§ 84b.8. Statement of actuarial opinion based on an asset adequacy analysis.

 (a)  General description. The statement of actuarial opinion submitted in accordance with this section shall consist of:

   (1)  An opening paragraph as provided in subsection (b)(1) identifying the appointed actuary and the individual’s qualifications.

   (2)  A scope paragraph as provided in subsection (b)(2) identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary’s work, including a tabulation delineating the reserves and related actuarial items which have been analyzed for asset adequacy and the method of analysis, and identifying the reserves and related actuarial items covered by the opinion which have not been so analyzed.

   (3)  A reliance paragraph as provided in subparagraphs (i)—(iii):

     (i)   If the appointed actuary has deferred to other experts in developing data, procedures or assumptions (for example, anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios), the reliance paragraph should include a statement as provided in subsection (b)(3)(i)(A) or (B), supported by a statement of each expert in the form prescribed by subsection (e).

     (ii)   If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph should include a statement as provided in subsection (b)(3)(ii).

     (iii)   If the appointed actuary has not examined the underlying records, but has relied upon listings and summaries of policies in force or asset records prepared by the company or a third party, the reliance paragraph should include a statement as provided in subsection (b)(3)(iii)(A) or (B).

   (4)  An opinion paragraph as provided in subsection (b)(4) expressing the appointed actuary’s opinion with respect to the adequacy of the supporting assets to mature the liabilities.

   (5)  One or more additional paragraphs will be needed in individual company cases as follows:

     (i)   If the appointed actuary considers it necessary to state a qualification of the opinion.

     (ii)   If the appointed actuary must disclose the method of aggregation for reserves of different products or lines of business for asset adequacy analysis.

     (iii)   If the appointed actuary must disclose reliance upon any portion of the assets supporting the Asset Valuation Reserve (AVR) or other mandatory or voluntary statement reserves for asset adequacy analysis.

     (iv)   If the appointed actuary must disclose an inconsistency in the method of asset allocation used at the prior opinion date with that used for this opinion.

     (v)   If there is an inconsistency in the method of analysis used at the prior opinion date with that used for this opinion.

     (vi)   If the appointed actuary must disclose whether additional reserves of the prior opinion date are released as of this opinion date, and the extent of the release.

     (vii)   If the appointed actuary chooses to add a paragraph briefly describing the assumptions which form the basis for the actuarial opinion.

 (b)  Recommended language. The following paragraphs shall be included in the statement of actuarial opinion in accordance with this section. The language is that which in typical circumstances should be included in a statement of actuarial opinion. 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 all pertinent aspects of the language provided in this subsection.

   (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 include a statement such as follows:

     ‘‘I, (name), am (title) of (insurance company name) 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 opin-ion and am familiar with the valuation requirements applicable to life and health insurance companies.’’

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

     ‘‘I, (name), 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 scope paragraph shall include 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, 19 (year). Those reserves and related actuarial items which have been subjected to asset adequacy analysis are tabulated as shown in the following table of Reserves and Liabilities.’’

   (3)  The reliance paragraph shall include a statement such as follows:

     (i)   If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph shall include a statement such as either (A) or (B) as follows:

       (A)   ‘‘I have relied on (name), (title) for (e.g., anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios) and, as certified in the attached statement, . . . .’’

       (B)   ‘‘I have relied on personnel as cited in the supporting memorandum for certain critical aspects of the analysis in reference to the accompanying statement.’’

 Such a statement of reliance on other experts shall be accompanied by a statement by each expert in the form prescribed by subsection (e).

     (ii)   If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph shall also include a statement such as follows:

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

     (iii)   If the appointed actuary has not examined the underlying records, but has relied upon listings and summaries of policies in force or asset records prepared by the company or a third party, the reliance paragraph shall include a statement such as either clause (A) or clause (B) as follows:

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

       (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 tests of the actuarial calculations as I considered necessary.’’

 Such a statement of reliance shall be accompanied by a statement by each person relied upon in the form prescribed by subsection (e).

   (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 presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;

 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 noted below;

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

 The reserves and related actuarial items, when considered in light of the assets held by the company with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on such assets, and the considerations anticipated to be received and retained under such policies and contracts, make adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company.

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

 This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion.

 or

 The following material change(s) which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: (Describe the change or changes.)

   Note: Choose one of the two immediately preceding paragraphs, whichever is applicable.

 The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company’s future experience may not follow all the assumptions used in the analysis.

 (c) Assumptions for new issues. 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 subsection (b)(4).

 (d)  Adverse opinions. If the appointed actuary is unable to form an opinion, the appointed actuary 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 should follow the scope paragraph and precede the opinion paragraph.

 (e)  Reliance on data furnished by other persons. If the appointed actuary does not express an opinion as to the accuracy and completeness of the listings and summaries of policies in force or asset related information, or both, there shall be attached to the opinion the statement of a company officer or accounting firm who prepared the underlying data similar to either paragraph (1) or (2) or both paragraphs (1) and (2).

   (1)  ‘‘I (name of officer), (title), of (name of company or accounting firm), hereby affirm that the listings and summaries of policies and contracts in force as of December 31, 19 (year), and other liabilities 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.

   (2) ‘‘I, (name of officer), (title) of (name of company, accounting firm, or security analyst), hereby affirm that the listings, summaries and analyses relating to data prepared for and submitted to (name of appointed actuary) in support of the asset related aspects of the opinion 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); 31 Pa. Code §  84b.6 (relating to required opinions); 31 Pa. Code §  84b.9 (relating to description of actuarial memorandum including an asset adequacy analysis); 31 Pa. Code §  84b.10 (relating to additional considerations for analysis); and 31 Pa. Code §  84c.5 (relating to general requirements for basic reserves and premium deficiency reserves).