Title 31--INSURANCE INSURANCE DEPARTMENT [31 PA. CODE CH. 84c] Valuation of Life Insurance Policies [30 Pa.B. 2228] The Insurance Department (Department) amends Chapter 84c (relating to valuation of life insurance policies), to read as set forth at 30 Pa.B. 23 (January 1, 2000). The Department is publishing the amendment of the regulation as a final-form rulemaking.
Statutory Authority
The final-form regulation is adopted under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412) and section 301(c)(1) and (3) of The Insurance Department Act of 1921 (40 P. S. § 71(c)(1) and (2)) (act).
Comments and Response
A notice of proposed rulemaking was published at 30 Pa.B. 23 with a 30-day comment period ending January 31, 2000. During the 30-day comment period, comments were received from Insurance Federation of Pennsylvania, Inc. (IFP) in favor of the proposal and requesting a retroactive effective date of January 1, 2000.
In preparing the final-form rulemaking, the Department did not modify the effective date as suggested by the IFP, due to concerns about the constitutionality of retroactive application of the amendments. This rulemaking will be effective upon final publication in the Pennsylvania Bulletin.
During its regulatory review, the Independent Regulatory Review Commission (IRRC) did not submit comments to the Department.
Affected Parties
The final-form rulemaking applies to all insurers and fraternal benefit societies marketing life insurance policies and who are licensed to do the business of life insurance in this Commonwealth.
Fiscal Impact
State Government
There will be no increase in cost to the Department due to the adoption of the rulemaking. The Department currently reviews valuation filings submitted by domestic life insurance companies and fraternal benefit societies for compliance with the minimum standards of valuation. The select mortality factors and the interpretation of the minimum reserve standard for plans with nonlevel premiums or benefits and for plans with secondary guarantees will not affect the time required to review a valuation filing.
General Public
Consumers will benefit from the advantages of purchasing life insurance from an insurance industry that is establishing sound and reasonable reserves to fulfill contractual obligations. Insurers may increase premium rates for policies sold after May 6, 2000, because of an increase in the required reserves.
Political Subdivisions
Adoption of the rulemaking will not impose additional costs on political subdivisions. Because this rulemaking promotes stability and sound reserves in the insurance industry, political subdivisions' tax revenues may benefit as a result of fewer insurance company insolvencies. Fewer insolvencies may also result in less unemployment.
Private Sector
The specific select factors and the rules for using the segmented reserve valuation method in the rulemaking do not apply to policies issued prior to May 6, 2000. An insurance company may need to increase reserves on policies issued on and after May 6, 2000. The rulemaking does permit an insurance company to recognize the company's specific mortality experience in calculating deficiency reserves. This should ensure that the reserves for a company are sound and reasonable.
Paperwork
The adoption of the rulemaking will not impose additional paperwork on the Department or the insurance industry. The select mortality factors and the interpretation of the minimum reserve standard affect an insurance company's reserve calculation but will not result in additional paperwork.
Effectiveness/Sunset Date
This rulemaking becomes effective upon final publication in the Pennsylvania Bulletin. No sunset date has been assigned.
Contact Person
Questions regarding these amendments should be directed to Peter J. Salvatore, Regulatory Coordinator, Office of Special Projects, 1326 Strawberry Square, Harrisburg, PA 17120, (717) 787-4429. In addition, questions or comments may be E-mailed to psalvato@ins.state.pa.us or faxed to (717) 772-1969.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on December 21, 1999, the Department submitted a copy of the notice of proposed rulemaking, published at 30 Pa.B. 23 to IRRC and to the Chairpersons of the Senate Banking and Insurance Committee and the House Insurance Committee for review and comment. In addition to the submitted proposal, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.'' A copy of that material is available to the public upon request.
In preparing this final-form rulemaking, the Department considered all comments received from IRRC, the Committees and the public. This final-form rulemaking was approved by the Senate and House Committees on April 4, 2000. In accordance with 5(g) of the Regulatory Review Act, IRRC met on April 13, 2000, and the final-form rulemaking was deemed approved.
Findings
The Department finds that:
(1) Public notice of intention to adopt this rulemaking as amended by this order has been given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The adoption of this rulemaking in the manner provided in this order is necessary and appropriate for the administration and enforcement of the authorizing statutes.
Order
The Commissioner, acting under the authorizing statutes, orders that:
(1) The regulations of the Department, 31 Pa. Code, are amended by adding §§ 84c.1--84c.7 and Appendix A to read as set forth at 30 Pa.B. 23.
(2) The Commissioner shall submit this order and 30 Pa.B. 23 to the Office of General Counsel and Office of Attorney General for approval as to form and legality as required by law.
(3) The Commissioner shall certify this order and 30 Pa.B. 23 and deposit them with the Legislative Reference Bureau as required by law.
(4) The order shall take effect upon final publication in the Pennsylvania Bulletin.
(Editor's Note: A correction to the proposed rulemaking was published at 30 Pa.B. 312 (January 15, 2000) replacing § 84c.4(b)(1)(i) with corrected text.)
M. DIANE KOKEN,
Insurance Commissioner(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 30 Pa.B. 2176 (April 29, 2000).)
Fiscal Note: Fiscal Note 11-196 remains valid for the final adoption of the subject regulations.
[Pa.B. Doc. No. 00-740. Filed for public inspection May 5, 2000, 9:00 a.m.]
