Okla. Stat. tit. 36, § 36-1510

Conflict.

A. Definitions. For the purposes of this section the following

definitions shall apply on or after the operative date of the

valuation manual:

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. "Company" means an entity which:

(a) has written, issued, or reinsured life insurance

contracts, accident and health insurance contracts, or

deposit-type contracts in this state and has at least

one such policy in force or on claim, or

(b) has written, issued, or reinsured life insurance

contracts, accident and health insurance contracts, or

deposit-type contracts 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;

Oklahoma Statutes - Title 36. Insurance Page 391

3. "Deposit-type contract" means contracts that do not

incorporate mortality or morbidity risks and as may be specified in

the valuation manual;

4. "Life insurance" means contracts that incorporate mortality

risk, including annuity and pure endowment contracts, and as may be

specified in the valuation manual;

5. "NAIC" means the National Association of Insurance

Commissioners;

6. "Policyholder behavior" means any action a policyholder,

contract holder or any other person with the right to elect options,

such as a certificate holder, may take under a policy or contract

subject to this section, including, but not limited to, lapse,

withdrawal, transfer, deposit, premium payment, loan, annuitization,

or benefit elections prescribed by the policy or contract but

excluding events of mortality or morbidity that result in benefits

prescribed in their essential aspects by the terms of the policy or

contract;

7. "Principle-based valuation" means a reserve valuation that

uses one or more methods or one or more assumptions determined by

the insurer and is required to comply with subsection Q of this

section as specified in the valuation manual;

8. "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 where there are observed events

of very significant size or magnitude; and

9. "Valuation manual" means the manual of valuation

instructions adopted by the NAIC as specified in this section or as

subsequently amended.

B. Reserve Valuation.

1. Policies and Contracts Issued Prior to the Operative Date of

the Valuation Manual.

(a) The Insurance Commissioner shall annually make

calculations of all outstanding policies, additions

thereto, unpaid dividends, annuity and pure endowment

contracts and all other obligations of every life

insurance corporation doing business in this state

issued prior to the operative date of the valuation

manual. In lieu of the valuation of the reserves

required of a foreign or alien company, the Insurance

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 this

section.

(b) The provisions set forth in subsections C, D, E, F, G,

H, J, K, L, M, N and O of this section shall apply to

all policies and contracts, as appropriate, subject to

Oklahoma Statutes - Title 36. Insurance Page 392

this section issued prior to the operative date of the

valuation manual and the provisions set forth in

subsections P and Q of this section shall not apply to

any such policies and contracts.

2. Policies and Contracts Issued On and After the Operative

Date of the Valuation Manual.
ply to

all policies and contracts, as appropriate, subject to

Oklahoma Statutes - Title 36. Insurance Page 392

this section issued prior to the operative date of the

valuation manual and the provisions set forth in

subsections P and Q of this section shall not apply to

any such policies and contracts.

2. Policies and Contracts Issued On and After the Operative

Date of the Valuation Manual.

(a) The Insurance Commissioner shall annually make

calculations of all outstanding policies, additions

thereto, unpaid dividends, annuity and pure endowment

contracts, accident and health contracts, deposit-type

contracts, and all other obligations of every company

doing business in this state 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 Insurance 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 this section.

(b) The provisions set forth in subsections P and Q of

this section shall apply to all policies and contracts

issued on or after the operative date of the valuation

manual.

C. 1. Valuations made by the Insurance Commissioner shall be

made upon the net premium basis. In the case of alien insurers,

such valuation shall be limited to its United States business. The

legal minimum standard for valuation of contracts issued before the

first day of January, 1910, shall be the Actuaries or Combined

Experience Table of Mortality, with interest at four percent (4%)

per annum, and for valuation of contracts issued on or after said

date and before June 6, 1949, shall be the American Experience Table

of Mortality, or the American Men Table of Mortality, with interest

at three and one-half percent (3 1/2%) per annum. Except as

otherwise provided policies issued on or after the operative date of

paragraph 4 of subsection I of Section 4029 of this title, policies

issued on or after June 6, 1949, shall be valued, collectively as to

all such policies or severally as to policies of any plan or form at

the option of the company according to the American Experience Table

of Mortality, the American Men Table of Mortality, the Commissioners

1941 Standard Ordinary Mortality Table or on and after July 1, 1962,

the Commissioners 1958 Standard Ordinary Mortality Table for

policies of ordinary insurance, and the Standard Industrial

Mortality Table (1907), or the 1941 Standard Industrial Mortality

Table or the Commissioners 1961 Standard Industrial Mortality Table

for policies of industrial insurance, with interest at not more than

three and one-half percent (3 1/2%) per annum, or four percent (4%)

per annum in the case of policies issued on or after April 11, 1974,

Oklahoma Statutes - Title 36. Insurance Page 393

and prior to March 17, 1978, and four and one-half percent (4 1/2%)

per annum for policies issued on or after March 17, 1978; provided,

however, that policies issued to substandard risks or other special

classes may be valued according to such other mortality tables, with

interest at not more than three and one-half percent (3 1/2%) per

annum, or four percent (4%) per annum in the case of policies issued

on or after April 11, 1974, and prior to March 17, 1978, and four

and one-half percent (4 1/2%) per annum for policies issued on or

after March 17, 1978, as may be approved by the Insurance

Commissioner.

2. 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 company, the Annuity Mortality Table for 1949,

Ultimate, or any modification of either of these tables approved by

the Commissioner.

3. For group annuity and pure endowment contracts, excluding
r.

2. 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 company, the Annuity Mortality Table for 1949,

Ultimate, or any modification of either of these tables approved by

the Commissioner.

3. 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

company, any of the tables or modifications of tables specified for

individual annuity and pure endowment contracts.

4. The mortality table used in determining the minimum standard

for the valuation of ordinary life insurance policies issued on or

after the operative date of paragraph 4 of subsection I of Section

4029 of this title shall be (i) the Commissioners 1980 Standard

Ordinary Mortality Table, or (ii) at the election of the company for

any one or more specified plans of life insurance, the Commissioners

1980 Standard Ordinary Mortality Table with Ten-Year Select

Mortality Factors, or (iii) any ordinary mortality table, adopted

after 1980 by the NAIC, that is approved by regulation promulgated

by the Commissioner for use in determining the minimum standard of

valuation for such policies.

5. Except as provided in subsection D of this section, the

minimum standard of valuation for individual annuity and pure

endowment contracts issued on or after the operative date of this

section and for annuities and pure endowments purchased on or after

such operative date under group annuity and pure endowment contracts

shall be the Commissioner's reserve valuation methods defined in

subsections G and H of this section and the following tables and

interest rates:

(a) For individual annuity and pure endowment contracts

issued prior to August 29, 1977, excluding any

disability and accidental death benefit in such

contracts, the 1971 Individual Annuity Mortality

Table, or any modification of this table approved by

the Commissioner, and six percent (6%) interest for

Oklahoma Statutes - Title 36. Insurance Page 394

single premium immediate annuity contracts, and four

percent (4%) interest for all other individual annuity

and pure endowment contracts,

(b) For individual single premium immediate annuity

contracts issued on or after August 29, 1977,

excluding any disability and accidental death benefits

in such contracts, the 1971 Individual Annuity

Mortality Table or any individual annuity mortality

table adopted after 1980 by the NAIC that is approved

by regulation promulgated by the Commissioner for use

in determining the minimum standard of valuation for

such contracts, or any modification of these tables

approved by the Commissioner, and seven and one-half

percent (7 1/2%) interest,

(c) For individual annuity and pure endowment contracts

issued on or after August 29, 1977, other than single

premium immediate annuity contracts, excluding any

disability and accidental death benefits in such

contracts, the 1971 Individual Annuity Mortality Table

or any individual annuity mortality table adopted

after 1980 by the NAIC that is approved by regulation

promulgated by the Commissioner for use in determining

the minimum standard of valuation for such contracts,

or any modification of these tables approved by the

Commissioner, and 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 such individual annuity

and pure endowment contracts,
d by the Commissioner for use in determining

the minimum standard of valuation for such contracts,

or any modification of these tables approved by the

Commissioner, and 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 such individual annuity

and pure endowment contracts,

(d) For all annuities and pure endowments purchased prior

to August 29, 1977, under group annuity and pure

endowment contracts, excluding any disability and

accidental death benefits purchased under such

contracts, the 1971 Group Annuity Mortality Table, or

any modification of this table approved by the

Commissioner, and six percent (6%) interest, and

(e) For all annuities and pure endowments purchased on or

after August 29, 1977, under group annuity and pure

endowment contracts, excluding any disability and

accidental death benefits purchased under such

contracts, the 1971 Group Annuity Mortality Table or

any group annuity mortality table adopted after 1980

by the NAIC that is approved by regulation promulgated

by the Commissioner for use in determining the minimum

standard of valuation for such annuities and pure

endowments, or any modification of these tables

Oklahoma Statutes - Title 36. Insurance Page 395

approved by the Commissioner, and seven and one-half

percent (7 1/2%) interest.

After June 14, 1973, any company may file with the Commissioner

a written notice of its election to comply with the provisions of

this section after a specified date before January 1, 1985, which

shall be the operative date of this section for such company,

provided, a company may elect a different operative date for

individual annuity and pure endowment contracts from that elected

for group annuity and pure endowment contracts. If a company makes

no such election, the operative date of this section for such

company shall be January 1, 1985.

D. 1. The interest rates used in determining the minimum

standard for the valuation of all life insurance policies issued in

a particular calendar year on or after the operative date of

paragraph 4 of subsection I of Section 4029 of this title shall be

the calendar year statutory valuation interest rates as defined in

this section.

2. The interest rates used in determining the minimum standard

valuation of individual annuity and pure endowment contracts issued

in a particular calendar year on or after January 1, 1985, and

annuities and pure endowments purchased in a particular calendar

year on or after January 1, 1985, under group annuity and pure

endowment contracts shall be the calendar year statutory valuation

interest rates as defined in this section.

E. 1. The calendar year statutory valuation interest rates, I,

shall be determined as follows and the results rounded to the

nearest one-fourth of one percent (1/4 of 1%):

(a) For life insurance,

I = .03 + W (Ra - .03) + (W/2) (Rb - .09)

where Ra is the lesser of R and .09, Rb 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,

(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 R 1 is the lesser of R and .09, R 2 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,
ities 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 R 1 is the lesser of R and .09, R 2 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 subparagraph (b) of this paragraph, the

Oklahoma Statutes - Title 36. Insurance Page 396

formula for life insurance stated in subparagraph (a)

of this paragraph 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 subparagraph (b)

of this paragraph 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 subparagraph (b) of this

paragraph 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

subparagraph (b) of this paragraph shall apply.

2. 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.

F. 1. The weighting factors referred to in the formulas stated

above are given in the following table:

(a) Weighting Factors for Life Insurance:

Guarantee

Duration Weighting

(Years) Factors

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.

Oklahoma Statutes - Title 36. Insurance Page 397

(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
surance with

premium rates or nonforfeiture values or both which

are guaranteed in the original policy.

Oklahoma Statutes - Title 36. Insurance Page 397

(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

subparagraph (b) of this paragraph, shall be as

specified in tables (1), (2) and (3) below, according

to the rules and definitions in (4) and (5) below:

(1) For annuities and guaranteed interest contracts

valued on an issue year basis:

Guarantee Weighting Factor

Duration 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

Oklahoma Statutes - Title 36. Insurance Page 398

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 (1) with an adjustment to

reflect changes in interest rates or asset values

since receipt of the funds by the insurance

company, or (2) without such adjustment but in

installments over five (5) years or more, or (3)

as an immediate life annuity, or (4) no

withdrawal permitted.

Plan Type B: Before expiration of the interest

rate guarantee, policyholder may withdraw funds

only (1) with adjustment to reflect changes in

interest rates or asset values since receipt of

the funds by the insurance company, or (2)

without such adjustment but in installments over

five (5) years or more, or (3) 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.

Plan Type C: Policyholder may withdraw funds

before expiration of interest rate guarantee in a

single sum or installments over less than five
hout such adjustment but in installments over

five (5) years or more, or (3) 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.

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 (1) without adjustment to

reflect changes in interest rates or asset values

since receipt of the funds by the insurance

company, or (2) subject only to a fixed surrender

charge stipulated in the contract as a percentage

of the fund.

2. A company may elect to value guaranteed interest contracts

with cash settlement options and annuities with cash settlement

options on either an issue year basis or on a change in fund basis.

Guaranteed interest contracts with no cash settlement options and

other annuities with no cash settlement options shall 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 for the entire

duration of the annuity or guaranteed interest contract is the

Oklahoma Statutes - Title 36. Insurance Page 399

calendar year valuation interest rate for the year of issue or year

of purchase of the annuity or guaranteed interest contract, and the

change in fund basis of valuation refers to a valuation basis under

which the interest rate used to determine the 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.

G. 1. The reference interest rate referred to above shall be

defined as follows:

(a) For 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 the Monthly Average of

the Composite Yield on Seasoned Corporate Bonds, 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 an issue year basis, except as

stated in subparagraph (b) of this paragraph, 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 the Monthly Average of the

Composite Yield on Seasoned Corporate Bonds, 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 an issue year basis, except as

stated in subparagraph (b) of this paragraph, 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

the Monthly Average of the Composite Yield on Seasoned

Corporate Bonds, as published by Moody's Investors

Service, Inc.,

Oklahoma Statutes - Title 36. Insurance Page 400
s, except as

stated in subparagraph (b) of this paragraph, 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

the Monthly Average of the Composite Yield on Seasoned

Corporate Bonds, as published by Moody's Investors

Service, Inc.,

Oklahoma Statutes - Title 36. Insurance Page 400

(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 the Monthly Average of

the Composite Yield on Seasoned Corporate Bonds, 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 subparagraph (b) of this paragraph, the

average over a period of twelve (12) months, ending on

June 30 of the calendar year of the change in the

fund, of the Monthly Average of the Composite Yield on

Seasoned Corporate Bonds, as published by Moody's

Investors Service, Inc.

H. In the event that the 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 NAIC determines

that the 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 NAIC and approved by

regulation promulgated by the Commissioner, may be substituted.

I. The Commissioner may vary the standards of interest and

mortality in particular cases of invalid life and other extra

hazards and value policies in groups, use approximate averages for

fractions of a year and otherwise, and accept the valuation of the

Department of Insurance of any other state or country, if made upon

a basis and according to standards not lower than herein required or

authorized, in place of the valuation herein required.

J. If in any contract year the gross premium charged by any

company on any policy or contract is less than the valuation net

premium for the policy or contract calculated by the method used in

computing the reserve liability 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 valuation 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

subsection are those standards stated in this section.

Oklahoma Statutes - Title 36. Insurance Page 401

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 subsection shall be applied as if

the method actually used in calculating the reserve for such policy

were the method described in paragraph 2 of subsection L of this

section, ignoring subparagraph (c) of that paragraph. The minimum
h 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 subsection shall be applied as if

the method actually used in calculating the reserve for such policy

were the method described in paragraph 2 of subsection L of this

section, ignoring subparagraph (c) of that paragraph. The minimum

reserve at each policy anniversary of such a policy shall be the

greater of the minimum reserve calculated in accordance with

paragraph 2 of subsection L of this section, including subparagraph

(c) of that paragraph, and the minimum reserve calculated in

accordance with this subsection.

K. Term Insurance.

Policies issued by life insurance companies doing business in

this state may provide for not more than one (1) year preliminary

term insurance, purchased by the whole or part of the premium to be

received during the first policy year, under the conditions

prescribed in this section.

L. Reserves.

1. Reserves on policies of ordinary insurance which are valued

in accordance with the American Experience Table of Mortality, or

the American Men Table of Mortality, and policies of industrial

insurance which are valued in accordance with the Standard

Industrial Mortality Table (1907), which are issued on or after June

6, 1949, may be computed as follows: If the premium charged for

term insurance under a limited payment life preliminary term policy

providing for the payment of all premiums thereon in less than

twenty (20) years from the date of the policy or under an endowment

preliminary term policy, exceeds that charged for life insurance,

under twenty-year payment life preliminary term policies of the same

company, the reserve thereon at the end of any year, including the

first, shall not be less than the reserve on a twenty-payment life

preliminary term policy issued in the same year and at the same age,

together with an amount which shall be equivalent to the

accumulation of a net level premium sufficient to provide for a pure

endowment at the end of the premium payment period equal to the

difference between the value at the end of such period of such a

twenty-payment life preliminary term policy and the full reserve at

such time of such a limited payment life or endowment policy. The

premium payment period is the period during which premiums are

concurrently payable under such twenty-payment life preliminary term

policy and such limited payment life or endowment policy. Any

policy valued in accordance with this paragraph shall specify the

Oklahoma Statutes - Title 36. Insurance Page 402

mortality table, rate of interest, and method used in calculating

the reserves on the policy.

2. Reserves on policies of ordinary insurance which are valued

in accordance with the Commissioners 1941 Standard Ordinary

Mortality Table, the Commissioners 1958 Standard Ordinary Mortality

Table, or the Commissioners 1980 Standard Ordinary Mortality Table,

policies of industrial insurance which are valued in accordance with

the 1941 Standard Industrial Mortality Table or the Commissioners

1961 Standard Industrial Mortality Table and policies valued in

accordance with any substandard mortality table approved by the

Commissioner pursuant to this section, issued on or after June 6,

1949, may be computed in accordance with the Commissioners Reserve

Valuation method, defined as follows: Reserves 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
ount 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 subparagraph (a) over subparagraph (b) as

follows:

(a) 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 per

annum payable on the first and each subsequent

anniversary of such policy on which a premium falls

due; provided, however, that such level annual premium

shall not exceed the net level annual premium on the

nineteen-year premium whole life plan for insurance of

the same amount at the age one (1) year higher than

the age at issue of such policy,

(b) a net one-year term premium for such benefits provided

for in the first policy year, and

(c) 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

Oklahoma Statutes - Title 36. Insurance Page 403

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 subsection J of this

section, be the greater of the reserve as of such

policy anniversary calculated as described in this

paragraph and the reserve as of such policy

anniversary calculated as described in subparagraph

(a) of this paragraph, but with (i) the value defined

in subparagraph (a) of that paragraph being reduced by

fifteen percent (15%) of the amount of such excess

first-year premium, (ii) all present values of

benefits and premiums being determined without

reference to premiums or benefits provided for by the

policy after the assumed ending date, (iii) the policy

being assumed to mature on such date as an endowment,

and (iv) the cash surrender value provided on such

date being considered as an endowment benefit. In

making the above comparison, the mortality and

interest bases stated in this section shall be used.

Reserves for life insurance policies providing for a varying

amount of insurance or requiring the payment of varying premiums

shall be calculated by a method consistent with the principles of

paragraph 2 of this subsection, provided that any extra premiums

charged because of impairments or special hazards shall be

disregarded in the determination of modified net premiums. All

modified net premiums and present values referred to in this

section, except those based on sex-distinct mortality tables, may be

calculated according to an age not more than six (6) years younger

than the actual age of the insured in the case of any category of

ordinary policies issued on female risks.

M. 1. Reserves on policies of any category may be computed, at

the option of the company, according to any valuation standard which

produces greater aggregate reserves than those computed according to

the minimum standard provided in this section.
ge not more than six (6) years younger

than the actual age of the insured in the case of any category of

ordinary policies issued on female risks.

M. 1. Reserves on policies of any category may be computed, at

the option of the company, according to any valuation standard which

produces greater aggregate reserves than those computed according to

the minimum standard provided in this section.

2. In the case of any plan of life insurance which provides for

future premium determination, the amounts of which are to be

determined by the insurance company based on then estimates of

future experience, or in the case of any plan of life insurance or

annuity which is of such a nature that the minimum reserves cannot

be determined by the methods described in subsections C, I, J, K,

and N of this section, the reserves which are held under any such

plan must:

(a) be appropriate in relation to the benefits and the

pattern of premiums for that plan, and

Oklahoma Statutes - Title 36. Insurance Page 404

(b) be computed by a method which is consistent with the

principles of this Standard Valuation Law,

as determined by regulations promulgated by the Commissioner.

N. 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.

O. 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 under paragraph 2 of subsection B of this

section. For accident and health insurance contracts issued prior

to the operative date of the valuation manual, the minimum standard

of valuation is the standard adopted by the commissioner by rule.

P. Valuation Manual for Policies Issued On or After the

Operative Date of the Valuation Manual.

1. For policies 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 under paragraph 2 of

subsection B of this section, except as provided under paragraph 5

or 7 of this subsection.

2. The operative date of the valuation manual is January 1 of

the first calendar year following the first July 1 as of which 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 members, or

Oklahoma Statutes - Title 36. Insurance Page 405

three-fourths (3/4) of the members voting, whichever

is greater,
ction.

2. The operative date of the valuation manual is January 1 of

the first calendar year following the first July 1 as of which 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 members, or

Oklahoma Statutes - Title 36. Insurance Page 405

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: life,

accident and health annual statements; health annual

statements; or fraternal annual statements, and

(c) the Standard Valuation Law, as amended by the NAIC in

2009, or legislation including substantially similar

terms and provisions, has been enacted by at least

forty-two of the following fifty-five jurisdictions:

the fifty states of the United States, American Samoa,

the American Virgin Islands, the District of Columbia,

Guam, and Puerto Rico.

3. 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:

(a) the change to the valuation manual has been adopted by

the NAIC by an affirmative vote representing:

(1) at least three-fourths (3/4) of the members of

the NAIC voting, but not less than a majority of

the total membership, and

(2) 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 in division (1) of

this subparagraph: life, accident and health

annual statements; health annual statements; or

fraternal annual statements, and

(b) the valuation manual becomes effective pursuant to

order adopted by the commissioner.

4. The valuation manual must specify all of the following:

(a) minimum valuation standards for and definitions of the

policies or contracts subject to paragraph 2 of

subsection B of this section. Such minimum valuation

standards shall be:

(1) the commissioner's reserve valuation method for

life insurance contracts, other than annuity

contracts, subject to paragraph 2 of subsection B

of this section,

Oklahoma Statutes - Title 36. Insurance Page 406

(2) the commissioner's annuity reserve valuation

method for annuity contracts subject to paragraph

2 of subsection B of this section, and

(3) minimum reserves for all other policies or

contracts subject to paragraph 2 of subsection B

of this section,

(b) which policies or contracts or types of policies or

contracts that are subject to the requirements of a

principle-based valuation in paragraph 1 of subsection

Q of this section and the minimum valuation standards

consistent with those requirements,

(c) for policies and contracts subject to a principle-

based valuation under subsection Q of this section:

(1) requirements for the format of reports to the

commissioner under subparagraph (c) of paragraph

2 of subsection Q of this section and which shall

include information necessary to determine if the

valuation is appropriate and in compliance with

this section,

(2) assumptions shall 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 such

procedures,
all

include information necessary to determine if the

valuation is appropriate and in compliance with

this section,

(2) assumptions shall 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 such

procedures,

(d) for policies not subject to a principle-based

valuation under subsection Q of this section, 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,

those relating to reserve methods, models for

measuring risk, generation of economic scenarios,

assumptions, margins, use of company experience, risk

measurement, disclosure, certifications, reports,

actuarial opinions and memorandums, transition rules

and internal controls, and

(f) the data and form of the data required under

subsection R of this section, with whom the data must

Oklahoma Statutes - Title 36. Insurance Page 407

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 this subsection,

then the company shall, with respect to such requirements, comply

with minimum valuation standards prescribed by the commissioner by

regulation.

6. The commissioner may engage a qualified actuary, at the

expense of the company, to perform an actuarial examination of the

company and opine on the appropriateness of any reserve assumption

or method used by the company, or to review and opine on a company's

compliance with any requirement set forth in this section. The

commissioner may rely upon the opinion, regarding provisions

contained within this section, of a qualified actuary engaged by the

commissioner of another state, district or territory of the United

States. As used in this paragraph, the term "engage" includes

employment and contracting.

7. The commissioner may require a company to change any

assumption or method that in the opinion of the commissioner is

necessary in order to comply with the requirements of the valuation

manual or this section; and the company shall adjust the reserves as

required by the commissioner. The commissioner may take other

disciplinary action as permitted pursuant to rule.

Q. Requirements of a Principle-Based Valuation.

1. A company must establish reserves using a principle-based

valuation that meets the following conditions for policies or

contracts as specified in the valuation manual:

(a) 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 during the lifetime of the

contracts. For policies or contracts with significant

tail risk, reflects conditions appropriately adverse

to quantify the tail risk,

(b) incorporate assumptions, risk analysis methods and

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,
appropriately adverse

to quantify the tail risk,

(b) incorporate assumptions, risk analysis methods and

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) incorporate assumptions that are derived in one of the

following manners:

(1) the assumption is prescribed in the valuation

manual,

Oklahoma Statutes - Title 36. Insurance Page 408

(2) for assumptions that are not prescribed, the

assumptions shall:

(i) be established utilizing the company's

available experience, to the extent it is

relevant and statistically credible, or

(ii) to the extent that company data is not

available, relevant, or statistically

credible, be established utilizing other

relevant, statistically credible experience,

and

(d) provide margins for uncertainty including adverse

deviation and estimation error, such that the greater

the uncertainty the larger the margin and resulting

reserve.

2. A company using a principle-based valuation for one or more

policies or contracts subject to this subsection 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 board of directors

an annual certification of the effectiveness of the

internal controls with respect to the principle-based

valuation. Such controls shall be designed to assure

that all material risks inherent in the liabilities

and associated assets subject to such 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.

R. Experience Reporting for Policies In Force On or After the

Operative Date of the Valuation Manual.

A company shall submit mortality, morbidity, policyholder

behavior, or expense experience and other data as prescribed in the

valuation manual.

S. When the actual funds of any life insurance company doing

business in this state, exclusive of its capital, are not of a net

cash value equal to its liabilities including the net value of its

policies according to the basis and minimum standards prescribed or

authorized by the laws of this state, it shall be the duty of the

Insurance Commissioner to give notice to such company and its agents

Oklahoma Statutes - Title 36. Insurance Page 409

to discontinue issuing new policies within this state, until such

time as its funds have become equal to its liabilities as aforesaid.

Any officer or agent who, after such notice has been given, issues

or delivers a new policy from and on behalf of such company before

its funds have become equal to its liabilities, as aforesaid, shall

forfeit to the state for each offense a sum not less than One

Hundred Dollars ($100.00) nor more than Five Thousand Dollars

($5,000.00) for each occurrence.

T. Single State Exemption.

1. The Commissioner may exempt specific product forms or

product lines of a domestic company that is licensed and doing

business only in Oklahoma from the requirements of subsection P of

this section provided:

(a) the Commissioner has issued an exemption in writing to

the company and has not subsequently revoked the

exemption in writing, and
for each occurrence.

T. Single State Exemption.

1. The Commissioner may exempt specific product forms or

product lines of a domestic company that is licensed and doing

business only in Oklahoma from the requirements of subsection P of

this section provided:

(a) the Commissioner has issued an exemption in writing to

the company and has not subsequently revoked the

exemption in writing, and

(b) the company computes reserves using assumptions and

methods used prior to the operative date of the

valuation manual in addition to any requirements

established by the commissioner and promulgated by

regulation.

2. For any company granted an exemption under this section,

subsections B and C of Section 4061 of this title and subsections C,

D, E, F, G, H, J, K, L, M, N and O of this section shall be

applicable. With respect to any company applying this exemption,

any reference to subsection P found in subsections B and C of

Section 4061 and subsections C, D, E, F, G, H, J, K, L, M, N and O

of this section shall not be applicable.

U. Conflict of law.

If any provision of law is inconsistent with the provisions of

this section, this section shall prevail.