Texas 2013 - 83rd Regular

Texas Senate Bill SB1379 Compare Versions

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1	1	83R24158 TJS-F
2	2	By: Hancock S.B. No. 1379
3	3	(Sheets)
4	4	Substitute the following for S.B. No. 1379: No.
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to the standard valuation for life insurance, accident and
10	10	health insurance, and annuities.
11	11	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
12	12	SECTION 1. Section 425.052, Insurance Code, is amended by
13	13	amending Subsection (a) and adding Subsection (c) to read as
14	14	follows:
15	15	(a) In this subchapter:
16	16	(1) "Accident and health insurance" means contracts
17	17	that incorporate morbidity risk and provide protection against
18	18	economic loss resulting from accident, sickness, or medical
19	19	conditions and as may be specified in the valuation manual.
20	20	(2) "Appointed actuary" means a qualified actuary who
21	21	is appointed in accordance with the valuation manual to prepare the
22	22	actuarial opinion required by Section 425.0545.
23	23	(3) "Company" means an entity that:
24	24	(A) has written, issued, or reinsured life
25	25	insurance contracts, accident and health insurance contracts, or
26	26	deposit-type contracts in this state and has at least one such
27	27	policy in force or on claim; or
28	28	(B) has written, issued, or reinsured life
29	29	insurance contracts, accident and health insurance contracts, or
30	30	deposit-type contracts in any state and is required to hold a
31	31	certificate of authority to write life insurance, accident and
32	32	health insurance, or deposit-type contracts in this state.
33	33	(4) "Deposit-type contract" means a contract that does
34	34	not incorporate mortality or morbidity risk and as may be specified
35	35	in the valuation manual.
36	36	(5) "Life insurance" means contracts that incorporate
37	37	mortality risk, including annuity and pure endowment contracts, and
38	38	as may be specified in the valuation manual.
39	39	(6) "Policyholder behavior" means any action a
40	40	policyholder, a contract holder, or any other person with the right
41	41	to elect options, such as a certificate holder, may take under a
42	42	policy or contract subject to this subchapter, including lapse,
43	43	withdrawal, transfer, deposit, premium payment, loan,
44	44	annuitization, or benefit elections prescribed by the policy or
45	45	contract but excluding events of mortality or morbidity that result
46	46	in benefits prescribed in their essential aspects by the terms of
47	47	the policy or contract.
48	48	(7) "Principle-based valuation" means the valuation
49	49	described by Section 425.074.
50	50	(8) "Qualified actuary" means an individual who is
51	51	qualified to sign the applicable statement of actuarial opinion in
52	52	accordance with the American Academy of Actuaries' qualification
53	53	standards for actuaries signing such statements and who meets the
54	54	requirements specified in the valuation manual.
55	55	(9) "Reserves" [, "reserves"] means reserve
56	56	liabilities.
57	57	(10) "Tail risk" means a risk that occurs either where
58	58	the frequency of low probability events is higher than expected
59	59	under a normal probability distribution or where there are observed
60	60	events of very significant size or magnitude.
61	61	(11) "Valuation manual" means the manual of valuation
62	62	instructions adopted by the commissioner by order.
63	63	(c) The definitions under Subsection (a) of "accident and
64	64	health insurance," "appointed actuary," "company," "deposit-type
65	65	contract," "life insurance," "policyholder behavior,"
66	66	"principle-based valuation," "qualified actuary," and "tail risk"
67	67	apply only on and after the operative date of the valuation manual.
68	68	SECTION 2. The heading to Section 425.053, Insurance Code,
69	69	is amended to read as follows:
70	70	Sec. 425.053. ANNUAL VALUATION OF RESERVES FOR POLICIES AND
71	71	CONTRACTS ISSUED BEFORE OPERATIVE DATE OF VALUATION MANUAL.
72	72	SECTION 3. Section 425.053, Insurance Code, is amended by
73	73	amending Subsections (a) and (c) and adding Subsections (d) and (e)
74	74	to read as follows:
75	75	(a) The department shall annually value or cause to be
76	76	[have] valued the reserves for all outstanding life insurance
77	77	policies and annuity and pure endowment contracts of each life
78	78	insurance company engaged in business in this state issued before
79	79	the operative date of the valuation manual. [The department may
80	80	certify the amount of those reserves, specifying the mortality
81	81	table or tables, rate or rates of interest, and methods, including
82	82	the net level premium method or another method, used in computing
83	83	those reserves.]
84	84	(c) Instead of valuing the reserves as required by
85	85	Subsection (a) for a foreign or alien company, the department may
86	86	accept any valuation made by or for the insurance supervisory
87	87	official of another state or jurisdiction if[:
88	88	[(1)] the valuation complies with the minimum standard
89	89	provided by this subchapter[; and
90	90	[(2) the official accepts as sufficient and valid for
91	91	all legal purposes a certificate of valuation made by the
92	92	department that states the valuation was made in a specified manner
93	93	according to which the aggregate reserves would be at least as large
94	94	as they would be if computed in the manner prescribed by the law of
95	95	that state or jurisdiction].
96	96	(d) Except as otherwise provided by this subchapter,
97	97	policies and contracts issued on or after the operative date of the
98	98	valuation manual are governed by Section 425.0535.
99	99	(e) The minimum standards for the valuation of policies and
100	100	contracts issued before the operative date of the valuation manual
101	101	are as provided by Sections 425.058 through 425.071 and Section
102	102	425.072(b), as applicable. Sections 425.072(a), 425.073, and
103	103	425.074 do not apply to a policy or contract described by this
104	104	subsection.
105	105	SECTION 4. Subchapter B, Chapter 425, Insurance Code, is
106	106	amended by adding Section 425.0535 to read as follows:
107	107	Sec. 425.0535. ANNUAL VALUATION OF RESERVES FOR POLICIES
108	108	AND CONTRACTS ISSUED ON OR AFTER OPERATIVE DATE OF VALUATION
109	109	MANUAL. (a) The commissioner shall annually value, or cause to be
110	110	valued, the reserves for all outstanding life insurance contracts,
111	111	annuity and pure endowment contracts, accident and health
112	112	contracts, and deposit-type contracts of each company issued on or
113	113	after the operative date of the valuation manual as provided by this
114	114	section.
115	115	(b) In lieu of the valuation of the reserves required of a
116	116	foreign or alien company, the commissioner may accept a valuation
117	117	made, or caused to be made, by the insurance supervisory official of
118	118	another state if the valuation complies with the minimum standard
119	119	provided by this subchapter.
120	120	(c) Sections 425.072(a), 425.073, and 425.074 apply to all
121	121	policies and contracts issued on or after the operative date of the
122	122	valuation manual.
123	123	SECTION 5. The heading to Section 425.054, Insurance Code,
124	124	is amended to read as follows:
125	125	Sec. 425.054. ACTUARIAL OPINION OF RESERVES BEFORE
126	126	OPERATIVE DATE OF VALUATION MANUAL [REQUIRED].
127	127	SECTION 6. Section 425.054, Insurance Code, is amended by
128	128	amending Subsection (a) and adding Subsections (a-1), (j), (k),
129	129	(l), (m), (n), (o), (p), and (q) to read as follows:
130	130	(a) This section applies only to an actuarial opinion of
131	131	reserves before the operative date of the valuation manual.
132	132	(a-1) For purposes of this section, "qualified actuary"
133	133	means:
134	134	(1) a qualified actuary, as that term is defined by
135	135	Section 802.002; or
136	136	(2) a person who, before September 1, 1993, satisfied
137	137	the requirements of the former State Board of Insurance to submit an
138	138	opinion under former Section 2A(a)(1), Article 3.28.
139	139	(j) Except as provided by Subsections (l), (n), (o), and
140	140	(p), any document or other information in the possession or control
141	141	of the department that is a memorandum in support of the opinion or
142	142	other material provided by the company to the commissioner in
143	143	connection with a memorandum is confidential and not subject to:
144	144	(1) disclosure under Chapter 552, Government Code;
145	145	(2) subpoena;
146	146	(3) discovery; or
147	147	(4) admissibility as evidence in a private civil
148	148	action.
149	149	(k) The commissioner or any person who receives a document
150	150	or other information described by Subsection (j) while acting under
151	151	the authority of the commissioner may not testify and may not be
152	152	compelled to testify in a private civil action concerning the
153	153	document or other information.
154	154	(l) The commissioner may:
155	155	(1) share documents or other information, including
156	156	the confidential and privileged documents or information described
157	157	by Subsection (j), with another state, federal, or international
158	158	regulatory agency, with the National Association of Insurance
159	159	Commissioners and its affiliates and subsidiaries, and with state,
160	160	federal, and international law enforcement authorities, provided
161	161	that the recipient agrees to maintain the confidentiality of the
162	162	document or information;
163	163	(2) receive documents or other information, including
164	164	confidential documents or information, from the National
165	165	Association of Insurance Commissioners and its affiliates and
166	166	subsidiaries, and from regulatory and law enforcement officials of
167	167	other foreign or domestic jurisdictions, provided that the
168	168	commissioner shall maintain as confidential any document or
169	169	information received with notice or understanding that it is
170	170	confidential under the laws of the jurisdiction that is the source
171	171	of the document or information; and
172	172	(3) enter into agreements governing sharing and use of
173	173	documents and other information consistent with this section.
174	174	(m) Disclosing information or providing a document to the
175	175	commissioner under this section, or sharing information as
176	176	authorized under this section, does not result in a waiver of any
177	177	applicable privilege or claim of confidentiality that may apply to
178	178	the document or information.
179	179	(n) A memorandum in support of the opinion, and any other
180	180	material provided by the company to the commissioner in connection
181	181	with the memorandum, may be subject to subpoena for the purpose of
182	182	defending an action seeking damages from the actuary submitting the
183	183	memorandum by reason of an action required by this section or rules
184	184	adopted under this section.
185	185	(o) The memorandum or other material provided by the company
186	186	to the commissioner in connection with the memorandum may otherwise
187	187	be released by the commissioner with the written consent of the
188	188	company, or to the Actuarial Board for Counseling and Discipline or
189	189	its successor on receipt of a request stating that the memorandum or
190	190	other material is required for the purpose of professional
191	191	disciplinary proceedings and setting forth procedures satisfactory
192	192	to the commissioner for preserving the confidentiality of the
193	193	memorandum or other material.
194	194	(p) The memorandum ceases to be confidential if:
195	195	(1) any portion of the memorandum is cited by the
196	196	company in its marketing;
197	197	(2) the memorandum is cited by the company before a
198	198	government agency other than a state insurance department; or
199	199	(3) the memorandum is released by the company to the
200	200	news media.
201	201	(q) This section does not prohibit the commissioner from
202	202	using information acquired under this section in the furtherance of
203	203	a legal or regulatory action relating to the administration of this
204	204	code.
205	205	SECTION 7. Subchapter B, Chapter 425, Insurance Code, is
206	206	amended by adding Section 425.0545 to read as follows:
207	207	Sec. 425.0545. ACTUARIAL OPINION OF RESERVES AFTER
208	208	OPERATIVE DATE OF VALUATION MANUAL. (a) A company that has
209	209	outstanding life insurance contracts, accident and health
210	210	insurance contracts, or deposit-type contracts in this state and is
211	211	subject to regulation by the department shall annually submit the
212	212	opinion of the appointed actuary as to whether the reserves and
213	213	related actuarial items held in support of the policies and
214	214	contracts are computed appropriately, are based on assumptions that
215	215	satisfy contractual provisions, are consistent with prior reported
216	216	amounts, and are in compliance with applicable laws of this state.
217	217	An opinion under this section must comply with provisions of the
218	218	valuation manual, including in regard to any items necessary to its
219	219	scope.
220	220	(b) Unless exempted by the valuation manual, a company
221	221	described by Subsection (a) shall include with the opinion required
222	222	by that subsection an opinion of the same appointed actuary
223	223	concerning whether the reserves and related actuarial items held in
224	224	support of the policies and contracts specified in the valuation
225	225	manual, when considered in light of the assets held by the company
226	226	with respect to the reserves and related actuarial items, including
227	227	investment earnings on the assets and considerations anticipated to
228	228	be received and retained under the policies and contracts, make
229	229	adequate provision for the company's obligations under the policies
230	230	and contracts, including benefits under and expenses associated
231	231	with the policies and contracts.
232	232	(c) Each opinion required by this section must:
233	233	(1) be in the form and contain the substance that is
234	234	specified by the valuation manual and is acceptable to the
235	235	commissioner;
236	236	(2) be submitted with the annual statement reflecting
237	237	the valuation of reserves for each year ending on or after the
238	238	operative date of the valuation manual;
239	239	(3) apply to all policies and contracts subject to
240	240	this section, plus other actuarial liabilities specified by the
241	241	valuation manual; and
242	242	(4) be based on standards adopted from time to time by
243	243	the Actuarial Standards Board or its successor, and on any
244	244	additional standards prescribed by the valuation manual.
245	245	(d) In the case of an opinion required to be submitted by a
246	246	foreign or alien company, the commissioner may accept the opinion
247	247	filed by the company with the insurance supervisory official of
248	248	another state if the commissioner determines that the opinion
249	249	reasonably meets the requirements applicable to a company domiciled
250	250	in this state.
251	251	SECTION 8. Section 425.055(a), Insurance Code, is amended
252	252	to read as follows:
253	253	(a) A memorandum [that, in form and substance, complies with
254	254	the commissioner's rules] shall be prepared to support each
255	255	actuarial opinion required by Section 425.054 or 425.0545. The
256	256	form and substance of each supporting memorandum must comply with
257	257	the commissioner's rules for memorandums subject to Section
258	258	425.054, or the valuation manual for memorandums subject to Section
259	259	425.0545.
260	260	SECTION 9. Section 425.056(a), Insurance Code, is amended
261	261	to read as follows:
262	262	(a) Except in cases of fraud or wilful misconduct or as
263	263	provided by Subsection (b), a person who certifies an opinion under
264	264	Section 425.054 or 425.0545 is not liable for damages to a person,
265	265	other than the life insurance company covered by the opinion, for an
266	266	act, error, omission, decision, or other conduct with respect to
267	267	the person's opinion.
268	268	SECTION 10. Section 425.057, Insurance Code, is amended to
269	269	read as follows:
270	270	Sec. 425.057. DISCIPLINARY ACTION: COMPANY OR PERSON
271	271	CERTIFYING OPINION. A company or person that certifies an opinion
272	272	under Section 425.054 or 425.0545 and that violates Section
273	273	425.054, 425.0545, or 425.055 or rules adopted or orders issued
274	274	under those sections is subject to disciplinary action under
275	275	Chapter 82.
276	276	SECTION 11. The heading to Section 425.058, Insurance Code,
277	277	is amended to read as follows:
278	278	Sec. 425.058. COMPUTATION [VALUATION] OF MINIMUM STANDARD
279	279	[POLICY OR CONTRACT]: GENERAL RULE.
280	280	SECTION 12. The heading to Section 425.059, Insurance Code,
281	281	is amended to read as follows:
282	282	Sec. 425.059. COMPUTATION [VALUATION] OF MINIMUM STANDARD
283	283	FOR CERTAIN ANNUITIES AND PURE ENDOWMENT CONTRACTS.
284	284	SECTION 13. The heading to Section 425.064, Insurance Code,
285	285	is amended to read as follows:
286	286	Sec. 425.064. COMMISSIONERS RESERVE VALUATION METHOD FOR
287	287	LIFE INSURANCE AND ENDOWMENT BENEFITS.
288	288	SECTION 14. The heading to Section 425.065, Insurance Code,
289	289	is amended to read as follows:
290	290	Sec. 425.065. COMMISSIONERS ANNUITY RESERVE VALUATION
291	291	METHOD FOR ANNUITY AND PURE ENDOWMENT BENEFITS.
292	292	SECTION 15. Subchapter B, Chapter 425, Insurance Code, is
293	293	amended by adding Sections 425.072, 425.073, 425.074, 425.075,
294	294	425.076, and 425.077 to read as follows:
295	295	Sec. 425.072. MINIMUM STANDARD FOR ACCIDENT AND HEALTH
296	296	INSURANCE CONTRACTS. (a) The standard prescribed by the valuation
297	297	manual for accident and health insurance contracts issued on or
298	298	after the operative date of the valuation manual is the minimum
299	299	standard of valuation required under Section 425.0535.
300	300	(b) For disability, accident and sickness, and accident and
301	301	health insurance contracts issued before the operative date of the
302	302	valuation manual, the minimum standard of valuation is the standard
303	303	in existence before the operative date of the valuation manual.
304	304	Sec. 425.073. POLICIES ISSUED ON OR AFTER THE OPERATIVE
305	305	DATE OF THE VALUATION MANUAL. (a) Except as otherwise provided by
306	306	this section, for policies issued on or after the operative date of
307	307	the valuation manual, the standard prescribed by the valuation
308	308	manual is the minimum standard of valuation required under Section
309	309	425.0535.
310	310	(b) The commissioner by order shall adopt a valuation manual
311	311	and determine the operative date of the valuation manual. A
312	312	valuation manual adopted by the commissioner under this section
313	313	must be substantially similar to the valuation manual approved by
314	314	the National Association of Insurance Commissioners. The operative
315	315	date must be January 1 of the first calendar year immediately
316	316	following a year in which, on or before July 1, the commissioner
317	317	determines that:
318	318	(1) the valuation manual has been adopted by the
319	319	National Association of Insurance Commissioners by an affirmative
320	320	vote of at least 42 members, or three-fourths of the members voting,
321	321	whichever is greater;
322	322	(2) the National Association of Insurance
323	323	Commissioners Standard Model Valuation Law, as amended by the
324	324	National Association of Insurance Commissioners in 2009, or
325	325	legislation including substantially similar terms and provisions,
326	326	has been enacted by states representing greater than 75 percent of
327	327	the direct premiums written as reported in the following annual
328	328	statements submitted for 2008:
329	329	(A) life insurance and accident and health annual
330	330	statements;
331	331	(B) health annual statements; or
332	332	(C) fraternal annual statements; and
333	333	(3) the National Association of Insurance
334	334	Commissioners Standard Model Valuation Law, as amended by the
335	335	National Association of Insurance Commissioners in 2009, or
336	336	legislation including substantially similar terms and provisions,
337	337	has been enacted by at least 42 of the following 55 jurisdictions:
338	338	(A) the 50 United States;
339	339	(B) American Samoa;
340	340	(C) the United States Virgin Islands;
341	341	(D) the District of Columbia;
342	342	(E) Guam; and
343	343	(F) Puerto Rico.
344	344	(c) After a valuation manual has been adopted by the
345	345	commissioner by order, any changes to the valuation manual must be
346	346	adopted by order and must be substantially similar to changes
347	347	adopted by the National Association of Insurance Commissioners.
348	348	Unless a change in the valuation specifies a later effective date,
349	349	the effective date for changes to the valuation manual may not be
350	350	earlier than January 1 of the year immediately following the date on
351	351	which the commissioner determines that the changes to the valuation
352	352	manual have been adopted by the National Association of Insurance
353	353	Commissioners by an affirmative vote representing:
354	354	(1) at least three-fourths of the members of the
355	355	National Association of Insurance Commissioners voting, but not
356	356	less than a majority of the total membership; and
357	357	(2) members of the National Association of Insurance
358	358	Commissioners representing jurisdictions totaling greater than 75
359	359	percent of the direct premiums written as reported in the most
360	360	recently available annual statements as provided by Subsections
361	361	(b)(2)(A)-(C).
362	362	(d) The valuation manual must specify:
363	363	(1) the minimum valuation standards for and
364	364	definitions of the policies or contracts subject to Section
365	365	425.0535, including:
366	366	(A) the commissioner's reserve valuation method
367	367	for life insurance contracts subject to Section 425.0535;
368	368	(B) the commissioner's annuity reserve
369	369	valuation method for annuity contracts subject to Section 425.0535;
370	370	and
371	371	(C) the minimum reserves for all other policies
372	372	or contracts subject to Section 425.0535;
373	373	(2) the policies or contracts that are subject to the
374	374	requirements of a principle-based valuation under Section 425.074
375	375	and the minimum valuation standards consistent with those
376	376	requirements, including:
377	377	(A) the requirements for the format of reports to
378	378	the commissioner under Section 425.074(b)(3), which must include
379	379	the information necessary to determine if a valuation is
380	380	appropriate and in compliance with this subchapter;
381	381	(B) the assumptions prescribed for risks over
382	382	which the company does not have significant control or influence;
383	383	and
384	384	(C) the procedures for corporate governance and
385	385	oversight of the actuarial function, and a process for appropriate
386	386	waiver or modification of the procedures;
387	387	(3) the policies that are not subject to a
388	388	principle-based valuation under Section 425.074;
389	389	(4) the data and form of data required under Section
390	390	425.074, to whom the data must be submitted, and other desired
391	391	requirements, including requirements concerning data analyses and
392	392	reporting of analyses; and
393	393	(5) other requirements, including requirements
394	394	relating to reserve methods, models for measuring risk, generation
395	395	of economic scenarios, assumptions, margins, use of company
396	396	experience, disclosure, certification, reports, actuarial opinions
397	397	and memorandums, transition rules, and internal controls.
398	398	(e) With respect to policies that are not subject to a
399	399	principle-based valuation under Section 425.074 as described by
400	400	Subsection (d)(3), the minimum valuation standard specified in the
401	401	valuation manual must:
402	402	(1) be consistent with the minimum valuation standard
403	403	before the operative date of the valuation manual; or
404	404	(2) develop reserves that quantify the benefits and
405	405	guarantees, and the funding, associated with the contracts and
406	406	their risks at a level of conservatism that reflects conditions
407	407	that include unfavorable events that have a reasonable probability
408	408	of occurring.
409	409	(f) In the absence of a specific valuation requirement or if
410	410	a specific valuation requirement in the valuation manual does not
411	411	in the commissioner's opinion comply with this subchapter, the
412	412	company shall, with respect to the requirement, comply with minimum
413	413	valuation standards prescribed by the commissioner by rule.
414	414	(g) The commissioner may employ or contract with a qualified
415	415	actuary, at the expense of the company, to perform an actuarial
416	416	examination of the company and provide an opinion concerning the
417	417	appropriateness of any reserve assumption or method used by the
418	418	company, or to review and provide an opinion on a company's
419	419	compliance with any requirement of this subchapter. The
420	420	commissioner may rely on the opinion, regarding provisions
421	421	contained within this subchapter, of a qualified actuary engaged by
422	422	the insurance supervisory official of another state.
423	423	(h) The commissioner may require a company to change an
424	424	assumption or method as necessary in the commissioner's opinion to
425	425	comply with a requirement of the valuation manual or this
426	426	subchapter.
427	427	(i) The commissioner may take other disciplinary action as
428	428	permitted under Chapter 82.
429	429	Sec. 425.074. REQUIREMENTS OF A PRINCIPLE-BASED VALUATION.
430	430	(a) A company shall establish reserves using a principle-based
431	431	valuation that meets the conditions for policies or contracts
432	432	provided by the valuation manual. At a minimum, the valuation
433	433	shall:
434	434	(1) quantify the benefits and guarantees, and the
435	435	funding, associated with the contracts and their risks at a level of
436	436	conservatism that reflects conditions that include unfavorable
437	437	events that have a reasonable probability of occurring during the
438	438	terms of the contracts;
439	439	(2) with respect to policies and contracts with
440	440	significant tail risk, reflect conditions appropriately adverse to
441	441	quantify the tail risk;
442	442	(3) incorporate assumptions, risk analysis methods,
443	443	and financial models and management techniques that are consistent
444	444	with those used in the company's overall risk assessment process,
445	445	while recognizing potential differences in financial reporting
446	446	structures and any prescribed assumptions or methods;
447	447	(4) incorporate assumptions:
448	448	(A) prescribed by the valuation manual; or
449	449	(B) established:
450	450	(i) using the company's available
451	451	experience, to the extent that data is relevant and statistically
452	452	credible; or
453	453	(ii) to the extent that the company data is
454	454	not available, relevant, or statistically credible, using other
455	455	relevant, statistically credible experience; and
456	456	(5) provide margins for uncertainty, including
457	457	adverse deviation and estimation error, such that the greater the
458	458	uncertainty the larger the margin and resulting reserve.
459	459	(b) A company using a principle-based valuation for one or
460	460	more policies or contracts subject to this section and as specified
461	461	by the valuation manual shall:
462	462	(1) establish procedures for corporate governance and
463	463	oversight of the actuarial valuation function consistent with
464	464	procedures specified by the valuation manual;
465	465	(2) provide to the commissioner and the company's
466	466	board of directors an annual certification of the effectiveness of
467	467	the internal controls with respect to the principle-based
468	468	valuation; and
469	469	(3) develop, and file with the commissioner on
470	470	request, a principle-based valuation report that complies with
471	471	standards prescribed in the valuation manual.
472	472	(c) A company's internal controls with respect to the
473	473	principle-based valuation must be designed to ensure that all
474	474	material risks inherent in the liabilities and associated assets
475	475	subject to the valuation are included in the valuation, and that
476	476	valuations are made in accordance with the valuation manual. The
477	477	certification described by Subsection (b)(2) must be based on the
478	478	controls in place as of the end of the preceding calendar year.
479	479	(d) A principle-based valuation may include a prescribed
480	480	formulaic reserve component.
481	481	Sec. 425.075. EXPERIENCE REPORTING FOR POLICIES IN FORCE ON
482	482	OR AFTER OPERATIVE DATE OF VALUATION MANUAL. A company shall submit
483	483	mortality, morbidity, policyholder behavior, or expense experience
484	484	and other data as prescribed in the valuation manual.
485	485	Sec. 425.076. CONFIDENTIALITY. (a) In this section,
486	486	"confidential information" means:
487	487	(1) a memorandum in support of an opinion submitted
488	488	under Section 425.0545 and any other documents, materials, and
489	489	other information, including, but not limited to, all working
490	490	papers, and copies thereof, created, produced, or obtained by or
491	491	disclosed to the commissioner or any other person in connection
492	492	with such memorandum;
493	493	(2) all documents, materials, and other information,
494	494	including, but not limited to, all working papers, and copies
495	495	thereof, created, produced, or obtained by or disclosed to the
496	496	commissioner or any other person in the course of an examination
497	497	made under Section 425.073(g); provided, however, that if an
498	498	examination report or other material prepared in connection with an
499	499	examination made under Subchapter B, Chapter 401, is not held as
500	500	private and confidential information under Subchapter B, Chapter
501	501	401, an examination report or other material prepared in connection
502	502	with an examination made under Section 425.073(g) shall not be
503	503	"confidential information" to the same extent as if such
504	504	examination report or other material had been prepared under
505	505	Subchapter B, Chapter 401;
506	506	(3) any reports, documents, materials, and other
507	507	information developed by a company in support of, or in connection
508	508	with, an annual certification by the company under Section
509	509	425.074(b)(2) evaluating the effectiveness of the company's
510	510	internal controls with respect to a principle-based valuation and
511	511	any other documents, materials, and other information, including,
512	512	but not limited to, all working papers, and copies thereof,
513	513	created, produced, or obtained by or disclosed to the commissioner
514	514	or any other person in connection with such reports, documents,
515	515	materials, and other information;
516	516	(4) any principle-based valuation report developed
517	517	under Section 425.074(b)(3) and any other documents, materials, and
518	518	other information, including, but not limited to, all working
519	519	papers, and copies thereof, created, produced, or obtained by or
520	520	disclosed to the commissioner or any other person in connection
521	521	with such report; and
522	522	(5) any documents, materials, data, and other
523	523	information submitted by a company under Section 425.075
524	524	(collectively, "experience data") and any other documents,
525	525	materials, data, and other information, including, but not limited
526	526	to, all working papers, and copies thereof, created or produced in
527	527	connection with such experience data, in each case that include any
528	528	potentially company-identifying or personally identifiable
529	529	information, that is provided to or obtained by the commissioner
530	530	(together with any "experience data," the "experience materials")
531	531	and any other documents, materials, data, and other information,
532	532	including, but not limited to, all working papers, and copies
533	533	thereof, created, produced, or obtained by or disclosed to the
534	534	commissioner or any other person in connection with such experience
535	535	materials.
536	536	(b) Except as provided in this section, a company's
537	537	confidential information is confidential by law and privileged, and
538	538	shall not be subject to Chapter 552, Government Code, shall not be
539	539	subject to subpoena, and shall not be subject to discovery or
540	540	admissible in evidence in any private civil action; provided,
541	541	however, that the commissioner is authorized to use the
542	542	confidential information in the furtherance of any regulatory or
543	543	legal action brought against the company as a part of the
544	544	commissioner's official duties.
545	545	(c) Neither the commissioner nor any person who received
546	546	confidential information while acting under the authority of the
547	547	commissioner shall be permitted or required to testify in any
548	548	private civil action concerning any confidential information.
549	549	(d) In order to assist in the performance of the
550	550	commissioner's duties, the commissioner may share confidential
551	551	information (1) with other state, federal, and international
552	552	regulatory agencies and with the National Association of Insurance
553	553	Commissioners and its affiliates and subsidiaries and (2) in the
554	554	case of confidential information specified in Subsections (a)(1)
555	555	and (a)(4) only, with the Actuarial Board for Counseling and
556	556	Discipline or its successor upon request stating that the
557	557	confidential information is required for the purpose of
558	558	professional disciplinary proceedings and with state, federal, and
559	559	international law enforcement officials; in the case of (1) and
560	560	(2), provided that such recipient agrees, and has the legal
561	561	authority to agree, to maintain the confidentiality and privileged
562	562	status of such documents, materials, data, and other information in
563	563	the same manner and to the same extent as required for the
564	564	commissioner.
565	565	(e) The commissioner may receive documents, materials,
566	566	data, and other information, including otherwise confidential and
567	567	privileged documents, materials, data, or information, from the
568	568	National Association of Insurance Commissioners and its affiliates
569	569	and subsidiaries, from regulatory or law enforcement officials of
570	570	other foreign or domestic jurisdictions and from the Actuarial
571	571	Board for Counseling and Discipline or its successor and shall
572	572	maintain as confidential or privileged any document, material,
573	573	data, or other information received with notice or the
574	574	understanding that it is confidential or privileged under the laws
575	575	of the jurisdiction that is the source of the document, material, or
576	576	other information.
577	577	(f) The commissioner may enter into agreements governing
578	578	sharing and use of information consistent with Subsections (b)
579	579	through (k).
580	580	(g) No waiver of any applicable privilege or claim of
581	581	confidentiality in the confidential information shall occur as a
582	582	result of disclosure to the commissioner under this section or as a
583	583	result of sharing as authorized in Subsection (d).
584	584	(h) A privilege established under the law of any state or
585	585	jurisdiction that is substantially similar to the privilege
586	586	established under Subsections (b) through (k) shall be available
587	587	and enforced in any proceeding in, and in any court of, this state.
588	588	(i) In this section, a reference to a regulatory agency, law
589	589	enforcement agency, or the National Association of Insurance
590	590	Commissioners includes an employee, agent, consultant, or
591	591	contractor of the agency or association, as applicable.
592	592	(j) Notwithstanding this section, any confidential
593	593	information specified in Subsections (a)(1) and (a)(4) may be:
594	594	(1) subject to subpoena for the purpose of defending
595	595	an action seeking damages from the appointed actuary submitting the
596	596	related memorandum in support of an opinion submitted under Section
597	597	425.054 or 425.0545 or a principle-based valuation report developed
598	598	under Section 425.074(b)(3) by reason of an action required by this
599	599	subchapter or by rules adopted or orders issued under this
600	600	subchapter; and
601	601	(2) released by the commissioner with the written
602	602	consent of the company.
603	603	(k) Once any portion of a memorandum in support of an
604	604	opinion submitted under Section 425.0545 or a principle-based
605	605	valuation report developed under Section 425.074(b)(3) is cited by
606	606	the company in its marketing or is publicly volunteered to or before
607	607	a governmental agency other than a state insurance department or is
608	608	released by the company to the news media, all portions of such
609	609	memorandum or report shall no longer be confidential.
610	610	Sec. 425.077. SINGLE STATE EXEMPTION. The commissioner may
611	611	exempt specific product forms or product lines of a domestic
612	612	company that is licensed and doing business only in this state from
613	613	the requirements of Section 425.073 if:
614	614	(1) the commissioner has issued an exemption in
615	615	writing to the company and has not subsequently revoked the
616	616	exemption in writing; and
617	617	(2) the company computes reserves using assumptions
618	618	and methods used before the operative date of the valuation manual
619	619	in addition to any requirements established by the commissioner and
620	620	adopted by rule.
621	621	SECTION 16. The commissioner of insurance shall determine
622	622	whether the National Association of Insurance Commissioners and a
623	623	sufficient number of states and other jurisdictions have adopted a
624	624	valuation manual as required by Section 425.073(b), Insurance Code,
625	625	as added by this Act. As soon as practicable after the commissioner
626	626	of insurance determines that the National Association of Insurance
627	627	Commissioners and a sufficient number of states and other
628	628	jurisdictions have adopted the valuation manual as required by that
629	629	section, the commissioner of insurance shall adopt rules or issue
630	630	orders necessary to implement this Act.
631	631	SECTION 17. This Act takes effect January 1, 2014.