General Assembly: 75 (1994 Regular GA) - Chapter 1176 - Insurance regulation


Published: 1994-05-13

Subscribe to a Global-Regulation Premium Membership Today!

Key Benefits:

Subscribe Now for only USD$20 per month, or Get a Day Pass for only USD$4.99.

CH. 1176 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION

CHAPTER 1176 INSURANCE REGULATION

S.F.2282

510

AN ACT relating to the regulation of insurance including provisions concerning the disclosure of confidential information, the standard valuation of certain insurance policies and con- tracts and annuities and endowments, and the disclosure of certain transactions of insurers domiciled in this state, and providing an effective date.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 505.7, subsection 1, Code Supplement 1993, is amended to read as follows: 1. All fees and charges which are required by law to be paid by insurance companies! aDd

associations! and other regulated entities shall be payable to the commissioner of the insur- ance division of the department of commerce or department of revenue and finance, as provided by law, whose duty it shall be to account for and pay over the same to the treasurer of state at the time and in the manner provided by law for deposit in the general fund of the state.

Sec. 2. Section 505.7, Code Supplement 1993, is amended by adding the following new sub- section:

NEW SUBSECTION. 8. The commissioner may assess the costs of an audit or examina- tion to a health insurance purchasing cooperative, in the same manner as provided for insur- ance companies under sections 507.7 through 507.9, and may establish by rule reasonable fil- ing fees to fund the cost of regulatory oversight.

Sec. 3. Section 505.8, Code 1993, is amended by adding the following new subsection: NEW SUBSECTION. 6. The commissioner shall supervise all health insurance purchasing

cooperatives providing services or operating within the state and the organization of domes- tic cooperatives. The commissioner may admit non domestic health insurance purchasing cooper- atives under the same standards as domestic cooperatives.

Sec. 4. NEW SECTION. 505.17 CONFIDENTIAL INFORMATION. The disclosure of confidential information, administrative or judicial orders which contain

confidential information, or information regarding other action of the division which is not a public record subject to disclosure, to regulatory officials from this or other states may be permitted by the commissioner provided that those officials are subject to, or agree to comply with, standards of confidentiality comparable to those imposed on the commissioner.

Sec. 5. NEW SECTION. 505.20 HEALTH ACCOUNTING STANDARDS - DUTIES OF COMMISSIONER.

The commissioner, in conjunction with the community health management information sys- tem established in chapter 144C, if enacted by the Seventy-fifth General Assembly, shall adopt rules establishing health accounting standards to be enforced statewide. The community health management information system board shall propose accounting standards for cost and qual- ity to the commissioner for approval. The commissioner shall enforce the standards in con- junction with the community health management information system board.

Sec. 6. NEW SECTION. 505.21 HEALTH CARE ACCESS - DUTIES OF COMMIS- SIONER - PENALTIES.

1. The commissioner shall adopt rules establishing a requirement that an employer provide access to health care to the employees of the employer. The rules shall provide that an employer doing business within this state shall offer each employee, at a minimum, access to health insur- ance. The requirement contained in this section may be satisfied by offering any of the following:

a. Health care coverage through an insurer or health maintenance organization authorized to do business in this state.

b. Access to health benefits through a health benefits plan qualified under the federal Employee Retirement Income Security Act of 1974.

511 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION CH. 1176

2. An employer may financially contribute toward the employee's health benefit plan. The employer shall offer payroll deduction of employee contributions and direct deposit of premium payments related to a health insurance purchasing cooperative or other health care coverage.

3. A violation of this section may be reported to the consumer and legal affairs bureau in the insurance division. The division may issue, upon a finding that an employer has failed to offer an employee access to health insurance, any of the following:

a. A cease and desist order instructing the employer to cure the failure and desist from future violations of this section.

b. An order requiring an employer who has previously been the subject of a cease and desist order to pay an employee's reasonable health insurance premiums necessary to prevent or cure a lapse in health care coverage arising out of the employer's failure to offer as required.

c. An order upon the employer assessing the reasonable costs of the division's investiga- tion and enforcement action.

4. The insurance division shall annually provide a written report to the general assembly beginning January I, 1995, which evaluates the effects of this section on providing universal coverage for all Iowans. If the division determines that the state has not achieved a level of individuals without health care coverage of less than three percent of total population through voluntary means by June 30,1999, the division shall make recommendations for the implemen- tation of and a financing mechanism for a requirement that all individuals in this state procure and maintain health care coverage for themselves and their dependents.

Sec. 7. Section 508.36, subsection I, Code 1993, is amended to read as follows: L RESERVE VAL U A TION. The commissioner shall annually value, or cause to be valued,

the reserve liabilities (hereiaafter ealled reserves)! referred to in this section as reserves, for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurance company doing business in this state, ~ that ffi the ease sf aft alieft eemflaay, Stleh vahlatiea shall be limited t6 its -l::Hmed States busiaess, and may certify the amount of any such reserves, specifying the mortality table or tables, rate or rates of interest, and metheds (the net level premium method or other} methods used in the calculation of such- reserves. In calculating sueh the reserves, the commissioner may use group methods and approximate aver- ages for fractions of a year or otherwise. Fer- the flurflese sf makiftg Stleh valuatiea the eem- missieaer may eHlflley a eemfleteat aetuary wOO shall be paid by the eemflaay ffip whleh the seI'Viee is readered; b-ut a demestie eemflaay may malre Stleh valuatiea aad it shall be reeeived by the eemmissieaer up6fI satislaetery fH'66l sf its eerreetaess. In lieu of the valuation of the reserves hePeiB required in this section of any foreign or alien company, the commissioner 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 hePeiB provided for in this section and if the official of such state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the commissioner when such certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction.

Afly- Stleh eemflaay whleh at aay time shall have adeflted aay staadard sf valuatiea flredue ifIg greateP aggregate reserves thaB these ealeulated aeeerdiag t6 the miaimum staadard hePeiB flre'lided may-;- with the aflflreval sf the eemmissieaer, ~ aay l&w& staadard sf valuatiea, b-ut Bot l&w& thaB the miaimum hePeiB flrevided.

Sec. 8. Section 508.36, subsection 2, Code 1993, is amended by striking the subsection and inserting in lieu thereof the following:

2. ACTUARIAL OPINION OF RESERVES. This subsection is effective January I, 1996. a. GENERAL. A life insurance company doing business in this state shall annually submit

the written opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulation are computed appropriately, are based on assumptions which satisfy contractual provisions, are

CH. 1176 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION 512

consistent with prior reported amounts, and are in compliance with applicable laws of this state. The commissioner shall define by rule the requirements and content of this opinion and add any other items deemed to be necessary.

b. ACTUARIAL ANALYSIS OF RESERVES AND ASSETS SUPPORTING SUCH RESERVES.

(1) Unless exempted by rule, a life insurance company shall also annually include in the opinion required by paragraph "a", an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of policies and contracts specified by the commis- sioner by rule, when considered with respect to the assets held by the company associated with the reserves and related actuarial items, including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, are sufficient for the company's obligations under the policies and contracts, including but not limited to the benefits under and expenses associated with the policies and contracts.

(2) The commissioner may provide by rule for a transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this section.

c. REQUIREMENTS FOR ACTUARIAL ANALYSIS. An opinion required by paragraph "b" shall be governed by the following provisions:

(1) A memorandum, in form and substance acceptable to the commissioner as specified by rule, shall be prepared to support each actuarial opinion.

(2) If the insurance company fails to provide a supporting memorandum at the request of the commissioner within a period specified by rule or the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the rules or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare such supporting memorandum as is required by the commis- sioner.

d. REQUIREMENT FOR ALL OPINIONS. An opinion required under this section is governed by the following provisions:

(1) The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after December 31, 1995.

(2) The opinion shall apply to all business in force, including individual and group health insurance plans, in form and substance acceptable to the commissioner as specified by rule.

(3) The opinion shall be based on standards adopted from time to time by the actuarial stan- dards board and on such additional standards as the commissioner may by rule prescribe.

(4) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

(5) For the purposes of this section, "qualified actuary" means a member in good standing of the American academy of actuaries who meets the requirements of the commissioner as specified by rule.

(6) Except in cases of fraud or willful misconduct, a qualified actuary is not liable for damages to any person, other than to the insurance company and the commissioner, for any act, error, omission, decision, or conduct with respect to the actuary's opinion.

(7) Disciplinary action which may be taken by the commissioner against the company or the qualified actuary shall be defined in rules adopted by the commissioner.

(8) Any memorandum in support of the opinion, and any other material provided by the com- pany to the commissioner in connection with the opinion, shall be kept confidential by the com- missioner and shall not be made public and shall not be subject to subpoena, other than for the purpose of defending an action seeking damages from any person by reason of any action required by this section or by rules adopted pursuant to this section. Notwithstanding this subparagraph, the memorandum or other material may be released by the commissioner if either of the following apply:

513 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION CH. 1176

(a) The commissioner receives the written consent of the company with which the opinion is associated.

(b) The American academy of actuaries requests that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth proce- dures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material.

Once any portion of the confidential memorandum is cited by the company in its marketing, is cited before any governmental agency other than a state insurance department, or is released by the company to the news media, all portions of the confidential memorandum are no longer confidential.

3. COMPUTATIONS OF MINIMUM STANDARDS. Except as otherwise provided in sub- sections 4, 5, and 12, the minimum standard for the valuation of all such policies and contracts issued prior to July 1, 1994, shall be that provided by the laws in effect immediately prior to such date. Except as otherwise provided in subsections 4, 5, and 12, the minimum standard for the valuation of all such policies and contracts shall be the commissioner's reserve valua- tion methods defined in subsections 6, 7, 10, and 11, five percent interest for group annuity and pure endowment contracts and three and one-half percent interest for all other policies and contracts, or in the case of policies and contracts, other than annuity and pure endowment contracts, issued on or after July 1, 1974, four percent interest for such policies issued prior to January 1, 1980, five and one-half percent interest for single premium life insurance policies and four and one-half percent interest for all other such policies issued on and after January 1, 1980, and the following tables:

a. For all ordinary policies of life insurance issued on the standard basis, excluding any dis- ability and accidental death benefits in the policies, the following:

(1) The commissioners 1941 standard ordinary mortality table for policies issued prior to the operative date of section 508.37, subsection 5, paragraph "a".

(2) The commissioners 1958 standard ordinary mortality table for such policies issued on or after the operative date of section 508.37, subsection 5, paragraph "c", provided that for any category of 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 six years young- er than the actual age of the insured.

(3) For policies issued on or after the operative date of section 508.37, subsection 5, para- graph "c", any of the following:

(a) The commissioners 1980 standard ordinary mortality table. (b) At the election of the company for anyone or more specified plans of life insurance, the

commissioners 1980 standard ordinary mortality table with ten-year select mortality factors. (c) Any ordinary mortality table, adopted after 1980 by the national association of insur-

ance commissioners, that is approved by rule adopted by the commissioner for use in deter- mining the minimum standard of valuation for such policies.

b. For all industrial life insurance policies issued on the standard basis, excluding any disa- bility and accidental death benefits in the policies, the following:

(1) For policies issued prior to the operative date of section 508.37, subsection 5, paragraph "b", the 1941 standard industrial mortality table.

(2) For policies issued on or after the operative date of section 508.37, subsection 5, para- graph "b", the commissioners 1961 standard industrial mortality table, or any industrial mor- tality table adopted after 1980 by the national association of insurance commissioners, that is approved by rule adopted by the commissioner for use in determining the minimum stan- dard of valuation for such policies.

c. For individual annuity and pure endowment contracts, excluding any disability and acciden- tal 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.

CH. 1176 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION 514

d. For group annuity and pure endowment contracts, excluding any disability and acciden- tal death benefits in such policies, the group annuity mortality table for 1951, or a modifica- tion of the 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, the following:

(1) For policies or contracts issued on or after January 1, 1966, the tables of period 2 dis- ablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the soci- ety 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 rule adopted by the commissioner for use in determining the minimum stan- dard of valuation for such policies.

(2) For policies or,contracts issued on or after January 1, 1961, and prior to January 1, 1966, either of the tables identified under subparagraph (1), or at the option of the company, the class (3) disability table (1926).

(3) For policies issued prior to January 1, 1961, the class (3) disability table (1926). A table used under this paragraph "e" 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, the following: (1) 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 insur- ance commissioners and approved by rule adopted by the commissioner for use in determin- ing the minimum standard of valuation for such policies.

(2) For policies issued on or after January 1, 1961, and prior to January 1, 1966, either of the tables identified under subparagraph (1), or at the option of the company, the inter-company double indemnity mortality table.

(3) For policies issued prior to January 1, 1961, the inter-company double indemnity mortal- ity table.

A table used under this paragraph uf' shall be combined with a mortality table for calculat- ing the reserves for life insurance policies.

g. For group life insurance, life insurance issued on the substandard basis, and other spe- cial benefits, tables approved by the commissioner.

4. COMPUTATION FOR MINIMUM STANDARDS FOR ANNUITIES. Except as provided in subsection 5, the minimum standard for the valuation of all individual annuity and pure endow- ment contracts issued on or after the operative date of this subsection, and for all annuities and pure endowments purchased on or after the operative date of this subsection under group annuity and pure endowment contracts, shall be the commissioner's reserve valuation methods defined in subsections 6 and 7, and the following tables and interest rates:

a. For individual annuity and pure endowment contracts issued prior to January 1, 1980, excluding any disability and accidental death benefits in such contracts, both of the following:

(1) The 1971 individual annuity mortality table, or any modification of this table approved by the commissioner.

(2) Six percent interest for single premium immediate annuity concracts, and four percent interest for all other individual annuity and pure endowment contracts.

b. For individual single premium immediate annuity contracts issued on or after January 1, 1980, excluding any disability and accidental death benefits in such contracts, both of the following:

(1) One of the following tables: (a) The 1971 individual annuity mortality table. (b) An individual annuity mortality table, adopted after 1980 by the national association of

insurance commissioners and approved by rule adopted by the commissioner for use in deter- mining the minimum standard of valuation for such contracts.

515 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION CH. 1176

(c) A modification of the tables identified in subparagraph subdivisions (a) and (b) approved by the commissioner.

(2) Seven and one-half percent interest. c. For individual annuity and pure endowment contracts issued on or after January 1,1980,

other than single premium immediate annuity contracts, excluding any disability and acciden- tal death benefits in such contracts, both of the following:

(1) One of the following tables: (a) The 1971 individual annuity mortality table. (b) An individual annuity mortality table adopted after 1980 by the national association of

insurance commissioners and approved by rule adopted by the commissioner for use in deter- mining the minimum standard of valuation for such contracts.

(c) A modification of the tables identified in subparagraph subdivisions (a) and (b) approved by the commissioner.

(2) Five and one-half percent interest for single premium deferred annuity and pure endow- ment contracts and four and one-half percent interest for all other such individual annuity and pure endowment contracts.

d. For all annuities and pure endowments purchased prior to January I, 1980, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, both of the following:

(1) The 1971 group annuity mortality table or any modification of this table approved by the commissioner.

(2) Six percent interest. e. For all annuities and pure endowments purchased on or after January 1,1980, under group

annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, both of the following:

(1) One of the following tables: (a) The 1971 group annuity mortality table. (b) A group annuity mortality table adopted after 1980 by the national association of insur-

ance commissioners and approved by rule adopted by the commissioner for use in determin- ing the minimum standard of valuation for such annuities and pure endowments.

(c) A modification of the tables identified in subparagraph subdivisions (a) and (b) approved by the commissioner.

(2) Seven and one-half percent interest. After July I, 1973, a company may file with the commissioner a written notice of its election

to comply with the provisions of this subsection after a specified date before January I, 1979, which shall be the operative date of this section for such company, provided, if a company makes no election, the effective date of this section for a company is January I, 1979.

5. COMPUTATION OF MINIMUM STANDARD BY CALENDAR YEAR OF ISSUE. a. APPLICABILITY OF THIS SUBSECTION. The calendar year statutory valuation

interest rates, as defined in this subsection, shall be used in determining the minimum stan- dard for the valuation of all of the following:

(1) All life insurance policies issued in a particular calendar year, on or after the operative date of section 508.37, subsection 5, paragraph "c".

(2) All individual annuity and pure endowment contracts issued in a particular calendar year on or after January I, 1995.

(3) All annuities and pure endowments purchased in a particular calendar year on or after January I, 1995, under group annuity and pure endowment contracts.

(4) The net increase, if any, in a particular calendar year on or after January I, 1995, in amounts held under guaranteed interest contracts.

b. CALENDAR YEAR STATUTORY VALUATION INTEREST RATES. (1) The calendar year statutory valuation interest rates, referred to in this paragraph as

"I", shall be determined as follows and the results rounded to the nearer one-quarter of one percent:

CH. 1176 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION 516

(a) For life insurance, W

I equals .03 + W(R1- .03) + 2 (R2 - .09), where R1 is the lesser of Rand .09, R2 is the greater of Rand .09, R is the reference interest rate defined in paragraph "d" of this subsection, and W is the weighting factor defined in paragraph "c" of this subsection.

(b) For single premium immediate annuities and for annuity benefits involving life contin- gencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options,

I equals .03 + W(R - .03), where R1 is the lesser of Rand .09, R2 is the greater of Rand .09, R is the reference interest rate defined in paragraph "d" of this subsection, and W is the weighting factor defined in paragraph "c" of this subsection.

(c) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement opti.ons, valued on an issue year basis, except as stated in subparagraph sub- division (b), the formula for life insurance stated in subparagraph subdivision (a) applies to annui- ties and guaranteed interest contracts with guarantee durations in excess of ten years, and the formula for single premium immediate annuities stated in subparagraph subdivision (b) applies to annuities and guaranteed interest contracts with guarantee durations of ten years or less.

(d) For other annuities with no cash settlement options and for guaranteed interest con- tracts with no cash settlement options, the formula for single premium immediate annuities stated in subparagraph subdivision (b) applies.

(e) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in subparagraph subdivision (b) applies.

(2) However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined under subparagraph (1), subparagraph subdi- vision (a) without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one per- cent, the calendar year statutory valuation interest rate for the life insurance policies is equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980, using the reference interest rate defined in 1979, and shall be determined for each subsequent calen- dar year regardless of the operative date of section 508.37, subsection 5, paragraph "c".

c. WEIGHTING FACTORS. (1) The weighting factors referred to in paragraph "b" are given in

the following tables: (a) Weighting Factors for Life Insurance: Guarantee Duration (Years) 10 or less More than 10, but not more than 20 More than 20

Weighting Factors .50 .45 .35

For life insurance, the guarantee duration is the maximum number of years the life insur- ance 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 guaran- teed in the original policy.

(b) The weighting factors for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options is .80.

(c) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in subparagraph subdivision (b), shall be as specified in subparagraph subdivision parts (i), (ii) and (iii) of this subparagraph subdivision, according to the rules and definitions in sub- paragraph subdivision parts (iv), (v), and (vi) of this subparagraph subdivision:

517 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION CH. 1176

(i) For annuities and guaranteed interest contracts valued on an issue year basis: Weighting Factor

for Plan Type Guarantee Duration (Years) ABC 5 or less .80 .60 .50 More than 5, but not more than 10 .75 .60 .50 More than 10, but not more than 20 .65 .50 .45 More than 20 .45 .35 .35

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

Plan Type ABC

.15 .25 .05 (iii) For annuities and guaranteed interest contracts valued on an issue-year basis, other

than those with no cash settlement options, 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 which do not guarantee interest rates on considera- tions received more than twelve months beyond the valuation date, the factors shown in sub- paragraph subdivision part (i) of this subparagraph subdivision or derived in subparagraph subdivision part (ii) of this subparagraph subdivision increased by:

Plan Type ABC

.05 .05 .05 (iv) For other annuities with cash settlement options and guaranteed interest contracts with

cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee durations in excess of twenty years. For other annui- ties with no cash settlement options and for guaranteed interest contracts with no cash settle- ment options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

(v) "Plan type", as used in subparagraph subdivision parts (i), (ii), and (iii) of this subpara- graph subdivision, is defined as follows:

"Plan Type A": At any time, the policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or may withdraw funds without that adjustment but in installments over five years or more, or may withdraw funds as in immediate life annuity; or no withdrawal is permitted.

"Plan Type B": Before expiration of the interest rate guarantee, the policyholder may with- draw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or may withdraw funds without that adjust- ment but in installments over five years or more; or no withdrawal is permitted. At the end of interest rate guarantee, funds may be withdrawn without adjustment in a single sum or installments over less than five years.

"Plan Type C": The policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five years either without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or subject only to a fixed surrender charge stipulated in the contract as a percent- age of the fund.

(vi) 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. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue-year basis. As used in this section, an issue-year basis of valuation refers to a valuation basis under which the interest rate used

CH. 1176 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION 518

to determine the minimum valuation standard for the entire duration of the annuity or guaran- teed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract, and the change-in-fund basis of valuation refers to a valuation basis under which the interest rate used to determine the mini- mum valuation standard applicable to each change in the fund held under the annuity or guaran- teed interest contract is the calendar year valuation interest rate for the year of the change in the fund.

d. REFERENCE INTEREST RATE. The reference interest rate referred to in paragraph "b" is defined as follows:

(1) For all life insurance, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June 30 of the calendar year next preced- ing the year of issue, of the monthly average of the composite yield on seasoned corporate bonds, as published, by moody's investors service, inc.

(2) For single premium immediate annuities and for annuity benefits involving life contin- gencies arising from other annuities with cash settlement options and guaranteed interest con- tracts with cash settlement options, the average over a period of twelve months, ending on June 30 of the calendar year of issue or year of purchase, of the monthly average of the compo- site yield on seasoned corporate bonds, as published by moody's investors service, inc.

(3) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue-year basis, except as stated in subparagraph (2), with guarantee duration in excess of ten years, the lesser of the average over a period of thirty- six months and the average over a period of twelve months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by moody's investors service, inc.

(4) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue-year basis, except as stated in subparagraph (2), with guarantee duration of ten years or less, the average over a period of twelve months, end- ing on June 30 of the calendar year of issue or purchase, of the monthly average of the compo- site yield on seasoned corporate bonds, as published by moody's investors service, inc.

(5) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by moody's investors service, inc.

(6) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change-in-fund basis, except as stated in subparagraph (2), the average over a period of twelve months, ending on June 30 of the calendar year of the change in the fund, of the monthly average of the composite yield on seasoned corporate bonds, as published by moody's investors service, inc.

e. ALTERNATIVE METHOD FOR DETERMINING REFERENCE INTEREST RATES. In the event that the monthly average of the composite yield on seasoned corporate bonds is no longer published by moody's investors service, inc., or in the event that the national association of insurance commissioners determines that the monthly average of the composite yield on seasoned corporate bonds as published by moody's investors service, inc. is no longer appropriate for the determination of the reference interest rate, an alternative method for determination of the reference interest rate, which is adopted by the national association of insurance commissioners and approved by rule adopted by the commissioner, may be sub- stituted.

6. RESERVE VALUATION METHOD - LIFE INSURANCE AND ENDOWMENT BENEFITS.

a. Except as otherwise provided in subsections 7, 10, and 12, reserves calculated according to the commissioner's reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, shall be the excess, if any, of the present value, at the date of valuation, of future

519 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION CH. 1176

guaranteed benefits provided for by such policies, over the present value, at the date of valua- tion, of any future modified net premiums for such policies. The modified net premiums for such policy is the uniform percentage of the respective contract premiums for the benefits such that the present value, at the date of issue of the policy, of all modified net premiums shall be equal to the sum of the present value, at the date of valuation, of such benefits provided for by the policy and the excess of the amount determined in subparagraph (1) over the amount determined in subparagraph (2), as follows:

(1) A net level annual premium equal to the present value at the date of issue, of the benefits provided for after the first policy year, divided by the present value at the date of issue, of an annuity of one per annum payable on the first, and each subsequent, anniversary of the policy on which a. premium falls due. However, the net level annual premium shall not exceed the net level annual premium on the nineteen-year premium whole life plan for insurance of the same amount at an age one year more than the age of the insured at issue of the policy.

(2) A net one-year term premium for the benefits provided for in the first policy year. b. However, for a life insurance policy issued on or after January 1,1998, for which the con-

tract premium in the first policy year exceeds that of the second year and for which no com- parable additional benefit is provided in the first year for such additional premium and which provides an endowment benefit or a cash surrender value or a combination of such benefit or value in an amount greater than the additional premium, the reserve according to the com- missioner's reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined as the first policy anniversary on which the sum of any endow- ment benefit and any cash surrender value then available is greater than such additional premium shall be, except as otherwise provided in subsection 10, the greater of the reserve as of such policy anniversary calculated as described in paragraph "au and the reserve as of such policy anniversary calculated as described in paragraph "au, but with the following modifi- cations:

(i) The value defined in paragraph "au being reduced by fifteen percent of the amount of such excess first year premium.

(ii) All present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date.

(iii) The policy being assumed to mature on such date as an endowment. (iv) The cash surrender value provided on such date being considered as an endowment

benefit. In making the above comparison the mortality and interest bases stated in subsections 4

and 5 shall be used. c. Reserves according to the commissioner's reserve valuation method shall be calculated

pursuant to a method consistent with this subsection for all of the following: (1) Life insurance policies providing for a varying amount of insurance or requiring the pay-

ment of varying premiums. (2) Group annuity and pure endowment contracts purchased under a retirement plan or plan

of deferred compensation established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the Inter- nal Revenue Code.

(3) Disability and accidental death benefits in all policies and contracts. (4) All other benefits, except life insurance and endowment benefits in life insurance poli-

cies and benefits provided by all other annuity and pure endowment contracts. 7. RESERVE VALUATION METHOD - ANNUITY AND PURE ENDOWMENT

BENEFITS. This subsection applies to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the Inter- nal Revenue Code.

CH. 1176 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION 520

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 considerations 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 deter- mining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values.

8. MINIMUM RESERVES. a. A company's aggregate reserves for all life insurance policies, excluding disability and

accidental death benefits, the operative date of section 508.37, shall not be less than the aggregate reserves calculated in accordance with the methods set forth in subsections 6, 7, 10, and 11, and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies.

b. A company's aggregate reserves for all policies, contracts, and benefits shall not be less than the aggregate reserves determined by the qualified actuary to be necessary to render the opinion required by subsection 2.

9. OPTIONAL RESERVE CALCULATION. Reserves for all policies and contracts issued prior to the operative date of section 508.37, 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 prior to July I, 1994.

Reserves for any category of policies, contracts, or benefits, as established by the commis- sioner, issued on or after the operative date of section 508.37, 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 as provided in this section, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits as provided in this section.

A company which at any time adopts a standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard as provided in this section may adopt, with the approval of the commissioner, any lower standard of valuation, not to be lower than the minimum as provided in this section, provided, however, that, for purposes of this section, the holding of additional reserves previously determined by a qualified actuary to be necessary to render the opinion required by subsection 2 shall not be deemed to be the adoption of a higher standard of valuation.

10. RESERVE CALCULATION - VALUATION NET PREMIUM EXCEEDING THE GROSS PREMIUM CHARGE.

a. If in any contract year the gross premium charged by a life insurance company on a policy or contract is less than the valuation net premium for the policy or contract, as calculated by the method used in calculating the reserve for such policy or contract but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract is the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum valu- ation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this section are those standards established in subsections 4 and 5.

521 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION CH. 1176

b. However, for any life insurance policy issued on or after January I, 1998, for which the gross premium in the first policy year exceeds that of the second year and for which no com- parable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value, or a combination of such benefit and value, in an amount greater than the excess premium, the provisions of paragraph "a" apply as if the method actually used in calculating the reserve for such policy is the method established in subsection 6, excluding paragraph "b" of that subsection. The minimum reserve of the policy at each policy anniversary shall be the greater of the minimum reserve calculated pursuant to subsection 6 and the minimum reserve calculated in accordance with this subsection.

11. RESERVE CALCULATION - INDETERMINATE PREMIUM PLANS. In the case of any plan of life insurance which provides for future premium determination, the amounts of such premium which are to be determined by the insurance company based on estimates of future experience, or in the case of any plan of life insurance or annuity, the minimum reserves of which cannot be determined by the methods established in subsections 6, 7, and 10, the reserves which are held under the plan must be appropriate in relation to the benefits and the pattern of premiums for that plan, and shall be computed by a method which is consistent with this section, as determined by rules adopted by the commissioner.

12. MINIMUM STANDARDS FOR HEALTH (DISABILITY, ACCIDENT, AND SICKNESS) PLANS. The commissioner shall adopt rules containing the minimum standards applicable to the valuation of health, disability, and sickness and accident plans.

Sec. 9. Section 513B.2, subsection 16, Code Supplement 1993, is amended to read as follows: 16. "Small employer" means a person actively engaged in business who, on at least fifty

percent of the employer's working days during the preceding year, employed not less than two and not more than tweBty five fifty full-time equivalent eligible employees. In determin- ing the number of eligible employees, companies which are affiliated companies or which are eligible to file a combined tax return for purposes of state taxation are considered one employer.

Sec. 10. Section 513B.4, Code Supplement 1993, is amended by adding the following new subsection:

NEW SUBSECTION. 1A. Notwithstanding subsection I, there shall be no variance in premium rates for a basic or standard benefit plan offered pursuant to this chapter for health status or claim experience.

Sec. 11. Section 513B.4, subsection 2, unnumbered paragraph 2, Code Supplement 1993, is amended by striking the paragraph and inserting in lieu thereof the following:

Case characteristics other than age, geographic area, family composition, and group size shall not be used by a small employer carrier without the prior approval of the commissioner.

Sec. 12. Section 513B.4, Code Supplement 1993, is amended by adding the following new subsection:

NEW SUBSECTION. 5. Notwithstanding subsection I, the commissioner, with the concur- rence of the board of the Iowa small employer health reinsurance program established in sec- tion 513B.13, may by order reduce or eliminate the allowed rating bands provided under sub- section I, paragraphs "a", "b", and "c", or otherwise limit or eliminate the use of experience rating.

Sec. 13. Section 515A.13, Code 1993, is amended by adding the following new subsection: NEW SUBSECTION. 5. PROHIBITED RELEASE. A person other than the commissioner

or the commissioner's designee shall not release to another person, other than to the servicing insurer of the policy or to the commissioner or the commissioner's designee, experience, pay- roll, loss data, expiration date of a policy, or classification information without the prior writ- ten approval of the policy holder. A violation of this section shall be considered an unfair trade practice pursuant to chapter 507B.

CH. 1176 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION 522

Sec. 14. Section 521C.2, subsection 8, paragraph c, Code 1993, is amended to read as follows: c. An underwriting manager who, pursuant to contract, manages all or part Q! the reinsur·

ance operations of the reinsurer, who is under common control with the reinsurer, subject to chapter 521A relating to the regulation of insurance holding company systems, and who is not compensated based upon the volume of premiums written.

Sec. 15. Section 521C.11, Code 1993, is amended to read as follows: 521C.11 PENALTIES AND LIABILITIES. 1. A reinsurance intermediary, insurer, er- reinsurer or other person found by the commis·

sioner, after a hearing conducted in accordance with chapter 17A, to he ifi vielatien &f have not materially complied with !!: provision of this chapter is subject to one or more of the following:

a. For each separate violation, a civil penalty in an amount not exceeding ten five thousand dollars.

b. Revocation or 'suspension of the license of the reinsurance intermediary. eo Ii a vielatien was eemmitted by the reinsurance intermediary, a ei-vH aeti6R breught by

the eemmissiener seeldng restitutien by the reinsurance intermediary ~ the insurer, reinsurer, renabilitater, er-liquidater &f the ifisureF- er- reinsurer ffiF- the Rcll6sses ineurred by the ifisureF- er- reinsurer attributable ~ the vielatien.

!! the commissioner finds that such noncompliance has resulted in !!: loss or damage to the insurer or reinsurer, the commissioner may bring!!: civil action on behalf of the insurer or rein· surer, and the policyholders and creditors of the insurer or reinsurer, seeking the recovery of compensatory damages for the benefit Q! the insurer or reinsurer, and the policyholders and creditors of the insurer or reinsurer, or seeking other relief as appropriate.

!! an order of rehabilitation or liquidation has been entered pursuant to chapter 507C, and the receiver appointed under the order determines that the reinsurance intermediary or any other person has not materially co~d with !!: pro~n of this chapter and such noncomPIi= ance has resulted in !!: loss or damage to the insurer or reinsurer, the receiver may bring !!: civil action on behalf Q! the insurer or reinsurer seeking the recovery of damages for the benefit Q! the insurer or reinsurer, or seeking other appropriate sanction or relief.

2. A decision, determination, or order of the commissioner made or entered pursuant to sub· section 1 is subject to judicial review pursuant to chapter 17 A.

3. This section does not affect the right of the commissioner to impose any other penalties provided in this subtitle.

4. This chapter shall not in any manner limit or restrict the rights of policyholders, claim- ants, creditors, or other third parties, or confer any rights to such persons.

Sec. 16. NEW SECTION. 52ID.1 TITLE. This chapter shall be known and may be cited as the "Disclosure of Material Transactions Act".

Sec. 17. NEW SECTION. 52ID.2 REPORT. 1. An insurer domiciled in this state shall file a report with the commissioner disclosing

material acquisitions and dispositions of assets, or material nonrenewals, cancellations, or revi- sions of ceded reinsurance agreements unless such acquisitions and dispositions of assets, or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements have been submitted to the commissioner for review, approval, or information purposes pursuant to other provisions of this subtitle or pursuant to other requirements. The report shall be filed not later than fifteen days after the end of the calendar year in which the material acquisition or disposition of assets, or material nonrenewal, cancellation, or revision of ceded reinsurance agreements occurs.

2. The insurer shall also file a copy of the report required to be filed with the commissioner pursuant to subsection 1, including any exhibits or other attachments filed as part of the report, with the national association of insurance commissioners.

3. All reports obtained by or disclosed to the commissioner and the national association of insurance commissioners pursuant to this chapter are confidential and shall not be subject to

523 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION CH. 1176

subpoena and shall not be made public by the commissioner, the national association of insur- ance commissioners, or any other person without the prior written consent of the insurer to which it pertains, unless the commissioner, after giving such insurer notice and providing an opportunity to be heard, determines that the interest of policyholders, shareholders, or the public will be served by the publication or disclosure of the report, in which event the commis- sioner may publish or disclose all or any part of the report as deemed appropriate.

Notwithstanding this subsection, the commissioner or the national association of insurance commissioners may provide the report to the insurance regulatory agencies of other states.

Sec. 18. NEW SECTION. 52ID.3 REPORT OF ACQUISITION AND DISPOSITION OF ASSETS - INFORMATION REQUIRED - SCOPE.

1. An acquisition or disposition of assets need not be reported pursuant to section 521D.2 if the acquisition or disposition is not material. For purposes of this chapter, a material acqui- sition, or the aggregate of any series of related acquisitions, or a disposition, or the aggregate of any series of related dispositions, during any thirty-day period, is one that is nonrecurring, is not in the ordinary course of business, and involves more than five percent of the reporting insurer's total admitted assets as reported in its most recent statutory statement filed with the insurance division of the insurer's state of domicile.

2. For purposes of this chapter, an asset acquisition includes every purchase, lease, exchange, merger, consolidation, succession, or other acquisition, other than the construction or develop- ment of real property by or for the reporting insurer or the acquisition of materials for such purpose. For purposes of this chapter, an asset disposition includes every sale, lease, exchange, merger, consolidation, mortgage, hypothecation, assignment, whether for the benefit of credi- tors of* otherwise, abandonment, destruction, or other disposition.

3. A report of a material acquisition or disposition of assets shall include all of the following: a. Date of the transaction. b. Manner of the acquisition or disposition. c. Description of the assets involved. d. Nature and amount of the consideration given or received. e. Purpose of, or reason for, the transaction. f. Manner by which the amount of consideration was determined. g. Gain or loss recognized or realized as a result of the transaction. h. Name or names of the person or persons from whom the assets were acquired or to whom

they were disposed. 4. An insurer is required to report material acquisitions and dispositions on a nonconsoli-

dated basis unless the insurer is part of a consolidated group of insurers which utilizes a pool- ing arrangement or one hundred percent reinsurance agreement that affects the solvency and integrity of the insurer's reserves, and such insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrange- ment, and the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer's capital and surplus.

Sec. 19. NEW SECTION. 52ID.4 REPORT OF NONRENEWAL, CANCELLATION, REVISION OF CEDED REINSURANCE AGREEMENTS - INFORMATION REQUIRED - SCOPE.

1. A nonrenewal, cancellation, or revision of a ceded reinsurance agreement need not be reported pursuant to section 521D.2 if the nonrenewal, cancellation, or revision is not material. For purposes of this chapter, a material nonrenewal, cancellation, or revision of a ceded reinsurance agreement is one that does the following:

a. For property and casualty business including accident and health business when written as such, affects more than fifty percent of an insurer's ceded written premium on an annual- ized basis as indicated in the insurer's most recently filed statutory statement.

"The word "or" probably intended

CH. 1176 LA WS OF THE SEVENTY -FIFTH G.A., 1994 SESSION 524

b. For life, annuity, and accident and health business, affects more than fifty percent of the total reserve credit taken for business ceded on an annualized basis as indicated in the insurer's most recently filed statutory statement.

2. Notwithstanding subsection 1, a filing is not required if the insurer's ceded written premium represents, on an annualized basis, less than ten percent of direct plus assumed writ- ten premium, or the total reserve credit taken for business ceded represents, on an annual- ized basis, less than ten percent of the statutory reserve requirement prior to any cession.

3. A report required to be filed pursuant to this chapter is to be filed regardless of who has initiated the nonrenewal, cancellation, or revision of the ceded reinsurance agreement whenever one or more of the following conditions exist:

a. The entire cession has been canceled, nonrenewed, or revised and ceded indemnity and loss adjustment expense reserves, after any nonrenewal, cancellation, or revision, represent less than fifty perce'nt of the comparable reserves that would have been ceded had the non- renewal, cancellation, or revision not occurred.

b. An authorized or accredited reinsurer has been replaced on an existing cession by an unauthorized reinsurer.

c. Collateral requirements previously established for unauthorized reinsurers have been reduced.

Subject to the materiality criteria, for purposes of paragraphs "b" and "c", a report shall be filed if the result of the revision affects more than ten percent of the cession.

4. A report of a material nonrenewal, cancellation, or revision of a ceded reinsurance agree- ment required to be filed shall include all of the following:

a. The effective date of the nonrenewal, cancellation, or revision. b. The description of the transaction including the identification of the initiator of the trans-

action. c. The purpose of, or reason for, the transaction. d. The identity of the replacement reinsurers, if applicable. 5. Insurers are required to report all material nonrenewals, cancellations, or revisions of

ceded reinsurance agreements on a nonconsolidated basis unless the insurer is part of a con- solidated group of insurers which utilizes an intercompany pooling agreement or arrangement or a one hundred percent reinsurance agreement under which the ceding company has ceded substantially one hundred percent of its direct and assumed business to a pool. An insurer is deemed to have ceded substantially one hundred percent of its direct and assumed business to a pool if the insurer has less than one million dollars of total direct plus assumed written premiums during a calendar year that are not subject to the pooling agreement or arrange- ment and the net income of the business not subject to the pooling agreement or arrangement represents less than five percent of the insurer's capital and surplus. If a group of insurers reports on a consolidated basis, the report shall identify the individual insurers that are mem- bers of the group.

Sec. 20. Section 6 of this Act, which creates new section 505.21, relating to health care access, is effective January 1, 1995.

Approved May 13, 1994