§ 84b.7. Statement of actuarial opinion not including an asset adequacy analysis.

 (a)  General description. The statement of actuarial opinion required by this section shall consist of:

   (1)  A paragraph identifying the appointed actuary and the appointed actuary’s qualifications.

   (2)  A regulatory authority paragraph stating that the company is exempt under this chapter from submitting a statement of actuarial opinion based on an asset adequacy analysis and that the opinion, which is not based on an asset adequacy analysis, is rendered in accordance with this section.

   (3)  A scope paragraph identifying the subjects on which the opinion is to be expressed and describing the scope of the appointed actuary’s work.

   (4)  An opinion paragraph expressing the appointed actuary’s opinion as required by section 301(f)(1) of the act (40 P. S. §  71(f)(1)).

 (b)  Recommended language. The following language is that which in typical circumstances would be included in a statement of actuarial opinion in accordance with this section. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary shall use language which clearly expresses the individual’s professional judgment. The opinion shall retain the pertinent aspects of the language provided in this section.

   (1)  The opening paragraph shall indicate the appointed actuary’s relationship to the company and the individual’s qualifications to sign the opinion.

     (i)   For a company actuary, the opening paragraph of the actuarial opinion shall contain a statement such as follows:

     ‘‘I, (name of actuary), am (title) of (name of company) and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the Commissioner dated (date). I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health companies.’’

     (ii)   For a consulting actuary, the opening paragraph of the actuarial opinion shall contain a statement such as follows:

     ‘‘I, (name and title of actuary), a member of the American Academy of Actuaries, am associated with the firm of (name of consulting firm). I have been appointed by, or by the authority of, the Board of Directors of (name of company) to render this opinion as stated in the letter to the Commissioner dated (date). I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.’’

   (2)  The regulatory authority paragraph shall contain a statement such as follows:

   ‘‘Said company is exempt pursuant to the Actuarial Opinion and Memorandum regulation of the Pennsylvania Insurance Department from submitting a statement of actuarial opinion based on an asset adequacy analysis. This opinion, which is not based on an asset adequacy analysis, is rendered in accordance with Section 84b.7 of the Actuarial Opinion and Memorandum regulation of Pennsylvania.’’

   (3)  The scope paragraph shall meet the following requirements:

     (i)   Shall contain a statement such as follows:

     ‘‘I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, (year).’’

     (ii)   Shall list items and amounts with respect to which the appointed actuary is expressing an opinion. The list shall include but not be limited to:

       (A)   Aggregate reserve for policies and contracts included in Exhibit 8 of the annual statement.

       (B)   Aggregate reserve for policies and contracts included in Exhibit 9 of the annual statement.

       (C)   Deposit funds, premiums, dividend and coupon accumulations and supplementary contracts not involving life contingencies included in Exhibit 10 of the annual statement.

       (D)   Policy and contract claims—liability end of current year included in Exhibit 11, Part I of the annual statement.

     (iii)   Shall include, if the appointed actuary has examined the underlying records, in addition to the statement required by paragraph (3)(i), a statement such as follows:

     ‘‘My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic records and such tests of the actuarial calculations as I considered necessary.’’

     (iv)   Shall include, if the appointed actuary has not examined the underlying records, but has relied upon listings and summaries of policies in force prepared by the company or a third party, in addition to the statement required by paragraph (3)(i), a statement such as either (A) or (B) as follows:

       (A)   ‘‘I have relied upon listings and summaries of policies and contracts and other liabilities in force prepared by (name and title of company officer certifying in force records) as certified in the attached statement. In other respects my examination included review of the actuarial assumptions and actuarial methods and such tests of the actuarial calculations as I considered necessary.’’ or

       (B)   ‘‘I have relied upon (name of accounting firm) for the substantial accuracy of the in force records inventory and information concerning other liabilities, as certified in the attached statement. In other respects my examination included review of the actuarial assumptions and actuarial methods and such tests of the actuarial calculations as I considered necessary.’’

     The statement of the person certifying shall follow the form indicated by paragraph (8).

   (4)  The opinion paragraph shall include a statement such as follows:

   ‘‘In my opinion the reserves and related actuarial items identified above:

   Are computed in accordance with those presently accepted actuarial standards which specifically relate to the opinion required under Section 84b.7 of the Actuarial Opinion and Memorandum regulation of Pennsylvania;

   Are based on actuarial assumptions which produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;

   Meet the requirements of the valuation law and regulations of the state of (state of domicile) and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;

   Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end with any exceptions as noted below;

   Include provision for all reserves and related actuarial statement items which ought to be established.

   The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Compliance Guidelines as promulgated by the Actuarial Standards Board, which guidelines form the basis of this statement of opinion.’’

   (5)  The concluding paragraph shall document the eligibility for the company to provide an opinion as provided by this section. It shall include a statement such as follows:

   ‘‘This opinion is provided in accordance with Section 84b.7 of the Actuarial Opinion and Memorandum regulation of Pennsylvania. As such it does not include an opinion regarding the adequacy of reserves and related actuarial itmes when considered in light of the assets which support them.’’

 Eligibility for Section 84b.7 is confirmed as follows:

 The ratio of the sum of capital and surplus to the sum of cash and invested assets is (amount), which equals or exceeds the applicable criteria of (ratio).

 The ratio of the sum of the reserves and liabilities for annuities and deposits to the total admitted assets is (amount), which is less than the applicable criteria of (ratio).

 The ratio of the book value of the non-investment grade bonds to the sum of capital and surplus is (amount), which is less than the applicable criteria of (ratio).

 To my knowledge, the NAIC Examiner Team has not designated the company as a ‘‘first priority company’’ in any of the 2 calendar years preceding the calendar year for which the actuarial opinion is applicable, or a ‘‘second priority company’’ in each of the 2 calendar years preceding the calendar year for which the actuarial opinion is applicable or the company has resolved the first or second priority status to the satisfaction of the commissioner of the state of domicile.

 To my knowledge there is not a specific request from any Commissioner requiring an asset adequacy analysis opinion.

   (6)  The adoption for new issues or new claims or other new liabilities of an actuarial assumption which differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of paragraph (4).

   (7)  An appointed actuary who is unable to form an opinion shall refuse to issue a statement of actuarial opinion. If the appointed actuary’s opinion is adverse or qualified, the appointed actuary shall issue an adverse or qualified actuarial opinion explicitly stating the reason for the opinion. This statement shall follow the scope paragraph and precede the opinion paragraph.

   (8)  If the appointed actuary does not express an opinion as to the accuracy and completeness of the listings and summaries of policies in force, there shall be attached to the opinion, the statement of a company officer or accounting firm who prepared the underlying data similar to the following:

   ‘‘I (name of officer), (title) of (name and address of company or accounting firm), hereby affirm that the listings and summaries of policies and contracts in force as of December 31, (year), prepared for and submitted to (name of appointed actuary), were prepared under my direction and, to the best of my knowledge and belief, are substantially accurate and complete.

   This section cited in 31 Pa. Code §  84b.3 (relating to scope); 31 Pa. Code §  84b.4 (relating to definitions); 31 Pa. Code §  84b.5 (relating to general requirements); and 31 Pa. Code §  84b.6 (relating to required opinions).