§ 84b.9. Description of actuarial memorandum including an asset
adequacy analysis.

 (a)  General.

   (1)  In accordance with section 301(f)(3) of the act (40 P. S. §  71(f)(3)), the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of the opinion regarding the reserves under a §  84b.8 (relating to statement of actuarial opinion based on asset adequacy analysis) opinion. The memorandum shall be made available for examination by the Commissioner upon the Commissioner’s request but will be returned to the company after examination and will not be considered a record of the Department or subject to automatic filing with the Commissioner.

   (2)  In preparing the memorandum, the appointed actuary may rely on, and include as a part of the memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of §  84b.5(b) (relating to general requirements), with respect to the areas covered in the memoranda, and so state in their memoranda.

   (3)  If the Commissioner requests a memorandum and no memorandum exists or if the Commissioner finds that the analysis described in the memorandum fails to meet the standards of the Actuarial Standards Board or the standards and requirements of this chapter, the Commissioner may designate a qualified actuary to review the opinion and prepare supporting memorandum as is required for review. The reasonable and necessary expense of the independent review shall be paid by the company but will be directed and controlled by the Commissioner. The reviewing actuary shall have the same status as an examiner for purposes of obtaining data from the company. The work papers and documentation of the reviewing actuary shall be retained by the Commissioner. Information provided by the company to the reviewing actuary and included in the work papers shall be considered as material provided by the company to the Commissioner and will be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the Commissioner under the act. The reviewing actuary may not be an employe of a consulting firm involved with the preparation of a prior memorandum or opinion for the insurer under this chapter for any one of the current year or the preceding 3 years.

 (b)  Details of the memorandum section documenting asset adequacy analysis. When an actuarial opinion under §  84b.8 is provided, the memorandum shall demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in §  84b.5(d) and additional standards under this chapter. It shall specify:

   (1)  For reserves:

     (i)   Product descriptions, including market description, underwriting and other aspects of a risk profile and the specific risks the appointed actuary deems significant.

     (ii)   Source of liability in force.

     (iii)   Reserve method and basis.

     (iv)   Investment reserves.

     (v)   Reinsurance arrangements.

   (2)  For assets:

     (i)   Portfolio descriptions, including a risk profile disclosing the quality, distribution and types of assets.

     (ii)   Investment and disinvestment assumptions.

     (iii)   Source of asset data.

     (iv)   Asset valuation bases.

     (v)   Method of asset allocation.

   (3)  Analysis basis:

     (i)   Methodology.

     (ii)   Rationale for an inconsistency in the method of asset allocation used at the prior opinion date with that used for this opinion and the extent of the inconsistency.

     (iii)   Rationale for an inconsistency in the method of analysis used at the prior opinion date with that used for this opinion.

     (iv)   Rationale for inclusion/exclusion of different blocks of business and how pertinent risks were analyzed.

     (v)   Rationale for degree of rigor in analyzing different blocks of business.

     (vi)   Criteria for determining asset adequacy.

     (vii)   Effect of Federal income taxes, reinsurance and other relevant factors.

   (4)  Summary of results.

   (5)  Conclusion.

 (c)  Conformity to standards of practice. The memorandum shall include a statement such as follows:

 ‘‘Actuarial methods, considerations and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum.’’

   This section cited in 31 Pa. Code §  84b.3 (relating to scope); and 31 Pa. Code §  84b.4 (relating to definitions).