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Form a Business

Assets and Liabilities

KRS tit. XXV, ch. 304, subtit. 6
in effect

KRS 304.6-005 "Accounting practices and procedures manual" and "SSAP" defined

304.6-005. "Accounting practices and procedures manual" and "SSAP" defined As used in this subtitle, unless the context requires otherwise: (1) "Accounting practices and procedures manual" means the accounting practices and procedures manual, as amended, published by the National Association of Insurance Commissioners; and (2) "SSAP" means the statements of statutory accounting principles in the accounting practices and procedures manual. Effective: July 13, 2004 History: Created 2004 Ky. Acts ch. 24, sec. 10, effective July 13, 2004.

KRS 304.6-010 "Assets" defined

304.6-010. "Assets" defined (1) In any determination of the financial condition of an insurer, there shall be allowed as assets only such assets as are owned by the insurer and which consist of: (a) Cash in the possession of the insurer, or in transit under its control, and including the true balance of any deposit in a solvent bank or trust company; (b) Investments, securities, properties and loans acquired or held in accordance with this code and in connection therewith the following items: 1. Interest due or accrued on any bond or evidence of indebtedness which is not in default and which is not valued on a basis including accrued interest; 2. Declared and unpaid dividends on stocks and shares, unless such amount has otherwise been allowed as an asset; 3. Interest due or accrued upon a collateral loan in an amount not to exceed one (1) year's interest thereon; 4. Interest due or accrued on deposits in solvent banks and trust companies, and interest due or accrued on other assets, if such interest is in the judgment of the commissioner a collectible asset; 5. Interest due or accrued on a mortgage loan, in an amount not exceeding in any event the amount, if any, of the excess of the value of the property less delinquent taxes thereon over the unpaid principal. Collectible interest one hundred eighty (180) days past due on a mortgage loan in default is a nonadmitted asset; and 6. Rent due or accrued on real property if such rent is not in arrears for more than three (3) months, and rent more than three (3) months in arrears if the payment of such rent be adequately secured by property held in the name of the tenant and conveyed to the insurer as collateral; (c) Premium notes, policy loans, and other policy assets and liens on policies of life insurance and annuity contracts and accrued interest thereon, in an amount not exceeding the policy reserves or cash surrender value; (d) The net amount of uncollected and deferred premiums and annuity considerations in the case of a life insurer, corresponding to the basis on which reserves are held; (e) Premiums in the course of collection, other than for life insurance, not more than three (3) months past due, less commissions payable thereon. To the extent that there is no related unearned premium, any uncollected premium balances which are over ninety (90) days due shall be nonadmitted. The uncollected agent's receivable on a policy basis which is over ninety (90) days due shall be nonadmitted regardless of any unearned premium; (f) Installment premiums other than life insurance premiums to the extent of the policy reserve carried on the policy to which premiums apply. If an installment premium is past due, the amount over ninety (90) days due plus all future installments that have been recorded on that policy shall be nonadmitted; (g) Bills receivable for premiums other than life insurance premiums, on policies permitted to be issued on such basis, to the extent of the policy reserve carried thereon. Bills receivable shall be nonadmitted if either of the following conditions are present: 1. If an installment premium is over ninety (90) days due, the entire bill's receivable balance from that policy shall be nonadmitted; or 2. If the bill's receivable balance due exceeds the policy's unearned premium, the amount in excess of the unearned premium is nonadmitted; (h) The full amount of reinsurance recoverable on paid losses and loss adjustment expense by a ceding insurer from a solvent reinsurer and which reinsurance is authorized under KRS 304.5-140; (i) Funds held or deposited with reinsured companies, whether premiums withheld as security for unearned premium and outstanding loss reserves or advances for loss payments, are admitted assets provided they do not exceed the liabilities they secure and provided the reinsured is solvent. Any funds in excess of the liabilities, and any funds held by an insolvent reinsured, shall be nonadmitted; (j) Deposits or equities recoverable from underwriting associations, syndicates and reinsurance funds, or from any suspended banking institution, to the extent deemed by the commissioner available for the payment of losses and claims and at values to be determined by the commissioner; (k) As to a title insurer, its title plant and equipment reasonably necessary for conduct of its abstract or title insurance business, at not to exceed the cost thereof; (l) Electronic data processing equipment and operating software are admitted assets to the extent they conform to the requirements of SSAP No. 4. Electronic data processing equipment and software shall be depreciated for a period not to exceed three (3) years using methods detailed in SSAP No. 19. The aggregate value of admitted electronic data processing equipment and operating system software (net of accumulated depreciation) shall be limited to three percent (3%) of the reporting entity's capital and surplus on the statutory balance sheet for its most recently filed statement with its domicilary state commissioner, adjusted to exclude electronic data processing equipment and operating system software, net deferred tax assets, and net positive goodwill; (m) A collateral loan or unconditional obligation for the payment of money secured by the pledge of an investment to the extent it conforms to the requirements of SSAP No. 4. The outstanding principal balance on the loan and any related accrued interest shall be recorded as an admitted asset subject to the following limitations: 1. A collateral loan determined to be impaired shall be an admitted asset equal to the fair market value of the collateral less estimated costs to obtain and sell the collateral. The difference between the net fair value of the collateral and the amount of the collateral loan shall be written off in accordance with SSAP No. 5. 2. A collateral loan secured by an asset that does not qualify as an investment shall be nonadmitted. 3. A collateral loan that exceeds the fair market value of the collateral shall be an admitted asset equal to the fair market value of the collateral. The excess shall be classified as a nonadmitted asset; (n) Deferred tax assets as defined in SSAP No. 10; (o) Receivable for securities as defined in SSAP No. 21; (p) Guaranteed investment contracts as defined in SSAP No. 21; (q) Cash value of life insurance where the reporting entity is owner and beneficiary as defined in SSAP No. 21; (r) Other amounts receivable under reinsurance contracts as defined in SSAP No. 21; (s) State guarantee association promissory notes; (t) All assets as may be allowed pursuant to the accounting practices and procedures manual; and (u) Other assets, not inconsistent with the provisions of this section, deemed by the commissioner to be available for the payment of losses and claims, at values to be determined by the commissioner. (2) Admitted assets may be allowed as deductions from corresponding liabilities, and liabilities may be charged as deductions from assets, and deductions from assets may be charged as liabilities, in accordance with the form of annual statement applicable to such insurer as prescribed by the commissioner, or otherwise in his or her discretion. The commissioner may make official regulations prescribing the application of the provisions of this section. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 995, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 11, effective July 13, 2004. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 1, effective June 18, 1970.

KRS 304.6-020 Assets not allowed

304.6-020. Assets not allowed The following expressly shall not be allowed as assets in any determination of the financial condition of an insurer: (1) Good will, trade names, and other like intangible assets, except as expressly permitted and as prescribed by the National Association of Insurance Commissioners' accounting practices and procedures; (2) Advances to officers or directors (other than policy loans) whether secured or not, and advances to employees, agents and other persons on personal security only; (3) Stock of such insurer, owned by it, or loans secured thereby. Any such stock owned by such insurer shall be held as treasury stock and be deducted from the total issue of outstanding shares; (4) Furniture, fixtures, furnishings, safes, vehicles, libraries, stationery, literature and supplies. The following assets are not excluded assets under this subsection: (a) Equipment authorized under subsection (1) of KRS 304.6-010; (b) For title insurers, such materials and plants as the insurer is expressly authorized to invest in under paragraph (k) of subsection (1) of KRS 304.6- 010; (c) Such personal property as the insurer is permitted to hold pursuant to Subtitle 7 or which is reasonably necessary for the maintenance and operation of real estate lawfully acquired and held by the insurer, other than real estate used by it for home office, branch office, and similar purposes; and (d) For health reporting entities, furniture, medical equipment, fixtures, and leasehold improvements used for the direct delivery of health care services; (5) The amount, if any, by which the aggregate book value of investments as carried in the ledger assets of the insurer exceeds the aggregate value thereof as determined under this code; (6) Due and accrued investment income determined to be uncollectible in accordance with SSAP No. 5; (7) Due and accrued investment interest determined to be uncollectible in accordance with SSAP No. 5; (8) Nonoperating system software; (9) Leasehold improvements that do not meet the definition of assets set forth in SSAP No. 4; (10) Deposits in suspended depositories; (11) Receivables determined to be uncollectible or otherwise impaired in accordance with SSAP No. 5; (12) Automobiles, airplanes, and other vehicles; (13) A loan receivable and accrued interest, if collateralized by the reporting entity's own stock; (14) Prepaid expenses; and (15) Any other asset that does not meet the definition of an asset, or has been specifically identified as a nonadmitted asset in the accounting practices and procedures manual. Effective: July 13, 2004 History: Amended 2004 Ky. Acts ch. 24, sec. 12, effective July 13, 2004. -- Amended 2001 Ky. Acts ch. 101, sec. 1, effective June 21, 2001. -- Amended 1982 Ky. Acts ch. 187, sec. 1, effective July 15, 1982. -- Amended 1978 Ky. Acts ch. 363, sec. 1, effective June 17, 1978. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 2, effective June 18, 1970.

KRS 304.6-030 Use of "wash" transactions -- Penalty

304.6-030. Use of "wash" transactions -- Penalty (1) Any member, officer, director, employee, or attorney in fact of any company, association, or exchange licensed to do an insurance business in this state, who on behalf of such company, association, or exchange, borrows, rents, hires, leases, or otherwise engages the use of stocks, bonds, debentures, notes, investment certificates, securities, or other obligations or evidences of indebtedness owned or issued by any other corporation, company, association, or individual, or of any government, political subdivision, or agency thereof, with intent to injure or defraud any other company, body politic, or corporation, or person, or to deceive the commissioner or other person legally authorized to examine the affairs of any such company, association, or exchange, is guilty of a Class D felony. (2) Any individual that aids and abets such insurance company, association, or exchange in borrowing, renting, hiring, leasing, or engaging the use of such stocks, bonds, debentures, notes, investment certificates, securities, or other obligations or evidences of indebtedness, is guilty of a Class D felony. (3) If any insurance company, association, or exchange is found in possession of stocks, bonds, debentures, notes, investment certificates, securities, or other obligations or evidences of indebtedness acquired in violation of subsection (1) of this section, or if any of its officers, directors, members, or attorneys in fact have been convicted under subsection (1) of this section, the company, association, or exchange may be subject to suspension of its certificate of authority by the commissioner. Nothing in this section shall be construed to prevent the commissioner from commencing delinquency proceedings under this code. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 996, effective July 15, 2010. -- Amended 1992 Ky. Acts ch. 463, sec. 34, effective July 14, 1992. -- Amended 1982 Ky. Acts ch. 320, sec. 11, effective July 15, 1982. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 3, effective June 18, 1970.

KRS 304.6-040 Liabilities, in general

304.6-040. Liabilities, in general In any determination of the financial condition of an insurer, capital stock and liabilities to be charged against its assets shall include: (1) The amount of its capital stock outstanding, if any, less the amount of shares held by the insurer as treasury stock as provided in subsection (3) of KRS 304.6-020; (2) The amount, estimated consistent with the provisions of Subtitle 6, necessary to pay all of its unpaid losses and claims incurred on or prior to the date of statement, whether reported or unreported, together with the expenses of adjustment or settlement thereof; (3) With reference to life insurance policies and annuity contracts, and disability and accidental death benefits in or supplemental thereto: (a) The amount of reserves on life insurance policies and annuity contracts in force, valued according to the tables of mortality, rates of interest, and methods adopted pursuant to KRS 304.6-130 to 304.6-180, inclusive; (b) Reserves for disability benefits, for both active and disabled lives required by paragraph (e) of subsection (2) of KRS 304.6-140; (c) Reserves for accidental death benefits, required by paragraph (f) of subsection (2) of KRS 304.6-140; and (d) Any additional reserves which may be required by the commissioner consistent with applicable customary and general practice in insurance accounting as set forth in regulations promulgated by the commissioner but no such additional reserve shall be required of any company solely for contingent liabilities which may arise under any agreement, filed with and approved by the commissioner, for the assumption of liability by the company growing out of the acts of its exclusive agents within the course and scope of their representation; (4) Reserves for health insurance required by KRS 304.6-070; (5) With reference to insurance other than specified in subsections (3) and (4) of this section, and other than title insurance, the amount of the policy reserves computed in accordance with Subtitle 6; (6) Taxes, expenses and other obligations due or accrued at the date of the statement; and (7) Deferred tax liabilities as defined in SSAP No. 10. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 997, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 13, effective July 13, 2004. -- Amended 1978 Ky. Acts ch. 161, sec. 5, effective June 17, 1978. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 4, effective June 18, 1970.

KRS 304.6-050 Unearned premium reserve

304.6-050. Unearned premium reserve (1) As to property, casualty, surety and mortgage guaranty insurance the insurer shall maintain an unearned premium reserve on all policies in force. (2) Except as provided in KRS 304.6-060 as to marine and transportation risks and in subsection (3) of this section the unearned premium reserve shall be computed, after deduction of applicable reinsurance in solvent insurers, at the insurer's election either: (a) On a daily pro rata method basis on each item of premium; or (b) On a monthly pro rata basis as to all such reserves. (3) As to mortgage guaranty insurers, premiums on risks written for one (1) year or less must be reserved on a monthly pro rata basis. (4) After adopting a method for computing such reserve, an insurer shall not change methods without the approval of the insurance supervisory official of the insurer's domicile. Effective: July 13, 2004 History: Amended 2004 Ky. Acts ch. 24, sec. 14, effective July 13, 2004. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 5, effective June 18, 1970.

KRS 304.6-060 Unearned premium reserve for marine and transportation insurance

304.6-060. Unearned premium reserve for marine and transportation insurance As to marine and transportation insurance, the entire amount of premiums on trip risks not terminated shall be deemed unearned; and the commissioner shall require the insurer to carry a reserve equal to one hundred percent (100%) of premiums on trip risks written during the month ended as of the date of statement. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 998, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 6, effective June 18, 1970.

KRS 304.6-070 Health insurance policy reserves

304.6-070. Health insurance policy reserves For all health insurance policies the insurer shall maintain an active life reserve and an actuarially determined claim reserve for unaccrued benefits which shall place a sound value on its liabilities under such policies and be not less than the reserve according to appropriate standards set forth in regulations issued by the commissioner and in no event less in the aggregate than the pro rata gross unearned premiums for such policies. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 999, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 7, effective June 18, 1970.

KRS 304.6-080 Title insurance reserves

304.6-080. Title insurance reserves In addition to an adequate reserve as to outstanding losses as required under KRS 304.6- 040, a title insurer shall maintain a guaranty fund or unearned premium reserve of not less than an amount computed as follows: (1) Ten percent (10%) of the total amount of the risk portion of premiums written in the calendar year for title insurance contracts shall be assigned originally to the reserve. (2) During each of the twenty (20) years next following the year in which the title insurance contract was issued, the reserve applicable to the contract shall be reduced by five percent (5%) of the original amount of such reserve. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 8, effective June 18, 1970.

KRS 304.6-090 Mortgage guaranty insurer to maintain statutory contingency reserve -- Release

304.6-090. Mortgage guaranty insurer to maintain statutory contingency reserve -- Release For the protection of the policyholders against loss during periods of extreme economic contraction, each mortgage guaranty insurer shall maintain a liability referred to as a statutory contingency reserve. The statutory contingency reserve shall be a separate fund, in addition to the mortgage guaranty insurer's unearned premium reserve. The insurer shall annually contribute fifty percent (50%) of the earned premiums from mortgage guaranty insurance contracts to this liability, which shall be maintained for ten (10) years regardless of the coverage period for which premiums were paid. Subject to the approval of the commissioner, the contingency reserve may be released in any year in which actual incurred losses exceed thirty-five percent (35%) of the corresponding earned premiums. Any reductions shall be made on a first-in, first-out basis. Changes in the reserve shall be recorded directly to unassigned funds. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1000, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 15, effective July 13, 2004. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 9, effective June 18, 1970

KRS 304.6-100 Loss reserves -- Casualty insurance

304.6-100. Loss reserves -- Casualty insurance (1) As to casualty insurance transacted by it, each insurer shall maintain at all times reserves in an amount estimated in the aggregate to provide for payment of all losses and claims incurred, whether reported or unreported, which are unpaid and for which the insurer may be liable, and to provide for the expenses of adjustment or settlement of losses and claims. The reserves shall be computed in accordance with regulations from time to time made by the commissioner, after due notice and hearing, upon reasonable consideration of the ascertained experience and the character of such kind of business for the purpose of adequately protecting the insured and the solvency of the insurer. (2) Whenever the loss and loss expense experience of the insurer show that reserves, calculated in accordance with such regulations, are inadequate, the commissioner may require the insurer to maintain additional reserves. (3) The commissioner may, by regulation, prescribe the manner and form of reporting pertinent information concerning the reserves provided for in this section. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1001, effective July 15, 2010. -- Amended 2004 Ky. Acts ch. 24, sec. 16, effective July 13, 2004. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 10, effective June 18, 1970.

KRS 304.6-110 Loss reserve -- Mortgage guaranty insurance

304.6-110. Loss reserve -- Mortgage guaranty insurance The case basis method shall be used to determine mortgage guaranty loss reserves, which shall include a reserve for claims reported and unpaid and a reserve for claims incurred but not reported. Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 11, effective June 18, 1970.

KRS 304.6-120 Short title

304.6-120. Short title KRS 304.6-130 to 304.6-180, inclusive, shall be known as the "Standard Valuation Law." Effective: June 18, 1970 History: Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 12, effective June 18, 1970.

KRS 304.6-130 Calculation of reserve liabilities -- Application -- Exceptions -- Annual valuation

304.6-130. Calculation of reserve liabilities -- Application -- Exceptions -- Annual valuation (1) (a) For policies and contracts issued prior to the operative date of the valuation manual, the commissioner shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurer transacting business in this state, except that in the case of an alien insurer, such valuation shall be limited to its United States business; and may certify the amount of any such reserves, specifying the mortality table or tables, rate or rates of interest and methods, net leveled premium method or other, used in the calculation of such reserves. In calculating such reserves, the commissioner may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves required of any foreign or alien insurer, the commissioner may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when such valuation complies with the minimum standard provided in KRS 304.6-130 to 304.6-180 and if the official of such state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the commissioner when such certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by law of that state or jurisdiction. Where any such valuation is made by the commissioner, the commissioner may use the actuary of the department or employ an actuary for the purpose, and the reasonable compensation and expenses of the actuary, at a rate approved by the commissioner, upon demand by the commissioner supported by an itemized statement of such compensation and expenses, shall be paid by the insurer. When a domestic insurer furnishes the commissioner with a valuation of its outstanding policies as computed by its own actuary or by an actuary deemed satisfactory for the purpose by the commissioner, the valuation shall be verified by the actuary of the department without cost to the insurer. (b) Any such insurer which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard herein provided may, with the approval of the commissioner, adopt any lower standard of valuation, but not lower than the minimum herein provided. (c) The provisions of KRS 304.6-140, 304.6-141, 304.6-145, 304.6-150, 304.6- 155, 304.6-160, 304.6-170, 304.6-180, and 304.15-410 shall apply to all policies and contracts as appropriate, issued on or after June 18, 1970, and prior to the operative date of the valuation manual. The provisions of KRS 304.6-143 and 304.6-151 shall not apply to the policies and contracts issued on or after June 18, 1970, and prior to the operative date of the valuation manual. (2) (a) Except for a company that is exempt under KRS 304.6-134, for policies and contracts issued on or after the operative date of the valuation manual, the commissioner shall annually value or cause to be valued the reserve liabilities, hereinafter called reserves, for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every company issued on or after the operative date of the valuation manual. In lieu of the valuation of the reserves required of a foreign or alien company, the commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in KRS 304.6-130 to 304.6-180. (b) Except for a company that is exempt under KRS 304.6-134, KRS 304.6-143 and 304.6-151 shall apply to all policies and contracts issued on or after the operative date of the valuation manual. Effective: June 24, 2015 History: Amended 2015 Ky. Acts ch. 57, sec. 10, effective June 24, 2015. -- Amended 2010 Ky. Acts ch. 24, sec. 1002, effective July 15, 2010. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 13, effective June 18, 1970.

KRS 304.6-131 Definitions for KRS 304.6-130 to 304.6-180

304.6-131. Definitions for KRS 304.6-130 to 304.6-180 As used in KRS 304.6-130 to 304.6-180, unless the context requires otherwise, the following definitions shall apply on or after the operative date of the valuation manual, as defined in subsection (11) of this section: (1) "Accident and health insurance" means contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the valuation manual; (2) "Appointed actuary" means a qualified actuary who is appointed in accordance with the valuation manual to prepare the actuarial opinion required by KRS 304.6-171(6) to (10); (3) "Company" means an entity which has written, issued, or reissued life insurance, accident and health insurance, or deposit-type contracts: (a) In Kentucky and has at least one (1) policy in force or a claim; or (b) In any state and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this state; (4) "Deposit-type contract" means a contract that does not incorporate mortality or morbidity risks and as may be specified in the valuation manual; (5) "Life insurance" means contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual; (6) "NAIC" means the National Association of Insurance Commissioners; (7) "Policyholder behavior" means any action a policyholder, contract holder, or any other person with the right to elect options may take under a policy or contract subject to KRS 304.6-130 to 304.6-180, excluding events of mortality that result in benefits prescribed in their essential aspects by the terms of the policy or contract, including but not limited to: (a) Lapse; (b) Withdrawal; (c) Transfer; (d) Deposit; (e) Premium payment; (f) Loan; (g) Annuitization; or (h) Benefit elections; (8) "Principle-based valuation" means a reserve valuation that uses one (1) or more methods or one (1) or more assumptions determined by the company and is required to comply with KRS 304.6-151 as specified in the valuation manual; (9) "Qualified actuary" means an individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American Academy of Actuaries qualification standards for actuaries signing the statements and who meets the requirements specified in the valuation manual; (10) "Tail risk" means a risk that occurs either where the frequency of low-probability events is higher than expected under a normal probability distribution or when there are observed events of very significant size or magnitude; and (11) "Valuation manual" means the manual of valuation instructions adopted by the NAIC and any subsequent amendments. Effective: June 24, 2015 History: Created 2015 Ky. Acts ch. 57, sec. 3, effective June 24, 2015.

KRS 304.6-132 Treatment of confidential information

304.6-132. Treatment of confidential information (1) For purposes of this section: (a) "Confidential information" means: 1. A memorandum in support of an opinion, submitted pursuant to KRS 304.6-171, and any other documents, materials, and other information, including but not limited to all working papers and copies created, produced, obtained by, or disclosed to the commissioner or any other person in connection with the memorandum; 2. All documents, materials, and other information, including but not limited to all working papers and copies created, produced, obtained by, or disclosed to the commissioner or any other person in the course of an examination made under KRS 304.6-143(6); except that if an examination report or other material prepared in connection with an examination made under KRS 304.2-250 is not held as private and confidential, an examination report or other material prepared in connection with an examination under KRS 304.6-143(6) shall not be confidential information to the same extent as if the examination report or other material had been prepared under KRS 304.2-250; 3. Any reports, documents, materials, and other information developed by a company in support of, or in connection with an annual certification by the company under KRS 304.6-151(2)(b) evaluating the effectiveness of the company's internal controls with respect to a principle-based valuation and any other documents, materials, and other information, including but not limited to all working papers and copies created, produced, obtained by, or disclosed to the commissioner or any other person in connection with reports, documents, materials, and other information; 4. Any principle-based valuation report developed under KRS 304.6- 151(2)(c) and any other documents, materials, and other information, including but not limited to all working papers and copies created, produced, obtained by, or disclosed to the commissioner or any other person in connection with the report; and 5. Any documents, materials, data and other information submitted by a company under KRS 304.6-133, collectively referred to as experience data, and any other documents, materials, data, and other information, including but not limited to all working papers and copies created or produced in connection with the experience data, in each case that includes any potential company-identifying or personal identifiable information that is provided to or obtained by the commissioner, with any experience data referred to as the experience materials, and any other documents, materials, data, and other information, including but not limited to all working papers and copies created, produced, obtained by, or disclosed to the commissioner or any other person in connection with the experience materials; and (b) "Regulatory agency," "law enforcement agency," and "NAIC" include, but are not limited to their employees, agents, or consultants. (2) (a) Except as provided in this section, a company's confidential information: 1. Shall be confidential by law and privileged; and 2. Shall not be subject to: a. The Kentucky Open Records Act, KRS 61.872 to 61.884; b. Subpoena; c. Discovery; or d. Admission in evidence in any private civil action, except that the commissioner is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as part of the commissioner's official duties. (b) Neither the commissioner nor any person who received confidential information, while acting under the authority of the commissioner, shall be permitted or required to testify in any private civil action concerning any confidential information. (c) In order to assist in the performance of the commissioner's duties, the commissioner may share confidential information if the recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of the documents, materials, data, and other information in the same manner and to the same extent as required for the commissioner with: 1. Other state, federal, and international regulatory agencies and with the NAIC and its affiliates and subsidiaries; and 2. In the case of confidential information, defined in subsection (1)(a)1. and 4. of this section, the Actuarial Board for Counseling and Discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal, and international law enforcement officials. (d) The commissioner may receive documents, materials, data, and other information, including otherwise confidential and privileged documents, materials, data, and other information from the NAIC and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions, and from the Actuarial Board for Counseling and Discipline, or its successor, and shall maintain as confidential or privileged any documents, materials, data, or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or other information. (e) The commissioner may enter into agreements governing sharing and use of information consistent with this subsection. (f) No waiver of any applicable privilege or claim of confidentiality of confidential information shall occur as a result of disclosure to the commissioner under this section, or as a result of sharing the information as authorized by paragraph (c) of this subsection. (g) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this subsection shall be available and enforced in any proceeding and in any court of this state. (3) (a) Notwithstanding subsection (2) of this section, any confidential information specified in subsection (1)(a)1. and 4. of this section: 1. May be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under KRS 304.6-171, or the principle-based valuation report developed under KRS 304.6- 151(2)(c), by reason of an action required by KRS 304.6-130 to 304.6- 180, or by administrative regulation. 2. May otherwise be released by the commissioner with the written consent of the company; and (b) All portions of a memorandum or report shall no longer be confidential if any portion of a memorandum in support of an opinion, submitted under KRS 304.6-171, or a principle-based valuation report, developed under KRS 304.6- 151(2)(c), is cited by the company in its marketing, is publicly volunteered to or before a governmental agency, other than a state insurance department, or is released by the company to the news media. Effective: June 24, 2015 History: Created 2015 Ky. Acts ch. 57, sec. 8, effective June 24, 2015.

KRS 304.6-133 Submission of required data -- Effective date of changes

304.6-133. Submission of required data -- Effective date of changes A company shall submit mortality, morbidity, policyholder behavior, or expense experience, and other data as prescribed in the valuation manual. Effective: June 24, 2015 History: Created 2015 Ky. Acts ch. 57, sec. 7, effective June 24, 2015.

KRS 304.6-134 Exemption of specific product forms or product lines

304.6-134. Exemption of specific product forms or product lines A specific product form or product line of a domestic company that is licensed and doing business only in Kentucky shall be exempt from the requirements of KRS 304.6-143 if: (1) The commissioner has in his or her discretion issued an exemption in writing to the company and has not subsequently revoked the exemption in writing; and (2) Either of the following are satisfied: (a) The company computes reserves using assumptions and methods used prior to the operative date of the valuation manual; or (b) The exemption is consistent with the valuation manual. Effective: July 15, 2024 History: Amended 2024 Ky. Acts ch. 129, sec. 1, effective July 15, 2024. -- Amended 2022 Ky. Acts ch. 133, sec. 5, effective July 14, 2022. -- Created 2015 Ky. Acts ch. 57, sec. 9, effective June 24, 2015.

KRS 304.6-140 Minimum standards

304.6-140. Minimum standards (1) This subsection applies only to policies and contracts issued prior to January 1, 1948, or such earlier date after June 13, 1944, as shall have been elected by an insurer as the date on and after which it would comply with the standard nonforfeiture law. Except as otherwise provided in paragraph (b) of subsection (2) of this section, the minimum standard for the valuation of all such policies and contracts shall be that provided by the laws in effect immediately prior to such date, except that the minimum standard for the valuation of annuities and pure endowments purchased under group annuity and pure endowment contracts issued prior to such effective date shall be that provided by the laws in effect immediately prior to such date but replacing the interest rates specified in such laws by an interest rate of five percent (5%) per annum. Reserves for all such policies and contracts may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by this subsection. (2) This subsection applies only to policies and contracts issued on and after January 1, 1948, or such earlier date after June 13, 1944, as shall have been elected by an insurer as the date on and after which it would comply with the standard nonforfeiture law, except as otherwise provided in paragraph (b) of this subsection for group annuity and pure endowment contracts issued prior to such date. (a) Except as otherwise provided in paragraph (b) of this subsection and in KRS 304.6-145, the minimum standard for the valuation of all such policies and contracts shall be the commissioners reserve valuation methods defined in KRS 304.6-150, 304.6-155, and 304.6-180, five and one-half percent (5.5%) interest for single premium life insurance policies, five percent (5%) interest for group annuity and pure endowment contracts, four percent (4%) interest for all other such policies and contracts issued prior to June 17, 1978, four and one-half percent (4-1/2%) interest for such policies and contracts, other than annuity and pure endowment contracts, issued on or after June 17, 1978, and the following tables: 1. Standard ordinary mortality table. For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies, -- the commissioners 1941 standard ordinary mortality table; provided, however, that the commissioners 1958 standard ordinary mortality table shall be the table for such minimum standard for such policies issued on and after January 1, 1966, or such earlier date after June 16, 1960, as shall have been elected by an insurer as the date on and after which it would use such table as the basis for minimum cash surrender values and nonforfeiture benefits under the standard nonforfeiture law and prior to the effective date of KRS 304.15-342; provided that for any category of such policies issued on female risks all modified net premiums and present values referred to in KRS 304.6-130 to 304.6-180, inclusive, may be calculated according to an age not more than six (6) years younger than the actual age of the insured; and for such policies issued on or after the effective date of KRS 304.15-342 the commissioners 1980 standard ordinary mortality table, or at the election of the company for any one (1) or more specified plans of life insurance, the commissioners 1980 standard ordinary mortality table with ten-year select mortality factors, or any ordinary mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such policies; 2. Standard industrial mortality table. For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies, -- the 1941 standard industrial mortality table; provided, however, that the commissioners 1961 standard industrial mortality table shall be the table for such minimum standard for such policies issued on and after January 1, 1968, or such earlier date after June 14, 1962, as shall have been elected by the insurer as the date on and after which it would use such table as the basis for minimum cash surrender values and nonforfeiture benefits under the standard nonforfeiture law or any industrial mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such policies; 3. Individual annuity mortality table or annuity mortality table. For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies -- the 1937 standard annuity mortality table or, at the option of the insurer, the annuity mortality table for 1949, ultimate, or any modification of either of these tables approved by the commissioner; 4. Group annuity mortality table. For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies -- the group annuity mortality table for 1951, any modification of such table approved by the commissioner, or, at the option of the insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts; 5. Disability table. For total and permanent disability benefits in or supplementary to ordinary policies or contracts on active and disabled lives -- for policies or contracts issued on or after January 1, 1966, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the society of actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates, adopted after 1980 by the National Association of Insurance Commissioners, that are approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such policies; for policies or contracts issued on or after January 1, 1961 and prior to January 1, 1966, either such tables or, at the option of the insurer, the class (3) disability table (1926), and for policies issued prior to January 1, 1961, the class (3) disability table (1926). In addition, any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies; 6. Accidental death mortality table. For accidental death benefits in or supplementary to policies -- for policies issued on or after January 1, 1966, the 1959 accidental death benefits table or any accidental death benefits table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such policies; for policies issued on or after January 1, 1961 and prior to January 1, 1966, either such table or, at the option of the insurer, the inter-company double indemnity mortality table; and for policies issued prior to January 1, 1961, the inter-company double indemnity mortality table. Any such table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies; and 7. Group life and other tables. For group life insurance, life insurance issued on the substandard basis and other special benefits -- such tables as may be approved by the commissioner. (b) Except as provided in KRS 304.6-145, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued prior to January 1, 1979, excluding any disability and accidental death benefits in such contracts, shall be the commissioners reserve valuation methods defined in KRS 304.6-150 and 304.6-155, six percent (6%) interest for single premium immediate annuity contracts and four percent (4%) interest for all other contracts, and the 1971 individual annuity mortality table, or any modification of this table approved by the commissioner. 1. The minimum standard for the valuation of all annuities and pure endowments purchased prior to January 1, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the commissioners reserve valuation methods defined in KRS 304.6-150 and 304.6-155, six percent (6%) interest, and the 1971 group annuity mortality table, or any modification of this table approved by the commissioner. 2. The minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after January 1, 1979, excluding any disability and accidental death benefits in such contracts, shall be the commissioners reserve valuation methods defined in KRS 304.6-150 and 304.6-155, seven and one-half percent (7-1/2%) interest for single premium immediate annuity contracts, five and one-half percent (5- 1/2%) interest for single premium deferred annuity and pure endowment contracts and four and one-half percent (4-1/2%) interest for all other individual annuity and pure endowment contracts, and the 1971 individual annuity mortality table, or any individual annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standards of valuation for such contracts, or any modification of these tables approved by the commissioner. 3. The minimum standard for the valuation of all annuities and pure endowments purchased on or after January 1, 1979 under group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the commissioners reserve valuation methods defined in KRS 304.6-150 and 304.6-155, seven and one-half percent (7-1/2%) interest, and the 1971 group annuity mortality table, or any group annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standards of valuation for such contracts, or any modification of these tables approved by the commissioner. 4. The minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after July 1, 1976, and prior to January 1, 1979, and of all annuities and pure endowments purchased on or after July 1, 1976, and prior to January 1, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the standard specified in this paragraph, or, at the option of the insurer with respect to any such contracts or purchases, the standard specified in paragraph (a) of this subsection. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1003, effective July 15, 2010. -- Amended 1996 Ky. Acts ch. 289, sec. 1, effective July 15, 1996. -- Amended 1982 Ky. Acts ch. 263, sec. 9, effective July 15, 1982. -- Amended 1978 Ky. Acts ch. 280, sec. 2, effective June 17, 1978. -- Amended 1976 Ky. Acts ch. 313, sec. 1. -- Amended 1974 Ky. Acts ch. 308, sec. 52. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 14, effective June 18, 1970.

KRS 304.6-141 Accident and health insurance contracts issued on or after the operative date of the valuation manual -- Application of KRS 304.6-130(2) minimum standard of valuation

304.6-141. Accident and health insurance contracts issued on or after the operative date of the valuation manual -- Application of KRS 304.6-130(2) minimum standard of valuation (1) For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required by KRS 304.6-130(2). (2) For disability, accident and sickness, and accident and health insurance contracts issued on or after June 18, 1970, but prior to the operative date of the valuation manual, the minimum standard of valuation shall be the standard adopted by the commissioner through administrative regulation. Effective: June 24, 2015 History: Created 2015 Ky. Acts ch. 57, sec. 4, effective June 24, 2015.

KRS 304.6-143 Policies issued on or after the operative date of the valuation manual -- Application of KRS 304.6-130(2) minimum standard of valuation

304.6-143. Policies issued on or after the operative date of the valuation manual -- Application of KRS 304.6-130(2) minimum standard of valuation (1) For policies issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual shall be the minimum standard of valuation required under KRS 304.6-130(2), except as provided by subsection (5) or (7) of this section. (2) The operative date of the valuation manual shall be January 1 of the first calendar year following the first July 1, at which time all of the following have occurred: (a) The valuation manual has been adopted by the NAIC by an affirmative vote of at least forty-two (42) members, or three-fourths (3/4) of the members voting, whichever is greater; (b) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing greater than seventy-five percent (75%) of the direct premiums written as reported in the following annual statements submitted for 2008: 1. Life, accident and health insurance; 2. Health insurance; or 3. Fraternal benefit societies, as defined in KRS 304.29-011, insurance; and (c) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted in by at least forty-two (42) of the fifty-five (55) jurisdictions, including: 1. The fifty (50) states of the United States; 2. American Samoa; 3. The American Virgin Islands; 4. The District of Columbia; 5. Guam; and 6. Puerto Rico. (3) (a) Unless a change in the valuation manual specifies a later effective date, changes to the valuation manual shall be effective on January 1 following the date when all of the following have occurred: 1. The change to the valuation manual has been adopted by the NAIC by an affirmative vote representing: a. At least three-fourths (3/4) of the members of the NAIC voting, but not less than a majority of the total membership; and b. Members of the NAIC representing jurisdictions totaling greater than seventy-five percent (75%) of the direct premiums written as reported in the following annual statements most recently available prior to the vote required by subparagraph 1. of this paragraph: i. Life, accident and health insurance; ii. Health insurance; or iii. Fraternal benefit societies, as defined in KRS 304.29-011, insurance; or (b) The valuation manual becomes effective pursuant to an order by the commissioner. (4) The valuation manual shall specify the following: (a) Minimum valuation standards for and definitions of the policies or contracts subject to KRS 304.6-130(2). The minimum valuation standards shall be: 1. The commissioner's reserve valuation method for life insurance contracts, other than annuity contracts; 2. The commissioner's annuity valuation method for annuity contracts; and 3. Minimum reserves for all other policies or contracts. (b) Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation, required by KRS 304.6- 151(1), and the minimum valuation standards consistent with those requirements; (c) For policies and contracts subject to a principle-based valuation under KRS 304.6-151(2)(c): 1. Requirements for the format of the reports to the commissioner, including information necessary to determine if the valuation is appropriate and in compliance with KRS 304.6-130 to 304.6-180; 2. Assumptions to be prescribed for risks over which the company does not have significant control or influence; and 3. Procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of the procedures; (d) For policies not subject to a principle-based valuation under KRS 304.6-151, the minimum valuation standard shall either: 1. Be consistent with the minimum standard of valuation prior to the operative date of the valuation manual; or 2. Develop reserves that quantify the benefits and guarantees, and the funding associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring; (e) Other requirements, including but not limited to: 1. Those relating to reserve methods; 2. Models for measuring risk; 3. Generation of economic scenarios; 4. Assumptions; 5. Margins; 6. Use of company experience; 7. Risk measurement; 8. Disclosure; 9. Certifications; 10. Reports; 11. Actuarial opinions and memorandums; 12. Transition rules; and 13. Internal controls; and (f) The data and form of the data required by KRS 304.6-133 and with whom the data shall be submitted, and may specify other requirements including data analyses and reporting of analyses. (5) In the absence of a specific valuation requirement or if a specific valuation requirement in the valuation manual is not, in the opinion of the commissioner, in compliance with KRS 304.6-151, the company shall, with respect to the requirements, comply with minimum valuation standards prescribed by the commissioner by administrative regulation. (6) The commissioner may engage a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and to opine on the appropriateness of a reserve assumption or method used by the company, or to review and opine on a company's compliance with any requirement set forth in KRS 304.6-130 to 304.6-180. The commissioner may rely upon the opinion of a qualified actuary, regarding KRS 304.6-130 to 304.6-180, who is engaged by the commissioner of another state, district, or territory of the United States. As used in this subsection, the term "engage" includes employment or contracting. (7) The commissioner may require a company to change any assumption or method that in the opinion of the commissioner is necessary to comply with the requirement of the valuation manual or KRS 304.6-130 to 304.6-180. The company shall adjust the reserves as required by the commissioner. The commissioner may take other disciplinary action as permitted under this subtitle. Effective: June 24, 2015 History: Created 2015 Ky. Acts ch. 57, sec. 5, effective June 24, 2015.

KRS 304.6-145 Minimum standards -- Operative dates

304.6-145. Minimum standards -- Operative dates (1) The interest rates used in determining the minimum standard for the valuation of: (a) All life insurance policies issued in a particular calendar year, on or after the effective date of KRS 304.15-342; (b) All individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1983; (c) All annuities and pure endowments purchased in a particular calendar year on or after January 1, 1983 under group annuity and pure endowment contracts; and (d) The net increase, if any, in a particular calendar year after January 1, 1983, in amounts held under guaranteed interest contracts shall be the calendar year statutory valuation interest rates as defined in this section. (2) The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearer one-quarter of one percent (1/4 of 1%): (a) For life insurance, I = .03 + W (R1 - .03) + W/2 (R2 - .09); (b) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options, I = .03 + W (R - .03) where R1 is the lesser of R and .09, R2 is the greater of R and .09, R is the reference interest rate defined in this section, and W is the weighting factor defined in this section; (c) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in paragraph (b) above, the formula for life insurance stated in paragraph (a) above shall apply to annuities and guaranteed interest contracts, with guarantee durations in excess of ten (10) years and the formula for single premium immediate annuities stated in paragraph (b) above shall apply to annuities and guaranteed interest contracts with guarantee duration of ten (10) years or less; (d) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in paragraph (b) above shall apply; and (e) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in paragraph (b) above shall apply. However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent (1/2 of 1%), the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980 (using the reference interest rate defined for 1979) and shall be determined for each subsequent calendar year regardless of when KRS 304.15-342 becomes effective. (3) The weighting factors referred to in the formulas stated above are given in the following tables: (a) Weighting Factors for Life Insurance: Guarantee Duration Weighting Factors (Years) 10 or less .50 More than 10, but not more than 20 .45 More than 20 .35 For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy; (b) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options: .80 (c) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in (b) above, shall be as specified in tables 1., 2., and 3. below, according to the rules and definitions in 4., 5., and 6. below: 1. For annuities and guaranteed interest contracts valued on an issue year basis: Guarantee Duration Weighting Factor for Plan Type (Years) A B C 5 or less: .80 .60 .50 More than 5, but not more than 10 .75 .60 .50 More than 10, but not more than 20: .65 .50 .45 More than 20: .45 .35 .35 2. For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in 1. above increased by: Plan Type A B C .15 .25 .05 3. For annuities and guaranteed interest contracts valued on an issue year basis (other than those with no cash settlement options) which do not guarantee interest on considerations received more than one (1) year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on considerations received more than twelve (12) months beyond the valuation date, the factors shown in 1. or derived in 2. increased by: Plan Type A B C .05 .05 .05 4. For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty (20) years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence. 5. Plan type as used in the above tables is defined as follows: Plan Type A: At any time policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or without such adjustment but in installments over five (5) years or more, or as an immediate life annuity, or no withdrawal permitted; Plan Type B: Before expiration of the interest rate guarantee, policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or without such adjustment but in installments over five (5) years or more, or no withdrawal permitted. At the end of interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than five (5) years; and Plan Type C: Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five (5) years either without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund. 6. An insurer may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in this section, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund. (4) The reference interest rate referred to in subsection (2) of this section shall be defined as follows: (a) For all life insurance, the lesser of the average over a period of thirty-six (36) months and the average over a period of twelve (12) months, ending on June 30 of the calendar year next preceding the year of issue, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.; (b) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.; (c) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in paragraph (b) above, with guarantee duration in excess of ten (10) years, the lesser of the average over a period of thirty-six (36) months and the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.; (d) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in paragraph (b) above, with guarantee duration of ten (10) years or less, the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.; (e) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve (12) months, ending on June 30 of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.; and (f) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in paragraph (b) above, the average over a period of twelve (12) months, ending on June 30 of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc. (5) In the event that Moody's Corporate Bond Yield Average - Monthly Average Corporates is no longer published by Moody's Investors Service, Inc., or in the event that the National Association of Insurance Commissioners determines that Moody's Corporate Bond Yield Average - Monthly Average Corporates as published by Moody's Investors Service, Inc. is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by regulation promulgated by the commissioner, may be substituted. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1004, effective July 15, 2010. -- Created 1982 Ky. Acts ch. 263, sec. 10, effective July 15, 1982.

KRS 304.6-150 Commissioners reserve valuation method defined

304.6-150. Commissioners reserve valuation method defined (1) Except as otherwise provided in KRS 304.6-141, 304.6-155, and 304.6-180, reserves according to the commissioners reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of (a) over (b), as follows: (a) Net level annual premium. A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one (1) per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due. Such net level annual premium shall not exceed the net level annual premium on the nineteen (19) year premium whole life plan for insurance of the same amount at an age one (1) year higher than the age at issue of such policy. (b) Net one (1) year term premium. A net one (1) year term premium for such benefits provided for in the first policy year. Provided that for any life insurance policy issued on or after January 1, 1986, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall, except as otherwise provided in KRS 304.6-180, be the greater of the reserve as of such policy anniversary calculated as described in the preceding subsection and the reserve as of such policy anniversary calculated as described in that subsection, but with the value defined in paragraph (a) of that subsection being reduced by fifteen percent (15%) of the amount of such excess first year premium, all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, the policy being assumed to mature on such date as an endowment, and the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in KRS 304.6-140 and 304.6-145 shall be used. (2) Reserves according to the commissioners reserve valuation method for: (a) Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums, (b) Group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, (c) Disability and accidental death benefits in all policies and contracts, and (d) All other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the provisions of this section, except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums. Effective: June 24, 2015 History: Amended 2015 Ky. Acts ch. 57, sec. 11, effective June 24, 2015. -- Amended 1982 Ky. Acts ch. 263, sec. 11, effective July 15, 1982. -- Amended 1978 Ky. Acts ch. 280, sec. 3, effective June 17, 1978. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 15, effective June 18, 1970.

KRS 304.6-151 Principle-based valuation -- Required actions

304.6-151. Principle-based valuation -- Required actions (1) A company shall establish reserves using a principle-based valuation as specified in the valuation manual that meets the following conditions for policies or contracts: (a) Quantification of the benefits and guarantees, and the funding associated with the contracts and their risks, at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, the valuation shall also reflect conditions appropriately adverse to quantify the tail risk; (b) Incorporation of assumptions, risk analysis methods, financial models, and management techniques that are consistent with but not necessarily identical to those utilized within the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods; (c) Incorporation of assumptions that are derived in one (1) of the following manners: 1. The assumption is prescribed in the valuation manual; 2. For assumptions that are not prescribed, the assumptions shall: a. Be established utilizing the company's available experience, to the extent it is relevant and statistically credible; or b. To the extent that company data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience; and (d) Provision of margins for uncertainty, including adverse deviation and estimation error, to ensure that the greater the uncertainty the larger the margin and resulting reserve. (2) A company using a principle-based valuation for one (1) or more policies or contracts subject to this section, as specified in the valuation manual, shall: (a) Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual; (b) Provide to the commissioner and the company's board of directors, an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. The controls shall be designed to ensure that all material risks inherent in the liabilities and associated assets, subject to the valuation, are included in the valuation and that valuations are made in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year; and (c) Develop and file with the commissioner, upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual. (3) A principle-based valuation may include a prescribed formulaic reserve component. Effective: June 24, 2015 History: Created 2015 Ky. Acts ch. 57, sec. 6, effective June 24, 2015.

KRS 304.6-155 Annuity and endowment contracts other than group annuity

304.6-155. Annuity and endowment contracts other than group annuity This section shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended. Reserves according to the commissioners annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values. Effective: June 17, 1978 History: Created 1978 Ky. Acts ch. 280, sec. 4, effective June 17, 1978.

KRS 304.6-160 Amount of aggregate reserves

304.6-160. Amount of aggregate reserves (1) In no event shall an insurer's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, which are subject to subsection (2) of KRS 304.6-140, be less than the aggregate reserves calculated in accordance with the methods set forth in KRS 304.6-150, 304.6-155, 304.6-180 and 304.15- 410, and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies. (2) In no event shall the aggregate reserves for all policies, contracts, and benefits be less than the aggregate reserves determined by the appointed actuary to be necessary to render the opinion required by KRS 304.6-171. Effective: June 24, 2015 History: Amended 2015 Ky. Acts ch. 57, sec. 12, effective June 24, 2015. -- Amended 1996 Ky. Acts ch. 289, sec. 2, effective July 15, 1996. -- Amended 1982 Ky. Acts ch. 263, sec. 12, effective July 15, 1982. -- Amended 1978 Ky. Acts ch. 280, sec. 5, effective June 17, 1978. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 16, effective June 18, 1970.

KRS 304.6-170 Calculation of reserves

304.6-170. Calculation of reserves (1) Reserves for any category of policies, contracts, or benefits as established by the commissioner, which are subject to subsection (2) of KRS 304.6-140, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be greater than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein. (2) Any such company which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard herein provided may, with the approval of the commissioner, adopt any lower standard of valuation, but not lower than the minimum required by this subtitle, except that for the purposes of this section, the holding of additional reserves previously determined by the appointed actuary to be necessary to render the opinion requested by KRS 304.6-171 shall not be deemed to be the adoption of a higher standard of valuation. Effective: June 24, 2015 History: Amended 2015 Ky. Acts ch. 57, sec. 13, effective June 24, 2015. -- Amended 2010 Ky. Acts ch. 24, sec. 1005, effective July 15, 2010. -- Amended 1996 Ky. Acts ch. 289, sec. 3, effective July 15, 1996. -- Amended 1978 Ky. Acts ch. 280, sec. 6, effective June 17, 1978. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 17, effective June 18, 1970.

KRS 304.6-171 Requirement for actuarial opinion as to appropriate computation of reserves and related items and compliance with state law -- Opinions to be submitted annually -- Form and substance of opinions -- Administrative regulations

304.6-171. Requirement for actuarial opinion as to appropriate computation of reserves and related items and compliance with state law -- Opinions to be submitted annually -- Form and substance of opinions -- Administrative regulations (1) Subsections (2) to (5) of this section shall become operative at the end of the first full calendar year following the year of enactment and shall be applicable prior to the operative date of the valuation manual. (2) Every life insurance company doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by administrative regulation are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this state. The commissioner by administrative regulation shall define the specifics of this opinion and add any other items deemed to be necessary to its scope. (3) (a) Every life insurance company, except as exempted by or pursuant to administrative regulation, shall also annually include in the opinion required by subsection (2) of this section, an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by administrative regulation, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including but not limited to the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including but not limited to the benefits under and expenses associated with the policies and contracts. (b) The commissioner may provide by administrative regulation for a transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this section. (4) Each opinion required by subsection (2) of this section shall be governed by the following provisions: (a) A memorandum, in form and substance acceptable to the commissioner as specified by administrative regulation, shall be prepared to support each actuarial opinion; and (b) If the insurance company fails to provide a supporting memorandum at the request of the commissioner within a period specified by administrative regulation or the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the administrative regulations or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum as is required by the commissioner. (5) Every opinion shall be governed by the following provisions: (a) The opinion shall be submitted with the annual statement reflecting the valuation of reserve liabilities for each year ending on or after December 31, 1996; (b) The opinion shall apply to business in force including individual and group health insurance plans, in form and substance acceptable to the commissioner as specified by administrative regulation; (c) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board and on such additional standards as the commissioner may by administrative regulation prescribe; (d) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state; (e) For the purposes of this section, "qualified actuary" means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in administrative regulations; (f) Except in cases of fraud or willful misconduct, the qualified actuary shall not be liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision, or conduct with respect to the actuary's opinion; (g) Disciplinary action by the commissioner against the company or the qualified actuary shall be defined in administrative regulations by the commissioner; and (h) Any memorandum in support of the opinion, and any other material provided by the company to the commissioner in connection therewith, shall be kept confidential by the commissioner and shall not be made public and shall not be subject to subpoena, other than for the purpose of defending an action seeking damages from any person by reason of any action required by this section or by administrative regulations promulgated hereunder. The memorandum or other material may otherwise be released by the commissioner with the written consent of the company or to the American Academy of Actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material. Once any portion of the confidential memorandum is cited by the company in its marketing, or is cited before any governmental agency other than a state insurance department or office, or is released by the company to the news media, all portions of the confidential memorandum shall be no longer confidential. (6) Unless a company is exempt under KRS 304.6-134, subsections (7) to (10) of this section shall become operative after the operative date of the valuation manual. (7) Every company with outstanding life insurance, accident and health insurance, or deposit-type contracts in this state, subject to regulation by the commissioner, shall annually submit the opinion of the appointed actuary stating whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this state. The valuation manual shall prescribe the specifics of this opinion, including any items deemed necessary to its scope. (8) Every company with outstanding life insurance, accident and health insurance, or deposit-type contracts in this state, subject to regulation by the commissioner, except as exempted in the valuation manual, shall also annually include in the opinion required by subsection (7) of this section an opinion of the same appointed actuary stating whether the reserves and related actuarial items held in support of the policies and contracts specified in the valuation manual, when considered with respect to the assets held by the company, the reserves, and related actuarial items, including but not limited to the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, making adequate provision for the company's obligations under the policies and contracts, including but not limited to the benefits under, and expenses associated with, the policies and contracts. (9) Each opinion required by subsection (8) of this section shall be governed by the following provisions: (a) A memorandum, in the form and substance specified in the valuation manual, and acceptable to the commissioner, shall be prepared to support each actuarial opinion; and (b) If the insurance company fails to provide a supporting memorandum at the request of the commissioner within a period specified in the valuation manual, or the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the valuation manual, or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary, at the expense of the company, to review the opinion and the basis for the opinion, and prepare the supporting memorandum required by the commissioner. (10) Every opinion required by subsections (7) and (8) of this section shall be governed by the following provisions: (a) The opinion shall be in the form and contain the substance specified in the valuation manual and acceptable to the commissioner; (b) The opinion shall be submitted with the annual statement reflecting the valuation of the reserve liability for each year ending on or after the operative date of the valuation manual; (c) The opinion shall apply to all policies and contracts subject to subsection (8) of this section, plus other actuarial liabilities as may be specified in the valuation manual; (d) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board or its successor, and on such additional standards as may be prescribed in the valuation manual; (e) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state; (f) Except in cases of fraud or willful misconduct, the appointed actuary shall not be liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision, or conduct with respect to the appointed actuary's opinion; and (g) Disciplinary action by the commissioner against the company or the appointed actuary shall be established by administrative regulation, promulgated by the commissioner. Effective: June 24, 2015 History: Amended 2015 Ky. Acts ch. 57, sec. 14, effective June 24, 2015. -- Amended 2010 Ky. Acts ch. 24, sec. 1006, effective July 15, 2010. -- Created 1996 Ky. Acts ch. 289, sec. 4, effective July 15, 1996.

KRS 304.6-180 Deficiency reserve -- Recognition of premium deficiency reserve

304.6-180. Deficiency reserve -- Recognition of premium deficiency reserve (1) If in any contract year the gross premium charged by any life insurer on any policy or contract, which is subject to subsection (2) of KRS 304.6-140, is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon, but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this section are those standards stated in KRS 304.6-140 and 304.6-145. Provided that for any life insurance policy issued on or after January 1, 1986, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the foregoing provisions of this section shall be applied as if the method actually used in calculating the reserve for such policy were the method described in KRS 304.6-150, ignoring the second subsection of that section. The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with KRS 304.6-150, including the second subsection of that section, and the minimum reserve calculated in accordance with this section. (2) When the anticipated losses, loss adjustment expenses, commissions and acquisition costs, and maintenance costs exceed the recorded unearned premium reserve and any future installment premiums on existing policies, a premium deficiency reserve shall be recognized by a property and casualty insurer by recording an additional liability for the deficiency, with a corresponding charge to operations. Commission and other acquisition costs need not be considered in the premium deficiency analysis to the extent they have previously been expensed. For purposes of determining if a premium deficiency exists, insurance contracts shall be grouped in a manner consistent with how policies are marketed, serviced, and measured. A liability shall be recognized for each grouping where a premium deficiency is indicated. Deficiencies shall not be offset by anticipated profits in other policy groupings. If a premium deficiency reserve is established, disclosure of the amount of that reserve shall be made in the financial statements. If a reporting entity utilizes anticipated investment income as a factor in the premium deficiency calculation, disclosure of this shall be made in the financial statements. (3) When the anticipated losses, loss adjustment expenses, commissions and other acquisition costs, and maintenance costs exceed the recorded unearned premium reserve, contingency reserve, and the estimated future renewal premium on existing policies, a mortgage guaranty insurer shall recognize a premium deficiency reserve by recording an additional liability for the deficiency with a corresponding charge to operations. Commissions and other acquisition costs need not be considered in the premium deficiency analysis to the extent they have been expensed. If a mortgage guaranty insurer utilizes anticipated investment income as a factor in the premium deficiency calculation, disclosure of this shall be made in the financial statements. (4) When the expected claims payments or incurred costs, claim adjustment expenses, and administration costs exceed the premiums to be collected for the remainder of a contract period, an individual or group accident and health insurer or health maintenance organization shall recognize a premium deficiency reserve by recording an additional liability for the deficiency, with a corresponding charge to operations. For purposes of determining if a premium deficiency exists, contracts shall be grouped in a manner consistent with how policies are marketed, serviced, and measured. A liability shall be recognized for each grouping where a premium deficiency is indicated. Deficiencies shall not be offset by anticipated profits in other policy groupings. Such accruals shall be made for any loss contracts, even if the contract period has not yet started. Effective: July 13, 2004 History: Amended 2004 Ky. Acts ch. 24, sec. 17, effective July 13, 2004. -- Amended 1982 Ky. Acts ch. 263, sec. 13, effective July 15, 1982. -- Amended 1978 Ky. Acts ch. 280, sec. 7, effective June 17, 1978. -- Created 1970 Ky. Acts ch. 301, subtit. 6, sec. 18, effective June 18, 1970.

KRS 304.6-190 Appraisals for mortgage loans

304.6-190. Appraisals for mortgage loans (1) A mortgage loan shall not be made or acquired by a domestic insurer unless an appraisal has been made by a competent appraiser for the purpose of the investment which meets the following requirements: (a) The appraisal shall be made prior to the date that the insurer commits to make the investment; (b) The appraisal shall be written and shall state an opinion of value as of a specific date, supported by presentation and analysis of relevant market material; (c) The appraisal shall provide the current fair market value of the real estate, that is the value of the real estate in an arms-length sale as of the date of the appraisal; and (d) The appraisal shall be reviewed and signed by a principal of the firm. The principal shall be a specific individual having appraisal experience with the property type, and shall be accountable for the conclusions contained in the report. (2) Appraisers conducting appraisals pursuant to this section shall not be compensated, directly or indirectly, on the basis of the outcome of the appraisal performed and shall have direct reporting access to the chief investment officer of the insurer. (3) The department may contract with qualified appraisers to conduct appraisals if an insurer fails to have appraisals done pursuant to this section. All costs for the services of an appraiser pursuant to this subsection shall be borne by the insurer. (4) All appraisals shall be placed in the appropriate real estate mortgage loan file, and shall be subject to evaluation by the department. (5) The department shall randomly select a number of appraisals from each domestic insurer with a mortgage loan portfolio and evaluate the quality of the appraisal. The evaluation shall be done annually and the number of appraisals reviewed shall be determined by the department. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1007, effective July 15, 2010. -- Created 1994 Ky. Acts ch. 496, sec. 11, effective July 15, 1994.
Source: Kentucky Legislative Research Commission (legislature.ky.gov)URL: https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=38692Fetched: 10/20/2026

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