§ 4494. Reports and valuations

Reports shall be filed and synopses of annual statements shall be published in accordance with the provisions of this section.

(1) Every society transacting business in this State shall annually, on or before March 1, unless for cause shown such time has been extended by the Commissioner of Financial Regulation, file with the Commissioner of Financial Regulation a true statement of its financial condition, transactions, and affairs for the preceding calendar year and pay a fee of $20.00 for filing it. The statement shall be in general form and context as approved by the National Association of Insurance Commissioners for fraternal benefit societies and as supplemented by additional information required by the Commissioner of Financial Regulation.

(2) A synopsis of its annual statement providing an explanation of the facts concerning the condition of the society thereby disclosed shall be printed and mailed to each benefit member of the society not later than June 1 of each year, or, in lieu thereof, the synopsis may be published in the society’s official publication.

(3) As a part of the annual statement required in this section, each society shall, on or before March 1, file with the Commissioner a valuation of its certificates in force on December 31 last preceding; provided, however, the Commissioner may, in the Commissioner’s discretion for cause shown, extend the time for filing the valuation for not more than two calendar months. Such report of valuation shall show, as reserve liabilities, the difference between the present mid-year value of the promised benefits provided in the certificates of the society in force and the present mid-year value of the future net premiums as the same are in practice actually collected, not including any value for the right to make extra assessments and not including any amount by which the present mid-year value of future net premiums exceeds the present mid-year value of promised benefits on individual certificates. At the option of any society, in lieu of the above, the valuation may show the net tabular value. The net tabular value as to certificates issued before one year after November 22, 1959 shall be determined in accordance with the provisions of law applicable before November 22, 1959, and as to certificates issued on or after one year from November 22, 1959 shall be not less than the reserves determined according to the Commissioners’ Reserve Valuation method as defined in this section. If the premium charged is less than the tabular net premium according to the basis of valuation used, an additional reserve equal to the present value of the deficiency in the premiums shall be set up and maintained as a liability. The reserve liabilities shall be properly adjusted in the event that the mid-year or tabular values are not appropriate.

(4)(A) Reserves according to the Commissioners’ Reserve Valuation method, for the life insurance and endowment benefits of certificates providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided for by the certificates, over the then present value of any future modified net premiums for the certificates. The modified net premiums for any such certificate shall be such percentage of the respective contract premiums for the benefits that the present value, at the date of issue of the certificate, of all such modified net premiums shall be equal to the sum of the then present value of the benefits provided for by the certificate and the excess of subdivision (i) of this subdivision (4)(A) over subdivision (ii) of this subdivision (4)(A) as follows:

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

(ii) a net one-year term premium for the benefits provided for in the first certificate year.

(B) Reserves according to the Commissioners’ Reserve Valuation method for (i) life insurance benefits for varying amounts of benefits or requiring the payment of varying premiums, (ii) annuity and pure endowment benefits, (iii) disability and accidental death benefits in all certificates and contracts, and (iv) all other benefits except life insurance and endowment benefits, shall be calculated by a method consistent with the principles of this subdivision.

(5) The present value of deferred payments due under incurred claims or matured certificates shall be deemed a liability of the society and shall be computed upon mortality and interest standards prescribed in subdivision (6) of this section.

(6)(A) Such valuation and underlying data shall be certified by a competent actuary or, at the expense of the society, verified by the actuary of the department of insurance of the state of domicile of the society.

(B) The minimum standards of valuation for certificates issued before one year from November 22, 1959 shall be those provided by the law applicable immediately before November 22, 1959 but not lower than the standards used in the calculating of rates for the certificates.

(C) The minimum standard of valuation for certificates issued after one year from November 22, 1959 shall be three and one-half percent interest and the following tables or such interest assumptions and tables as are authorized for use by domestic life insurers:

(i) for certificates of life insurance—American Men Ultimate Table of Mortality, with Bowerman’s or Davis’ Extension thereof or with the consent of the Commissioner of Financial Regulation, the Commissioner’s 1941 Standard Ordinary Mortality Table or the Commissioner’s 1941 Standard Industrial Table of Mortality;

(ii) for annuity certificates, including life annuities provided or available under optional modes of settlement in the certificates—the 1937 Standard Annuity Table;

(iii) for disability benefits issued in connection with life benefit certificates—Hunter’s Disability Table, which, for active lives, shall be combined with a mortality table permitted for calculating the reserves on life insurance certificates, except that the table known as Class III Disability Table (1926) modified to conform to the contractual waiting period, shall be used in computing reserves for disability benefits under a contract that presumes that total disability shall be considered to be permanent after a specified period;

(iv) for accidental death benefits issued in connection with life benefit certificates—the Inter-Company Double Indemnity Mortality Table combined with a mortality table permitted for calculating the reserves for life insurance certificates; and

(v) for noncancellable accident and health benefits—the Class III Disability Table (1926) with conference modifications or, with the consent of the Commissioner of Financial Regulation, tables based upon the society’s own experience.

(D) The Commissioner may, in the Commissioner’s discretion, accept other standards for valuation if the Commissioner finds that the reserves produced by such standards will be not less in the aggregate than reserves computed in accordance with the minimum valuation standard prescribed in this section. The Commissioner may, in the Commissioner’s discretion, vary the standards of mortality applicable to all certificates of insurance on substandard lives or other extra hazardous lives by any society authorized to do business in this State. Whenever the mortality experience under all certificates valued on the same mortality table is in excess of the expected mortality according to the table for a period of three consecutive years, the Commissioner may require additional reserves when deemed necessary in the Commissioner’s judgment on account of the certificates.

(E) Any society, with the consent of the commissioner of insurance of the state of domicile of the society and under such conditions, if any, that such commissioner may impose, may establish and maintain reserves on its certificates in excess of the reserves required under such certificates, but the contractual rights of any insured member shall not be affected by such excess reserves.

(7) A society neglecting to file the annual statement in the form and within the time provided by this section shall forfeit $500.00 for each day during which the neglect continues, and, upon notice by the Commissioner of Financial Regulation to that effect, its authority to do business in this State shall cease while such default continues.

(8) Notwithstanding any provision of this section to the contrary, for societies whose assets exceed $250,000,000.00 as of January 1, 1991, the minimum standard of valuation for certificates issued after January 1, 1991 must be the interest assumptions and tables authorized for use by domestic life insurers. For societies whose assets are less than $250,000,000.00 on January 1, 1991, the interest assumptions and tables authorized for use by domestic life insurers must be utilized after the end of the year in which their assets first exceed $250,000,000.00. (Added 1959, No. 197, § 34, eff. Nov. 22, 1959; amended 1985, No. 111 (Adj. Sess.), §§ 4, 5, eff. April 8, 1986; 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 167 (Adj. Sess.), § 15; 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2019, No. 131 (Adj. Sess.), § 7; 2021, No. 105 (Adj. Sess.), § 201, eff. July 1, 2022.)