Chapter 3901-3 Acquisitions and Mergers; Insurance Holding Company Systems

3901-3-01 Requirement for approval of the proposed acquisition of control of or merger with a domestic insurer.

(A) Authority

This rule is issued by the superintendent of insurance pursuant to sections 3901.321 and 3901.041 of the Revised Code.

(B) Purpose

Section 3901.321 of the Revised Code requires any person who wishes to engage in any transaction described in division (B)(1) of that section to file with the superintendent an information statement (hereinafter called "Form A"). The purpose of this rule is to establish the content of and form to be used in the application for approval of the proposed transaction with an insurer domiciled in this state.

(C) Additional information

In addition to the information expressly required to be included in Form A, there shall be added such further material information, if any, as may be necessary to make the information contained therein not misleading. The superintendent reserves the right to request other information or documentation that in the superintendent's sole discretion is deemed necessary or appropriate for the protection of policyholders of the domestic insurer or in the public interest.

(D) Exhibits

Applicants may file supplemental exhibits as desired in addition to those expressly required by Form A. Exhibits shall clearly indicate the subject matter to which they refer.

(E) Amendments or modifications

Applicants shall promptly advise the superintendent of any changes in the information furnished on Form A arising subsequent to the date upon which the information was furnished.

(F) Definitions

Terms found in this regulation are used as defined in the Insurance Holding Company Systems Regulatory Act, section 3901.32 et seq. of the Revised Code, and rule 3901-3-02 of the Administrative Code.

(G) General requirements

Applicants must file the information statement in the exact form as set forth in paragraph (H) of this rule. The statement shall contain the numbers and captions of all items. If the answer to any item is in the negative, an appropriate statement to that effect shall be made. Two copies of the information statement, including exhibits and all other papers or documents filed as a part thereof, shall be filed with the superintendent. At least one copy of each statement shall be manually signed in the manner prescribed. The unsigned copy shall be conformed. The unsigned copy is to be submitted in electronic form prescribed by the Superintendent. Copies of Form A, exhibits and all other papers or documents filed as a part thereof shall be clear, easily readable and in the English language with monetary values stated in United States currency. If any exhibit, paper or document filed is in a foreign language it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency shall be converted into United States currency.

(H) Information to be included in Form A.

Form A

Statement regarding the acquisition of control of or merger with a domestic insurer

_____________________________________________________

Name of domestic insurer by

_____________________________________________________

_____________________________________________________

_____________________________________________________

Name and address of acquiring person

Filed with the insurance department of

_______________________________________________________________

(State of domicile of insurer being acquired)

Dated: ________________________________, 20_____

Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed:

_____________________________________________________

_____________________________________________________

_____________________________________________________

_____________________________________________________

Item 1. Insurer and method of acquisition

State the name and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired.

Item 2. Identity and background of the applicant

(A) State the name and address of the applicant seeking to acquire control of the insurer.

(B) If the applicant is not an individual, state the nature of its business operations for the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence. Briefly describe the business intended to be done by the applicant and the applicant's subsidiaries.

(C) Furnish a chart or listing clearly presenting the identities of and inter-relationships among the applicant and all affiliates of the applicant. Indicate in such chart or listing the percentage of voting securities of each such person which is owned or controlled by the applicant or by any other such person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings and the date when commenced.

Item 3. Identity and background of individuals associated with the applicant

(1) Identify the applicant if (s)he is an individual or, if the applicant is not an individual, all persons who are directors, executive officers or owners of ten percent or more of the voting securities of the applicant.

(2) Each individual applicant or all persons who are directors, executive officers or owners of ten percent or more of the voting securities of the applicant shall complete a biographical affidavit and authority for release of information that is prescribed for such use by the Superintendent.

Item 4. Nature, source and amount of consideration

(A) Describe the nature, source and amount of funds or other consideration used or to be used in effecting the proposed transaction. If any part of the consideration is or is to be borrowed or otherwise obtained for the purpose of acquiring, holding or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any (whether direct or indirect), between the borrower and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, understanding, promissory notes and security arrangements relating thereto. If the stock or any asset of the domestic insurer is to be pledged or hypothecated in any way, so describe and provide a copy of the agreement or arrangement.

(B) Explain the criteria used in determining the nature and amount of such consideration.

Item 5. Future plans of insurer

(1) Describe any contemplated or actual plans or proposals which the applicant may have to: cause the insurer to declare dividends, liquidate or dissolve the insurer, sell any asset of the insurer, enter into any rental, leasing, service or financial, or other arrangements with the insurer, or merge/reorganize the insurer with any person or persons. Provide terms and conditions of all applicable arrangements to the transaction.

(2) Provide a plan of operation for the domestic insurer for three years following consummation of the proposed transaction including: type of business to be written, amount of anticipated premiums, investment policy, marketing plans, relocation of home office or of corporate records and changes in reinsurance or reinsurers.

(3) Describe all changes planned to be made after consummation of the proposed transaction concerning the board of directors or executive officers of the domestic insurer and those of the organization which will succeed the latter as a result of the proposed transaction. Describe the nature, extent and amount of any commitments to or agreements or understandings with the present officers and directors of the domestic insurer. Attach copies of all contemplated or actual contracts, commitments, agreements or understandings for: employment, consultation, advice, management or services.

(4) Provide pro forma balance sheets and income statements of the insurer prepared in accordance with statutory accounting principles, for three years following consummation of the proposed transaction. If any part of the consideration for the proposed transaction involves borrowed funds, describe debt service in detail. If any part of the consideration is to be obtained from or financed by an affiliate of the applicant, identify the source of funds and describe the method of distribution.

(5) If the insurer will be a member of an insurance holding company system following consummation of the proposed transaction, provide the following:

(a) A pro forma balance sheet and income statement showing the effect of the proposed transaction, prepared on a consolidated and applicant-only basis.

(b) If the applicant is an insurer actively engaged in the business of insurance, the statements shall be prepared in accordance with statutory accounting principles.

(c) If the applicant is not an insurer actively engaged in the business of insurance, the statements shall be prepared in accordance with generally accepted accounting principles.

(6) State the amount of premiums written by the domestic insurer and all affiliates for each line of business transacted in Ohio, as of the thirty-first day of December next preceding. State the amount of premiums written by the applicant and all affiliates for each line of business transacted in Ohio, as of the thirty-first day of December next preceding.

Item 6. Voting securities to be acquired

State the number of shares of the insurer's voting securities which the applicant, its affiliates and any person listed in Item 3, plans to acquire. Describe the terms of the offer, request, invitation, agreement or acquisition. State the method used to determine the fairness of the proposal.

Item 7. Ownership of voting securities

State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates or any person listed in Item 3.

Item 8. Contracts, arrangements, or understandings with respect to voting securities of the insurer

Fully describe any contracts, arrangements or understandings with respect to any voting security of the insurer in which the applicant, its affiliates or any person listed in Item 3 is involved, including but not limited to: transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits or the giving or withholding of proxies. Identify the persons with whom such contracts, arrangements or understandings have been entered.

File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and, if distributed, of additional soliciting material relating thereto and annual reports to the stockholders of the insurer and applicant for the last two fiscal years.

Item 9. Recent purchases of voting securities

Describe any purchases of any voting securities of the insurer by the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement. Include in the description the dates of purchase, the names of the purchasers, and the consideration paid or agreed to be paid therefore. State whether any such shares are pledged or hypothecated.

Item 10. Recent recommendations to purchase

Describe any recommendations to purchase any voting security of the insurer made by the applicant, its affiliates or any person listed in Item 3, or by anyone based upon interviews or at the suggestion of the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement.

Item 11. Agreements with broker-dealers

Describe the terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of voting securities of the insurer for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.

Item 12. Financial statements

(A) Financial statements shall be attached to this statement as exhibits. However, list under this item the financial statements so attached.

(B) The financial statements shall include: (1) the annual financial statements of the persons identified in Item 2(C) for the preceding five fiscal years or for such lesser period as such applicant and its affiliates and any of its predecessors shall have been in existence and (2) similar information covering the period from the end of such person's last fiscal year, if such information is available. Such statements may be prepared on either an individual basis or, unless the superintendent otherwise requires, on a consolidated basis, if the consolidated statements are prepared in the usual course of business.

(C) The annual financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the applicant is an insurer which is actively engaged in the business of insurance, the financial statements must be based on the annual statement of such person filed with the insurance department of the person's domiciliary state and be in accordance with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of such state.

Item 13. Corporate authority

If the applicant is not an individual, file a certified copy of:

(1) The resolution of the board of directors of the applicant approving the transaction and directing that the agreement underlying the transaction be submitted to a vote of the shareholders, members or policyholders entitled to vote on the matter.

(2) The resolution of the shareholders, members or policyholders of the applicant approving the transaction.

Item 14. Notice to domestic insurer

State whether the applicant has sent a copy of Form A to the domestic insurer.

Item 15. Signature and certification

Signature and certification required as follows:

Signature Pursuant to the requirements of section 3901.321 of the Revised Code ________________ has caused this application to be duly signed on its behalf in the city of ______________ and state of ______________ on the ___________ day of __________, 20______.

______________________________________________

Name of applicant

By: _____________________________, its: _____________________________

(Name)

Attest: __________________________________, _________________________________

(Signature of officer) (Title)

Certification The undersigned deposes and says that (s)he has duly executed the attached application dated __________________, 20_____, for and on behalf of _________________________, and that (s)he is authorized (Name of applicant) to execute and file such instrument. Deponent further says that (s)he is the ________________________ of such company and that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his or her knowledge, information and belief.

(Signature)

_________________________________

_________________________________

(Type or print name)

State of _________________)

ss

County of ________________)

The foregoing instrument was acknowledged before me this ___________ day of ______________, 20____.

_______________________________

Notary public

(I) Severability

If any section, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3901.321
Rule Amplifies: 3901.321
Prior Effective Dates: 10/20/1991; 04/13/2006

3901-3-02 Regulation and registration of insurers under the Insurance Holding Company Regulatory Act.

(A) Purpose and authority

Sections 3901.32 to 3901.37 of the Revised Code, provide for the regulation and registration of insurance holding company systems. The purpose of this rule is to interpret certain terms, establish standards, and to promulgate forms to be adhered to in the regulation and registration of insurers authorized to do business in this state. This rule is issued pursuant to the authority vested in the superintendent under section 3901.041 of the Revised Code.

(B) Definitions

(1) "Executive officer" means any individual charged with active management and control, in an executive capacity, including a president, vice president, treasurer, secretary, controller, and any other individual performing for a person, whether incorporated or unincorporated, functions corresponding to those performed by the foregoing officers.

(2) "Ultimate controlling person" means that person within an insurance holding company system which is not controlled by any other person.

(3) "Insurer" as defined in division (D) of section 3901.32 of the Revised Code includes, but is not limited to, domestic, foreign, and alien stock or mutual insurance companies, mutual protective insurance associations, fraternal benefit societies, risk retention groups domiciled in this state as described in division (A) of section 3960.02 of the Revised Code, reciprocals, title guarantee and trust companies, health insuring corporations, and any other persons engaged either directly or indirectly in this state in the business of insurance which is subject to regulation by the superintendent of insurance.

(4) "Applicant" means a person or persons seeking to control an insurer.

(5) All other terms used herein shall have the same meanings prescribed in section 3901.32 of the Revised Code unless the context otherwise requires. Other nomenclature or terminology is according to the Revised Code, or insurance usage if not defined by the Revised Code.

(C) Registration of insurer--statement filing

An insurer required to file a registration statement or an amendment thereto pursuant to section 3901.33 of the Revised Code shall furnish the required information on form B as outlined in paragraph (J) of this rule.

(D) Amendments

(1) Form B is the annual registration statement to be filed annually by the registered insurer on or before June one, each year after the initial registration. Such annual filing shall restate the form B and make current all information in the form B, including amendments filed during the current reporting year.

(2) An amendment to form B shall be filed within fifteen days after the end of any month in which the following occurs:

(a) There is a change in the control of the registered insurer, in which case the entire form B shall be made current;

(b) There is a material change in or addition to the information given in item 5 or item 6 of form B.

(E) Alternative and consolidated registrations

(1) Any insurer authorized to do business in this state may file a registration statement on behalf of any affiliated insurer or insurers which are required to register under section 3901.33 of the Revised Code. Such registration statement may include information regarding any insurer in the insurance holding company system even if such insurer is not authorized to do business in this state. In lieu of filing a registration statement on form B, an insurer authorized to do business in this state may file a copy of the registration statement or similar report which it is required to file in its state of domicile, provided:

(a) The statement or report contains substantially similar information required to be furnished on form B; and

(b) The filing insurer is the principal insurance company in the insurance holding company system.

(2) The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact and an insurer filing a registration statement or report in lieu of form B on behalf of an affiliated insurer shall set forth a simple statement of facts which will substantiate the filing insurer's claim that it, in fact, is the principal insurer in the insurance holding company system.

(3) With the prior approval of the superintendent, an insurer not authorized to do business in this state may follow any of the procedures which could be done by an insurer authorized to do business in this state under paragraph (E)(1) of this rule.

(4) Two or more affiliated insurers subject to registration may file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements. The superintendent, however, reserves the right to require individual registration statements if he deems it necessary in the interest of clarity, ease of administration or the public good.

(F) Exemptions

(1) A foreign or alien insurer otherwise subject to section 3901.33 of the Revised Code shall not be required to register pursuant to section 3901.33 of the Revised Code if it is subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in section 3901.33 of the Revised Code.

(2) The state of entry of an alien insurer shall be deemed to be its domiciliary state for the purposes of section 3901.33 of the Revised Code.

(3) Any insurer not otherwise exempt from section 3901.33 of the Revised Code may apply for an exemption from the requirements of section 3901.33 of the Revised Code by submitting a statement to the superintendent setting forth its reasons for being exempt. No exemption shall be granted except upon written order of the superintendent, stating his findings, made after a hearing held upon not less than ten days written notice to the insurer requesting the exemption.

(G) Disclaimers and termination of registration

(1) A disclaimer of affiliation pursuant to division (J) of section 3901.33 of the Revised Code or a request for termination of registration pursuant to division (F) of section 3901.33 of the Revised Code claiming that a person does not, or will not upon the taking of some proposed action, control any other person (hereinafter referred to as the "subject") shall contain the following:

(a) The number of authorized, issued and outstanding voting securities of the subject:

(b) With respect to the person whose control is denied and all affiliates of such person:

(i) The number and percentage of shares of the subject's voting securities which are held of record or know to be beneficially owned, and the number of such shares concerning which there is a right to acquire, directly or indirectly;

(ii) Information as to all transactions in any voting securities of the subject which were effected during the past six months by such persons;

(c) All material relationships and bases for affiliations between the subject and the person whose control is denied and all affiliates of such person;

(d) A statement explaining why such person should not be considered to control the subject.

(2) A request for termination of registration shall be deemed to have been granted unless the superintendent, within thirty days after he received the request, notifies the registered insurer otherwise.

(H) Extraordinary dividends and other distributions

Request for approval of extraordinary dividends or any other extraordinary distribution shall include the following:

(1) The amount of extraordinary dividend or extraordinary distribution;

(2) The date established for payment of the dividend or distribution;

(3) A statement as to whether the dividend or distribution is to be in cash or other property and, if in property, a description thereof, its cost, and the fair market value of such property together with an explanation of the basis for valuation;

(4) The amounts and dates of all dividends or distributions paid within the period of twelve consecutive months ending on the date fixed for payment of the proposed dividend or distribution for which approval is sought and commencing on the day after the same day of the same month in the last preceding year;

(5) A balance sheet and statement of income for the period intervening from the last annual statement filed with the superintendent and the end of the month preceding the month in which the request for dividend or distribution approval is submitted;

(6) A brief statement as to the effect of the proposed dividend or distribution upon the insurer's surplus and the reasonableness of surplus in relation to the insurer's outstanding liabilities and the adequacy of surplus relative to the insurer's financial needs.

(I) Form B: instructions

(1) General requirements

(a) Form B is intended to be a guide in the preparation of the statement required by section 3901.33 of the Revised Code. It is not intended to be a blank form which is to be filled in. The statement filed shall contain the numbers and captions of all items, but the text of the items may be omitted provided the answers thereto are so prepared as to indicate to the reader the coverage of the items without the necessity of his referring to the text of the items or the instructions thereto. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is not applicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made;

(b) Two copies of each statement, including exhibits and all other papers and documents filed as part thereof, shall be filed with the superintendent. One of the copies is to be submitted in electronic form as prescribed by the superintendent. If a consolidated report is made to amend the individual registration statement of more than one insurer, one complete copy of such report shall be filed. Each statement or report filed with the superintendent shall be manually signed in the manner prescribed in the form. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of such power of attorney or other authority shall also be filed with the statement or report;

(c) Statements or reports should be prepared on paper 8 1/2 x 11" or 8 1/2" x 13" in size and preferably bound at the top of the top left-hand corner. Exhibits and financial statements, unless specifically prepared for filing, may be submitted in their original size. All copies of any statement, report, financial statement, or exhibits shall be clear, easily readable and suitable for photocopying. Debits in credit categories shall be designed so as to be clearly distinguishable as such on photocopies. Statements or reports shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper document filed with the statement or report is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency shall be converted into United States currency.

(2) Incorporation by reference, summaries and omissions.

(a) Information required by an item of form B may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of form B provided such document or paper is filed as an exhibit to the statement or report. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents already on file with the superintendent need not be attached as exhibits. References to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that such material is to be incorporated by reference in answer to the item. Matter shall not be incorporated by reference in any case where such incorporation would render the statement or report incomplete, unclear or confusing;

(b) Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the most important provisions of the document. In addition to such statement, the summary or outline may incorporate by reference particular parts of any exhibit or document on file with the superintendent and may be qualified in its entirety by such reference. In any case where two or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, a copy of only one of the documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which such omitted documents differ from the document of which a copy is filed. The superintendent may at any time in his discretion require the filing of copies of any omitted documents.

(3) Information unknown or unavailable and extension of time to furnish:

(a) Information required need be given only insofar as it is known or reasonably available to the registered insurer. If any required information is unknown and not reasonably available to the registered insurer, either because the obtaining thereof would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the registered insurer filing, the information may be omitted, subject to the following conditions:

(i) The registered insurer shall give such information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources thereof; and

(ii) The registered insurer shall include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of any affiliation with the person within whose knowledge the information rests and stating the result of a request made to such person for the information.

(b) If it is impractical to furnish any required information, document or report at the time it is required to be filed, there may be filed with the superintendent as a separate document an application (i) identifying the information, document or report in question, (ii) stating why the filing thereof at the time required is impractical, and (iii) requesting an extension of time for filing the information, document or report to a specified date. The application shall be deemed granted unless the superintendent within thirty days after receipt thereof, shall enter an order denying the application.

(4) Additional information and exhibits.

In addition to the information expressly required to be included in Form B, there shall be added such further material information, if any, as may be necessary to make the information contained therein not misleading. The person filing may also file such exhibits as it may desire in addition to those expressly required by the statement. Such exhibits shall be so marked as to indicate clearly the subject matters to which they refer.

(5) Amendments

Any amendment to form B shall include on the top of the cover page the phrase: "amendment no. _____ to" and shall indicate the date of the amendment and the date of the original filing of the statement being amended.

(J) Form B: Information to be included in form B Insurance holding company system registration statement Filed with the insurance department of the state of Ohio by

______________________________________________________________

Name of registrant (or registrants if this is a consolidated registration statement)

"NAIC Group No." _____________________

On behalf of the following insurance companies:

____________________________________________________________

____________________________________________________________

Dated: ________________ , 20__

Name, title and address of officer to whom notices and correspondence concerning this statement should be addressed:

____________________________________________________________

____________________________________________________________

Item 1. Identity and control of registrant

Furnish the exact name of each insurer registering or being registered (hereinafter called "the registrant"), the home office address and principal executive officers of each, the date on which each registrant became part of the insurance holding company system, and the method(s) by which control of each registrant was acquired and is maintained.

Item 2. Organizational chart

Furnish a chart or listing clearly presenting the identities of and interrelationships amount all affiliated persons within the insurance holding company system. The chart or list should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing, indicate the type or organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile.

Item 3. The ultimate controlling person

As to the ultimate controlling person, furnish the following information:

(a) Name;

(b) Home office address;

(c) Principal executive office;

(d) The organizational structure of the person, e.g., corporation, partnership, individual, trust, etc.;

(e) The principal business of the person;

(f) The name and address of any person who holds ten percent or more of any class of voting security of the ultimate controlling person, the class of such security, the name of shares held of record or known to be beneficially owned, and the percentage of class so held or owned.

Item 4. Biographical information

Furnish the following information on the directors or trustees, the members of a non- profit corporation, as well as the executive officers of the insurer and ultimate controlling person, beneficial or record owners of ten percent or more of any class of voting security of the ultimate controlling person:

(a) For new registrants, provide a biographical affidavit on a form prescribed by the superintendent for all persons described in item 4.

(b) For registrants without any changes to the list of persons described in item 4 since the previous filing, provide each person's name and address, his principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years.

(c) For registrants with changes to the list of persons described in item 4 since the previous filing, provide a biographical affidavit on a form prescribed by the superintendent for any person not previously required to submit biographical information; for all others provide the information described in paragraph (b) of item 4.

Item 5. Transaction, relationships and agreements

Briefly describe the following agreements in force, relationships subsisting, and transactions currently outstanding between the registrant and its affiliates:

(a) Loans, other investments, or purchases, sales or exchanges of securities of the affiliated by the registrant or of the registrant by its affiliates;

(b) Purchases, sales or exchanges of assets;

(c) Transactions not in the ordinary course of business;

(d) Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the registrant's assets to liability, other than insurance contracts entered into in the ordinary course of the registrant's business;

(e) All management and service contracts and all cost sharing arrangements;

(f) Reinsurance agreements;

(g) Dividends and other distributions to shareholders;

(h) Consolidated tax allocation agreements;

(i) Any pledge of the insurer's stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system, and

(j) Other matters concerning transactions between registered insures and any affiliates as may be included from time to time in any registration forms adopted or approved by the superintendent.

No Information need be disclosed if such information is not material. Sales purchases, exchanges, loans or extensions of credit or investments involving one-half of one per cent or less of the registrant's admitted assets as of the thirty-first day of December next preceding shall not be deemed material.

The description shall be in a manner as to permit the proper evaluation thereof by the superintendent, and shall include at least the following: the nature and purpose of the transaction; the nature and the amounts of any payments or transfers of assets between the parties; the identity of all parties to such transaction; the relationship of the affiliated parties to the registrant; and if applicable the date upon which the agreements, relationships, transactions and distributions described in item 5 of paragraph (J) of this rule were reported to the superintendent pursuant to division (C) of section 3901.34 or section 3901.34 1 of the Revised Code.

Item 6. Litigation or administrative proceedings

A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which the ultimate controlling person or any directors or executive officers of the ultimate controlling person was a party or of which the property of any such person is or was the subject; give the names of the parties, the court or agency in which such litigation or proceeding is or was pending, and the date when commenced:

(a) Criminal prosecutions or administrative proceedings by any governmental agency or authority which may be relevant to the trustworthiness or any party thereto; and

(b) Proceedings which may have a material effect upon the solvency or capital structure of the ultimate controlling person including, but not necessarily limited to, bankruptcy, liquidation, receivership, or corporate reorganizations.

Item 7. Financial statements and exhibits

(a) Financial statements and exhibits for registrants shall be attached to this statement as an appendix unless incorporated herein by reference to such statements or exhibits already filed with the superintendent;

(b) The financial statements shall include the annual financial statements of the ultimate controlling person in the insurance holding company system as of the end of such person's latest fiscal year.

If at the time of the initial registration, any annual financial statements required to be filed for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information shall be filed for any subsequent period to the extent such information is available. Financial statements may be prepared on either an individual basis, or unless the superintendent otherwise requires, on a consolidated basis if such consolidated statements are prepared in the usual course of business.

Unless the superintendent otherwise permits, the annual financial statements shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the ultimate controlling person is an insurer which is actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the annual statement of such insurer filed with the insurance department of the insurer's domiciliary state and are in accordance with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of such state.

(c) Exhibits shall include copies of the latest annual reports to shareholders of the ultimate controlling person and proxy material used by the ultimate controlling person.

Signatures

Signatures and certification of the forms as follows:

Pursuant to the requirements of section 3901.33 of the Revised Code and rule 3901-3-02 of the Administrative Code, the registrant has caused this registration statement to be duly signed on its behalf in the city of__________ and state of

__________ on the _____ day of __________ , 20___.

__________________________________ (Name) (Title)

(Seal)

______________________________ (Name of registrant)

Attest:

_______________________ (Signature of officer)

_______________________ (Title)

The undersigned deposes and says the he has duly executed the attached registration statement dated __________ , 20___, for and on behalf of __________ ;

that he is the __________ (Title of officer) of such company, and that he has the authority to execute and file such instrument. Deponent further says that he is familiar with such instrument and that the facts therein set forth are true to the best of his knowledge, information and belief.

(Signature) __________________________

(Type or print name beneath) __________________________

(K) Summary of registration statement

A form C summary of registration statement, must be prepared and filed with each form B filing in the following form:

Form C Summary of registration statement Filed with the insurance department of the state of __________ By

________________________________

Name of registrant

"NAIC Group No." ______________________________

On behalf of following insurance companies Name address

_________________________________________________________

_________________________________________________________

_________________________________________________________

_________________________________________________________

Date: __________ , 20___

Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed:

_________________________________________________________

_________________________________________________________

_________________________________________________________

Furnish a brief description of all items in the current annual registration statement which represent changes from the prior year's annual registration statement. The description shall be in a manner as to permit the proper evaluation thereof by the superintendent, and shall include specific references to item numbers in the annual registration statement and to the terms contained therein.

Changes occurring under item 2 of form B insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where such changes are ones which result in ownership or holdings of ten per cent or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest.

Changes occurring under item 4 of form B need only be included where an individual is, for the first time, made a director or executive officer of the ultimate controlling person; a director or executive officer terminates his or her responsibilities with the ultimate controlling person; or in the event an individual is named president of the ultimate controlling person.

If a transaction disclosed on the prior year's annual registration statement has been changed, the nature of such change shall be included. If a transaction disclosed on the prior year's annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction.

The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions whose purpose it is to avoid statutory threshold amounts and the review that might otherwise occur.

Signature and certification Signature and certification required as follows:

Pursuant to the requirements of section 3901.33 of the Revised Code, registrant has caused this registration statement summary be duly signed on its behalf of the city of __________ and state of __________ on the _____ day of __________ , 20___.

(Seal) ________________________

Name of applicant By ________________________

(Name) (Title)

Attest:

_________________________

(Signature of officer)

_________________________

(Title)

Certification The undersigned deposes and says that (s)he has duly executed the attached annual registration statement dated __________ , 20___, for and on behalf of __________

(name of applicant); that (s)he is the __________ (title of officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.

(Signature) _______________________

(Type or print name beneath) _______________________

(L) Severability If any section, term, or paragraph of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term, or paragraph of this rule, but the remaining section, terms, and paragraphs shall be and continue in full force and effect.

Effective: 11/18/2010
R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041
Rule Amplifies: 3901.32 to 3901.37
Prior Effective Dates: 11/22/1971, 10/20/1991, 6/1/1996, 4/13/2006

3901-3-03 Transactions subject to prior notice - notice filing.

(A) Purpose

The purpose of this rule is to establish the form and content an insurer must use in order to give notice of a proposed transaction under section 3901.341 of the Revised Code.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent under section 3901.041 and section 3901.341 of the Revised Code.

(C) Definitions

Terms found in this regulation are used as defined in the Insurance Holding Company System Act, section 3901.32 et. seq. of the Revised Code, and rule 3901-3-02 of the Administrative Code.

(D) Written notice

In giving notice to the superintendent of a proposed transaction pursuant to section 3901.341 of the Revised Code, the insurer shall use the form set forth below.

Form D

Prior notice of a transaction

Filed with the insurance department of the state of Ohio

By

______________________________

Name of registrant

On behalf of the following insurance companies

Name Address

____________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

Date: __________________, 20 __

Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed:

____________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

Item 1. Identity of parties to transaction

Furnish the following information for each of the parties to the transaction:

(a) Name.

(b) Home office address.

(c) Principal executive office address.

(d) The organizational structure, e.g. corporation, partnership, individual, trust, etc.

(e) A description of the nature of the parties' business operations.

(f) Relationship to the insurer of other parties to the transaction, if any, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer, or by the insurer in the affiliated parties.

(g) Where the transaction is with a non-affiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction.

Item 2. Description of the transaction

Furnish the following information in electronic form prescribed by the Superintendent for each transaction for which notice is being given:

(a) A statement as to whether notice is being given under 3901.341(A)(1), (2), (3), (4), or (5) of the Revised Code.

(b) A statement of the nature of the transaction and a complete copy of the agreement to include amendments if applicable.

(c) The proposed effective date of the transaction.

Item 3. Sales, purchases, exchanges, loans, extensions of credit, guarantees or investments

If notice is being given under section 3901.341(A)(1) of the Revised Code, furnish a brief description of the amount and source of funds, securities, property or other consideration for the sale, purchase, exchange of assets, loan, extension of credit, guarantee, or investment. If any securities are involved in the transaction, provide a description of the terms of the securities.

If consideration for the transaction is other than cash describe the consideration, its cost, and fair market value, and explain the basis for evaluation.

If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount which the insurer will be obligated to make available under such loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest.

If the transaction involves an investment, guarantee or other arrangement, state the time period during which the investment, guarantee or other arrangement will remain in effect, together with any provisions for extensions or renewals of such investments, guarantees or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given if the maximum amount which can at any time be outstanding or for which the insurer can be legally obligated under the loan, extension of credit or guarantee is less than, (A) in the case of non-life insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders or, (B) in the case of life insurers, three percent of the insurer's admitted assets, each as of the thirty-first day of December next preceding.

Item 4. Loans or extensions of credit to a non-affiliate

If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of or make investments in any affiliate. Describe the amount and source of funds, securities, property or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost and its fair market value together with an explanation of the basis for evaluation. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given if the loan or extension of credit is one which equals less than, in the case of non-life insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders or, with respect to life insurers, three percent of the insurer's admitted assets, each as of the thirty-first day of December next preceding.

Item 5. Reinsurance

If the transaction is a reinsurance agreement or modification thereto, as described by section 3901.341(A)(3) of the Revised Code, furnish a description of the known and/or estimated amount of liability to be ceded and/or assumed in each calendar year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and non-affiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurer's affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurer's surplus.

No notice need be given for reinsurance agreements or modifications thereto if the reinsurance premium or a change in the insurer's liabilities in connection with the reinsurance agreement or modification thereto is less than five percent of the insurer's surplus as regards policyholders, as of the thirty-first day of December next preceding.

Item 6. Management agreements, service agreements, cost-sharing arrangements and tax allocation agreements.

For management and service agreements, furnish:

(a) A brief description of the managerial responsibilities, or services to be performed.

(b) A brief description of the agreement, including a statement of its duration, together with brief descriptions of the basis for compensation and the terms under which payment or compensation is to be made.

For cost-sharing arrangements, furnish:

(a) A brief description of the purpose of the agreement.

(b) A description of the period of time during which the agreement is to be in effect.

(c) A brief description of each party's expenses or costs covered by the agreement.

(d) A brief description of the accounting basis to be used in calculating each party's costs under the agreement.

Item 7. Signature and certification

Signature and certifications required as follows:

Signature

Pursuant to the requirements of section 3901.341 of the Revised Code, ___________ has caused this notice to be duly signed on its behalf in the city of _____________________ and state of ___________________ on the _______ day of ________, 20____.

(Seal)

__________________________________

Name of applicant

By __________________________________

(Name) (Title)

Attest:

__________________________________________

(Signature of officer)

__________________________________________

(Title)

Certification

The undersigned deposes and says that (s)he has duly executed the at- tached notice dated _______, 20____, for and on behalf of __________________; (Name of applicant) That (s)he is the _____________________ of such company and that (s)he is (Title of officer) authorized to execute and file such instrument. Deponent further says the (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.

(Signature) ________________________________

(Type or print name beneath)__________________________

______________________________________

(E) Severability

If any section, term or provision of this rule is adjudged invalid for any reason, the judgement shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3901.341
Rule Amplifies: 3901.341
Prior Effective Dates: 11/9/1991, 4/13/2006

3901-3-04 Hazardous financial condition standards.

(A) Purpose

The purpose of this rule is to facilitate the department of insurance's surveillance of the financial condition of insurers by setting out standards which the superintendent may use for identifying insurers whose condition is such as to render the continuance of their business hazardous to their policyholders, creditors, or the general public. This rule shall not be interpreted to limit the powers granted the superintendent by any laws of this state.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent under sections 3901.041 , 3903.09 and 3903.71 of the Revised Code.

(C) Standards

(1) The following standards, either singly or a combination of two or more, may be considered by the superintendent to determine whether the continued operation of any insurer might be deemed to be hazardous to their policyholders, creditors, or the general public. The superintendent may consider:

(a) Adverse findings reported in financial condition or market conduct examination reports, statutory audit reports, and actuarial opinions, reports or summaries;

(b) The "National Association of Insurance Commissioners Insurance Regulatory Information System" and its other financial analysis solvency tools and reports;

(c) Whether the insurer has made adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contracted obligations and related expenses of the insurer, when considered in light of the assets held by the insurer 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;

(d) The ability of an assuming reinsurer to perform and whether the insurer's reinsurance program provides sufficient protection for the insurer's remaining surplus after taking into account the insurer's cash flow and the classes of business written as well as the financial condition of the assuming reinsurer;

(e) As reported in the most recent quarterly or annual statutory financial statement filing, the insurer's net loss or negative net income in the last twelve month period or any shorter period of time, including but not limited to net unrealized capital gains or losses, change in nonadmitted assets, and the payment of cash dividends to shareholders which are greater than fifty per cent of such insurer's remaining capital and surplus as regards policyholders in excess of the minimum amount required and/or;

(f) As reported in the most recent quarterly or annual statutory financial statement filing, the insurer's net decrease in capital and policyholders surplus, in the last twelve month period or any shorter period of time, is greater than fifty per cent of such insurer's remaining capital and policyholders surplus in excess of the minimum required;

(g) As reported in the most recent quarterly or annual statutory financial statement filing, whether the insurer's net loss or negative net income in the last twelve month period or any shorter period of time, excluding net realized capital gains and losses, is greater than twenty per cent of the insurer's remaining surplus as regards policyholders in excess of the minimum required;

(h) Whether a reinsurer, obligor, or any entity within the insurer's insurance holding company system is insolvent, threatened with insolvency, or delinquent in payment of its monetary or other obligation and which in the opinion of the superintendent may affect the solvency of the insurer;

(i) Contingent liabilities, pledges or guarantees which either individually or collectively involve a total amount which in the opinion of the superintendent may affect the solvency of the insurer;

(j) Whether any person, exercising control of an insurer as defined in division (C) of section 3905.61 of the Revised Code is delinquent in the transmitting to, or payment of, net premiums to such insurer;

(k) The age and collectibility of receivables;

(l) Whether the management of an insurer, including officers, directors, or any other person who directly or indirectly controls the operation of such insurer, fails to possess and demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in such position;

(m) Whether management of an insurer has failed to respond to inquiries relative to the condition of the insurer or has furnished false and misleading information concerning an inquiry;

(n) Whether the insurer has failed to meet financial and holding company filing requirements in the absence of a reason satisfactory to the superintendent;

(o) Whether management of an insurer has filed any false or misleading sworn financial statement, or has released false or misleading financial statements to lending institutions or to the general public, or has made a false or misleading entry, or has omitted an entry of material amount in the books of the insurer;

(p) Whether the insurer has grown so rapidly and to such an extent that it lacks adequate financial and administrative capacity to meet its obligations in a timely manner;

(q) Whether the insurer has experienced or will experience in the foreseeable future cash flow and/or liquidity problems;

(r) Whether an insurer has failed to comply with paragraph (J) of rule 3901-1-50 of the Administrative Code;

(s) Whether the insurer meets measures of capital adequacy adopted by statute or rule;

(t) Whether management has established reserves that do not comply with state insurance laws, regulations, statutory accounting standards, sound actuarial principles, and standards of practice;

(u) Whether management engages in reporting inadequate reserve levels that result in material adverse development;

(v) Whether a material change during the year to the insurer's financial condition, including, but not limited to, changes in assets, liabilities, surplus, premium growth, mix of business, reinsurance, or operating performance that may adversely impact the result of the next year-end risk based capital calculation to a level that would require regulatory action;

(w) Whether transactions among affiliates, subsidiaries, or controlling persons for which the insurer receives assets or capital gains, or both, do not provide sufficient value, liquidity or diversity to assure the insurer's ability to meet its outstanding obligations as they mature;

(x) Any other finding determined by the superintendent to be hazardous to the insurer's policyholders, creditors, or general public.

(2) For the purposes of making a determination of an insurer's financial condition under this rule the superintendent may:

(a) Disregard any credit or amount receivable resulting from transactions with a reinsurer which is insolvent, impaired or otherwise subject to a delinquency proceeding;

(b) Make appropriate adjustments including disallowance to asset values attributable to investments in or transactions with parents, subsidiaries, or affiliates, consistent with the NAIC accounting practices and procedures manual, state laws and regulations;

(c) Refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor;

(d) Refuse to recognize the stated value of assets pledged or in any way hypothecated to secure a liability to the extent that they are in excess of the specific recorded liability of the insurer;

(e) Increase the insurer's liability in an amount equal to any contingent liability, pledge, or guarantee not otherwise included if there is a substantial risk that the insurer will be called upon to meet the obligation undertaken within the next twelve-month period.

(D) Severability

If any section, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041
Rule Amplifies: 3903.09 , 3903.71
Prior Effective Dates: 10/20/1991, 4/13/2006, 7/10/2009

3901-3-05 Valuation of investments.

(A) Purpose

The purpose of this rule is to facilitate the department's analysis and examination of the financial condition of insurers by establishing procedures for the valuing of investments to be used by insurers in the preparation and filing of statutory financial statements and other financial information.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent of insurance under sections 3901.041 , 3901.77 , 3907.20 and 1751.47 of the Revised Code.

(C) Procedures

The "Valuation of Securities Manual", "Purposes and Procedures Manual of the NAIC Securities Valuation Office", and the "Accounting Practices and Procedures Manual" as published by the National Association of Insurance Commissioners (NAIC) have been adopted for use in Ohio by section 3901.77 of the Revised Code. The procedures outlined in these publications are to be used for valuing investments for which valuations are not otherwise defined by statute or rule. The superintendent shall disallow any accounting practice or procedure prescribed by the publications if he deems it necessary to ascertain the condition and affairs of any company. In making the disallowance determination, the superintendent shall consider such factors as the nature of the investment; the financial stability of the issuing company; the applicability of other standardized accounting procedures; and other factors affecting the accuracy of the valuation.

(D) Valuations of investments otherwise defined.

A company which has an investment which cannot be valued in accordance with paragraph (C) of this rule shall be a non-admitted investment and afforded a value of zero in any filing of statutory financial statements and other financial information.

(E) Severability

If any section, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

Eff 10-20-91; 12-31-00; 3-21-05
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3901.77 , 3907.20 , 1751.47
Rule Amplifies: 3901.77 , 3907.20 , 1751.47
R.C. 119.032 review dates: 08/31/2009 and 08/30/2014

3901-3-06 Admitted assets. [Rescinded].

Rescinded eff 11-15-09

3901-3-07 Credit for life reinsurance agreements.

(A) Scope

This rule shall apply to all domestic life insurers and to all other licensed life insurers which are not subject to a substantially similar regulation in their state of domicile. This rule shall also apply to all domestic property and casualty insurers with respect to their accident and health business and to all other licensed property and casualty insurers with respect to their accident and health business which are not subject to a substantially similar regulation in their state of domicile. This rule shall not apply to assumption reinsurance, yearly renewable term reinsurance or certain nonproportional reinsurance such as stop loss or catastrophe reinsurance.

(B) Purpose

The purpose of this rule is to facilitate the department's surveillance of the financial condition of insurers by establishing accounting requirements for insurers to reduce any liability or establish any asset in any financial statement filed with the department based on reinsurance ceded by the insurer. These requirements are to ensure that financial statements accurately reflect the financial condition of a ceding insurer, and that a ceding insurer has not reduced liabilities or established assets through the improper use of reinsurance reserve credits.

(C) Authority

This rule is issued under the authority vested in the superintendent under sections 3901.041 , 3901.62 and 3901.77 of the Revised Code.

(D) Accounting requirements

(1) No insurer subject to this rule shall, for reinsurance ceded, reduce any liability or establish any asset in any financial statement filed with the department if, by the terms of the reinsurance agreement, in substance or effect, any of the following conditions exist:

(a) Renewal expense allowance provided or to be provided to the ceding insurer by the reinsurer in any accounting period, are not sufficient to cover anticipated allocable renewal expenses of the ceding insurer on the portion of the business reinsured, unless a liability is established for the present value of the shortfall (using assumptions equal to the applicable statutory reserve basis on the business reinsured). Those expenses include commissions, premium taxes and direct expenses including, but not limited to, billing, valuation, claims and maintenance expected by the company at the time the business is reinsured;

(b) The ceding insurer can be deprived of surplus or assets at the reinsurer's option or automatically upon the occurrence of some event, such as the insolvency of the ceding insurer, except that termination of the reinsurance agreement by the reinsurer for nonpayment of reinsurance premiums or other amounts due, such as modified coinsurance reserve adjustments, interest and adjustments on funds withheld, and tax reimbursements, shall not be considered to be such a deprivation of surplus or assets;

(c) The ceding insurer is required to reimburse the reinsurer for negative experience under the reinsurance agreement, except that neither offsetting experience refunds against current and prior years' losses under the agreement nor payment by the ceding insurer of an amount equal to the current and prior years' losses under the agreement upon voluntary termination of in force reinsurance by the ceding insurer shall be considered such a reimbursement to the reinsurer for negative experience. Voluntary termination does not include situations where termination occurs because of unreasonable provisions which allow the reinsurer to reduce its risk under the agreement. An example of such a provision is the right of the reinsurer to increase reinsurance premiums or risk and expense charges to excessive levels forcing the ceding company to prematurely terminate the reinsurance treaty;

(d) The ceding insurer must, at specific points in time scheduled in the agreement, terminate or automatically recapture all or part of the reinsurance ceded;

(e) The reinsurance agreement involves the possible payment by the ceding insurer to the reinsurer of amounts other than from income realized from the reinsured policies. For example, it is improper for a ceding company to pay reinsurance premiums, or other fees or charges to a reinsurer which are greater than the direct premiums collected by the ceding company;

(f) The treaty does not transfer all of the significant risk inherent in the business being reinsured. The following table identifies for a representative sampling of products or type of business, the risks which are considered to be significant. For products not specifically included, the risks determined to be significant shall be consistent with this table.

Risk categories:

(i) Morbidity

(ii) Mortality

(iii) Lapse

This is the risk that a policy will voluntarily terminate prior to the recoupment of a statutory surplus strain experienced at issuance of the policy.

(iv) Credit quality (C1)

This is the risk that invested assets supporting the reinsured business will decrease in value. The main hazards are that assets will default or that there will be a decrease in earning power. It excludes market value declines due to changes in interest rate.

(v) Reinvestment (C3)

This is the risk that interest rates will fall and funds reinvested (coupon payments or monies received upon asset maturity or call) will therefore earn less than expected. If asset durations are less than liability durations, the mismatch will increase.

(vi) Disintermediation (C3)

This is the risk that interest rates rise and policy loans and surrenders increase or maturing contracts do not renew at anticipated rates of renewal. If asset durations are greater than the liability durations, the mismatch will increase. Policyholders will move their funds into new products offering higher rates. The company may have to sell assets at a loss to provide for these withdrawals.

+ - Significant 0 - Insignificant

RISK CATEGORY

a b c d e f

Health insurance - other than LTC/LTD* + 0 + 0 0 0

Health insurance - LTC/LTD* + 0 + + + 0

Immediate annuities 0 + 0 + + 0

Single premium deferred annuities 0 0 + + + +

Flexible premium deferred annuities 0 0 + + + +

Guaranteed interest contracts 0 0 0 + + +

Other annuity deposit business 0 0 + + + +

Single premium whole life 0 + + + + +

Traditional non-par permanent 0 + + + + +

Traditional non-par term 0 + + 0 0 0

Traditional par permanent 0 + + + + +

Traditional par term 0 + + 0 0 0

Adjustable premium permanent 0 + + + + +

Indeterminate premium permanent 0 + + + + +

Universal life flexible premium 0 + + + + +

Universal life fixed premium 0 + + + + +

Universal life fixed premium 0 + + + + +

Dump-in premiums allowed

*LTC = Long term care insurance

LTD = Long term disability insurance

(g)

(i) The credit quality, reinvestment, or disintermediation risk is significant for the business reinsured and the ceding company does not (other than for the classes of business excepted in paragraph (d)(1)(g)(ii) of this rule either transfer the underlying assets to the reinsurer or legally segregate such assets in a trust or escrow account or otherwise establish a mechanism satisfactory to the superintendent which legally segregates, by contract or contract provision, the underlying assets.

(ii) Notwithstanding the requirements of paragraph (d)(1)(g)(i) of this rule, the assets supporting the reserves for the following classes of business and any classes of business which do not have a significant credit quality, reinvestment or disintermediation risk may be held by the ceding company without segregation of such assets:

(a) Health insurance - LTC/LTD

(b) Traditional non-par permanent

(c) Traditional par permanent

(d) Adjustable premium permanent

(e) Indeterminate premium permanent

(f) Universal life fixed premium (no dump-in premiums allowed)

The associated formula for determining the reserve interest rate adjustment must use a formula which reflects the ceding company's investment earnings and incorporates all realized and unrealized gains and losses reflected in the statutory statement. The following is an acceptable formula:

Rate = 2 (I + CG)

-----------------

X + Y - I - CG

Where: I is the net investment income

CG is capital gains less capital losses

X is the current year cash and invested assets plus investment income due and accrued less borrowed money

Y is the same as X but for the prior year

(h) Settlements are made less frequently than quarterly or payments due from the reinsurer are not made in cash within ninety days of the settlement date.

(i) The ceding insurer is required to make representations or warranties not reasonably related to the business being reinsured.

(j) The ceding insurer is required to make representations or warranties about future performance of the business being reinsured.

(k) The reinsurance agreement is entered into for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business reinsured and, in substance or effect, the expected potential liability to the ceding insurer remains basically unchanged.

(2) Notwithstanding paragraph (D)(1) of this rule, an insurer subject to this rule may, with the prior approval of the superintendent take such reserve credit as the superintendent may deem consistent with the insurance law, rules and regulations, including actuarial interpretations or standards adopted by the department.

(3)

(a) Agreements entered into after the effective date of this regulation which involve the reinsurance of business issued prior to the effective date of the agreements, along with any subsequent amendments thereto, shall be filed by the ceding company with the commissioner within thirty days from its date of execution. Each filing shall include data detailing the financial impact of the transaction. The ceding insurer's actuary who signs the financial statement actuarial opinion with respect to valuation of reserves shall consider this rule and any applicable actuarial standards of practice when determining the proper credit in financial statements filed with this department. The actuary should maintain adequate documentation and be prepared upon request to describe the actuarial work performed for inclusion in the financial statements and to demonstrate that such work conforms to this rule.

(b) Any increase in surplus net of federal income tax resulting from arrangements described in paragraph (d)(3)(a) of this rule shall be identified separately on the insurer's statutory financial statement as a surplus item (aggregate write-ins for gains and losses in surplus in the capital and surplus account, page four of the Annual Statement) and recognition of the surplus increase as income shall be reflected on a net of tax basis in the "Reinsurance ceded" line, page four of the annual statement as earnings emerge from the business reinsured.

{For example, on the last day of calendar year N, company XYZ pays a $20 million initial commission and expense allowance to company ABC for reinsuring an existing block of business. Assuming a thirty-four per cent tax rate, the net increase in surplus at inception is $ 13.2 million ($20 million - $ 6.8 million) which is reported on the "Aggregate write-ins for gains and losses in surplus" line in the capital and surplus account. $ 6.8 million (thirty-four percent of $20 million) is reported as income on the "Commissions and expense allowances on reinsurance ceded" line of the summary of operations.

At the end of year N + 1 the business has earned $4 million. ABC has paid $.5 million in profit and risk charges in arrears for the year and has received a $1 million experience refund. Company ABC's annual statement would report $ 1.65 million (sixty-six percent of ($4 million - $1 million - $.5 million) up to a maximum of $ 13.2 million) on the "Commissions and expense allowance on reinsurance ceded" line of the summary of operations, and -$ 1.65 million on the "Aggregate write-ins for gains and losses in surplus" line of the capital and surplus account. The experience refund would be reported separately as a miscellaneous income item in the summary of operations.}

(E) Written agreements

(1) No reinsurance agreement or amendment to any agreement may be used to reduce any liability or to establish any asset in any financial statement filed with the department, unless the agreement, amendment or a letter of intent has been duly executed by both parties no later than the "as of date" of the financial statement.

(2) In the case of a letter of intent, a reinsurance agreement or an amendment to a reinsurance agreement must be executed within a reasonable period of time, not exceeding ninety days from the execution date of the letter of intent, in order for credit to be granted for the reinsurance ceded.

(F) Existing agreements

Insurers subject to this regulation shall reduce to zero by December 31, 1997 any reserve credits or assets established with respect to reinsurance agreements entered into prior to the effective date of this rule which, under the provisions of this regulation would not be entitled to recognition of the reserve credits or assets; provided, however, that the reinsurance agreements shall have been in compliance with laws or rules in existence immediately preceding the effective date of this rule.

(G) Severability

If any section, term, or paragraph of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or paragraph of this rule, but the remaining section, terms and paragraph shall be and continue in full force and effect.

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041
Rule Amplifies: 3901.62 , 3901.77
Prior Effective Dates: 10/20/1991, 12/31/1995, 4/13/2006

3901-3-08 Definition of work papers.

(A) Purpose

Section 3901.07 of the Revised Code provides authority to the superintendent of insurance to review the financial affairs of all insurance companies. The purpose of this rule is to define the term "work papers" as employed in section 3901.48 of the Revised Code as it relates to the surveillance and examination of insurers pursuant to section 3901.07 of the Revised Code.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent of insurance under section 3901.041 of the Revised Code.

(C) Definition of "Work Papers"

The term "work papers" means the records kept by the superintendent of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to his or her examination and surveillance of the financial affairs of an insurer. Work papers may include audit planning documentation, work programs, analyses, memoranda, notes, letters of confirmation and representation, copies of work papers of certified public accountants, abstracts or copies of company documents and schedules of commentaries prepared or obtained by the superintendent in the course of his or her examination and surveillance of the financial affairs of an insurer.

Information related to the financial affairs of insurers maintained by the "National Association of Insurance Commissioners" that is available to the superintendent in his surveillance of the financial affairs of insurers is also considered a "Work Paper", and may include but is not limited to: formulae, ratios and data known as "Risk Based Capital", "Financial Analysis Workbench, Examination Jumpstart", "Financial Analysis and Solvency Tracking", "Insurance Regulatory Information System", Ratios used by the "Financial Analysis Working Group" or other financial information deemed to be confidential by the "National Association of Insurance Commissioners."

The term "Work Paper" does not mean the annual and quarterly financial statements and exhibits, or the audited financial statements prepared by independent certified public accountants which an insurer is required to file with the department of insurance. The term also does not mean a financial examination report issued by the department of insurance pursuant to section 3901.07 of the Revised Code.

(D) Severability

If any paragraph, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other paragraph, term or provision of this rule, but the remaining paragraphs, terms and provisions shall be and continue in full force and effect.

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041
Rule Amplifies: 3901.48
Prior Effective Dates: 9/6/1994

3901-3-09 Requirements for domestic insurers employing the services of reinsurance intermediaries.

(A) Purpose

The purpose of this rule is to establish minimum contractual terms between domestic insurers, domestic reinsurers and reinsurance intermediaries. This rule also establishes standards for business assumed by domestic reinsurers through reinsurance intermediaries as reported in their annual statement.

The rule also sets out the information reinsurance intermediaries must maintain for the purpose of examination under section 3901.07 of the Revised Code as "documents ... of other persons relevant to [an] examination."

(B) Authority

This rule is issued pursuant to section 3901.041 , section 3901.07 , and division (B) of section 3901.77 of the Revised Code.

(C) Definitions

As used in this rule:

(1) "Insurer" means a person licensed to operate or to do business in this state under Chapter 1751. of the Revised Code or Title XXXIX of the Revised Code, who is domiciled in the state of Ohio.

(2) "Qualified United States Financial Institution" means an institution that meets all of the following conditions:

(a) The institution is organized or, in the case of a United States office of a foreign banking organization, licensed, under the laws of the United States or any state of the United States;

(b) The institution is regulated, supervised, and examined by authorities of the United States or any state of the United States having regulatory authority over banks and trust companies;

(c) The institution has been determined by either the superintendent of insurance, or the securities valuation office of the National Association of Insurance Commissioners, to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the superintendent.

(3) "Reinsurance intermediary" means a reinsurance intermediary-broker or a reinsurance intermediary-manager.

(4) "Reinsurance intermediary-broker" means a person, other than an officer or employee of the ceding insurer, that solicits, negotiates, or places reinsurance cessions or retrocessions on behalf of a ceding insurer without the authority or power to bind reinsurance on behalf of such insurer.

(5)

(a) "Reinsurance intermediary-manager" means a person who has authority to bind or manages all or part of the assumed reinsurance business of a reinsurer, including the management of a separate division, department, or underwriting office; and acts as an agent for the reinsurer whether known as a reinsurance intermediary-manager, manager or other similar term.

(b) "Reinsurance intermediary-manager" does not include any of the following:

(i) An employee of the reinsurer;

(ii) A United States manager of the United States branch of an alien reinsurer;

(iii) An underwriting manager that, pursuant to contract, manages all the reinsurance operations of the reinsurer, is under common control with the reinsurer, subject to sections 3901.32 to 3901.37 of the Revised Code, and whose compensation is not based on the volume of premiums written;

(iv) The manager of a group, association, pool or organization of insurers that engages in joint underwriting or joint reinsurance and that are subject to examination by the insurance regulatory authority of the state in which the manager's principal business office is located.

(6) "Reinsurer" means a person licensed in this state pursuant to Title XXXIX of the Revised Code as an insurer with the authority to assume reinsurance, who is domiciled in the state of Ohio.

(D) Required contract provisions between an insurer and a Reinsurance Intermediary-Broker.

(1) Transactions between the reinsurance intermediary-broker and the insurer it represents may only be entered into pursuant to a written authorization which specifies the responsibilities of each party. The authorization, at a minimum, shall provide all of the following:

(a) The insurer may terminate the reinsurance intermediary-broker's authority at any time.

(b) The reinsurance intermediary-broker shall render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing, to the reinsurance intermediary-broker, and remit all funds due to the insurer within thirty days after receipt.

(c) All funds collected for the insurer's account shall be held by the reinsurance intermediary-broker in a fiduciary capacity in a bank which is a qualified United States financial institution.

(d) The reinsurance intermediary-broker shall comply with the written standards established by the insurer for the cession or retrocession of all risks.

(e) The reinsurance intermediary-broker shall disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded.

(f) The reinsurance intermediary-broker shall agree to maintain for at least ten years after the expiration of each contract of reinsurance transacted a complete record of each transaction showing all of the following:

(i) The type of contract, limits, underwriting restrictions, classes or risks, and territory;

(ii) Period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellation;

(iii) Reporting and settlement requirements of balances;

(iv) Rate used to compute the reinsurance premium;

(v) Names and addresses of assuming reinsurers;

(vi) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-broker;

(vii) Related correspondence and memoranda;

(viii) Proof of placement;

(ix) Details regarding retrocessions handled by the reinsurance intermediary-broker including the identity of retrocessionaires and percentage of each contract assumed or ceded;

(x) Financial records, including premium and loss accounts;

(xi)

(a) Written evidence that the assuming reinsurer has agreed to assume the risk, where the reinsurance intermediary-broker, on behalf of a domestic ceding insurer, procures a reinsurance contract directly from the assuming reinsurer; or

(b) Written evidence that the assuming reinsurer has delegated binding authority to the representative, where the reinsurance intermediary-broker, on behalf of a domestic ceding insurer, procures a reinsurance contract placed through a representative, other than an employee, of the assuming reinsurer.

(g) The reinsurance intermediary-broker shall agree to provide the ceding insurer with access, the right to copy, and the right to audit all accounts and records maintained by the reinsurance intermediary-broker related to the insurer's business in a form usable by the insurer.

(h) The reinsurance intermediary-broker agrees to provide annually to the insurer copies of statements of the reinsurance intermediary-broker's financial condition prepared by an independent certified public accountant.

(E) Prohibited acts - insurer

(1) No insurer shall employ a reinsurance intermediary-broker that is not licensed by an insurance regulatory authority of any state of the United States of America as a reinsurance intermediary-broker.

(2) No insurer shall jointly employ an individual who also is employed by a reinsurance intermediary-broker with which the insurer transacts business, unless the reinsurance intermediary-broker is under common control with the insurer and subject to sections 3901.32 to 3901.37 of the Revised Code.

(F) Required contract provisions between a reinsurer and a reinsurance intermediary-manager.

Transactions between a reinsurance intermediary-manager and the reinsurer it represents in the capacity of a reinsurance intermediary-manager shall be entered into only pursuant to a written contract, specifying the responsibilities of each party. The contract shall be approved by the reinsurer's board of directors. At least thirty days before the reinsurer assumes or cedes business through the reinsurance intermediary-manager, a copy of the approved contract shall be filed by the reinsurer with the superintendent of insurance. The contract, at a minimum, shall provide all of the following:

(1) The reinsurer may terminate the contract for cause upon written notice to the reinsurance intermediary-manager. The reinsurer may immediately suspend the authority of the reinsurance intermediary-manager to assume or cede business during the pendency of any dispute regarding the cause for termination.

(2) The reinsurance intermediary-manager shall render accounts to the reinsurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to the reinsurance intermediary-manager, and shall remit all funds due under the contract to the reinsurer on at least a monthly basis.

(3) Any funds collected for the reinsurer's account shall be held by the reinsurance intermediary-manager in a fiduciary capacity in a bank that is a qualified United States financial institution. The reinsurance intermediary-manager shall retain no more than three months' estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer it represents.

(4) For at least ten years after the expiration of each contract of reinsurance transacted by the reinsurance intermediary-manager, the reinsurance intermediary-manager shall keep a complete record for each transaction showing all of the following:

(a) The type of contract, limits, underwriting restrictions, classes or risks, and territory;

(b) Period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellation, and disposition of outstanding reserves on covered risks;

(c) Reporting and settlement requirements of balances;

(d) Rate used to compute the reinsurance premium;

(e) Names and addresses of reinsurers;

(f) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager;

(g) Related correspondence and memoranda;

(h) Proof of placement;

(i) Details regarding retrocessions handled by the reinsurance intermediary-manager pursuant to paragraph (F)(14) of this rule, including the identity of retrocessionaires and percentage of each contract assumed or ceded;

(j) Financial records, including premium and loss accounts;

(k)

(i) Written evidence that the assuming reinsurer has agreed to assume the risk, where the reinsurance intermediary-manager, on behalf of a ceding insurer, places a reinsurance contract directly from the assuming reinsurer; or

(ii) Written evidence that the assuming reinsurer has delegated binding authority to the representative, where the reinsurance intermediary-manager, on behalf of a ceding insurer, places a reinsurance contract through a representative, other than an employee, of the assuming reinsurer.

(5) The reinsurer shall have access to and the right to copy all accounts and records maintained by the reinsurance intermediary-manager related to the reinsurer's business in a form usable by the reinsurer.

(6) The contract cannot be assigned in whole or in part by the reinsurance intermediary-manager.

(7) The reinsurance intermediary-manager shall comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection, or cession of all risks.

(8) The contract shall set forth the rates, terms, and purposes of commissions, charges, and other fees that the reinsurance intermediary-manager may levy against the reinsurer.

(9) If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer;

(a) All claims shall be reported to the insurer in a timely manner;

(b) A copy of the claim file shall be sent to the reinsurer at its request or as soon as it becomes known that any of the following applies:

(i) The claim has the potential to exceed the limit set by the reinsurer;

(ii) The claim involves a coverage dispute;

(iii) The claim may exceed the reinsurance intermediary-manager's claims settlement authority;

(iv) The claim is open for more than six months;

(v) The claim is closed by payment of an amount set by the reinsurer.

(c) All claim files shall be the joint property of the reinsurer and the reinsurance intermediary-manager. However, upon an order of rehabilitation or liquidation of the reinsurer such files shall become the sole property of the reinsurer or its estate, but the reinsurance intermediary-manager shall have reasonable access to and the right to copy the files on a timely basis.

(d) Any settlement authority granted to the reinsurance intermediary-manager may be terminated for cause upon the reinsurer's written notice to the reinsurance intermediary-manager or upon the termination of the contract. The reinsurer may suspend the settlement authority during the pendency of the dispute regarding the cause of termination.

(10) If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, the interim profits shall not be paid until one year after the end of each underwriting period for property business, five years after the end of each underwriting period for casualty business, and not until the adequacy of reserves on remaining claims has been verified pursuant to paragraph (F)(15) of this rule.

(11) The reinsurance intermediary-manager shall annually provide the reinsurer with a statement of its financial condition prepared by an independent certified public accountant.

(12) The reinsurer shall periodically, but at least semi-annually, conduct an on-site review of the underwriting and claims processing operations of the reinsurance intermediary-manager.

(13) The reinsurance intermediary-manager shall disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with such insurer pursuant to the contract.

(14) Binding authority for all retrocessional contracts or participation in reinsurance syndicates shall rest with an officer of the reinsurer. The officer shall not be affiliated with the reinsurance intermediary-manager.

(15) If a reinsurance intermediary-manager establishes loss reserves, the reinsurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the reinsurance intermediary-manager. This opinion shall be in addition to any other required loss reserve certification. As used in this paragraph, "actuary" means a person who is a member in good standing of the American Academy of Actuaries.

(16) Within the scope of its actual or apparent authority the acts of the reinsurance intermediary-manager are deemed to be the acts of the reinsurer on whose behalf it is acting.

(17) The reinsurance intermediary-manager shall file with the superintendent of insurance a bond for the protection of the reinsurer in an amount, and from an insurer, acceptable to the superintendent of insurance.

(18) The reinsurer shall require the reinsurance intermediary-manager to maintain an errors and omissions policy.

(G) Prohibited acts - reinsurer

(1) No reinsurer shall employ a reinsurance intermediary-manager that is not licensed by an insurance regulatory authority of any state of the United States of America as a reinsurance intermediary-manager.

(2) No reinsurer shall permit its reinsurance intermediary-manager to do any of the following:

(a) Cede retrocessions on behalf of the reinsurer. However, the reinsurance intermediary-manager may cede facultative retrocessions pursuant to obligatory facultative agreements if the contract with the reinsurer contains reinsurance underwriting guidelines for such retrocessions. The guidelines shall include all of the following:

(i) A list of reinsurers with which automatic agreements are in effect;

(ii) For each such reinsurer, the coverages and amounts or percentages that may be reinsured;

(iii) Commission schedules.

(b) Commit the reinsurer to participate in reinsurance syndicates.

(c) Appoint any producer without assuring that the producer is lawfully licensed to transact the type of reinsurance for which he is appointed.

(d) Without prior approval of the reinsurer, pay or commit the reinsurer to pay a claim, net of retrocessions, that exceeds the lesser of an amount specified by the reinsurer or one per cent of the reinsurer's policyholder's surplus as of the thirty-first day of December of the last complete calendar year.

(e) Collect any payment from a retrocessionaire or commit the reinsurer to any claim settlement with a retrocessionaire, without prior approval of the reinsurer.

(f) Jointly employ an individual who is employed by the reinsurer unless the reinsurance intermediary-manager is under common control with the reinsurer subject to sections 3901.32 to 3901.37 of the Revised Code.

(g) Appoint a sub-reinsurance intermediary-manager.

(3) A reinsurer shall not appoint to its board of directors, any officer, director, employee, controlling shareholder or subproducer of its reinsurance intermediary-manager.

(H) Severability

If any section, term or provision of this rule be adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3901.07 , 3901.77
Rule Amplifies: 3901.07 , 3901.77
Prior Effective Dates: 1/1/1993, 4/13/2006

3901-3-10 Licensing of managing general agents.

(A) Authority

This rule is issued by the superintendent of insurance pursuant to section 3901.041 and 3905.79 of the Revised Code.

(B) Purpose

Section 3905.72 of the Revised Code sets out the requirements for licensing of managing general agents. The purpose of this rule is to establish the procedures to be used in the licensing of managing general agents.

(C) Application

(1) Every person who seeks a license as a managing general agent under section 3905.71 to 3905.79 of the Revised Code shall make application in writing to the superintendent of insurance on a form provided by the superintendent.

(2) In addition to the information required by section 3905.72(B)(1) to (6) of the Revised Code the application form shall also contain:

(a) Questions to determine if the applicant has had any criminal or administrative action taken against the applicant;

(b) Questions to determine if the applicant has ever been involved with an entity which was placed in bankruptcy, conservatorship, or similar supervision;

(c) Any other information required by the superintendent.

(3) When the applicant applies for a license the applicant shall provide a list, including addresses, of all the applicant's agents, producers, or subproducers, which shall be kept current by filing notice of any changes within thirty days of the end of each calendar quarter.

(4) The application fee of twenty dollars shall be submitted with the application.

(D) Effective date

The date on which an applicant is assigned a license number by the department is the effective date of that license. The license shall expire on the last day of February of each calendar year, except that if an insurer terminates the appointment of a managing general agent the license will expire on the date of the termination. An insurer shall immediately notify the superintendent of insurance when it terminates the appointment of a managing general agent and such termination shall be effective on the date it is received by the department.

(E) Change of address

Every licensed managing general agent shall notify the superintendent in writing of any change in their business or residence address within thirty days of the change. This change of address shall be made on a form provided by the superintendent of insurance, and merely placing the new address on correspondence or filings with the department without filing a change of address notice is not sufficient to comply with this requirement.

(F) Violation

Failure to comply with any requirements set out in this rule shall be grounds for the revocation or suspension of a managing general agent license.

(G) Severability

If any section, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3905.79
Rule Amplifies: 3905.72
Prior Effective Dates: 5/1/1993

3901-3-11 Actuarial opinion and memorandum.

(A) Purpose

The purpose of this rule is to prescribe:

(1) Requirements for statements of actuarial opinion that are to be submitted in accordance with division (B) of section 3903.72 of the Revised Code, and for memoranda in support thereof;

(2) Rules applicable to the appointment of an appointed actuary ; and

(3) Guidance as to the meaning of "adequacy of reserves."

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent of insurance of the state of Ohio under sections 3901.041 and 3903.72 of the Revised Code. This rule will take effect for annual statements for the year 2009.

(C) Scope

This rule shall apply to all companies and fraternal benefit societies that file the life, accident and health annual statement and to all companies and fraternal benefit societies that are authorized to assume through reinsurance life insurance, annuities or accident and health insurance business in this state.

Companies that file the property and casualty annual statement or the health annual statement will follow the actuarial opinion and supporting actuarial memoranda requirements pursuant to the instructions for these annual statements. Such companies are not subject to actuarial opinion and supporting actuarial memoranda requirements in this rule.

This rule shall be applied in a manner that allows the appointed actuary to utilize his or her professional judgment in performing the asset analysis and developing the actuarial opinion and supporting memoranda, consistent with relevant actuarial standards of practice. However, the superintendent shall have the authority to specify specific methods of actuarial analysis and actuarial assumptions when, in the superintendent's judgment, these specifications are necessary for an acceptable opinion to be rendered relative to the adequacy of reserves and related items.

This rule shall be applicable to all annual statements filed with the office of the superintendent after the effective date of this rule. A statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with paragraph ( F) of this rule, and a memorandum in support thereof in accordance with paragraph ( G) of this rule, shall be required each year.

(D) Definitions

(1) Actuarial opinion

"Actuarial Opinion" means the opinion of an appointed actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with paragraph (F) of this rule and with applicable actuarial standards of practice.

(2) Actuarial standards board

"Actuarial Standards Board" means the board established by the "American Academy of Actuaries" to develop and promulgate standards of actuarial practice.

(3) Annual statement

"Annual Statement" means that statement required by section 3929.30 of the Revised Code to be filed by the company with the office of the superintendent annually.

(4) Appointed actuary

"Appointed Actuary" means any individual who is appointed or retained in accordance with the requirements set forth in paragraph (E)(3) of this rule to provide the actuarial opinion and supporting memorandum as required by division (B) of section 3903.72 of the Revised Code.

(5) Asset adequacy analysis

"Asset Adequacy Analysis" means an analysis that meets the standards and other requirements referred to in paragraph (E)(4) of this rule.

(6) Qualified actuary

"Qualified Actuary" means an individual who meets the requirements set forth in paragraph (E)(2) of this rule.

(E) General requirements

(1) Submission of statement of actuarial opinion

(a) There is to be included on or attached to page one of the annual statement for each year beginning with the year in which this rule becomes effective the statement of an appointed actuary, entitled "Statement of Actuarial Opinion," setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with paragraph ( F) of this rule.

(b) Upon written request by the company, the superintendent may grant an extension of the date for submission of the statement of actuarial opinion.

(2) Qualified actuary A "Qualified Actuary" is an individual who:

(a) Is a member in good standing of the "American Academy of Actuaries";

(b) Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the "American Academy of Actuaries" qualification standards for actuaries signing such statements;

(c) Is familiar with the valuation requirements applicable to life and health insurance companies; and

(d) Has not been found by the superintendent, or if so found has subsequently been reinstated as a qualified actuary, following appropriate notice and hearing, to have:

(i) Violated any provision of, or any obligation imposed by, the insurance law or other law in the course of acting as a qualified actuary;

(ii) Been found guilty of fraudulent or dishonest practices;

(iii) Demonstrated incompetency, lack of cooperation, or untrustworthiness to act as a qualified actuary;

(iv) Submitted to the superintendent during the past five years, pursuant to this rule, an actuarial opinion or memorandum that the superintendent rejected because it did not meet the provisions of this rule including standards set by the actuarial standards board; or

(v) Resigned or been removed as an actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; and

(e) Has not failed to notify the superintendent of any action taken by any superintendent of any other state similar to that under paragraph (E)(2)(d) of this rule.

(3) Appointed actuary

(a) An "Appointed Actuary" is a qualified actuary who is appointed or retained to prepare the statement of actuarial opinion required by this rule, either directly by or by the authority of the board of directors through an executive officer of the company other than the qualified actuary.

(b) The company shall provide the superintendent timely written notice of the name, title and, in the case of a consulting actuary, the name of the firm and the manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in the notice that the person meets the requirements set forth in paragraph (E)(2) of this rule.

(c) Once notice is furnished, no further notice is required with respect to this person, provided that the company shall give the superintendent timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements set forth in paragraph (E)(2) of this rule.

(d) If any person appointed or retained as an appointed actuary replaces the previous appointed actuary, the notice shall so state and give the reasons for replacement. Prior to accepting the appointment to replace an appointed actuary, the candidate should consult with the previous appointed actuary to determine whether reasons exist to decline the appointment. If reasons do exist, the source of the conflict should be resolved, or the appointment should be declined.

(e) The new appointed actuary must furnish a copy of his letter of acceptance to the superintendent, as well as a statement of consultation. The statement of consultation must be signed by the previous appointed actuary and the new appointed actuary and must include the address or new place of employment and the telephone number of the previous appointed actuary.

(f) The statement must also be accompanied by an inventory of any outstanding valuation issues that the previous appointed actuary considered unresolved at the time of resignation, or an affirmative declaration that no material issues exist. The inventory may include comments with respect to any valuation reserve issue, including but not limited to: formula reserve compliance; formula reserve adequacy with respect to assets or other factors; adequacy of system and staff support for the appointed actuary function; adequacy of controls on systems, data bases and other mechanisms relied upon in forming the actuarial opinion; and organizational issues impacting upon the formation of an actuarial opinion (i.e., scope, authority, responsibility).

(4) Standards for asset adequacy analysis

The asset adequacy analysis required by this rule:

(a) Shall conform to the standards of practice as promulgated from time to time by the actuarial standards board and on any additional standards under this rule, which standards are to form the basis of the statement of actuarial opinion in accordance with paragraph ( F) of this rule; and

(b) Shall be based on methods of analysis as are deemed appropriate for such purposes by the actuarial standards board.

(5) Liabilities to be covered

(a) Under authority of division (B) of section 3903.72 of the Revised Code, the statement of actuarial opinion shall apply to all in force business on the statement date, whether directly issued or assumed, regardless of when or where issued, e.g., reserves of Exhibits 8, 9 and 10, and claim liabilities in Exhibit 11, Part 1 and equivalent items in the separate account statement or statements.

(b) If the appointed actuary determines as the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods set forth in divisions (E), (F), (G), (H), (K), (L), and (M) of section 3903.72 of the Revised Code, the company shall establish such additional reserve.

(c) Additional reserves established under paragraph (E)(5)(b) of this rule and deemed not necessary in subsequent years may be released. Any amounts released must be disclosed in the actuarial opinion for the applicable year. The release of such reserves would not be deemed an adoption of a lower standard of valuation.

(F) Statement of actuarial opinion based on an asset adequacy analysis.

(1) General description

The statement of actuarial opinion submitted in accordance with this paragraph ( F) of this rule shall consist of:

(a) A paragraph identifying the appointed actuary and the appointed actuary's qualifications (see paragraph ( F)(2)(a) of this rule);

(b) A scope paragraph 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 that have been analyzed for asset adequacy and the method of analysis, (see paragraph ( F)(2)(b) of this rule) and identifying the reserves and related actuarial items covered by the opinion that have not been so analyzed;

(c) A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, supported by a statement of each such expert in the form prescribed by paragraph ( F)(5) of this rule. See paragraph (F)(2)(c) of this rule for an example of a reliance paragraph; and

(d) An opinion paragraph expressing the appointed actuary's opinion with respect to the adequacy of the supporting assets to mature the liabilities. See paragraph ( F)(2)(f) of this rule.

(e) 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 an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for this opinion.

(iii) 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.

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

(2) Recommended language

The following paragraphs are to be included in the statement of actuarial opinion in accordance with this paragraph ( F) of this rule. The language provided 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 should use language which clearly expresses professional judgment. However, in any event the opinion shall retain all pertinent aspects of the language provided in this paragraph ( F) of this rule.

(a) The opening paragraph should indicate the appointed actuary's relationship to the company and qualifications to sign the opinion. For a company actuary, the opening paragraph of the actuarial opinion should include a statement substantially 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 superintendent dated [insert 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."

For a consulting actuary, the opening paragraph should include a statement substantially 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 superintendent dated [insert 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."

(b) The scope paragraph should include a statement substantially 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, ____. Tabulated below are those reserves and related actuarial items which have been subjected to asset adequacy analysis."

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Notes:

(a) The additional actuarial reserves are the reserves established under paragraph (E)(5)(b) of this rule.

(b) The appointed actuary should indicate the method of analysis, determined in accordance with the standards for asset adequacy analysis referred to in paragraph (E)(4) of this rule by means of symbols that should be defined in the footnotes to the table.

(c) Allocated amount of "Asset Valuation Reserve (AVR)".

(c) If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph should include a statement substantially as follows:

"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" or "certain critical aspects of the analysis performed in conjunction with forming my opinion"], as certified in the attached statement. I have reviewed the information relied upon for reasonableness."

A statement of reliance on other experts should be accompanied by a statement by each of such experts of the form prescribed by paragraph ( F)(5) of this rule.

(d) If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph should include a statement substantially 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. I also reconciled the underlying basic asset and liability records to [exhibits and schedules listed as applicable] of the company's current annual statement."

(e) If the appointed actuary has not examined the underlying records, but has relied upon data (e.g., listings and summaries of policies in force and/or asset records) prepared by the company , the reliance paragraph should include a statement substantially as follows:

"In forming my opinion on [specify types of reserves] I relied upon data prepared by [name and title of company officer certifying in force records or other data] as certified in the attached statements. I evaluated that data for reasonableness and consistency. I also reconciled that data to [exhibits and schedules to be listed as applicable] of the company's current annual statement. In other respects, my examination included review of the actuarial assumptions and actuarial methods used and tests of the calculations I considered necessary."

The section shall be accompanied by a statement by each person relied upon of the form prescribed by paragraph ( F)(5) of this rule.

(f) The opinion paragraph should include a statement substantially as follows:

"In my opinion the reserves and related actuarial values concerning the statement items identified above:

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

(ii) Are based on actuarial assumptions that 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;

(iii) Meet the requirements of the insurance law and rules 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;

(iv) 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); and

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

The reserves and related 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 the assets, and the considerations anticipated to be received and retained under the 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. At the discretion of the superintendent, this language may be omitted for an opinion filed on behalf of a company doing business only in this state and in no other state.

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 above two 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.

___________________________________

Signature of appointed actuary

___________________________________

Address of appointed actuary

___________________________________

Telephone number of appointed actuary"

____________________________________

Date

(3) Assumptions for new issues

The adoption for new issues or new claims or other new liabilities of an actuarial assumption that 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 this paragraph ( F) of this rule.

(4) Adverse opinions

If the appointed actuary is unable to form an opinion, then he or she shall refuse to issue a statement of actuarial opinion. If the appointed actuary's opinion is adverse or qualified, he or she shall issue an adverse or qualified actuarial opinion explicitly stating the reason(s) for the opinion. This statement should follow the scope paragraph and precede the opinion paragraph.

(5) Reliance on information furnished by other persons

If the appointed actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the actuarial opinion, or the appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, the actuarial opinion should so indicate the persons the actuary is relying upon and a precise identification of the items subject to reliance. In addition, the persons on whom the appointed actuary relies shall provide a certification that precisely identifies the items on which the person is providing information and a statement as to the accuracy, completeness or reasonableness, as applicable, of the items. This certification shall include the signature, title, company, address and telephone number of the person rendering the certification, as well as the date on which it is signed.

(6) Alternate option

(a) Section 3903.72 of the Revised Code gives the superintendent board authority to accept the valuation of a foreign insurer when that valuation meets the requirements applicable to a company domiciled in this state in the aggregate. As an alternative to the requirements of paragraph (F)(2)(f), the superintendent may make one or more of the following additional approaches available to the opining actuary:

(i) A statement that the reserves "meet the requirements of the insurance laws and rules of the State of [state of domicile] and the formal written standards and conditions of this state for filing an opinion based on the law of the state of domicile." If the superintendent chooses to allow this alternative, a formal written list of standards and conditions shall be made available. If a company chooses to use this alternative, the standards and conditions in effect on the first day of July of a calendar year shall apply to statements for that calendar year, and they shall remain in effect until they are revised or revoked. If no list is available, this alternative is not available.

(ii) A statement that the reserves "meet the requirements of the insurance laws and rules of the State of [state of domicile] and I have verified that the company's request to file an opinion based on the law of the state of domicile has been approved and that any conditions required by the superintendent for approval of that request have been met." If the superintendent chooses to allow this alternative, a formal written statement of such allowance shall be issued no later than the thirty-first day of March of the year it is first effective. It shall remain valid until rescinded or modified by the superintendent. The rescission or modifications shall be issued no later than the thirty-first day of March of the year they are first effective. Subsequent to that statement being issued, if a company chooses to use this alternative, the company shall file a request to do so, along with justification for its use, no later than the thirtieth day of April of the year of the opinion to be filed. The request shall be deemed approved on the first day of October of that year if the superintendent has not denied the request by that date.

(iii) A statement that the reserves "meet the requirements of the insurance laws and rules of the State of [state of domicile] and I have submitted the required comparison as specified by this state."

(a)If the superintendent chooses to allow this alternative, a formal written list of products (to be added to the table in paragraph (F)(6)(a)(iii)(b) of this rule) for which the required comparison shall be provided may be published. If a company chooses to use this alternative, the list in effect on the first day of July of a calendar year shall apply to statements for that calendar year, and it shall remain in effect until it is revised or revoked. If no list is available, this alternative is not available.

(b)If a company desires to use this alternative, the appointed actuary shall provide a comparison of the gross nationwide reserves held to the gross nationwide reserves that would be held under "National Association of Insurance Commissioners (NAIC)" codification standards. Gross nationwide reserves are the total reserves calculated for the total company in force business directly sold and assumed, indifferent to the state in which the risk resides, without reduction for reinsurance ceded. The information provided shall be at least:

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(c)The information listed shall include all products identified by either the state of filing or any other states subscribing to this alternative.

(d)If there is no codification standard for the type of product or risk in force or if the codification standard does not directly address the type of product or risk in force, the appointed actuary shall provide detailed disclosure of the specific method and assumptions used in determining the reserves held.

(e)The comparison provided by the company is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

(b) Notwithstanding the forgoing, the superintendent may reject an opinion based on the laws and rules of the state of domicile and require an opinion based on the laws of this state. If a company is unable to provide the opinion within sixty days of the request or such other period of time determined by the superintendent after consultation with the company, the superintendent may contract an independent actuary at the company's expense to prepare and file the opinion.

(G) Description of actuarial memorandum including an asset adequacy analysis and regulatory asset adequacy issues summary.

(1) General

(a) In accordance with division (B) of section 3703.72 of the Revised Code, the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of the actuary's opinion regarding the reserves . The memorandum shall be made available for examination by the superintendent upon the superintendent's request but shall be returned to the company after such examination and shall not be considered a record of the insurance department or subject to automatic filing with the superintendent.

(b) 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 paragraph (E)(2) of this rule, with respect to the areas covered in such memoranda, and so state in their memoranda.

(c) If the superintendent requests a memorandum and no such memorandum exists or if the superintendent 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 rule, the superintendent may designate a qualified actuary to review the opinion and prepare such supporting memorandum as is required for review. The reasonable and necessary expense of the independent review shall be paid by the company but shall be directed and controlled by the superintendent.

(d) The reviewing actuary shall have the same status as an examiner for purposes of obtaining data from the company and the work papers and documentation of the reviewing actuary shall be retained by the superintendent; however, any 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 superintendent and shall be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the superintendent pursuant to the statute governing this rule. The reviewing actuary shall not be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer pursuant to this rule for any one of the current year or the preceding three years.

(e) In accordance with division (B) of section 3903.72 of the Revised Code, the appointed actuary shall prepare a regulatory asset adequacy issues summary, the contents of which are specified in paragraph (G)(3) of this rule. Companies domiciled in Ohio shall submit the regulatory asset adequacy issues summary no later than the fifteenth day of March of the year following the year for which a statement of actuarial opinion based on asset adequacy is required. Ohio foreign companies are not required to submit the regulatory asset adequacy issues summary annually, however, it shall be made available to the superintendent upon request. The regulatory asset adequacy issues summary is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

(2) Details of the memorandum division documenting asset adequacy analysis .

When an actuarial opinion is provided, the memorandum shall demonstrate that the analysis has been completed in accordance with the standards for asset adequacy referred to in paragraph (E)(4) of this rule and any additional standards under this rule. It shall specify:

(a) 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 ;

(vi) Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis; and (vii) Documentation of assumptions to test reserves for the following:

(a)Lapse rates (both base and excess);

(b)Interest crediting rate strategy;

(c)Mortality;

(d)Policyholder dividend strategy;

(e)Competitor or market interest rate;

(f)Annuitization rates;

(g)Commissions and expenses; and(h) Morbidity.

The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions.

(b) 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 ; and

(v) Documentation of assumptions made for:

(a) Default costs;

(b)Bond call function;

(c)Mortgage prepayment function;

(d)Determining market value of assets sold due to disinvestment strategy; and(e)Determining yield on assets acquired through the investment strategy.

The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions.

(c) For the analysis basis:

(i) Methodology;

(ii) Rationale for inclusion or exclusion of different blocks of business and how pertinent risks were analyzed;

(iii) Rationale for degree of rigor in analyzing different blocks of business (including in the rationale the level of "materiality" that was used in determining how rigorously to analyze different blocks of business);

(iv) Criteria for determining asset adequacy (include in the criteria the precise basis for determining if assets are adequate to cover reserves under "moderately adverse conditions" or other conditions as specified in relevant actuarial standards of practice); and

(v) Whether the impact of federal income taxes was considered and the method of treating reinsurance in the asset adequacy analysis;

(d) Summary of material changes in methods, procedures, or assumptions from prior year's asset adequacy analysis;

(e) Summary of results; and

(f) Conclusion

(3) Details of the regulatory asset adequacy issues summary.

(a) The regulatory asset adequacy issues summary shall include:

(i) Descriptions of the scenarios tested (including whether those scenarios are stochastic or deterministic) and the sensitivity testing done relative to those scenarios. If negative ending surplus results under certain tests in the aggregate, the actuary should describe those tests and the amount of additional reserve as of the valuation date which, if held, would eliminate the negative aggregate surplus values. Ending surplus values shall be determined by either extending the projection period until the in force and associated assets and liabilities at the end of the projection period are immaterial or by adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in force.

(ii) The extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different than the assumptions used in the previous asset adequacy analysis;

(iii) The amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but were not subject to analysis for the current opinion;

(iv) Comments on any interim results that may be of significant concern to the appointed actuary;

(v) The methods used by the actuary to recognize the impact of reinsurance on the company's cash flows, including both assets and liabilities, under each of the scenarios tested; and

(vi) Whether the actuary has been satisfied that all options whether explicit or embedded, in any asset or liability (including but not limited to those affecting cash flows embedded in fixed income securities) and equity-like features in any investments have been appropriately considered in the asset adequacy analysis;

(b) The regulatory asset adequacy issues summary shall contain the name of the company for which the regulatory asset adequacy issues summary is being supplied and shall be signed and dated by the appointed actuary rendering the actuarial opinion.

(4) Conformity to standards of practice

The memorandum shall include a statement:

"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."

(5) Use of assets supporting the interest maintenance reserve and the asset valuation reserve.

An appropriate allocation of assets in the amount of the interest maintenance reserve ("IMR"), whether positive or negative, shall be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the asset valuation reserve ("AVR"); these "AVR" assets may not be applied for any other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support.

The amount of the assets used for the "AVR" shall be disclosed in the table of reserves and liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets shall be disclosed in the memorandum.

(6) Documentation

The appointed actuary shall retain on file, for at least seven years, sufficient documentation so that it will be possible to determine the procedures followed, the analyses performed, the bases for assumptions and the results obtained.

(H) Severability If any paragraph, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other paragraph, term or provision of this rule, and the remaining paragraphs, terms and provisions shall be and shall continue in full force and effect.

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3903.72
Rule Amplifies: 3903.72(B)
Prior Effective Dates: 6/1/1996, 1/8/2010

3901-3-13 Health insurance reserves.

(A) Purpose

The purpose of this rule is to establish the minimum reserve standards for all individual and group health insurance coverages, including single premium credit disability insurance, as required by division (M) of section 3903.72 of the Revised Code. All other credit insurance is not subject to this rule.

(B) Authority

This rule is promulgated pursuant to the authority vested in the superintendent under section 3901.041 and division (M) of section 3903.72 of the Revised Code.

(C) Scope

(1) These standards establish a minimum reserve standard for all individual and group health insurance coverages including single premium credit disability insurance. When an insurer determines that adequacy of its health insurance reserves requires reserves in excess of the minimum standards specified herein, such increased reserves shall be held and shall be considered the minimum reserves for that insurer.

(2) With respect to any block of contracts, or with respect to an insurer's health business as a whole, a prospective gross premium valuation is the ultimate test of reserve adequacy as of a given valuation date. Such a gross premium valuation will take into account, for contracts in force, in a claims status, or in a continuation of benefits status on the valuation date, the present value as of the valuation date of: all expected benefits unpaid, all expected expenses unpaid, and all unearned or expected premiums, adjusted for future premium increases reasonably expected to be put into effect.

(3) Such a gross premium valuation is to be performed whenever a significant doubt exists as to reserve adequacy with respect to any major block of contracts, or with respect to the insurer's health business as a whole. In the event inadequacy is found to exist, immediate loss recognition shall be made and the reserves restored to adequacy. Adequate reserves (inclusive of claim, premium and contract reserves, if any) shall be held with respect to all contracts, regardless of whether contract reserves are required for such contracts under these standards.

(4) Whenever minimum reserves, as defined in these standards, exceed reserve requirements as determined by a prospective gross premium valuation, such minimum reserves remain the minimum requirement under these standards.

(5) This rule sets forth minimum standards for three categories of health insurance reserves; claim reserves, premium reserves and contract reserves. Adequacy of an insurer's health insurance reserves is to be determined on the basis of all three categories combined. However, these standards emphasize the importance of determining appropriate reserves for each of these categories separately.

(D) Definitions

(1) "Annual claim cost" means the net annual cost per unit of benefit before the addition of expenses, including claim settlement expenses, and a margin for profit or contingencies. For example, the annual claim cost for a one hundred dollar monthly disability benefit, for a maximum disability benefit period of one year, with an elimination period of one week, with respect to a male at age thirty-five, in a certain occupation might be twelve dollars, while the gross premium for this benefit might be eighteen dollars. The additional six dollars would cover expenses and profit or contingencies.

(2) "Claims accrued" means that portion of claims incurred on or prior to the valuation date which result in liability of the insurer for the payment of benefits for medical services which have been rendered on or prior to the valuation date, and for the payment of benefits for days of hospitalization and days of disability which have occurred on or prior to the valuation date, which the insurer has not paid as of the valuation date, but for which it is liable, and will have to pay after the valuation date. This liability is sometimes referred to as a liability for "accrued" benefits. A claim reserve, which represents an estimate of this accrued claim liability, must be established.

(3) "Claims reported" means a claim that has been incurred on or prior to the valuation date and the insurer has been informed of it on or before the valuation date. This claim is considered a reported claim for annual statement purposes.

(4) "Claims unaccrued" means that portion of claims incurred on or prior to the valuation date which result in liability of the insurer for the payment of benefits for medical services expected to be rendered after the valuation date, and for benefits expected to be payable for days of hospitalization and days of disability occurring after the valuation date. This liability is sometimes referred to as a liability for unaccrued benefits. A claim reserve, which represents an estimate of the unaccrued claim payments expected to be made (which may or may not be discounted with interest), must be established.

(5) "Claims unreported" means a claim that has been incurred on or prior to the valuation date but the insurer has not been informed of it on or before the valuation date. This claim is considered an unreported claim for annual statement purposes.

(6) "Date of disablement" means the earliest date the insured is considered as being disabled under the definition of disability in the contract, based on a doctor's evaluation or other evidence. Normally this date will coincide with the start of any elimination period.

(7) "Elimination period" means a specified number of days, weeks, or months starting at the beginning of each period of loss, during which no benefits are payable.

(8) "Gross premium" means the amount of premium charged by the insurer. It includes the net premium (based on claim-cost) for the risk, together with any loading for expenses, profit or contingencies.

(9) "Group insurance" means blanket insurance and franchise insurance and any other forms of group insurance.

(10) "Level premium" means a premium calculated to remain unchanged throughout either the lifetime of the policy, or for some shorter projected period of years. The premium need not be guaranteed; in which case, although it is calculated to remain level, it may be changed if any of the assumptions on which it was based are revised at a later time. Generally, the annual claim costs are expected to increase each year and the insurer, instead of charging premiums that correspondingly increase each year, charges a premium calculated to remain level for a period of years or for the lifetime of the contract. In this case the benefit portion of the premium is more than needed to provide for the cost of benefits during the earlier years of the policy and less than the actual cost in the later years. The building of a prospective contract reserve is a natural result of level premiums.

(11) "Long-term care insurance" means any insurance policy or rider advertised, marketed, offered or designed to provide coverage for not less than twelve consecutive months for each covered person on an expense incurred, indemnity, prepaid or other basis; for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance or personal care services, provided in a setting other than an acute care unit of a hospital. Such term also includes a policy or rider which provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. Long-term care insurance may be issued by insurers; fraternal benefit societies; nonprofit health, hospital, and medical service corporations; prepaid health plans; health maintenance organizations or any similar organization to the extent they are otherwise authorized to issue life or health insurance. Long-term care insurance shall not include any insurance policy which is offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset-protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage.

(12) "Modal premium" means the premium paid on a contract based on a premium term which could be annual, semi-annual, quarterly, monthly, or weekly. Thus if the annual premium is one hundred dollars and if, instead, monthly premiums of nine dollars are paid then the modal premium is nine dollars.

(13) "Negative reserve" means the terminal reserve where the values of the benefits are decreasing with advancing age or duration such that it results in a negative value, called a negative reserve. Normally the terminal reserve is a positive value.

(14) "Preliminary term reserve method" means the method of valuation where the valuation net premium for each year falling within the preliminary term period is exactly sufficient to cover the expected incurred claims of that year, so that the terminal reserves will be zero at the end of the year. As of the end of the preliminary term period, a new constant valuation net premium (or stream of changing valuation premiums) becomes applicable such that the present value of all such premiums is equal to the present value of all claims expected to be incurred following the end of the preliminary term period.

(15) "Present value of amounts not yet due on claims" means the reserve for "claims unaccrued" which may be discounted at interest.

(16) "Rating block" means a grouping of contracts determined by the valuation actuary based on common characteristics filed with the superintendent, such as a policy form or forms having similar benefit designs.

(17) "Reserve" means all items of benefit liability, whether in the nature of incurred claim liability or in the nature of contract liability relating to future periods of coverage, and whether the liability is accrued or unaccrued. An insurer under its contracts promises benefits which result in: claims which have been incurred, that is, for which the insurer has become obligated to make payment, on or prior to the valuation date, (on these claims, payments expected to be made after the valuation date for accrued and unaccrued benefits are liabilities of the insurer which should be provided for by establishing claim reserves); or claims which are expected to be incurred after the valuation date, (any present liability of the insurer for these future claims should be provided for by the establishment of contract reserves and unearned premium reserves.)

(18) "Terminal reserve" means the reserve at the end of the contract year which is equal to the present value of benefits expected to be incurred after the contract year minus the present value of future valuation net premiums.

(19) "Unearned premium reserve" means that portion of the premium paid or due to the insurer which is applicable to the period of coverage extending beyond the valuation date. Thus if an annual premium of one hundred twenty dollars was paid on November first, twenty dollars would be earned as of December thirty-first and the remaining one hundred dollars would be unearned. The unearned premium reserve could be on a gross basis as in this example, or on a valuation net premium basis.

(20) "Valuation net modal premium" means the modal fraction of the valuation net annual premium that corresponds to the gross modal premium in effect on any contract to which contract reserves apply. Thus if the mode of payment in effect is quarterly, the valuation net modal premium is the quarterly equivalent of the valuation net annual premium.

(E) Claim reserves

(1) General

(a) Claim reserves are required for all incurred but unpaid claims on all health insurance policies.

(b) Appropriate claim expense reserves are required with respect to the estimated expense of settlement of all incurred but unpaid claims.

(c) All such reserves for prior valuation years are to be tested for adequacy and reasonableness along the lines of claim runoff schedules in accordance with the statutory financial statement including consideration of any residual unpaid liability.

(2) Minimum standards for claim reserves

(a) Disability income

(i) Interest. The maximum interest rate for claim reserves is specified in paragraph (I) of this rule.

(ii) Morbidity. Minimum standards with respect to morbidity are those specified in paragraph (I) of this rule except that, at the option of the insurer:

(a) For individual disability income claims incurred on or after January 1, 2005, assumptions regarding claim termination rates for the period less than two years from the date of disablement may be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

(b) For group disability income claims incurred on or after January 1, 2005:

(i) Assumptions regarding claim termination rates for the period less than two years from the date of disablement may be based on the insurer's experience, if the experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

(ii) Assumptions regarding claim termination rates for the period two or more years but less than five years from the date of disablement may, with the approval of the superintendent, be based on the insurer's experience for which the insurer maintains underwriting and claim administration control. The request for such approval of a plan of modification to the reserve basis must include:

(A) An analysis of the credibility of the experience;

(B) A description of how all of the insurer's experience is proposed to be used in setting reserves;

(C) A description and quantification of the margins to be included;

(D) A summary of the financial impact that the proposed plan of modification would have had on the insurer's last filed annual statement;

(E) A copy of the approval of the proposed plan of modification by the superintendent of the state of domicile; and

(F) Any other information deemed necessary by the superintendent.

(c) For disability income claims incurred prior to January 1, 2005 each insurer may elect which of the following to use as the minimum morbidity standard for claim reserves:

(i) The minimum morbidity standard in effect for claim reserves as of the date of the claim was incurred, or

(ii) The standards as defined in paragraphs (E)(2)(a)(ii)(a) and (E)(2)(a)(ii)(b) of this rule, applied to all open claims. Once an insurer elects to calculate reserves for all open claims on the standard defined in paragraphs (E)(2)(a)(ii)(a) and (E)(2)(a)(ii)(b) of this rule, all future valuations must be on that basis.

(iii) Duration of disablement. For contracts with an elimination period, the duration of disablement should be measured as dating from the time that benefits would have begun to accrue had there been no elimination period.

(b) All other benefits

(i) Interest. The maximum interest rate for claim reserves is specified in paragraph (I) of this rule.

(ii) Morbidity or other contingency. The reserve should be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

(3) Claim reserve methods generally

A generally accepted actuarial reserving method or other reasonable method as approved by the superintendent prior to the statement date based on information and data describing the proposed method, or a combination of methods may be used to estimate all claim liabilities. The methods used for estimating liabilities generally may be aggregate methods, or various reserve items may be separately valued. Approximations based on groupings and averages may also be employed. Adequacy of the claim reserves, however, shall be determined in the aggregate.

(F) Premium reserves

(1) General

(a) Unearned premium reserves are required for all contracts, except individual and group single premium credit disability insurance, with respect to the period of coverage for which premiums, other than premiums paid in advance, have been paid beyond the date of valuation.

(b) If premiums due and unpaid are carried as an asset, such premiums must be treated as premiums in force, subject to unearned premium reserve determination. .

(c) The gross premiums paid in advance for a period of coverage commencing after the next premium due date which follows the date of valuation may be appropriately discounted to the valuation date and shall be held either as a separate liability or as an addition to the unearned premium reserve which would otherwise be required as a minimum.

(2) Minimum standards for unearned premium reserves

(a) The minimum unearned premium reserve with respect to any contract is the pro rata unearned modal premium that applies to the premium period beyond the valuation date, with such premium determined on the basis of:

(i) The valuation net modal premium on the contract reserve basis applying to the contract; or

(ii) The gross modal premium for the contract if no contract reserve applies.

(b) In no event may the sum of the unearned premium and contract reserves for all contracts of the insurer subject to contract reserve requirements be less than the gross modal unearned premium reserve on all such contracts, as of the date of valuation. Such reserve shall never be less than the expected claims for the period beyond the valuation date represented by such unearned premium reserve, to the extent not provided for elsewhere.

(3) Premium reserve methods generally

The insurer may employ suitable approximations and estimates; including, but not limited to groupings, averages and aggregate estimation; in computing premium reserves. Such approximations or estimates should be tested periodically to determine their continuing adequacy and reliability.

(G) Contract reserves

(1) General

(a) Contract reserves are required, unless otherwise specified in paragraph (G)(1)(b) of this rule for:

(i) All individual and group contracts with which level premiums are used; or

(ii) All individual and group contracts with respect to which, due to the gross premium pricing structure at issue, the value of the future benefits at any time exceeds the value of any appropriate future valuation net premiums at that time. This evaluation may be applied on a rating block basis if the total premiums for the block were developed to support the total risk assumed and expected expenses for the block each year, and a qualified actuary certifies the premium development. The actuary should state in the certification that premiums for the rating block were developed such that each year's premium was intended to cover that year's costs without any prefunding. If the premium is also intended to recover costs for any prior years, the actuary should also disclose the reasons for and magnitude of such recovery. The values specified in paragraph (G)(1)(a)(ii) of this rule shall be determined on the basis specified in paragraph (G)(2) of this rule.

(b) Contracts not requiring a contract reserve are:

(i) Contracts which cannot be continued after one year from issue; or

(ii) Contracts already in force on the effective date of these standards for which no contract reserve was required under the immediately preceding standards.

(c) The contract reserve is in addition to claim reserves and premium reserves.

(d) The methods and procedures for contract reserves should be consistent with those for claim reserves for any contract, or else appropriate adjustment must be made when necessary to assure provision for the aggregate liability. The definition of the date of incurral must be the same in both determinations.

(e) The contract reserves for single premium credit disability insurance shall never be less than the expected claims for the period beyond the valuation date.

(f) The total contract reserve established shall incorporate provisions for moderately adverse deviations.

(2) Minimum standards for contract reserves

(a) Basis

(i) Morbidity or other contingency. Minimum standards with respect to morbidity are those set forth in paragraph (I) of this rule. Valuation net premiums used under each contract must have a structure consistent with the gross premium structure at issue of the contract as this relates to advancing age of insured, contract duration and period for which gross premiums have been calculated.

Contracts for which tabular morbidity standards are not specified in paragraph (I) of this rule shall be valued using tables established for reserve purposes by a qualified actuary and acceptable to the superintendent. The morbidity tables shall contain a pattern for incurred claims cost that reflects the underlying morbidity and shall not be constructed for the primary purpose of minimizing reserves.

(a)In determining the morbidity assumptions, the actuary shall use assumptions that represent the best estimate of anticipated future experience, but shall not incorporate any expectation of future morbidity improvement. Morbidity improvement is a change, in the combined effect of claim frequency and the present value of future expected claim payments given that a claim has occurred, from the current morbidity tables or experience that will result in a reduction to reserves. It is not the intent of this provision to restrict the ability of the actuary to reflect the morbidity impact for a specific known event that has occurred and that is able to be evaluated and quantified.

(b)Business in force as of the effective date of paragraph (G)(2)(a)(iii) of this rule may be permitted to retain the original reserve basis which may not meet the provisions of paragraph (G)(2)(a)(i)(a) of this rule, subject to the acceptability of the superintendent.

(ii) Interest. The maximum interest rate is specified in paragraph (I) of this rule.

(iii) Termination rates. Termination rates used in the computation of reserves shall be on the basis of a mortality table as specified in paragraph (I) of this rule except as noted in paragraphs (G)(2)(a)(iii)(a), (G)(2)(a)(iii)(b), and (G)(2)(a)(iii)(c) of this rule.

(a) Under contracts for which premium rates are not guaranteed, and where the effects of insurer underwriting are specifically used by policy duration in the valuation morbidity standard or for return of premium or other deferred cash benefits, total termination rates may be used at ages and durations where these exceed specified mortality table rates, but not in excess of the lesser of:

(i) Eighty per cent of the total termination rate used in the calculation of the gross premiums, or

(ii) Eight per cent.

(b) For long-term care individual policies or group certificates issued after December 31, 2003, the contract reserve may be established on a basis of separate:

(i) Mortality (as specified in paragraph (I) of this rule); and

(ii) Terminations other than mortality, where the terminations are not to exceed:

(A) For policy years one through four, the lesser of eighty per cent of the voluntary lapse rate used in the calculation of gross premiums and eight per cent;

(B) For policy years five and later, the lesser of one hundred per cent of the voluntary lapse rate used in the calculation of gross premiums and four per cent.

(c) For long-term care individual policies or group certificates issued on or after January 1, 2011, the contract reserve may be established on a basis of separate:

(i) Mortality (as specified in paragraph (I) of this rule); and

(ii) Terminations other than mortality, where the terminations are not to exceed;

(A)For policy year one, the lesser of eighty per cent of the voluntary lapse rate used in the calculation of gross premiums and six per cent;

(B)For policy year two through four, the lesser of eighty per cent of the voluntary lapse rate used in the calculation of gross premiums and four per cent;

(C)For policy year five and later, the lesser of one hundred per cent of the voluntary lapse rate used in the calculation of gross premiums and two per cent, except for group insurance as defined in section 3923.41 of the Revised Code where the two per cent shall be three per cent.

(d) Where a morbidity standard specified in paragraph (I) of this rule is on an aggregate basis, such morbidity standard may be adjusted to reflect the effect of insurer underwriting by policy duration. The adjustments must be appropriate to the underwriting and be acceptable to the superintendent.

(b) Reserve method

(i) For insurance except long-term care and return of premium or other deferred cash benefits, the minimum reserve is the reserve calculated on the two-year full preliminary term method; that is, under which the terminal reserve is zero at the first and also the second contract anniversary.

(ii) For long-term care insurance, the minimum reserve is the reserve calculated as follows:

(a) For individual policies and group certificates issued on or before December 31, 1996, reserves calculated on the two-year full preliminary term method;

(b) For individual policies and group certificates issued on or after January 1, 1997, reserves calculated on the one-year full preliminary term method.

(iii) For return of premium or other deferred cash benefits, the minimum reserve is the reserve calculated as follows:

(a) On the one year preliminary term method if such benefits are provided at any time before the twentieth anniversary;

(b) On the two year preliminary term method if such benefits are only provided on or after the twentieth anniversary.

The preliminary term method may be applied only in relation to the date of issue of a contract. Reserve adjustments introduced later, as a result of rate increases, revisions in assumptions (e.g., projected inflation rates) or for other reasons, are to be applied immediately as of the effective date of adoption of the adjusted basis.

(c) Negative reserves. Negative reserves on any benefit may be offset against positive reserves for other benefits in the same contract, but the total contract reserve with respect to all benefits combined may not be less than zero.

(d) Nonforfeiture benefits for long-term care insurance. The contract reserve on a policy basis shall not be less than the net single premium for the nonforfeiture benefits at the appropriate policy duration, where the net single premium is computed according to the above specifications.

(3) Alternative valuation methods and assumptions generally

Provided the contract reserve on all contracts to which an alternative method or basis is applied is not less in the aggregate than the amount determined according to the applicable standards specified above; an insurer may use any reasonable assumptions as to interest rates, termination and mortality rates, and rates of morbidity or other contingency. Also, subject to the preceding condition, the insurer may employ methods other than the methods stated above in determining a sound value of its liabilities under such contracts, including, but not limited to the following: the net level premium method; the one-year full preliminary term method; prospective valuation on the basis of actual gross premiums with reasonable allowance for future expenses; the use of approximations such as those involving age groupings, groupings of several years of issue, average amounts of indemnity, grouping of similar contract forms; the computation of the reserve for one contract benefit as a percentage of, or by other relation to, the aggregate contract reserves exclusive of the benefit or benefits so valued; and the use of a composite annual claim cost for all or any combination of the benefits included in the contracts valued.

(4) Tests for adequacy and reasonableness of contract reserves

Annually, an appropriate review shall be made of the insurer's prospective contract liabilities on contracts valued by tabular reserves, to determine the continuing adequacy and reasonableness of the tabular reserves giving consideration to future gross premiums. The insurer shall make appropriate increments to such tabular reserves if such tests indicate that the basis of such reserves is no longer adequate; subject, however, to the minimum standards of paragraph (G)(2) of this rule.

In the event a company has a contract or a group of related similar contracts, for which future gross premiums will be restricted by contract, insurance department regulations, or for other reasons, such that the future gross premiums reduced by expenses for administration, commissions, and taxes will be insufficient to cover future claims, the company shall establish contract reserves for such shortfall in the aggregate.

(H) Reinsurance

Increases to, or credits against reserves carried, arising because of reinsurance assumed or reinsurance ceded, must be determined in a manner consistent with these minimum reserve standards and with all applicable provisions of the reinsurance contracts which affect the insurer's liabilities.

(I) Specific standards for morbidity, interest and mortality

(1) Morbidity

(a) Minimum morbidity standards for valuation of specified individual contract health insurance benefits are as follows:

(i) Disability income benefits due to accident or sickness.

(a) Contract reserves:

Contracts issued on or after January 1, 1965 and prior to January 1, 1992:

The 1964 commissioners disability table (64CDT).

Contracts issued on or after January 1, 1992:

The 1985 commissioners individual disability tables A (85CIDA); or The 1985 commissioners individual disability tables B (85CIDB).

Contracts issued during 1987 through 1991:

Optional use of either the 1964 Table or the 1985 Tables.

Each insurer shall elect, with respect to all individual contracts issued in any one statement year, whether it will use Tables A or Tables B as the minimum standard. The insurer may, however, elect to use the other tables with respect to any subsequent statement year.

(b) Claim reserves:

(i) For claims incurred on or after January 1, 2004:

The 1985 "Commissioners Individual Disability Table A" (85CIDA) with claim termination rates multiplied by the following adjustment factors:

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*The adjusted termination rates derived from the application of the adjustment factors to the "DTS Valuation Table" termination rates shown in exhibits 3a, 3b, 3c, 4, and 5 ("Transactions of the Society of Actuaries" (TSA) XXXVII, pages 457 to 463) is displayed. The adjustment factors for age, elimination period, class, sex, and cause displayed in exhibits 3a, 3b, 3c, and 4 should be applied to the adjusted termination rates shown in this table.

**Applicable "DTS Valuation Table" duration rate from exhibits 3c and 4 (TSA XXXVII, pages 462 to 463).

The 85CIDA table so adjusted for the computation of claim reserves shall be known as 85CIDC (The 1985 "Commissioners Individual Disability Table C").

(ii) For claims incurred prior to January 1, 2004:

Each insurer may elect which of the following to use as the minimum standard for claims incurred prior to January 1, 2004:

(A) The minimum morbidity standard in effect for contract reserves on currently issued contracts, as of the date the claim is incurred, or

(B) The standard as defined in paragraph (I)(1)(a)(i)(b)(i)of this rule, applied to all open claims.

(C) Once an insurer elects to calculate reserves for all open claims on the standard defined in paragraph (I)(1)(a)(i)(b)(i)of this rule, all future valuations must be on that basis.

(ii) Hospital benefits, surgical benefits and maternity benefits (scheduled benefits or fixed time period benefits only).

(a) Contract reserves:

Contracts issued on or after January 1, 1955, and before January 1, 1982:

The 1956 intercompany hospital-surgical tables.

Contracts issued on or after January 1, 1982:

The 1974 medical expense tables, Table A, "Transactions of the Society of Actuaries", Volume XXX, pg. 63. Refer to the paper (in the same volume, pg. 9) to which this table is appended, including its discussions, for methods of adjustment for benefits not directly valued in Table A: "Development of the 1974 Medical Expense Benefits," Houghton and Wolf.

(b) Claim reserves:

No specific standard. See paragraph (I)(1)(a)(vi) of this rule.

(iii) Cancer expense benefits (scheduled benefits or fixed time period benefits only.)

(a) Contract reserves:

Contract issued on or after January 1, 1986:

The 1985 NAIC Cancer claim cost tables.

(b) Claim reserves:

No specific standard. See paragraph (I)(1)(a)(vi) of this rule.

(iv) Accidental death benefits.

(a) Contract reserves:

Contracts issued on or after January 1, 1965:

The 1959 accidental death benefits table.

(b) Claim reserves:

Actual amount incurred.

(v) Single premium credit disability.

(a) Contract reserves:

(i) For contracts issued on or after January 1, 2004:

(A) For plans having less than a thirty-day elimination period, the 1985 "Commissioners Individual Disability Table A" (85CIDA) with claim incidence rates increased by twelve per cent.

(B) For plans having a thirty-day and greater elimination period, the 85CIDA for a fourteen-day elimination period with the adjustment in paragraph (I)(1)(a)(v)(a)(i)(A) of this rule.

(ii) For contracts issued prior to January 1, 2004, each insurer may elect either paragraph (I)(1)(a)(v)(a)(ii)(A) or paragraph (I)(1)(a)(v)(a)(ii)(B) of this rule to use as the minimum standard. Once an insurer elects to calculate reserves for all contracts on the standard defined in paragraph (I)(1)(a)(v)(a)(i) of this rule, all future valuations must be on that basis.

(A) The minimum morbidity standard in effect for contract reserves on currently issued contracts, as of the date the contract was issued, or

(B) The standard as defined in paragraph (I)(1)(a)(v)(a)(i) of this rule, applied to all contracts.

(b) Claim reserves:

Claim reserves are to be determined as provided in paragraph (E)(3) of this rule.

(vi) Other individual contract benefits.

(a) Contract reserves:

For all other individual contract benefits, morbidity assumptions are to be determined as provided in the reserve standards.

(b) Claim reserves:

For all benefits other than disability, claim reserves are to be determined as provided in the standards.

(b) Minimum morbidity standards for valuation of specified group contract health insurance benefits are as follows:

(i) Disability income benefits due to accident or sickness.

(a) Contract reserves:

Contracts issued prior to January 1, 1992:

The same basis, if any, as that employed by the insurer as of January 1, 1992;

Contracts issued on or after January 1, 1992:

The 1987 commissioners group disability income table (87CGDT).

(b) Claim reserves:

For claims incurred on or after January 1, 1992:

The 1987 commissioners group disability income table (87CGDT);

For claims incurred prior to January 1, 1992:

Use of the 87CGDT is optional.

(ii) Single premium credit disability

(a) Contract reserves:

(i) For contracts issued on or after January 1, 2004:

(A) For plans having less than a thirty-day elimination period, the 1985 "Commissioners Individual Disability Table A" (85CIDA) with claim incidence rates increased by twelve per cent.

(B) For plans having a thirty-day and greater elimination period, the 85CIDA for a fourteen-day elimination period with the adjustment in paragraph (I)(1)(b)(ii)(a)(i)(A) of this rule.

(ii) For contracts issued prior to January 1, 2004, each insurer may elect either paragraph (I)(1)(b)(ii)(a)(ii)(A) or paragraph (I)(1)(b)(ii)(a)(ii)(B) of this rule to use as the minimum standard. Once an insurer elects to calculate reserves for all contracts on the standard defined in paragraph (I)(1)(b)(ii)(a)(i) of this rule, all future valuations must be on that basis.

(A) The minimum morbidity standard in effect for contract reserves on currently issued contracts, as of the date the contract was issued, or

(B) The standard as defined in paragraph (I)(1)(b)(ii)(a)(i) of this rule, applied to all contracts.

(b) Claim reserves:

Claim reserves are to be determined as provided in paragraph (E)(3) of this rule.

(iii) Other group contract benefits.

(a) Contract reserves:

For all other group contract benefits, morbidity assumptions are to be determined as provided in the reserve standards.

(b) Claim reserves:

For all benefits other than disability, claim reserves are to be determined as provided in the standards.

(2) Interest

(a) For contract reserves the maximum interest rate is the maximum rate permitted by law in the valuation of whole life insurance issued on the same date as the health insurance contract.

(b) For claim reserves on policies that require contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of whole life insurance issued on the same date as the claim incurral date.

(c) For claim reserves on policies not requiring contract reserves, the maximum interest rate is the maximum rate permitted by law in the valuation of single premium immediate annuities issued on the same date as the claim incurral date, reduced by one hundred basis points.

(3) Mortality

(a) Except as provided in paragraphs (I)(3)(b) and (I)(3)(c) of this rule, the mortality basis used for all policies except long-term care individual policies and group certificates and for long-term care individual policies or group certificates issued before January 1, 2004 shall be according to a table (but without use of selection factors) permitted by law for the valuation of whole life insurance issued on the same date as the health insurance contract. For long-term care insurance individual policies or group certificates issued on or after January 1, 2004 , the mortality basis used shall be the "1983 Group Annuity Mortality Table" without projection. For long-term care insurance individual policies or group certificates issued on or after January 1, 2011, the mortality basis used shall be the "1994 Group Annuity Mortality Static Table."

(b) Other mortality tables adopted by the "NAIC" and promulgated by the superintendent may be used in the calculation of the minimum reserves if appropriate for the type of benefits and if approved by the superintendent. The request for such approval must include the proposed mortality table and the reason that the standard specified in paragraph (I)(3)(a) of this rule is inappropriate.

(c) For single premium credit insurance using the 85CIDA table, no separate mortality shall be assumed.

(J) Reserves for waiver of premium

Waiver of premium reserves involve several special considerations. First, the disability valuation tables promulgated by the "NAIC" are based on exposures that include contracts on premium waiver as in-force contracts. Hence, contract reserves based on these tables are not reserves on active lives but rather reserves on contracts in force. This is true for the 1964 CDT and for both the 1985 CIDA and CIDB tables.

Accordingly, tabular reserves using any of these tables should value reserves on the following basis:

Claim reserves should include reserves for premiums expected to be waived, valuing as a minimum the valuation net premium being waived.

Premium reserves should include contracts on premium waiver as in-force contracts, valuing as a minimum the unearned modal valuation net premium being waived.

Contract reserves should include recognition of the waiver of premium benefit in addition to other contract benefits provided for, valuing as a minimum the valuation net premium to be waived.

If an insurer is, instead, valuing reserves on what is truly an active life table, or if a specific valuation table is not being used but the insurer's gross premiums are calculated on a basis that includes in the projected exposure only those contracts for which premiums are being paid, then it may not be necessary to provide specifically for waiver of premium reserves. Any insurer using such a true active life basis should carefully consider, however, whether or not additional liability should be recognized on account of premiums waived during periods of disability or during claim continuation.

(K) Severability

If any paragraph, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other paragraph, term or provision of this rule, and the remaining paragraphs, terms, and provisions shall continue in full force and effect.

Effective: 11/18/2010
R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041
Rule Amplifies: 3903.72(M)
Prior Effective Dates: 6/1/1996, 12/14/2003

3901-3-14 Life risk based capital instructions.

(A) Purpose

The purpose of this rule if to adopt the national association of insurance commissioners' 2009 instructions for the completion of the life risk based capital report.

(B) Authority

This rule is promulgated pursuant to the authority vested in the superintendent under section 3901.041 and division (M) of section 3903.81 of the Revised Code.

(C) Scope

This rule applies to all domestic life insurance companies required to report their risk based capital with the superintendent of insurance pursuant to section 3903.82 of the Revised Code.

(D) Instructions

In preparing a report of its risk based capital for filing with the superintendent of insurance each domestic life company shall comply with the 2009 instructions adopted by the national association of insurance commissioners which are set forth in appendix A of this rule.

(E) Severability

If any paragraph, term or provision of the rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other paragraph, term or provisions of this rule, and remaining paragraphs, term and provisions shall be and shall continue in full force and effect.

Replaces: 3901-3-14

Click to view Appendix

Effective: 12/28/2009
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3903.81(M)
Rule Amplifies: 3903.81(M)
Prior Effective Dates: 12/31/2007 (Emer.), 12/31/2008 (Emer.)

3901-3-15 Property and casualty risk based capital instructions.

(A) Purpose

The purpose of this rule is to adopt the national association of insurance commissioners' 2009 instructions for the completion of the property and casualty risk based capital report.

(B) Authority

This rule is promulgated pursuant to the authority vested in the superintendent under section 3901.041 and division (M) of section 3903.81 of the Revised Code.

(C) Scope

This rule applies to all domestic property and casualty insurance companies required to report their risk based capital with the superintendent of insurance pursuant to section 3903.82 of the Revised Code.

(D) Instructions

In preparing a report of its risk based capital for filing with the superintendent of insurance each domestic property and casualty company shall comply with the 2009 instructions adopted by the national association of insurance commissioners which are set out as appendix A of the rule.

(E) Severability

If any paragraph, term or provision of this rule is adjudged invalid for any reason such judgment shall not affect, impair or invalidate any other paragraph, term or provisions of this rule, and remaining paragraphs, terms and provisions shall be and shall continue in full force and effect.

Replaces: 3901-3-15

Click to view Appendix

Effective: 12/28/2009
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3903.81(M)
Rule Amplifies: 3903.81(M)
Prior Effective Dates: 12/31/2007 (Emer.), 12/31/2008 (Emer.)

3901-3-16 Credit for reinsurance.

(A) Purpose

The purpose of this rule is to set out procedural requirements which the superintendent deems necessary to carry out the provisions of sections 3901.61 to 3901.65 of the Revised Code, credit for reinsurance ceded. The information and procedures set out in this rule are necessary for the protection of ceding insurers domiciled in this state.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent under sections 3901.041 and 3901.65 of the Revised Code.

(C) Credit for reinsurance when reinsurer licensed in this state

Pursuant to division (A)(1) of section 3901.62 , of the Revised Code the superintendent shall allow credit for reinsurance ceded by a domestic insurer to assuming insurers which were licensed in this state as of the date of the ceding insurer's statutory financial statement.

(D) Credit for reinsurance when reinsurers maintain trust funds

(1) Pursuant to division (A)(3) of section 3901.62 of the Revised Code, the superintendent shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer which, as of the date of the ceding insurer's statutory financial statement maintains a trust fund in an amount prescribed below in a qualified United States financial institution as defined in division (B)(2) of section 3901.63 of the Revised Code, for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest. The assuming insurer shall report annually to the superintendent substantially the same information as that required to be reported on the NAIC annual statement form by licensed insurers, to enable the superintendent to determine the sufficiency of the trust fund.

(2) The following requirements apply to the following categories of assuming insurer:

(a) The trust fund for a single assuming insurer shall consist of funds in trust in an amount not less than the assuming insurer's liabilities attributable to business written in the United States, and in addition, a trusteed surplus of not less than $20,000,000.

(b) The trust fund for a group of individual unincorporated under writers shall consist of funds in trust in an amount not less than the group's aggregate liabilities attributable to business written in the United States and, in addition, the group shall maintain a trusteed surplus of which $100,000,000 shall be held jointly for the benefit of the United States ceding insurers of any member of the group. The group shall make available to the superintendent annual certifications by the group's domiciliary regulator and its independent public accountants of the solvency of each under writer member of the group.

(c) The trust fund for a group of incorporated insurers under common administration, whose members possess aggregate policyholders surplus of $10,000,000,000 (calculated and reported in substantially the same manner as prescribed by the annual statement instructions and "Accounting Practices and Procedures Manual" of the national association of insurance commissioners) and which has continuously transacted an insurance business outside the United States for at least three years immediately prior to assuming reinsurance shall consist of funds in trust in an amount not less than the assuming insurers' liabilities attributable to business ceded by United States ceding insurers to any members of the group pursuant to reinsurance contracts issued in the name of such group and, in addition, the group shall maintain a joint trusteed surplus of which $100,000,000 shall be held jointly for the benefit of United States ceding insurers of any member of the group. The group shall file a properly executed Form AR-1 as evidence of the submission to this state's authority to examine the books and records of any of its members and shall certify that any member examined will bear the expense of any such examination. The group shall make available to the superintendent annual certifications by the members' domiciliary regulators and their independent public accountants of the solvency of each member of the group.

(3) The trust shall be established in a form approved by the superintendent and complying with division (C) of section 3901.63 of the Revised Code. The trust instrument shall provide that:

(a) Contested claims shall be valid and enforceable out of funds in trust to the extent remaining unsatisfied thirty days after entry of the final order of any court of competent jurisdiction in the United States.

(b) Legal title to the assets of the trust shall be vested in the trustee for the benefit of the grantor's United States policyholders and ceding insurers, their assigns and successors in interest.

(c) The trust shall be subject to examination as determined by the superintendent.

(d) The trust shall remain in effect for as long as the assuming insurer, or any member or former member of a group of insurers, shall have outstanding obligations under reinsurance agreements subject to the trust.

(e) No later than February twenty-eighth of each year the trustees of the trust shall report to the superintendent in writing setting forth the balance in the trust and listing the trust's investments at the preceding year end, and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December thirty-first.

(f) No amendment to the trust shall be effective unless reviewed and approved in advance by the superintendent.

(E) Credit for reinsurance required by law pursuant to division (A)(2) of section 3901.62 of the Revised Code, the superintendent shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of division (A)(1) or (A)(3) of section 3901.62 of the Revised Code, but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by the applicable law or regulation of that jurisdiction. As used in this section, "jurisdiction" means any state, district or territory of the United States and any lawful national government.

(F) Reduction from liability for reinsurance ceded to an unauthorized assuming insurer

Pursuant to division (A)(3) of section 3901.62 of the Revised Code, the superintendent shall allow a reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of division (A)(1) of section 3901.62 of the Revised Code in an amount not exceeding the liabilities carried by the ceding insurer. Such reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the exclusive benefit of the ceding insurer, under a reinsurance contract with such assuming insurer as security for the payment of obligations thereunder. Such security must be held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer or, in the case of a trust, held in a qualified United States financial institution as defined in division (B)(2) of section 3901.63 of the Revised Code. This security may be in the form of any of the following.

(1) Cash.

(2) Securities listed by the securities valuation office of the national association of insurance commissioners and qualifying as admitted assets.

(3) Clean, irrevocable, unconditional and "evergreen" letters of credit issued or confirmed by a qualified United States institution, as defined in division (C)(3) of section 3901.63 of the Revised Code, effective no later than December thirty-first of the year for which filing is being made, and in the possession of the ceding company on or before the filing date of its annual statement. Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance (or confirmation) shall, notwithstanding the issuing (or confirming) institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs.

(4) Any other form of security acceptable to the superintendent.

An admitted asset or a reduction from liability for reinsurance ceded to an unauthorized assuming insurer pursuant to paragraph (F) of this rule shall be allowed only when the requirements of paragraph (G), (H) or (I) of this rule are met.

(G) Trust agreements qualified under paragraph (F) of this rule

(1) As used in this paragraph:

(a) "Beneficiary" means the entity for whose sole benefit the trust has been established and any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named beneficiary includes and is limited to the court appointed domiciliary receiver (including conservator, rehabilitator or liquidator).

(b) "Grantor" means the entity that has established a trust for the sole benefit of the beneficiary. When established in conjunction with a reinsurance agreement, the grantor is the unlicensed, unaccredited assuming insurer.

(c) "Obligations", as used in paragraph (G)(2)(k) of this rule, means:

(i) Reinsured losses and allocated loss expenses paid by the ceding company, but not recovered from the assuming insurer;

(ii) Reserves for reinsured losses reported and outstanding;

(iii) Reserves for reinsured losses incurred but not reported; and

(iv) Reserves for allocated reinsured loss expenses and unearned premiums.

(2) Required conditions.

(a) The trust agreement shall be entered into between the beneficiary, the grantor and a trustee which shall be a qualified United States financial institution as defined in division (B)(2) of section 3901.63 of the Revised Code.

(b) The trust agreement shall create a trust account into which assets shall be deposited.

(c) All assets in the trust account shall be held by the trustee at the trustee's office in the United States, except that a bank may apply for the superintendent's permission to use a foreign branch office of such bank as trustee for trust agreements established pursuant to this section. If the superintendent approves the use of such foreign branch office as trustee, then its use must be approved by the beneficiary in writing and the trust agreement must provide that the written notice described in paragraph (G)(2)(d)(i) of this rule must also be presentable, as a matter of legal right, at the trustee's principal office in the United States.

(d) The trust agreement shall provide that:

(i) The beneficiary shall have the right to withdraw assets from the trust account at any time, without notice to the grantor, subject only to written notice from the beneficiary to the trustee;

(ii) No other statement or document is required to be presented in order to withdraw assets, except that the beneficiary may be required to acknowledge receipt of withdrawn assets;

(iii) It is not subject to any conditions or qualifications outside of the trust agreement; and

(iv) It shall not contain references to any other agreements or documents except as provided for under paragraph (G)(2)(k) of this rule.

(e) The trust agreement shall be established for the sole benefit of the beneficiary.

(f) The trust agreement shall require the trustee to:

(i) Receive assets and hold all assets in a safe place;

(ii) Determine that all assets are in such form that the beneficiary, or the trustee upon direction by the beneficiary, may whenever necessary negotiate any such assets, without consent or signature from the grantor or any other person or entity;

(iii) Furnish to the grantor and the beneficiary a statement of all assets in the trust account upon its inception and at intervals no less frequent than the end of each calendar quarter;

(iv) Notify the grantor and the beneficiary within ten days, of any deposits to or withdrawals from the trust account;

(v) Upon written demand of the beneficiary, immediately take any and all steps necessary to transfer absolutely and unequivocally all right, title and interest in the assets held in the physical custody of the assets to the beneficiary; and

(vi) Allow no substitutions or withdrawals of assets from the trust account, except on written instructions from the beneficiary, except that the trustee may, without the consent of but with notice to the beneficiary, upon call or maturity of any trust asset, withdraw such asset upon condition that the proceeds are paid into the trust account.

(g) The trust agreement shall provide that at least thirty days, but not more than forty-five days, prior to termination of the trust account, written notification of termination shall be delivered by the trustee to the beneficiary.

(h) The trust agreement shall be made subject to and governed by the laws of the state in which the trust is established.

(i) The trust agreement shall prohibit invasion of the trust corpus for the purpose of paying compensation to, or reimbursing the expense of, the trustee.

(j) The trust agreement shall provide that the trustee shall be liable for its own negligence, willful misconduct or lack of good faith.

(k) Notwithstanding other provisions of this regulation, when a trust agreement is established in conjunction with a reinsurance agreement covering risks other than life, annuities and accident and health, where it is customary practice to provide a trust agreement for a specific purpose, such a trust agreement may, notwithstanding any other conditions in this regulation, provide that the ceding insurer shall undertake to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, for the following purposes:

(i) To pay or reimburse the ceding insurer for the assuming insurer's share under the specific reinsurance agreement regarding any losses and allocated loss expenses paid by the ceding insurer, but not recovered from the assuming insurer, or for unearned premiums due to the ceding insurer if not otherwise paid by the assuming insurer;

(ii) To make payment to the assuming insurer of any amounts held in the trust account that exceed 102 percent of the actual amount required to fund the assuming insurer's obligations under the specific reinsurance agreement; or

(iii) Where the ceding insurer has received notification of termination of the trust account and where the assuming insurer's entire obligations under the specific reinsurance agreement remain unliquidated and undischarged ten days prior to the termination date, to withdraw amounts equal to the obligations and deposit those amounts in a separate account, in the name of the ceding insurer in any qualified United States financial institution as defined in division (B)(2) of section 3901.63 of the Revised Code apart from its general assets, in trust for such uses and purposes specified in paragraphs (G)(2)(k)(i) and (G)(2)(k)(ii) of this rule as may remain executory after such withdrawal and for any period after the termination date.

(l) The reinsurance agreement entered into in conjunction with the trust agreement may, but need not, contain the provisions required by paragraph (G)(4)(a)(i) of this rule, so long as these required conditions are included in the trust agreement.

(3) Permitted conditions.

(a) The trust agreement may provide that the trustee may resign upon delivery of a written notice of resignation, effective not less than ninety days after receipt by the beneficiary and grantor of the notice and that the trustee may be removed by the grantor by delivery to the trustee and the beneficiary of a written notice of removal, effective not less than ninety days after receipt by the trustee and the beneficiary of the notice, provided that no such resignation or removal shall be effective until a successor trustee has been duly appointed and approved by the beneficiary and the grantor and all assets in the trust have been duly transferred to the new trustee.

(b) The grantor may have the full and unqualified right to vote any shares of stock in the trust account and to receive from time to time payments of any dividends or interest upon any shares of stock or obligations included in the trust account. Any such interest or dividends shall be either forwarded promptly upon receipt to the grantor or deposited in a separate account established in the grantor's name.

(c) The trustee may be given authority to invest, and accept substitutions of, any funds in the account, provided that no investment or substitution shall be made without prior approval of the beneficiary, unless the trust agreement specifies categories of investments acceptable to the beneficiary and authorizes the trustee to invest funds and to accept substitutions which the trustee determines are at least equal in market value to the assets withdrawn and that are consistent with the restrictions in paragraph (G)(4)(a)(ii) of this rule.

(d) The trust agreement may provide that the beneficiary may at any time designate a party to which all or part of the trust assets are to be transferred. Such transfer may be conditioned upon the trustee receiving, prior to or simultaneously, other specified assets.

(e) The trust agreement may provide that, upon termination of the trust account, all assets not previously withdrawn by the beneficiary shall, with written approval by the beneficiary, be delivered over to the grantor.

(4) Additional conditions applicable to reinsurance agreements.

(a) A reinsurance agreement, which is entered into in conjunction with a trust agreement and the establishment of a trust account, may contain provisions that:

(i) Require the assuming insurer to enter into a trust agreement and to establish a trust account for the benefit of the ceding insurer, and specifying what the agreement is to cover;

(ii) Stipulate that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash (United States legal tender), certificates of deposit (issued by a United States bank and payable in United States legal tender), and investments of the types permitted by Title 39 of the Revised Code or any combination of the above, provided that such investments are issued by an institution that is not the parent, subsidiary or affiliate of either the grantor or the beneficiary. The reinsurance agreement may further specify the types of investments to be deposited. Where a trust agreement is entered into in conjunction with a reinsurance agreement covering risks other than life, annuities and accident and health, then the trust agreement may contain the provisions required by this paragraph in lieu of including such provisions in the reinsurance agreement;

(iii) Require the assuming insurer, prior to depositing assets with the trustee to execute assignments or endorsements in blank or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may whenever necessary negotiate these assets without consent or signature from the assuming insurer or any other entity;

(iv) Require that all settlements of account between the ceding insurer and the assuming insurer be made in cash or its equivalent; and

(v) Stipulate that the assuming insurer and the ceding insurer agree that the assets in the trust account, established pursuant to the provisions of the reinsurance agreement, may be withdrawn by the ceding insurer at any time, notwithstanding any other provisions in the reinsurance agreement, and shall be utilized and applied by the ceding insurer or its successors in interest by operation of law, including without limitation any liquidator, rehabilitator, receiver or conservator of such company, without diminution because of insolvency on the part of the ceding insurer or the assuming insurer, only for the following purposes:

(a) To reimburse the ceding insurer for the assuming insurer's share of premiums returned to the owners of policies reinsured under the reinsurance agreement because of cancellations of such policies;

(b) To reimburse the ceding insurer for the assuming insurer's share of surrenders and benefits or losses paid by the ceding insurer pursuant to the provisions of the policies reinsured under the reinsurance agreement;

(c) To fund an account with the ceding insurer in an amount at least equal to the deduction, for reinsurance ceded, from the ceding insurer liabilities for policies ceded under the agreement. The account shall include, but not be limited to, amounts for policy reserves, claims and losses incurred (including losses incurred but not reported), loss adjustment expenses and unearned premium reserves; and

(d) To pay any other amounts the ceding insurer claims are due under the reinsurance agreement.

(vi) The reinsurance agreement may also contain provisions that:

(a) Give the assuming insurer the right to seek approval from the ceding insurer to withdraw from the trust account all or any part of the trust assets and transfer those assets to the assuming insurer, provided:

(i) The assuming insurer shall, at the time of withdrawal, replace the withdrawn assets with other qualified assets having a market value equal to the market value of the assets withdrawn so as to maintain at all times the deposit in the required amount, or

(ii) After withdrawal and transfer, the market value of the trust account is no less than one hundred two per cent of the required amount.

The ceding insurer shall not unreasonably or arbitrarily withhold its approval.

(b) Provide for:

(i) The return of any amount withdrawn in excess of the actual amounts required for paragraph (G)(4)(a)(v) of this rule, or in the case of paragraph (G)(4)(a)(v)(D) of this rule, any amounts that are subsequently determined not to be due; and

(ii) Interest payments, at a rate not in excess of the prime rate of interest, on the amounts held pursuant to paragraph (G)(4)(a)(v)(C) of this rule.

(c) Permit the award by any arbitration panel or court of competent jurisdiction of:

(i) Interest at a rate different from that provided in paragraph (G)(4)(b)(ii) of this rule,

(ii) Court of arbitration costs,

(iii) Attorney's fees, and

(iv) Any other reasonable expenses.

(c) Financial reporting. A trust agreement may be used to reduce any liability for reinsurance ceded to an unauthorized assuming insurer in financial statements required to be filed with this department in compliance with the provisions of this regulation when established on or before the date of filing of the financial statement of the ceding insurer. Further, the reduction for the existence of an acceptable trust account may be up to the current fair market value of acceptable assets available to be withdrawn from the trust account at that time, but such reduction shall be no greater than the specific obligations under the reinsurance agreement that the trust account was established to secure.

(d) Existing agreements. Notwithstanding the effective date of this regulation, any trust agreement or underlying reinsurance agreement in existence prior to December 31, 1997 will continue to be acceptable until December 31, 1998, at which time the agreements will have to be in full compliance with this regulation for the trust agreement to be acceptable.

(e) The failure of any trust agreement to specifically identify the beneficiary as defined in paragraph (G)(1)(a) of this rule shall not be construed to affect any actions or rights which the superintendent may take or possess pursuant to the provisions of the laws of this state.

(H) Letter of credit qualified under paragraph (F) of this rule

(1) The letter of credit must be clean, irrevocable and unconditional and issued or confirmed by a qualified United States financial institution as defined in division (B)(2) of section 3901.63 of the Revised Code. The letter of credit shall contain an issue date and date of expiration and shall stipulate that the beneficiary need only draw a sight draft under the letter of credit and present it to obtain funds and that no other document need be presented. The letter of credit shall also indicate that it is not subject to any condition or qualifications outside of the letter of credit. In addition, the letter of credit itself shall not contain reference to any other agreements, documents or entities, except as provided in paragraph (H)(9)(a) of this rule. As used in this paragraph, "beneficiary" means the domestic insurer for whose benefit the letter of credit has been established and any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named beneficiary includes and is limited to the court appointed domiciliary receiver (including conservator, rehabilitator or liquidator).

(2) The heading of the letter of credit may include a boxed section which contains the name of the applicant and other appropriate notations to provide a reference for the letter of credit. The boxed section shall be clearly marked to indicate that such information is for internal identification purposes only.

(3) The letter of credit shall contain a statement to the effect that the obligation of the qualified United States financial institution under the letter of credit is in no way contingent upon reimbursement with respect thereto.

(4) The term of the letter of credit shall be for at least one year and shall contain an "evergreen clause" which prevents the expiration of the letter of credit without due notice from the issuer. The "evergreen clause" shall provide for a period of no less than thirty days' notice prior to expiry date or nonrenewal.

(5) The letter of credit shall state whether it is subject to and governed by the laws of this state or the "Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce (Publication 500)," and all drafts drawn thereunder shall be presentable at an office in the United States of a qualified United States financial institution.

(6) If the letter of credit is made subject to the "Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce (Publication 500)," then the letter of credit shall specifically address and make provision for an extension of time to draw against the letter of credit in the event that one or more of the occurrences specified in "Article 19 of Publication 500 occur."

(7) The letter of credit shall be issued or confirmed by a qualified United States financial institution authorized to issue letters of credit, pursuant to division (B)(2) of section 3901.63 of the Revised Code.

(8) If the letter of credit is issued by a qualified United States financial institution authorized to issue letters of credit, other than a qualified United States financial institution as described in paragraph (H)(7) of this rule, then the following additional requirements shall be met:

(a) The issuing qualified United States financial institution shall formally designate the confirming qualified United States financial institution as its agent for the receipt and payment of the drafts, and

(b) The "evergreen clause" shall provide for thirty days' notice prior to expiry date for nonrenewal.

(9) Reinsurance agreement provisions.

(a) The reinsurance agreement in conjunction with which the letter of credit is obtained may contain provisions which:

(i) Require the assuming insurer to provide letters of credit to the ceding insurer and specify what they are to cover.

(ii) Stipulate that the assuming insurer and ceding insurer agree that the letter of credit provided by the assuming insurer pursuant to the provisions of the reinsurance agreement may be drawn upon at any time, notwithstanding any other provisions in the agreement, and shall be utilized by the ceding insurer or its successors in interest only for one or more of the following reasons:

(a) To reimburse the ceding insurer for the assuming insurer's share of premiums returned to the owners of policies reinsured under the reinsurance agreement on account of cancellations of such policies:

(b) To reimburse the ceding insurer for the assuming insurer's share of surrenders and benefits or losses paid by the ceding insurer under the terms and provisions of the policies reinsured under the reinsurance agreement;

(c) To fund an account with the ceding insurer in an amount at least equal to the deduction, for reinsurance ceded, from the ceding insurer's liabilities for policies ceded under the agreement (such amount shall include, but not be limited to, amounts for policy reserves, claims and losses incurred and unearned premium reserves); and

(d) To pay any other amounts the ceding insurer claims are due under the reinsurance agreement.

(iii) All of the foregoing provisions of paragraph (H)(9) of this rule should be applied without diminution because of insolvency on the part of the ceding insurer or assuming insurer.

(b) Nothing contained in paragraph (H)(9) of this rule shall preclude the ceding insurer and assuming insurer from providing for:

(i) An interest payment, at a rate not in excess of the prime rate of interest, on the amounts held pursuant to paragraph (G)(4)(a)(v)(C) of this rule and/or

(ii) The return of any amounts drawn down on the letters of credit in excess of the actual amounts required for the above or, in the case of paragraph (G)(4)(a)(v)(D) of this rule, any amounts that are subsequently determined not to be due.

(c) When a letter of credit is obtained in conjunction with a reinsurance agreement covering risks other than life, annuities and health, where it is customary practice to provide a letter of credit for a specific purpose, then the reinsurance agreement may, in lieu of paragraph (H)(9)(a)(ii) of this rule, require that the parties enter into a "Trust Agreement" which may be incorporated into the reinsurance agreement or be a separate document.

(10) A letter of credit may not be used to reduce any liability for reinsurance ceded to an unauthorized assuming insurer in financial statements required to be filed with this department unless an acceptable letter of credit with the filing ceding insurer as beneficiary has been issued on or before the date of filing of the financial statement. Further, the reduction for the letter of credit may be up to the amount available under the letter of credit but no greater than the specific obligation under the reinsurance agreement which the letter of credit was intended to secure.

(I) Other security

A ceding insurer may take credit for unencumbered funds withheld by the ceding insurer in the United States subject to withdrawal solely by the ceding insurer and under its exclusive control.

(J) Reinsurance contract

Credit will not be granted to a ceding insurer for reinsurance effected with assuming reinsurers meeting the requirements of this rule after the effective date of this rule unless the reinsurance agreement:

(1) Includes a proper insolvency clause pursuant to divisions (A)(1) and (A)(2) of section 3901.64 of the Revised Code; and

(2) Includes a provision whereby the assuming insurer, if an unauthorized assuming insurer, has submitted to the jurisdiction of an alternate dispute resolution panel or court of competent jurisdiction within the United States, has agreed to comply with all requirements necessary to give such court or panel jurisdiction, has designated an agent upon whom service of process may be effected, and has agreed to abide by the final decision of such court or panel.

(K) Contracts affected

All new and renewal reinsurance transactions entered into after December 31, 1997 shall conform to the requirements of sections 3901.61 to 3901.65 of the Revised Code and this rule if credit is to be given to the ceding insurer for such reinsurance.

(L) Severability

If any term or paragraph of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other term or paragraph of this rule, but the remaining terms and paragraphs shall be and continue in full force and effect.

Appendix 1 Form ar-1 Certificate of assuming insurer

I, ________________________________ __________________________________ (Name of officer) (Title of officer) Of _______________________________________________, the assuming insurer (Name of assuming insurer) Under a reinsurance agreement(s) with one or more insurers domiciled In _____________________________________________________, hereby (Name of state) _______________________________________________ ("Assuming insurer"): (Name of assuming insurer)

1. Submits to the jurisdiction of any court of competent jurisdiction in ___________________________________________________________________ (Ceding insurer's state of domicile) For the adjudication of any issues arising out of the reinsurance agreement(s), agrees to comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or any appellate court in the event of an appeal. Nothing in this paragraph constitutes or should be understood to constitute a waiver of Assuming insurer's rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United states District Court, or to seek a transfer of a case to another court as permitted by the laws of the United states or of any state in the United States. This paragraph is not intended to conflict with or override the obligation of the parties to the reinsurance agreement(s) to arbitrate their disputes if such an obligation is created in the agreement(s).

2. Designates the insurance superintendent of ____________________________________________________________________ (Ceding insurer's state of domicile) as its lawful attorney upon whom may be served any lawful process in any action, suit or proceeding arising out of the reinsurance agreement(s) instituted by or on behalf of the ceding insurer.

3. Submits to the authority of the Insurance Superintendent of _______________________________________________ to examine its books (ceding insurer's state of domicile) and records and agrees to bear the expense of any such examination.

4. Submits with this form a current list of insurers domiciled in ______________________________________ reinsured by assuming insurer (ceding insurer's state of domicile) and undertakes to submit additions to or deletions from the list to the insurance superintendent at least once per calendar quarter.

Dated: ____________________

_________________________________________

(Name of assuming insurer)

By: _________________________________________

(Name of officer)

_________________________________________

(Title of officer)

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3901.65
Rule Amplifies: 3901.61 to 3901.65
Prior Effective Dates: 7/18/1997

3901-3-17 New annuity mortality tables for use in determining reserve liabilities for annuities.

(A) Purpose

The purpose of this rule is to recognize new annuity mortality tables for use in determining the minimum standard of valuation for annuity and pure endowment contracts.

(B) Authority

This rule is issued pursuant to section 3901.041 and section 3903.72 of the Revised Code.

(C) Definitions

(1) The "1983 table 'A'" means the mortality table developed by the society of actuaries committee to recommend a new mortality basis for individual annuity valuation and adopted as a recognized mortality table for annuities in June 1982 by the national association of insurance commissioners (NAIC). (see appendix A).

(2) The "1983 GAM table" means the mortality table developed by the society of actuaries committee on annuities and adopted as a recognized mortality table for annuities in December 1983 by the NAIC. (see appendix B).

(3) The "1994 GAR table" means the mortality table developed by the society of actuaries group annuity valuation task force and adopted as a recognized mortality table for annuities in December 1996 by the NAIC. (See appendix C for males and appendix D for females).

(4) The "Annuity 2000 Mortality Table" means the mortality table developed by the society of actuaries committee on life insurance research and adopted as a recognized mortality table for annuities in December 1996 by the NAIC. (See appendix E).

(D) Individual annuity or pure endowment contracts

(1) Except as provided in paragraph (D)(2) of this rule, the 1983 table "A" and the annuity 2000 mortality table are recognized and approved as individual annuity mortality tables for valuation, and, at the option of the company, may be used for purposes of determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1979.

(2) Except as provided in paragraph (D)(3) of this rule, the annuity 2000 mortality table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 1999.

(3) The 1983 table "A" without projection is to be used for determining the minimum standards of valuation for an individual annuity of pure endowment contract issued on or after January 1, 1999, solely when the contract is based on life contingencies and is issued to fund periodic benefits arising from:

(a) Settlements of various forms of claims pertaining to court settlements or out of court settlements from tort actions;

(b) Settlements involving similar actions such as worker's compensation claims; or

(c) Settlements of long term disability claims where a temporary or life annuity has been used in lieu of continuing disability payments.

(E) Group annuity or pure endowment contracts

(1) The 1983 GAM table, the 1983 table "A" and the 1994 GAR table are recognized and approved as group annuity mortality tables for valuation, and, at the option of the company, any one of these tables may be used for purposes of valuation for any annuity of pure endowment purchased on or after January 1, 1979 under a group annuity or pure endowment contract.

(2) The 1994 GAR table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 1999 under a group annuity or pure endowment contract.

(F) Application of the 1994 GAR table

In using the 1994 GAR table, the mortality rate for a person age X in year (1994 + N) is calculated as follows:

qx1994 + n= qx1994(1 - AAx)n

Where the Q x1994S and the AAxS are as specified in the 1994 GAR table.

(G) If any paragraph, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other paragraph, term or provision of this rule, and the remaining paragraphs, terms and provisions shall be and shall continue in full force and effect.

Appendix A

1983 "A" ----- 1,000 Qx

AGEMALEFEMALEAGEMALEFEMALEAGEMALEFEMALE

5 0.3770.194 45 2.3991.122 85 90.98765.518

6 0.3500.160 46 2.6931.231 86 99.12273.493

7 0.3330.134 47 3.0091.356 87 107.57782.318

8 0.3520.134 48 3.3431.499 88 116.31692.017

9 0.3680.136 49 3.6941.657 89 125.394102.491

10 0.3820.141 50 4.0571.830 90 134.887113.605

11 0.3940.147 51 4.4312.016 91 144.873125.227

12 0.4050.155 52 4.8122.215 92 155.429137.222

13 0.4150.165 53 5.1982.426 93 166.629149.462

14 0.4250.175 54 5.5912.650 94 178.537161.834

15 0.4350.188 55 5.9942.891 95 191.214174.228

16 0.4460.201 56 6.4093.151 96 204.721186.535

17 0.4580.214 57 6.8393.432 97 219.120198.646

18 0.4720.229 58 7.2903.739 98 234.735211.102

19 0.4880.244 59 7.7824.081 99 251.889224.445

20 0.5050.260 60 8.3384.467 100 270.906239.215

21 0.5250.276 61 8.9834.908 101 292.111255.953

22 0.5460.293 62 9.7405.413 102 315.826275.201

23 0.5700.311 63 10.6305.990 103 342.377297.500

24 0.5960.330 64 11.6646.633 104 372.086323.390

25 0.6220.349 65 12.8517.336 105 405.278353.414

26 0.6500.368 66 14.1998.090 106 442.277388.111

27 0.6770.387 67 15.7178.888 107 483.406428.023

28 0.7040.405 68 17.4149.731 108 528.989473.692

29 0.7310.423 69 19.29610.653 109 579.351525.658

30 0.7590.441 70 21.37111.697 110 634.814584.462

31 0.7860.460 71 23.64712.905 111 695.704650.646

32 0.8140.479 72 26.13114.319 112 762.343724.750

33 0.8430.499 73 28.83515.980 113 835.056807.316

34 0.8760.521 74 31.79417.909 114 914.167898.885

35 0.9170.545 75 35.04620.127 115 1000.0001000.000

36 0.9680.574 76 38.63122.654

37 1.0320.607 77 42.58725.509

38 1.1140.646 78 46.95128.717

39 1.2160.691 79 51.75532.328

40 1.3410.742 80 57.02636.395

41 1.4920.801 81 62.79140.975

42 1.6730.867 82 69.08146.121

43 1.8860.942 83 75.90851.889

44 2.1291.026 84 83.23058.336

Appendix B

1983 GAM ----- 1,000 Qx

AGEMALEFEMALEAGEMALEFEMALEAGEMALEFEMALE

5 0.3420.171 45 2.1831.010 85 114.83669.918

6 0.3180.140 46 2.4711.117 86 124.17076.570

7 0.3020.118 47 2.7901.237 87 133.87083.870

8 0.2940.104 48 3.1381.366 88 144.07391.935

9 0.2920.097 49 3.5131.505 89 154.859101.354

10 0.2930.096 50 3.9091.647 90 166.307111.750

11 0.2980.104 51 4.3241.793 91 178.214123.076

12 0.3040.113 52 4.7551.949 92 190.460135.630

13 0.3100.122 53 5.2002.120 93 203.007149.577

14 0.3170.131 54 5.6602.315 94 217.904165.103

15 0.3250.140 55 6.1312.541 95 234.086182.419

16 0.3330.149 56 6.6182.803 96 248.436201.757

17 0.3430.159 57 7.1393.103 97 263.954222.044

18 0.3530.168 58 7.7193.443 98 280.803243.899

19 0.3650.179 59 8.3843.821 99 299.154268.185

20 0.3770.189 60 9.1584.241 100 319.185295.187

21 0.3920.201 61 10.0644.703 101 341.086325.225

22 0.4080.212 62 11.1335.210 102 365.052358.897

23 0.4240.225 63 12.3915.769 103 393.102395.843

24 0.4440.239 64 13.8686.386 104 427.255438.360

25 0.4640.253 65 15.5927.064 105 469.531487.816

26 0.4880.268 66 17.5797.817 106 521.945545.886

27 0.5130.284 67 19.8048.681 107 586.518614.309

28 0.5420.302 68 22.2299.702 108 665.268694.885

29 0.5720.320 69 24.81710.922 109 760.215789.474

30 0.6070.342 70 27.53012.385 110 1000.0001000.000

31 0.6450.364 71 30.35414.128

32 0.6870.388 72 33.37016.160

33 0.7340.414 73 36.68018.481

34 0.7850.443 74 40.38821.092

35 0.8600.476 75 44.59723.992

36 0.9070.502 76 49.38827.185

37 0.9660.536 77 54.75830.672

38 1.0390.573 78 60.67834.459

39 1.1280.617 79 67.12538.549

40 1.2380.665 80 74.07042.945

41 1.3700.716 81 81.48447.655

42 1.5270.775 82 89.32052.691

43 1.7150.842 83 97.52558.071

44 1.9320.919 84 106.04763.807

Appendix C

1994 GAR Table - Males

AGE1000Q x1994AAxAGE1000Qx1994AAxAGE1000Qx1994AAx

1 0.5920.020 41 1.1560.009 81 68.6150.009

2 0.4000.020 42 1.2520.010 82 75.5320.008

3 0.3320.020 43 1.3520.011 83 82.5100.008

4 0.2590.020 44 1.4580.012 84 89.6130.007

5 0.2370.020 45 1.5780.013 85 97.2400.007

6 0.2270.020 46 1.7220.014 86 105.7920.007

7 0.2170.020 47 1.8990.015 87 115.6710.006

8 0.2010.020 48 2.1020.016 88 126.9800.005

9 0.1940.020 49 2.3260.017 89 139.4520.005

10 0.1970.020 50 2.5790.018 90 152.9310.004

11 0.2080.020 51 2.8720.019 91 167.2600.004

12 0.2260.020 52 3.2130.020 92 182.2810.003

13 0.2550.020 53 3.5840.020 93 198.3920.003

14 0.2970.019 54 3.9790.020 94 215.7000.003

15 0.3450.019 55 4.4250.019 95 233.6060.002

16 0.3910.019 56 4.9490.018 96 251.5100.002

17 0.4300.019 57 5.5810.017 97 268.8150.002

18 0.4600.019 58 6.3000.016 98 285.2770.001

19 0.4840.019 59 7.0900.016 99 301.2980.001

20 0.5070.019 60 7.9760.016 100 317.2380.001

21 0.5300.018 61 8.9860.015 101 333.4610.000

22 0.5560.017 62 10.1470.015 102 350.3300.000

23 0.5890.015 63 11.4710.014 103 368.5420.000

24 0.6240.013 64 12.9400.014 104 387.8550.000

25 0.6610.010 65 14.5350.014 105 407.2240.000

26 0.6960.006 66 16.2390.013 106 425.5990.000

27 0.7270.005 67 18.0340.013 107 441.9350.000

28 0.7540.005 68 19.8590.014 108 457.5530.000

29 0.7790.005 69 21.7290.014 109 473.1500.000

30 0.8010.005 70 23.7300.015 110 486.7450.000

31 0.8210.005 71 25.9510.015 111 496.3560.000

32 0.8390.005 72 28.4810.015 112 500.0000.000

33 0.8480.005 73 31.2010.015 113 500.0000.000

34 0.8490.005 74 34.0510.015 114 500.0000.000

35 0.8510.005 75 37.2110.014 115 500.0000.000

36 0.8620.005 76 40.8580.014 116 500.0000.000

37 0.8910.005 77 45.1710.013 117 500.0000.000

38 0.9390.006 78 50.2110.012 118 500.0000.000

39 0.9990.007 79 55.8610.011 119 500.0000.000

40 1.0720.008 80 62.0270.010 120 1000.0000.000

Appendix D

1994 GAR Table - Females

AGE1000Q x1994AAxAGE1000Qx1994AAxAGE1000Qx1994AAx

1 0.5310.020 41 0.7680.015 81 43.9520.007

2 0.3460.020 42 0.8250.015 82 49.1530.007

3 0.2580.020 43 0.8770.015 83 54.8570.007

4 0.1940.020 44 0.9230.015 84 60.9790.007

5 0.1750.020 45 0.9730.016 85 67.7380.006

6 0.1630.020 46 1.0330.017 86 75.3470.005

7 0.1530.020 47 1.1120.018 87 84.0230.004

8 0.1370.020 48 1.2060.018 88 93.8200.004

9 0.1300.020 49 1.3100.018 89 104.5940.003

10 0.1310.020 50 1.4280.017 90 116.2650.003

11 0.1380.020 51 1.5680.016 91 128.7510.003

12 0.1480.020 52 1.7340.014 92 141.9730.003

13 0.1640.020 53 1.9070.012 93 155.9310.002

14 0.1890.018 54 2.0840.010 94 170.6770.002

15 0.2160.016 55 2.2940.008 95 186.2130.002

16 0.2420.015 56 2.5630.006 96 202.5380.002

17 0.2620.014 57 2.9190.005 97 219.6550.001

18 0.2730.014 58 3.3590.005 98 237.7130.001

19 0.2800.015 59 3.8630.005 99 256.7120.001

20 0.2840.016 60 4.4390.005 100 276.4270.001

21 0.2860.017 61 5.0930.005 101 296.6290.000

22 0.2890.017 62 5.8320.005 102 317.0930.000

23 0.2920.016 63 6.6770.005 103 338.5050.000

24 0.2910.015 64 7.6210.005 104 361.0160.000

25 0.2910.014 65 8.6360.005 105 383.5970.000

26 0.2940.012 66 9.6940.005 106 405.2170.000

27 0.3020.012 67 10.7640.005 107 424.8460.000

28 0.3140.012 68 11.7630.005 108 444.3680.000

29 0.3310.012 69 12.7090.005 109 464.4690.000

30 0.3510.010 70 13.7300.005 110 482.3250.000

31 0.3730.008 71 14.9530.006 111 495.1100.000

32 0.3970.008 72 16.5060.006 112 500.0000.000

33 0.4220.009 73 18.3440.007 113 500.0000.000

34 0.4490.010 74 20.3810.007 114 500.0000.000

35 0.4780.011 75 22.6860.008 115 500.0000.000

36 0.5120.012 76 25.3250.008 116 500.0000.000

37 0.5510.013 77 28.3660.007 117 500.0000.000

38 0.5980.014 78 31.7270.007 118 500.0000.000

39 0.6520.015 79 35.3620.007 119 500.0000.000

40 0.7090.015 80 39.3960.007 120 1000.0000.000

Appendix E

Annuity 2000 Mortality Table ------ 1,000 Qx

AGEMALEFEMALEAGEMALEFEMALEAGEMALEFEMALE

5 0.2910.171 45 1.7520.939 85 73.27557.913

6 0.2700.141 46 1.9741.035 86 80.07665.119

7 0.2570.118 47 2.2111.141 87 87.37073.136

8 0.2940.118 48 2.4601.261 88 95.16981.991

9 0.3250.121 49 2.7211.393 89 103.45591.577

10 0.3500.126 50 2.9941.538 90 112.208101.758

11 0.3710.133 51 3.2791.695 91 121.402112.395

12 0.3880.142 52 3.5761.864 92 131.017123.349

13 0.4020.152 53 3.8842.047 93 141.030134.486

14 0.4140.164 54 4.2032.244 94 151.422145.689

15 0.4250.177 55 4.5342.457 95 162.179156.846

16 0.4370.190 56 4.8762.689 96 173.279167.841

17 0.4490.204 57 5.2282.942 97 184.706178.563

18 0.4630.219 58 5.5933.218 98 196.946189.604

19 0.4800.234 59 5.9883.523 99 210.484201.557

20 0.4990.250 60 6.4283.863 100 225.806215.013

21 0.5190.265 61 6.9334.242 101 243.398230.565

22 0.5420.281 62 7.5204.668 102 263.745248.805

23 0.5660.298 63 8.2075.144 103 287.334270.326

24 0.5920.314 64 9.0085.671 104 314.649295.719

25 0.6160.331 65 9.9406.250 105 346.177325.576

26 0.6390.347 66 11.0166.878 106 382.403360.491

27 0.6590.362 67 12.2517.555 107 423.813401.054

28 0.6750.376 68 13.6578.287 108 470.893447.860

29 0.6870.389 69 15.2339.102 109 524.128501.498

30 0.6940.402 70 16.97910.034 110 584.004562.563

31 0.6990.414 71 18.89111.117 111 651.007631.645

32 0.7000.425 72 20.96712.386 112 725.622709.338

33 0.7010.436 73 23.20913.871 113 808.336796.233

34 0.7020.449 74 25.64415.592 114 899.633892.923

35 0.7040.463 75 28.30417.564 115 1000.0001000.000

36 0.7190.481 76 31.22019.805

37 0.7490.504 77 34.42522.328

38 0.7960.532 78 37.94825.158

39 0.8640.567 79 41.81228.341

40 0.9530.609 80 46.03731.933

41 1.0650.658 81 50.64335.985

42 1.2010.715 82 55.65140.552

43 1.3620.781 83 61.08045.690

44 1.5470.855 84 66.94851.456

R.C. 119.032 review dates: 09/02/2010 and 08/31/2015
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3903.72
Rule Amplifies: 3903.72
Prior Effective Dates: 5/1/1998, 4/13/2006

3901-3-18 NAIC manuals.

(A) Purpose

The purpose of this rule is to adopt the forms, instructions and manuals prescribed by the "National Association of Insurance Commissioners" for the preparation and filing of statutory financial statements and other financial information.

(B) Authority

This rule is promulgated pursuant to the authority vested in the superintendent of insurance under sections 3901.041 , 3901.07 , 3901.77 , 1739.09 and 1751.47 of the Revised Code.

(C) Definition

For purposes of this rule, "Insurer" means property and casualty insurance companies, life insurance companies, fraternal benefit associations, title insurance companies, health insuring corporations and multiple employer welfare associations.

(D) Scope

This rule applies to all domestic insurers and the Ohio department of insurance.

(E) Financial examinations and analysis

The Ohio department of insurance shall employ the most current version of "Valuation of Securities Manual", the "Purpose and Procedures Manual of the Securities Valuation Office", the "Accounting Practices and Procedures Manual," The "Examiners Handbook," the "annual statement blanks" and the "annual statement instructions" published by the "National Association of Insurance Commissioners" in discharging its duty to examine and analyze the financial condition of insurers authorized to conduct business in the state of Ohio.

(F) Preparation of financial statements

All domestic insurers shall employ the most current version of the "Valuation of Securities Manual", the "Purpose and Procedures Manual of the Securities Valuation Office", the "Accounting Practices and Procedures Manual" and the "annual statement instructions" published by the "National Association of Insurance Commissioners" for the purpose of preparing and filing quarterly and annual statements with the Ohio department of insurance and other financial information.

(G) Credit for reinsurance

The "Accounting Practices and Procedures Manual" provides instructions on how an insurer may take credit for reinsurance and account for reinsurance transactions. Domestic insurers are limited by the provisions of sections 3901.61 to 3901.65 of the Revised Code which establish the requirements for an insurer to take credit for any reinsurance ceded as either an asset or a reduction of liability. The "Accounting Practices and Procedures Manual" sets out a method for taking credit for reinsurance ceded not permitted by the Revised Code, and therefore those provisions of it may not be employed by domestic insurers in the preparation of their financial statements.

(H) Severability

If any paragraph, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other paragraph, term or provisions of this rule, and remaining paragraphs, terms and provisions shall be and shall continue in full force and effect.

Eff 12-31-00; 3-21-05
Promulgated Under: 119.03
Statutory Authority: 3901.041 , 3901.07 , 3901.77 , 1739.09 , 1751.47
Rule Amplifies: 3901.77 , 1739.09 , 1751.47
R.C. 119.032 review dates: 08/31/2009 and 08/30/2014