Sec. 31.05.03.06. Conditions for Use of Mortality Tables

A. Plans of Insurance With Separate Rates for Smokers and Nonsmokers. For each plan of insurance with separate rates for smokers and nonsmokers, an insurer may use:

(1) Composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits;

(2) Smoker and nonsmoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by Insurance Article, §5-311, Annotated Code of Maryland, and composite mortality tables to determine the basic minimum reserves, minimum cash surrender values, and amounts of paid-up nonforfeiture benefits; or

(3) Smoker and nonsmoker mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

B. Plans of Insurance Without Separate Rates for Smokers and Nonsmokers. For each plan of insurance without separate rates for smokers and nonsmokers, an insurer shall use the composite mortality tables.

C. Plans of Insurance With Separate Rates for Preferred and Standard Nonsmokers.

(1) For each plan of insurance with separate rates for preferred and standard nonsmokers, an insurer may use super preferred nonsmoker, preferred nonsmoker, and residual standard nonsmoker tables to substitute for the nonsmoker mortality table found in the 2001 CSO Mortality Table to determine minimum reserves.

(2) At the time of election and annually thereafter, except for business valued under the residual standard nonsmoker table, the appointed actuary shall certify that:

(a) The present value of death benefits over the next 10 years after the valuation date, using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the valuation basic table corresponding to the valuation table being used for that class; and

(b) The present value of death benefits over the future life of the contracts, using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the valuation basic table corresponding to the valuation table being used for that class.

D. Plans of Insurance With Separate Rates for Preferred and Standard Smokers.

(1) For each plan of insurance with separate rates for preferred and standard smoker lives, an insurer may use the preferred smoker and residual standard smoker tables to substitute for the smoker mortality table found in the 2001 CSO Mortality Table to determine minimum reserves.

(2) At the time of election and annually thereafter, for business valued under the preferred smoker table, the appointed actuary shall certify that:

(a) The present value of death benefits over the next 10 years after the valuation date, using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the preferred smoker valuation basic table corresponding to the valuation table being used for that class; and

(b) The present value of death benefits over the future life of the contracts, using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the preferred smoker valuation basic table corresponding to the valuation table being used for that class.

E. Unless exempted by the Commissioner, every authorized insurer using the 2001 CSO Preferred Class Structure Mortality Table shall annually file with the Commissioner, with the NAIC, or with a statistical agent designated by the NAIC and acceptable to the Commissioner, statistical reports showing mortality and such other information as the Commissioner may consider necessary or expedient for the administration of the provisions of this regulation.

F. The form of the reports required pursuant to §E of this regulation, shall be established by the Commissioner, or the Commissioner may require the use of a form established by the NAIC or by a statistical agent designated by the NAIC, and acceptable to the Commissioner.

G. The use of the 2001 CSO Preferred Class Structure Mortality Table for the valuation of policies issued prior to January 1, 2007 may not be permitted in any statutory financial statement in which a company reports, with respect to any policy or portion of a policy coinsured, for either of the following:

(1) In cases where the mode of payment of the reinsurance premium is less frequent than the mode of payment of the policy premium, a reserve credit that exceeds, by more than the amount specified in this subsection as Y, the gross reserve calculated before reinsurance. Y is the amount of the gross reinsurance premium that:

(a) Provides coverage for the period from the next policy premium due date to the earlier of the end of the policy year and the next reinsurance premium due date; and

(b) Would be refunded to the ceding entity upon the termination of the policy.

(2) In cases where the mode of payment of the reinsurance premium is more frequent than the mode of payment of the policy premium, a reserve credit that is less than the gross reserve, calculated before reinsurance, by an amount that is less than the amount specified in this subsection as Z. Z is the amount of the gross reinsurance premium that the ceding entity would need to pay the assuming company to provide reinsurance coverage from the period of the next reinsurance premium due date to the next policy premium due date minus any liability established for the proportionate amount not remitted to the reinsurer.

H. For purposes of §G of this regulation, both the reserve credit and the gross reserve before reinsurance (i) for the mean reserve method shall be defined as the mean reserve minus the deferred premium asset, and (ii) for the mid-terminal reserve method shall include the unearned premium reserve. A company may estimate and adjust its accounting on an aggregate basis in order to meet the conditions to use the 2001 CSO Preferred Class Mortality Structure Table.

I. Reserve Liabilities, Cash Surrender Values, and Paid-Up Nonforfeiture Benefits. Subject to the restrictions of Regulations .02 and .10-.12 of this chapter and Insurance Article, Title 5, Subtitle 3, Annotated Code of Maryland, relative to use of the select and ultimate form of the 2001 CSO Mortality Table, an insurer may use the ultimate form or the ultimate and select form of the 2001 CSO Mortality Table to determine:

(1) Minimum reserve liabilities;

(2) Minimum cash surrender values; and

(3) Amounts of paid-up nonforfeiture benefits.

J. Asset Adequacy Analysis.

(1) When the 2001 CSO Mortality Table is the minimum reserve standard for any plan for a company, the actuarial opinion in the annual statement filed with the Commissioner shall be based on an asset adequacy analysis as specified in COMAR 31.05.01.08.

(2) The Commissioner may waive the requirement of §D(1) of this regulation for an insurer doing business in this State and in no other state.