Nev. Admin. Code § 681A.Sec. 19 - NEW
1. Except as otherwise provided in this
subsection, for a covered policy described in subsection 1 of section 8, the
actuarial method is the greater of the deterministic reserve or the net premium
reserve as set forth in the Valuation Manual, regardless of
whether the criteria for exemption testing can be met. If the covered policy
does not meet the requirements of the stochastic reserve exclusion test as set
forth in the Valuation Manual, the actuarial method is the
greatest of the deterministic reserve, the stochastic reserve or the net
premium reserve, as set forth in the Valuation Manual. If a
covered policy described in this subsection is reinsured in a reinsurance
treaty that also contains a covered policy described in subsection 2 of section
8, the ceding insurer may elect to use the actuarial method described in
subsection 2 for the entire reinsurance agreement. Any actuarial method used
pursuant to this subsection must comply with the requirements and restrictions
that the Valuation Manual imposes on the aggregation of
different types of covered policies for purposes of principle-based reserve
calculations.
2. For a covered
policy described in subsection 2 of section 8, the actuarial method is the
greatest of the deterministic reserve, the stochastic reserve or the net
premium reserve as set forth in the Valuation Manual,
regardless of whether the criteria for exemption testing can be met.
3. Except as otherwise provided in subsection
4, the actuarial method must be applied on a gross basis to all risks with
respect to a covered policy as originally issued or assumed by the ceding
insurer.
4. Except as otherwise
provided in subsection 5, if a reinsurance treaty cedes less than 100 percent
of the risk pertaining to its covered policies, the required level of primary
security may be reduced as follows:
(a) If a
reinsurance treaty cedes only a quota share of some or all of the risks
pertaining to its covered policies, the required level of primary security, as
well as any applicable adjustment made pursuant to paragraph (c), may be
reduced to a pro rata portion in accordance with the percentage of the risk
ceded.
(b) If a reinsurance treaty
in a nonexempt arrangement cedes only the risks pertaining to a secondary
guarantee, the required level of primary security may be reduced by an amount
determined by applying the actuarial method on a gross basis to all risks,
except for risks related to the secondary guarantee, pertaining to its covered
policies, except that for covered policies for which the ceding insurer did not
elect to apply the provisions of the Valuation Manual to
establish statutory reserves, the required level of primary security may be
reduced by the statutory reserve retained by the ceding insurer on such covered
policies, where the retained reserve of the covered policies is reflective of
any reduction pursuant to the cession of mortality risk on a yearly renewable
term basis in an exempt arrangement.
(c) If a portion of the risk associated with
the covered policies in a reinsurance treaty is ceded to another reinsurer on a
yearly renewable term basis in an exempt arrangement, the required level of
primary security may be reduced by the amount determined by applying the
actuarial method, including, without limitation, the reinsurance section of the
Valuation Manual, to the portion of the risks associated with
the covered policies ceded in the exempt arrangement, except for the covered
policies issued before January 1, 2017, for which the adjustment is not to
exceed, where c x is calculated using the same mortality table used in
calculating the net premium reserve.
5. If a reinsurance treaty cedes a portion of
risk to a different reinsurer, including, without limitation, stop loss, excess
of loss or any other nonproportional reinsurance treaty, the required level of
primary security may not be reduced.
6. If more than one of the scenarios
described in paragraph (a), (b) or (c) of subsection 4 or in subsection 5
applies to a reinsurance treaty, any adjustment to the required level of
primary security must be done in the order that accurately reflects the portion
of the risk ceded via the treaty. The ceding insurer shall document the
rationale and steps taken to accomplish the adjustments to the required level
of primary security due to the cession of less than 100 percent of the risk.
The adjustments for other reinsurance will be made only with respect to
reinsurance treaties entered into directly by the ceding insurer. The ceding
insurer may not make an adjustment as a result of a retrocession treaty entered
into by the assuming insurers.
7.
Regardless of the actuarial method applied pursuant to this section, the
required level of primary security may never exceed the amount of statutory
reserves ceded.
8. If the ceding
insurer cedes risks pertaining to covered policies in more than one reinsurance
treaty, including, without limitation, any riders, the aggregate required level
of primary security for such reinsurance treaties may not be less than the
required level of primary security calculated using the actuarial method if all
risks ceded in those treaties were ceded in a single reinsurance
treaty.
9. If a reinsurance treaty
cedes risk on both covered policies and noncovered policies, credit for the
ceded reserves must be determined as follows:
(a) The actuarial method must be used to
determine the required level of primary security for the covered policies and
the amount of reinsurance credit for the covered policy reserves must be
determined pursuant to section 20.
(b) Credit for the noncovered policy reserves
must be granted only to the extent that security, in addition to security held
to satisfy the requirements of paragraph (a), is held by or on behalf of the
ceding insurer in accordance with
NRS
681A.140 to
681A.240, inclusive, and NAC
681A.400 to
681A.520, inclusive. Any primary
security used to meet the requirements of this paragraph may not be used to
satisfy the required level of primary security for covered policies.
10. For the purposes of
calculating the required level of primary security pursuant to this section and
determining the amount of primary security and other security, as applicable,
held by or on behalf of the ceding insurer, the following conditions and
limitations shall apply:
(a) For assets held
in trust that would be admitted under the Accounting Practices and
Procedures Manual of the National Association of Insurance
Commissioners if the assets were held by the ceding insurer, the valuations
must be determined according to statutory accounting procedures as if the
assets were held in the ceding insurer's general account and without taking
into consideration the effect of any prescribed or permitted
practices.
(b) For all other assets
not described in paragraph (a), the valuations are those that were assigned to
the assets for the purpose of determining the amount of reserve credit taken.
Additionally, the asset spread tables and asset default costs tables required
by the Valuation Manual must be included in the actuarial
method if such tables are adopted by the Life Actuarial (A) Task Force of the
National Association of Insurance Commissioners not later than December 31 of
any given year on or immediately preceding the valuation date for which the
required level of primary security is being calculated. The asset spread tables
and asset default cost tables must be incorporated into the actuarial method in
the manner specified in the Valuation Manual.
Notes
NRS 679B.130, 681A.130, 681A.145
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