§ 31–4701. Valuation of reserves by Commissioner.

(a)(1)(A) The Commissioner shall annually value, or cause to be valued, the reserve liabilities (hereinafter called reserves) for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in the District issued prior to the operative date of the valuation model, except that in the case of an alien company such valuation shall be limited to its insurance transactions in the United States. All such valuations made by him or by his authority shall be made upon the net premium basis. In calculating such reserves, he may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves herein required of any foreign or alien company, he may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when such valuation complies with the minimum standard provided in this section.

(B) The provisions set forth in subsections (c), (d), (e), and (f) of this section and § 31-4720 shall apply to all policies and contracts, as appropriate, subject to this section, issued on or after the operative date of § 31-4705.02 and before the operative date of the valuation model. The provisions set forth in subsections (g) and (h) of this section shall not apply to any such policies and contracts.

(C) The minimum standard for the valuation of policies and contracts issued before the operative date of § 31-4705.02 shall be provided in subsection (b) of this section.

(1A)(A) The Commissioner shall annually value, or cause to be valued, the reserve liabilities ("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.

(B) The provisions set forth in subsections (f), (g), and (h) of this section shall apply to all policies and contracts issued on or after the operative date of the valuation manual.

(2) Any such company which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to a minimum standard herein provided may, with the approval of the Commissioner, adopt any lower standard of valuation, but not lower than the minimum herein provided.

(b)(1) This subsection shall apply to only those policies and contracts issued prior to the operative date of § 31-4705.02 (the standard nonforfeiture law).

(2) The legal minimum standard for the valuation of life insurance contracts issued before January 1, 1935, shall be the method and basis of valuation heretofore applied by the Commissioner in the valuation of such contracts, and for life insurance contracts issued on and after said date shall be the 1-year preliminary term method of valuation, except as hereinafter modified, on the basis of the American Experience Table of Mortality with interest at 3 1/2% per annum; provided, that any life company may, at its option, value its insurance contracts issued on and after January 1, 1935, in accordance with their terms on the basis of the American Men Ultimate Table of Mortality with interest not higher than 3 1/2% per annum by the level net premium method or by the modified preliminary term method hereinafter described.

(3) If the premium charged for term insurance under a limited payment life preliminary term policy providing for the payment of all premiums thereon in less than 20 years from date of the policy, or under an endowment preliminary term policy, exceeds that charged for like insurance under 20-payment life preliminary term policies of the same company, the reserve thereon at the end of the year, including the 1st, shall not be less than the reserve on a 20-payment life preliminary term policy issued in the same year and at the same age, together with an amount which shall be equivalent to the accumulation of a net level premium sufficient to provide for a pure endowment at the end of the premium payment period, equal to the difference between the value at the end of such period of such a 20-payment life preliminary term policy and the full net level premium reserve at such time of such a limited payment life or endowment policy. The premium payment period is the period during which premiums are concurrently payable under such 20-payment life preliminary term policy and such limited payment life or endowment policy.

(4) Policies issued on the preliminary term method shall contain a clause specifying that the reserve thereof shall be computed in accordance with modified preliminary term method of valuation provided for herein.

(5) Except as otherwise provided in paragraph (3) of subsection (c) of this section for group annuity and pure endowment contracts, the legal minimum standard for the valuation of annuities issued on and after January 1, 1935, shall be McClintock’s Table of Mortality Among Annuitants, with interest at 4% per annum, but annuities deferred 10 or more years and written in connection with life insurance shall be valued on the same basis as that used in computing the consideration or premium therefor, or upon any higher standard at the option of the company.

(6) The legal minimum standard for the valuation of industrial policies issued after January 1, 1935, shall be the American Experience Table of Mortality with interest at 3 1/2% per annum; provided, that any life company may voluntarily value its industrial policies on the basis of the standard industrial mortality table or the substandard industrial mortality table by the level net premium method or in accordance with their terms by the modified preliminary term method hereinbefore described.

(7) The Commissioner may vary the standards of interest and mortality in the case of alien companies as to contracts issued by such companies in countries other than the United States, and in particular cases of invalid lives and other extra hazards.

(8) Reserves for all such policies and contracts may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by this subsection.

(c)(1) This subsection shall apply to only those policies and contracts issued on or after the operative date of § 31-4705.02 (the standard nonforfeiture law) except as otherwise provided in paragraph (3) of this subsection for group annuity and pure endowment contracts issued prior to such operative date.

(2) Except as otherwise provided in paragraph (3) of this subsection and subsections (d) and (f) of this section, the minimum standard for the valuation of all such policies and contracts shall be the Commissioner's reserve valuation methods defined in paragraphs (4) and (5) of this subsection and in § 31-4720, 3 1/2% interest per annum, or in the case of policies and contracts, other than annuity and pure endowment contracts, issued on or after the October 13, 1978, 4 1/2% interest per annum, and the following tables:

(A) For ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies, the Commissioners 1941 Standard Ordinary Mortality Table for such policies issued prior to the operative date of paragraph (5) of § 31-4705.02(d), and the Commissioners 1958 Standard Ordinary Mortality Table for category of the policies issued on or after the operative date of the 5th paragraph in § 31-4705.02(d) and before the operative date for the category of policies described in § 31-4705.02(e); provided that for any category of such policies issued on female risks all modified net premiums and present values referred to in this section may be calculated according to an age not more than 6 years younger than the actual age of the insured and for any category of the policies issued on or after the operative date for the category described in § 31-4705.02(e), the Commissioners 1980 Standard Ordinary Mortality Table, or at the election of the company for any 1 or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors or any ordinary mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by the Commissioner for determining the minimum standard for valuing the policies;

(B) For industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies, the 1941 Standard Industrial Mortality Table for such policies issued prior to the operative date of paragraph (6) of subsection (d) of § 31-4705.02, and for such policies issued on or after such operative date; provided, that for any category of such policies issued on female risks and evaluated by either the 1941 Standard Industrial Mortality Table or the Commissioners 1961 Standard Industrial Mortality Table, all modified net premiums and present values referred to in this section may be calculated according to an age not more than 6 years younger than the actual age of the insured, the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by the Commissioner for determining the minimum standard for valuing the policies;

(C) For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies, 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 Commissioner;

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

(E) For total and permanent disability benefits in or supplementary to ordinary policies or contracts, 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 National Association of Insurance Commissioners and approved by the Commissioner for determining the minimum standard for valuing the policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such 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 such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies;

(F) For accidental death benefits in or supplementary to policies, for policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the National Association of Insurance Commissioners and approved by the Commissioner for determining the minimum standards for valuing the policies; for policies issued on or after January 1, 1961, and prior to January 1, 1966, either such table or, at the option of the company, the Intercompany Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Intercompany Double Indemnity Mortality Table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies; or

(G) For group life insurance, life insurance issued on the substandard basis and other special benefits, such tables as may be approved by the Commissioner.

(3)(A) Except as provided in subsection (d) of this section, the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after the operative date of this paragraph and for annuities and pure endowments purchased on or after such operative date under group annuity and pure endowment contracts shall be the Commissioner's reserve valuation methods defined in paragraphs (4) and (5) of this subsection and the following tables and interest rates:

(i) For individual single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, any individual annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by the Commissioner for determining the minimum standard for valuing the contracts, or any modification of the tables approved by the Commissioner and 7 1/2% interest per annum;

(ii) For individual annuity and pure endowment contracts, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, any individual annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by the Commissioner for determining the minimum standard for valuing the contracts, or any modification of the tables approved by the Commissioner and 5 1/2% interest per annum for single premium deferred annuity and pure endowment contracts and 4 1/2% interest per annum for all other such individual annuity and pure endowment contracts; or

(iii) For annuities and pure endowments purchased under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table, any group annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by the Commissioner for determining the minimum standard for valuing the annuities and the pure endowments, or any modification of the tables approved by the Commissioner and 7 1/2% interest per annum.

(B) After October 13, 1978, any company may file with the Commissioner a written notice of its election to comply with the provisions of this paragraph after a specified date before January 1, 1979, which shall be the operative date of this paragraph for such company, provided, a company may elect a different operative date for individual annuity and pure endowment contracts from that elected for group annuity and pure endowment contracts. If a company makes no such election, the operative date of this paragraph for such company shall be January 1, 1979.

(4)(A) Except as provided in paragraph (5) of this subsection and in § 31-4720, and according to the reserve valuation method, reserves for life insurance and endowment benefits from policies providing uniform amounts of insurance and requiring uniform premium payments shall be the excess of the present value, on the valuation date, of the future guaranteed benefits from the policies over the then present value of any future modified net premiums.

(B) The modified net premiums shall be a uniform percentage of the respective premiums that makes the present value, on the issuance date, of all modified net premiums equal the sum of the then present value of the benefits and the excess of the amount described in sub-subparagraph (i) of this subparagraph over the amount described in sub-subparagraph (ii) of this subparagraph.

(i) Except as provided in subparagraph (C) of this paragraph, a net level annual premium equal to the present value, on issuance date, of the benefits provided after the first policy year, divided by the present value, on issuance date, of an annuity of one per year to be paid on every anniversary of the policy for which a premium becomes due.

(ii) A net 1-year term premium for the benefits provided in the first policy year.

(C) The net level annual premium described in subparagraph (B)(i) of this paragraph shall not exceed the net level annual premium or the 19-year premium whole life plan for insuring the same amount at an age one year higher than the age at issuance in the policy.

(4A)(A) This paragraph governs life insurance policies issued after December 31, 1986, when the policies have the following features:

(i) The premium for the first year of the life insurance policy exceeds the premium for the second year.

(ii) The policy does not provide an additional benefit in the first year of the policy for the amount that the 1st-year premium exceeds the premium for the second year.

(iii) The policy provides an endowment benefit or a cash surrender value that exceeds the difference in the first year and the second year premiums.

(B) Except as provided in § 31-4702, and according to the reserve valuation method on any policy anniversary that takes place no later than the 1st year after a life insurance policy provides an endowment benefit or a cash surrender value that, together, exceeds the difference in the premiums described in subparagraph (A)(i) of this paragraph, the reserve shall be the greater of the following amounts:

(i) The reserve on the policy anniversary as described in paragraph (4) of this subsection.

(ii) The reserve on the policy anniversary as described in paragraph (4) of this subsection, but with the amount described in paragraph (4)(B)(i) of this subsection reduced by 15% of the excess first year premium, with present values of benefits and premiums determined without reference to premiums or benefits after the first year after a life insurance policy provides an endowment benefit or a cash surrender value that, together, exceeds the difference in the premiums described in subparagraph (A)(i) of this paragraph, with an assumption that the policy will mature as an endowment on that date; and with the cash surrender value provided on that date regarded as an endowment benefit.

(C) For the comparison described in subparagraph (B) of this paragraph, the mortality and interest bases described in paragraphs (3) and (4) of this subsection and in subsection (d)(2) and (3) of this section shall apply.

(5)(A) This paragraph shall apply to all annuity and pure endowment contracts except those group annuity and pure endowment contracts for which reserves are to be calculated by a method consistent with the principles of paragraph (4) of this subsection.

(B) Reserves according to the Commissioner's annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation consideration derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values.

(6) In no event shall a company’s aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, be less than the aggregate reserves calculated according to the method described in paragraph (4) of this subsection, in subsection (e) of this section, in § 31-4720, and in the mortality tables and rates of interest used to calculate nonforfeiture benefits for the policies.

(7) Reserves for any category of policies, contracts, or benefits, as established by the Commissioner, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be greater than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided in the policies or contracts.

(d)(1) The calendar year statutory valuation interest rates shall be the interest rates used to determine the minimum standard for valuing the following:

(A) Life insurance benefits under § 31-4705.02 and issued no earlier than the operative date for policies under § 31-4705.02(e).

(B) Annuities and pure endowments purchased under group annuity and pure endowments contracts after December 31, 1983.

(C) Except as provided in subparagraphs (A) and (B) of this paragraph, all life insurance benefits, individual annuity contracts, and pure endowment contracts issued after December 31, 1983.

(D) In a calendar year following December 31, 1983, the net increase of amounts held under guaranteed interest contracts.

(2) The calendar year statutory valuation interest rates shall be determined according to the equations described in this paragraph, and the results from the equations shall be rounded to the nearest 1/4%.

(A) For life insurance, the equation for determining the calendar year statutory valuation interest rates is the following:

I = .03 + W (R - .03) + w /2 (R2 - .09).

(B) For single premium 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 R /1 is the lesser of R and .09,

R /2 is the greater of R and .09,

R is the reference interest rate described in paragraph (4) of this subsection,

and W is the weighting factor.

(C) Where cash settlement options are valued on an issue year basis, the formula in subparagraph (A) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee duration exceeding 10 years and the formula in subparagraph (B) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee duration of 10 years or less.

(D) Where no cash settlement options apply, the formula for single premium immediate annuities stated in subparagraph (B) of this paragraph shall apply.

(E) Where cash settlement options are valued on a change in fund basis, the formula for single premium immediate annuities stated in subparagraph (B) of this paragraph shall apply.

(F)(i) If the calendar year statutory valuation interest rate for life insurance policies for a calendar year differs from the actual interest rate for similar policies issued in the preceding calendar year by less than 1⁄2%, the calendar year statutory valuation interest rate shall equal the corresponding actual interest rate for the preceding calendar year.

(ii) The calendar year statutory valuation interest rate shall be determined for each calendar year regardless of when § 31-4705.02(e) becomes operative.

(3) The weighting factors in the paragraph (2)(A) and (B) of this subsection equations are as follows:

(A) Weighting factors for life insurance:

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.

(B) Weighting factor for single premium 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: .80.

(C) Except as provided in subparagraph (B) of this paragraph, weighting factors for other annuities and for guaranteed interest contracts shall be specified in the following sub-subparagraphs:

(i) For purposes of this subsection, the following plan types apply:

“Plan Type A” means that, unless the company prohibits a withdrawal, the policyholder may withdraw funds with an adjustment to reflect changes in interest rates or asset values since the company received the funds; without adjustment, but in installments for 5 years or more; or as an immediate life annuity.

“Plan Type B” means that, before the interest rate guarantee expires, and unless the company prohibits a withdrawal, the policyholder may withdraw funds with an adjustment to reflect changes in interest rates or asset values since the company received the funds; without the adjustment, but in installments for 5 years or more; or, after the interest rate guarantee ends, in a lump sum without the adjustment or in installments lasting less than 5 years.

“Plan Type C” means that, before the interest rate guarantee expires, the policyholder may withdraw funds in a lump sum or in installments lasting less than 5 years, and either without the withdrawal being adjusted to reflect changes in interest rates or asset values since the company received the funds or with the withdrawal subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(ii) Weighting factors for annuities and guaranteed interest contracts valued on an issue year basis:

(iii) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in sub-subparagraph (ii) of this subparagraph increased by:

(iv) For annuities and guaranteed interest contracts valued on an issue year basis (other than those with no cash settlement options) and 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 and which do not guarantee interest rates on considerations received more than 12 months beyond the valuation date, the factors shown in sub-subparagraph (ii) of this subparagraph or derived in sub-subparagraph (iii) of this subparagraph increased by:

(v) Where cash settlement options apply to annuities and guaranteed interest contracts, the guarantee duration is the number of years that the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of 20 years.

(vi) Where no cash settlement options apply to annuities or guaranteed interest contracts, the guarantee duration is the number of years from the issuance or the purchase date that the policy has scheduled the annuity benefits to begin.

(D)(i) 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.

(ii) Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis.

(iii) An issue year basis of valuation refers to a valuation basis where the interest rate used to determine the minimum valuation standard for the annuity or the guaranteed interest contract is the calendar year valuation interest rate for the issuance year or purchase year.

(iv) The change in fund basis of valuation refers to a valuation basis where the interest rate used to determine the minimum valuation standard for each change in the annuity or the guaranteed interest contract fund is the calendar year valuation interest rate for the year that the fund changed.

(4) The reference interest rate referred to in paragraph (2) of this subsection shall be as follows:

(A) For all life insurance, the reference rate shall be the lesser between the average rate during a 36-month period and the average rate during a 12-month period ending June 30 of the calendar year preceding the issuance year.

(B) For single premium immediate annuities and for annuity benefits involving life contingencies arising where cash settlement options apply to other annuities and to guaranteed interest contracts, the reference rate shall be the average rate during a 12-month period ending June 30 of the calendar year of issue or purchase.

(C) Where guarantee duration exceeds 10 years and where cash settlement options for annuities and for guaranteed interest contracts have values based upon the issuance year, the reference rate shall be the least between the average rate during a 36-month period and the average rate during a 12-month period ending June 30 of the calendar year of issue or purchase.

(D) Where guarantee duration does not exceed 10 years and where cash settlement options for annuities and for guaranteed interest contracts have values based upon the issuance year, the reference rate shall be the average rate during a 12-month period ending June 30 of the calendar year of issue or purchase.

(E) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the reference rate shall be the average rate during a 12-month period ending June 30 of the calendar year of issue or purchase.

(F) Where cash settlement options apply to annuities and to guaranteed interest contracts and have values based on a change in the fund, the reference rate shall be the average rate during a 12-month period ending June 30 of the calendar year of the change in the fund.

(5) The reference interest rate referred to in paragraph (2) of this subsection shall be as follows:

(A) Moody’s Corporate Bond Yield Average—Monthly Average Corporate published by Moody’s Investors Service, Inc., shall set the reference rates described in paragraph (4) of this subsection.

(B) If the National Association of Insurance Commissioners determines that Moody’s Investors Service, Inc., is no longer an appropriate source for the reference rate, then an alternative method shall be adopted by the National Association of Insurance Commissioners and approved by the Commissioner.

(e) For life insurance plans which require the company to fix future premium determination according to the then present estimates of future experience, and for life insurance plans or annuities with minimum reserves that cannot be determined by the methods described in subsection (c)(5) and (6) of this section and in § 31-4720, the reserves held under the plan shall:

(1) Be appropriated in relation to the benefits and the pattern of premiums for the plan.

(2) Be computed by a method consistent with the principles of the Standard Valuation Law and according to regulations promulgated by the Commissioner.

(f) For disability and accident and sickness health insurance policies and contracts as provided under § 31-4712 and accident and long-time care health insurance policies and contracts as provided under Chapter 36 of this title, issued on or after the operative date of § 31-4705.02 and before the operative date of the valuation manual, the minimum standard of valuation is the standard adopted by the Commissioner by regulation. For accident and health insurance policies and 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 under subsection (a)(1A) of this section.

(g)(1) 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 under subsection (a)(1A) of this section, except as provided under paragraphs (5) or (7) of this subsection.

(2) The operative date of the valuation manual is April 11, 2019.

(3) The valuation manual shall specify the following:

(A) The minimum valuation standards for and definitions of the policies or contracts subject to subsection (a)(1A) of this section. Such minimum valuation standards shall be:

(i) The Commissioner's reserve valuation method for life insurance contracts, other than annuity contracts, subsection to (a)(1A) of this section;

(ii) The Commissioner's annuity reserve valuation method for annuity contracts subject to subsection (a)(1A) of this section; and

(iii) The Minimum reserves for all other policies or contracts subject to subsection (a)(1A) of this section;

(B) Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in subsection (h)(1) of this section and the minimum valuation standards consistent with those requirements;

(C) For policies and contracts subject to a principle-based valuation under subsection (h) of this section:

(i) The requirements for the format of reports to the Commissioner under subsection (h)(2)(C) of this section and which shall include information necessary to determine if the valuation is appropriate and in compliance with this section;

(ii) The assumptions shall be prescribed for risks over which the company does not have significant control or influence; and

(iii) The procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or medication of such procedures;

(D) For policies not subject to a principle-based valuation under subsection (h) of this section, that the minimum valuation standard shall:

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

(ii) Require the development of reserves that quantify the benefits and guarantees, and the funding, associated with the contracts and their risk at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring;

(E) 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

(F) The data and form of the data, required under subsection (i) of this section, to whom the data must be submitted, and may specify other requirements, including data analyses and reporting of analyses.

(4) 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 Commissioner, in compliance with this section, then the company shall, with respect to such requirements, comply with minimum valuation standards prescribed by the Commissioner by regulation.

(5)(A) The Commissioner 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 section or § 31-4709. The Commissioner may rely upon the opinion, regarding provisions contained within this section or § 31-4709 of a qualified actuary engaged by the Commissioner of another state, district, or territory of the United States.

(B) For the purposes of this paragraph, the term "engage" means to employ or contract.

(6) The Commissioner may require a company to change any assumption or method that in the opinion of the Commissioner is necessary to comply with the requirements of the valuation manual or this section. The company shall adjust the reserves as required by the Commissioner.

(g)(1) 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 under subsection (a)(1A) of this section, except as provided under paragraphs (5) or (7) of this subsection.

(h)(1) A company shall establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:

(A) Quantifies the benefits and guarantees, and the funding, associated with the policies and 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 policies and contracts, and for polices and contracts with significant tail risk, reflects conditions appropriately adverse to quantify the tail risk;

(B) Incorporates assumptions, risk analysis methods, and 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 assumptions or methods;

(C) Incorporates assumptions that are derived in one of the following manners:

(i) The assumption is prescribed in the valuation manual; or

(ii) For assumptions that are not prescribed, the assumptions shall:

(I) Be established utilizing the company's available experience, to the extent it is relevant and statistically credible; or

(II) To the extent that company data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience; and

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

(2) A company using a principle-based valuation for one or more policies or contracts subject to this subsection as specified in the valuation manual shall:

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

(B) Provide to the Commissioner and the Board of Directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation where the controls are 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, and which certification shall be based on the controls in place as of the end of the preceding calendar year; and

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

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

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

(j)(1) For the purposes of this subsection, the term "confidential information" shall mean:

(A) A memorandum in support of an opinion submitted pursuant to § 31-4901, and any other documents, materials, and other information, including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the Commissioner or any other person in connection with such memorandum;

(B) All documents, materials, and other information, including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the Commissioner or any other person in the course of an examination made under subsection (g)(5) of this section; provided, that if an examination report or other material prepared in connection with an examination made pursuant to Chapter 14 of this title is not held as private and confidential information, the examination report or other materials prepared in connection with an examination made under subsection (g)(5) of this section shall not be confidential information to the same extent as such examination report that had been prepared pursuant to the Chapter 14 of this title.

(C) 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 subsection (h)(2)(B) of this section that evaluates 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 Commissioner or any other person in connection with such reports, documents, materials, and other information;

(D) Any principle-based valuation report developed under section (h)(2)(C) of this section and any other documents, materials, and other information, including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the Commissioner or any other person in connection with such report; and

(E) Any documents, materials, data, and other information submitted by a company under subsection (i) of this section 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, which in each case includes any potentially company-identifying or personally identifiable information, that is provided to, or obtained by, the Commissioner 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 Commissioner or any other person in connection with such experience materials.

(2) Confidential information specified in paragraphs (1)(A) and (D) of this subsection:

(A) 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 § 31-4901 or principle-based valuation report developed under subsection (h)(2)(C) of this section by reason of an action required by this section or by regulations issued pursuant to this section;

(B) May be released by the Commissioner with written consent of the company; and

(C) Shall no longer be confidential once any portion of a memorandum of support of an opinion submitted pursuant to Chapter 49 of this title or a principle-based valuation report developed under subsection (h)(2)(C) of this section is cited by the company in its marketing or is publicly volunteered to or before a governmental agency, other than the insurance department of a state or jurisdiction, or is released by the company to the news media.

(3)(A) Except as provided in this subsection, a company's confidential information is confidential by law and privileged and shall not be subject to subchapter II of Chapter 5 of Title 2, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. The Commissioner is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as part of the Commissioner's official duties.

(B) Neither the Commissioner nor any other person who received confidential information while acting under the authority of the Commissioner in performing the duties as required by this chapter shall be permitted or required to testify in any private civil action concerning any confidential information.

(C)(i) To assist in the performance of the Commissioner's duties, the Commissioner may share and receive confidential information from:

(I) Other state, federal, and international regulatory agencies; and

(II) The National Association of Insurance Commissioners and its affiliates and subsidiaries.

(ii) The Commissioner may share and receive confidential information specified in paragraphs (1)(A) and (D) of this subsection from the Actuarial Board for Counseling and Discipline or its successor upon a request stating that the confidential information is required for the purpose of professional disciplinary proceedings with state, federal, or international law enforcement officials.

(iii) Any recipient of confidential information shall maintain the confidentiality and privileged status of such documents, materials, data, or other information in the same manner and to the same extent as required for the Commissioner of the jurisdiction that is the source of the documents, materials, data, or other information.

(D) The Commissioner may enter into agreements governing sharing and use of information pursuant to this paragraph.

(E) No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure to the Commissioner under this subsection.

(F) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this paragraph shall be available and enforced in any proceeding in, and in any court of, the District of Columbia.

(k)(1) The Commissioner may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in the District of Columbia from the requirements provided under subsection (g) of this section if:

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

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

(2) Subsections (c), (d), (e), and (f) of this section and § 31-4720 and Chapter 49 of this title shall remain applicable to a company that is granted an exemption under this subsection. With respect to a company applying for an exemption under this subsection, any reference to subsection (g) found in subsections (c), (d), (e), and (f) of this section and § 31-4720 and Chapter 49 of this title shall not be applicable.

(l) For the purposes of this section, the term:

(1) "Accident and health insurance" means contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the valuation manual.

(2) "Appointed actuary" means a qualified actuary who is appointed in accordance with the valuation manual to prepare the actuarial opinion required under § 31-4901(c) and (d).

(3) "Company" means an entity that:

(A) Has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in the District and has at least one such 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 or jurisdiction and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in the District.

(4) "Deposit-type contract" means contracts that do not incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual.

(5) "Life insurance" means contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual.

(6) "Policyholder behavior" means 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 section 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.

(7) "Principle-based valuation" means a reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and is required to comply with subsection (h) of this section as specified in the valuation manual.

(8) "Qualified actuary" means 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 requirement specified in the valuation manual.

(9) "Tail risk" means 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.

(10) "Valuation manual" means the manual of valuation instructions adopted by the National Association of Insurance Commissioner as specified in this section or as amended.