(2) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, is enacted by states representing greater than seventy-five percent of the direct premiums written as reported in the following annual statements submitted for 2008: life, accident, and health annual statements; health annual statements; or fraternal annual statements;

(3) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, is enacted by at least forty-two of the following fifty-five jurisdictions: The fifty states of the United States, American Samoa, the American Virgin Islands, the District of Columbia, Guam, and Puerto Rico.

Source: SL 2015, ch 254, § 26.

58-26-93. Adoption of change to valuation manual.

The director may approve a change to the valuation manual pursuant to rules promulgated pursuant to chapter 1-26 when the change to the valuation manual is adopted by the NAIC by an affirmative vote representing:

(1) At least three-fourths of the members of the NAIC voting, but not less than a majority of the total membership; and

(2) Members of the NAIC representing jurisdictions totaling greater than seventy-five percent of the direct premiums written as reported in the following annual statements most recently available prior to the vote in subdivision (1) above: life, accident, and health annual statements, health annual statements, or fraternal annual statements.

Source: SL 2015, ch 254, § 27.

58-26-94. Specifications required for adoption of valuation manual.

The director may adopt the NAIC valuation manual of instruction if the valuation manual specifies the following:

(1) Minimum valuation standards for, and definitions of, the policies or contracts subject to § 58-26-45.1. The minimum valuation standards are:

(a) The commissioner's reserve valuation method for life insurance contracts, other than annuity contracts, subject to § 58-26-45.1;

(b) The commissioners annuity reserve valuation method for annuity contracts subject to § 58-26-45.1; and

(2) Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in § 58-26-98 and the minimum valuation standards consistent with those requirements;

(3) For policies and contracts subject to a principle-based valuation pursuant to §§ 58-26-98 to 58-26-100, inclusive:

(a) Requirements for the format of reports to the director pursuant to subdivision 58-26-99(3), and which shall include information necessary to determine if the valuation is appropriate and in compliance with this chapter;

(b) Assumptions are prescribed for risks over which the company does not have significant control or influence; and

(c) Procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of such procedures;

(4) For policies not subject to a principle-based valuation pursuant to §§ 58-26-98 to 58-26-100, inclusive, the minimum valuation standard shall:

(a) Be consistent with the minimum standard of valuation prior to the operative date of the valuation manual; or

(b) 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;

(5) Other requirements, including those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules, and internal controls; and

(6) The data and form of the data required pursuant to § 58-26-101, with whom the data must be submitted, and may specify other requirements including data analyses and reporting of analyses.

Source: SL 2015, ch 254, § 28.

58-26-95. Exceptions to valuation manual requirements.

In the absence of a specific valuation requirement or if a specific valuation requirement in the valuation manual is not, in the opinion of the director, in compliance with this chapter, then the company shall, with respect to the requirements, comply with minimum valuation standards prescribed by the director by rules promulgated pursuant to chapter 1-26.

Source: SL 2015, ch 254, § 29.

58-26-96. Qualified actuary engaged by director or by official of another state.

The director may engage a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and opine on the appropriateness of any reserve assumption or method used by the company, or to review and opine on a company's compliance with any requirement set forth in this chapter. The director may rely upon the opinion, regarding provisions contained within this chapter, of a qualified actuary engaged by the insurance supervisory official of another state, district or territory of the United States. As used in this section, the term, engage, includes employment and contracting.

Source: SL 2015, ch 254, § 30.

58-26-97. Required change in assumption or method and adjustment of reserves.

The director may require a company to change any assumption or method that in the opinion of the director is necessary in order to comply with the requirements of the valuation manual or this chapter; and the company shall adjust the reserves as required by the director. The director may take other disciplinary action as permitted pursuant to the laws of this state.

Source: SL 2015, ch 254, § 31.

58-26-98. Reserves to be established using principle-based valuation--Conditions.

A company must establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:

(1) 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 during the lifetime of the contracts. For polices or contracts with significant tail risk, reflects conditions appropriately adverse to quantify the tail risk;

(2) Incorporate assumptions, risk analysis methods, financial models, and management techniques that are consistent with, but not necessarily identical to, those utilized within the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumption or method;

(3) Incorporate assumptions that are derived in one of the following manners:

(a) The assumption is prescribed in the valuation manual;

(b) For an assumption that is not prescribed, the assumption shall be established utilizing the company's available experience, to the extent it is relevant and statistically credible; or to the extent that company data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience;

(4) Provide margins for uncertainty including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.

Source: SL 2015, ch 254, § 32.

58-26-99. Procedures, controls and report regarding principle-based valuation.

A company using a principle-based valuation for one or more policies or contracts subject to §§ 58-26-98 to 58-26-100, inclusive, as specified in the valuation manual shall:

(1) Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual;

(2) Provide to the director and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. The controls shall be designed to assure that all material risks inherent in the liabilities and associated assets subject to such valuation are included in the valuation, and that valuations are made in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year;

(3) Develop, and file with the director upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.

Source: SL 2015, ch 254, § 33.

58-26-100. Prescribed formulaic reserve component.

A principle-based valuation may include a prescribed formulaic reserve component.

Source: SL 2015, ch 254, § 34.

58-26-101. Data to be submitted as prescribed in valuation manual.

A company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the valuation manual.

Source: SL 2015, ch 254, § 35.

58-26-102. Confidential information defined.

For purposes of this chapter, confidential information, means:

(1) A memorandum in support of an opinion submitted pursuant to §§ 58-26-46 to 58-26-55.1, inclusive, and any other document, material, and other information, including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the director or any other person in connection with such memorandum;

(2) All documents, materials, and other information, including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the director or any other person in the course of an examination made pursuant to § 58-26-96; provided that if an examination report or other material prepared in connection with an examination made pursuant to chapter 58-3 is not held as private and confidential information pursuant to chapter 58-3, an examination report or other material prepared in connection with an examination made pursuant to § 58-26-96 is not confidential information to the same extent as if such examination report or other material had been prepared pursuant to chapter 58-3;

(3) Any reports, documents, materials, and other information developed by a company in support of, or in connection with, an annual certification by the company pursuant to subdivision 58-26-99(2) evaluating the effectiveness of the company's internal controls with respect to a principle-based valuation and any other documents, materials, and other information, including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the director or any other person in connection with such reports, documents, materials, and other information;

(4) Any principle-based valuation report developed pursuant to subdivision 58-26-99(3) and any other documents, materials, and other information, including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the director or any other person in connection with such report; and

(5) Any documents, materials, data, and other information submitted by a company pursuant to § 58-26-101, collectively, "experience data," and any other documents, materials, data, and other information, including all working papers, and copies thereof, created or produced in connection with such experience data, in each case that include any potentially company-identifying or personally identifiable information, that is provided to or obtained by the director together with any experience data, the experience materials, and any other documents, materials, data, and other information, including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the director or any other person in connection with such experience materials.

Source: SL 2015, ch 254, § 36.

58-26-103. Confidential information privileged--Use and sharing.

(1) Except as provided in §§ 58-26-102 to 58-26-104, inclusive, a company's confidential information is confidential by law and privileged, and is not subject to open records, freedom of information, sunshine or other appropriate phrase, is not subject to subpoena and is not subject to discovery or admissible in evidence in any private civil action; provided, however, that the director is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the director's official duties;

(2) Neither the director nor any person who received confidential information while acting under the authority of the director is permitted to testify in any private civil action concerning any confidential information;

(3) In order to assist in the performance of the director's duties, the director may share confidential information:

(a) With other state, federal, and international regulatory agencies and with the NAIC and its affiliates and subsidiaries; and

(b) In the case of confidential information specified in subdivisions 58-26-102(1) and (4) only, with the Actuarial Board for Counseling and Discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal, and international law enforcement officials;

In the case of (a) and (b), provided that such recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of such documents, materials, data, and other information in the same manner and to the same extent as required for the director;

(4) The director may receive documents, materials, data, and other information, including otherwise confidential and privileged documents, materials, data, or information, from the NAIC and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions and from the Actuarial Board for Counseling and Discipline or its successor and shall maintain as confidential or privileged any document, material, data, or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or other information;

(5) The director may enter into agreements governing sharing and use of information consistent with this section;

(6) No waiver of any applicable privilege or claim of confidentiality in the confidential information occurs as a result of disclosure to the director pursuant to this section or as a result of sharing as authorized in subdivision (3);

(7) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established pursuant to this section is available and enforced in any proceeding in, and in any court of, this state;

(8) For purposes of §§ 58-26-102 to 58-26-104, inclusive, regulatory agency, law enforcement agency, and the NAIC include their employees, agents, consultants, and contractors.

Source: SL 2015, ch 254, § 37.

58-26-104. Exceptions to confidentiality of information.

Notwithstanding § 58-26-103, any confidential information specified in subdivisions 58-26-102(1) and (4):

(1) May be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted pursuant to §§ 58-26-46 to 58-26-55.1, inclusive, or principle-based valuation report developed pursuant to subdivision 58-26-99(3), by reason of an action required by this chapter or by regulations promulgated hereunder;

(2) May otherwise be released by the director with the written consent of the company; and

(3) Once any portion of a memorandum in support of an opinion submitted pursuant to §§ 58-26-46 to 58-26-55.1, inclusive, or a principle-based valuation report developed pursuant to subdivision 58-26-99(3), is cited by the company in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of such memorandum or report is no longer confidential.

Source: SL 2015, ch 254, § 38.

58-26-105. Exemption of certain forms or product lines of domestic insurer.

The director may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in South Dakota from the requirements of §§ 58-26-91 to 58-26-97, inclusive, provided:

(1) The director has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing; and

(2) The company computes reserves using assumptions and methods used prior to the operative date of the valuation manual in addition to any requirements established by the director and promulgated by regulation.

For any company granted an exemption pursuant to this section, §§ 58-26-46 to 58-26-84, inclusive, are applicable. With respect to any company applying this exemption, any reference to §§ 58-26-91 to 58-26-97, inclusive, found in §§ 58-26-46 to 58-26-84, inclusive, is not applicable.

Source: SL 2015, ch 254, § 39.