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61A.25 STANDARD VALUATION LAW.
    Subdivision 1. Citation. This section shall be known as the Standard Valuation Law.
    Subd. 2. Valuation of reserves. The commissioner shall cause to be valued annually the
reserve liabilities, hereinafter called reserves, for all outstanding life insurance policies and annuity
and pure endowment contracts of every life insurance company doing business in this state,
except that in the case of a foreign or alien insurer such valuation shall be limited to its insurance
transactions in the United States, and may certify the amount of any such reserves, specifying the
mortality table or tables, rate or rates of interest and methods (net level premium method or other)
used in calculation of such reserves. In calculating such reserves, the commissioner may use group
methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of
the reserves herein required of any foreign or alien company, the commissioner may accept any
valuation made, or caused to be made, by the insurance supervisory official of any state or other
jurisdiction when such valuation complies with the minimum standard herein provided and if
the official of such state or jurisdiction accepts as sufficient and valid for all legal purposes the
certificate of valuation of the commissioner when such certificate states the valuation to have been
made in a specified manner according to which the aggregate reserves would be at least as large as
if they had been computed in the manner prescribed by the law of that state or jurisdiction. In the
case of insurance issued by a domestic insurer upon the lives of residents of a foreign country, the
commissioner may vary the mortality standard to a standard applicable to that country.
    Subd. 2a. Actuarial opinion of reserves; general. (a) Every life insurance company doing
business in this state shall annually submit the opinion of a qualified actuary as to whether the
reserves and related actuarial items held in support of the policies and contracts specified by
the commissioner by rule are computed appropriately, are based on assumptions which satisfy
contractual provisions, are consistent with prior reported amounts, and comply with applicable
laws of this state. The commissioner may by rule define the specifics of this opinion and add
any other items considered to be necessary to its scope. The opinion must be included in the
company's annual statement.
(b) The requirement to annually submit the opinion of a qualified actuary applies to service
plan corporations licensed under chapter 62C, to legal service plans licensed under chapter 62G,
and to all fraternal benefit societies except those societies paying only sick benefits not exceeding
$250 in any one year, or paying funeral benefits of not more than $350, or aiding those dependent
on a member not more than $350, nor any subordinate lodge or council which is, or whose
members are, assessed for benefits which are payable by a grand body.
(c) The opinion applies to all business in force, including individual and group health
insurance plans, and must be based on standards adopted by the Actuarial Standards Board. The
opinion must be acceptable to the commissioner in both form and substance.
(d) In the case of an opinion required to be submitted by a foreign or alien company, the
commissioner may accept the opinion filed by that company with the insurance supervisory
official of another state if the commissioner determines that the opinion reasonably meets the
requirements applicable to a company domiciled in this state.
(e) For the purposes of this section, "qualified actuary" means a member in good standing of
the American Academy of Actuaries who meets the requirements specified in the regulations.
(f) The board of directors of every insurer subject to this section shall appoint a qualified
actuary to sign its actuarial opinion. The appointment of the qualified actuary shall be approved
by the commissioner. The qualified actuary so appointed may be an employee of the insurer.
Notice of the appointment, including a copy of the board of directors' resolution, and the date of
appointment shall be filed with the commissioner. The notice may be filed before or at the time
the actuarial opinion is submitted. The notice shall state the qualifications of the actuary. If the
board appoints a new actuary to sign actuarial opinions during the year, the commissioner shall
be notified of the new appointment and the reason for change.
(g) Except in cases of fraud or willful misconduct, the qualified actuary is not liable for
damages to any person, other than the insurance company and the commissioner, for any act,
error, omission, decision, or conduct with respect to the actuary's opinion.
(h) A memorandum, in form and substance acceptable to the commissioner based on
standards adopted by the Actuarial Standards Board and on additional standards as the
commissioner may by rule prescribe, must be prepared to support each actuarial opinion.
(i) If the insurance company fails to provide a supporting memorandum at the request of the
commissioner within a period specified by the commissioner, or the commissioner determines
that the supporting memorandum provided by the insurance company fails to meet the standards
based on standards adopted by the Actuarial Standards Board and on additional standards as
the commissioner may by rule prescribe or is otherwise unacceptable to the commissioner, the
commissioner may engage a qualified actuary at the expense of the company to review the opinion
and the basis for the opinion and prepare the required supporting memorandum.
(j) Any memorandum in support of the opinion, and any other material provided by the
company to the commissioner in connection with the memorandum, must be kept confidential by
the commissioner and must not be made public and is not subject to subpoena, other than for the
purpose of defending an action seeking damages from any person by reason of any action required
by this section or by rules promulgated under this section. The memorandum or other material
may otherwise be released by the commissioner (1) with the written consent of the company or
(2) to the American Academy of Actuaries upon request stating that the memorandum or other
material is required for the purpose of professional disciplinary proceedings and setting forth
procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum
or other material. Once any portion of the confidential memorandum is cited by the company in
its marketing or is cited before any governmental agency other than a state insurance department
or is released by the company to the news media, all portions of the confidential memorandum
are no longer confidential.
    Subd. 2b. Actuarial analysis. (a) Every life insurance company, except as exempted by or
pursuant to regulation, shall also annually include in the opinion required under subdivision 2a,
paragraph (a), an opinion of the same qualified actuary as to whether the reserves and related
actuarial items, including page 3, line 10, of the annual statement, held in support of the policies
and contracts specified by the commissioner, when considered in light of the assets held by the
company with respect to the reserves and related actuarial items, including but not limited to the
investment earnings on the assets and the considerations anticipated to be received and retained
under the policies and contracts, make adequate provision for the company's obligations under the
policies and contracts, including but not limited to the benefits under and expenses associated
with the policies and contracts.
(b) The commissioner may provide by rule for a transition period for establishing any higher
reserves which the qualified actuary may consider necessary in order to give the opinion required
under subdivision 2a.
    Subd. 3. Minimum standards of valuation generally. Except as otherwise provided in
subdivisions 3a and 3b, the minimum standard for the valuation of the policies and contracts
issued prior to the operative date of Laws 1947, chapter 182, shall be that provided by the laws in
effect immediately prior to that date. Except as otherwise provided in subdivisions 3a and 3b, the
minimum standard for the valuation of the policies and contracts issued on or after the operative
date of Laws 1947, chapter 182, shall be the commissioners reserve valuation methods described
in subdivisions 4, 4a and 7, 3-1/2 percent interest, or in the case of policies and contracts, other
than annuity and pure endowment contracts, issued on or after April 11, 1974, four percent
interest for policies issued prior to August 1, 1978, 5-1/2 percent interest for single premium
life insurance policies and 4-1/2 percent interest for other policies issued on or after August
1, 1978, and the following tables:
(a) For all ordinary policies of life insurance issued on the standard basis, excluding any
disability and accidental death benefits in the policies, the Commissioners 1941 Standard
Ordinary Mortality Table for the policies issued prior to the operative date of section 61A.24,
subdivision 9
and the Commissioners 1958 Standard Ordinary Mortality Table for the policies
issued on or after the operative date of section 61A.24, subdivision 9, and prior to the operative
date of section 61A.24, subdivision 12; provided, that for any category of the policies issued on
female risks all modified net premiums and present values referred to in Laws 1959, chapter 26,
may be calculated according to an age not more than six years younger than the actual age of the
insured; and for policies issued on or after the operative date of section 61A.24, subdivision 12:
(1) the Commissioners 1980 Standard Ordinary Mortality Table; (2) 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 (3) any ordinary mortality
table, including any adopted after 1980 by the National Association of Insurance Commissioners,
that is approved by rule adopted by the commissioner for use in determining the minimum
standard of valuation for the policies.
(b) For all industrial life insurance policies issued on the standard basis, excluding any
disability and accidental death benefits in the policies, the 1941 Standard Industrial Mortality
Table for the policies issued prior to the operative date of section 61A.24, subdivision 11 and for
the policies issued on or after the operative date, the Commissioners 1961 Standard Industrial
Mortality Table or any industrial mortality table, including any adopted after 1980 by the National
Association of Insurance Commissioners, that is approved by rule adopted by the commissioner
for use in determining the minimum standard of valuation for the policies.
(c) For individual annuity and pure endowment contracts, excluding any disability and
accidental death benefits in the 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.
(d) For group annuity and pure endowment contracts, excluding any disability and accidental
death benefits in the policies, the Group Annuity Mortality Table for 1951, any modification of
the 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.
(e) For total and permanent disability benefits in or supplemental to ordinary policies or
contracts, for policies or contracts issued on or after January 1, 1966, the tables of period 2
disablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the
Society of Actuaries, with due regard to the type of benefit or any tables of disablement rates
and termination rates, including any adopted after 1980 by the National Association of Insurance
Commissioners, that are approved by rule adopted by the commissioner for use in determining
the minimum standard of valuation for the policies; for policies or contracts issued on or after
January 1, 1963, and prior to January 1, 1966, either the tables or, at the option of the company,
the class (3) disability table (1926); and for policies issued prior to January 1, 1963, the class
(3) disability table (1926). The table shall, for active lives, be combined with a mortality table
permitted for calculating the reserves for life insurance policies.
(f) For accidental death benefits in or supplementary to policies, for policies issued on or
after January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental death benefits
table, including any adopted after 1980 by the National Association of Insurance Commissioners,
that is approved by rule adopted by the commissioner for use in determining the minimum
standard of valuation for the policies; for policies issued on or after January 1, 1963, and prior to
January 1, 1966, either table or, at the option of the company, the Intercompany Double Indemnity
Mortality Table; and for policies issued prior to January 1, 1963, the Intercompany Double
Indemnity Mortality Table. Either table shall be combined with a mortality table permitted for
calculating the reserves for life insurance policies.
(g) For group life insurance, life insurance issued on the substandard basis and other special
benefits, any tables as may be approved by the commissioner.
    Subd. 3a. Minimum standard of valuation for annuities and pure endowment contracts.
Except as provided in subdivision 3b, the minimum standard for the valuation of all individual
annuity and pure endowment contracts issued on or after the operative date of this subdivision
and for all annuities and pure endowments purchased on or after this operative date under group
annuity and pure endowment contracts, shall be the commissioner's reserve valuation methods
defined in subdivisions 4 and 4a, and the following tables and interest rates:
(a) For individual annuity and pure endowment contracts issued prior to August 1, 1978,
excluding any disability and accidental death benefits in the contracts, the 1971 individual annuity
mortality table, or any modification of this table approved by the commissioner, and six percent
interest for single premium immediate annuity contracts, and four percent interest for all other
individual annuity and pure endowment contracts.
(b) For individual single premium immediate annuity contracts issued on or after August 1,
1978, excluding any disability and accidental death benefits in the contracts, the 1971 individual
annuity mortality table, any individual annuity mortality table, including any adopted after 1980
by the National Association of Insurance Commissioners, that is approved by rule adopted by the
commissioner for use in determining the minimum standard of valuation for the contracts, or any
modification of these tables approved by the commissioner, and 7-1/2 percent interest.
(c) For individual annuity and pure endowment contracts issued on or after August 1, 1978,
other than single premium immediate annuity contracts, excluding any disability and accidental
death benefits in the contracts, the 1971 individual annuity mortality table, any individual annuity
mortality table, including any adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by rule adopted by the commissioner for use in determining the
minimum standard of valuation for the contracts, or any modification of these tables approved
by the commissioner, and 5-1/2 percent interest for single premium deferred annuity and
pure endowment contracts and 4-1/2 percent interest for all other individual annuity and pure
endowment contracts.
(d) For all annuities and pure endowments purchased prior to August 1, 1978, under group
annuity and pure endowment contracts, excluding any disability and accidental death benefits
purchased under the contracts, the 1971 group annuity mortality table, or any modification of this
table approved by the commissioner, and six percent interest.
(e) For all annuities and pure endowments purchased on or after August 1, 1978, under
group annuity and pure endowment contracts, excluding any disability and accidental death
benefits purchased under the contracts, the 1971 group annuity mortality table, any group annuity
mortality table, including any adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by rule adopted by the commissioner for use in determining the
minimum standard of valuation for the annuities and pure endowments, or any modification of
these tables approved by the commissioner, and 7-1/2 percent interest.
After April 11, 1974, a company may file with the commissioner a written notice of its
election to comply with the provisions of this subdivision after a specified date before January 1,
1979, which shall be the operative date of this subdivision for the company. 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 election, the operative
date of this subdivision for the company shall be January 1, 1979.
    Subd. 3b. Computation of minimum standard by calendar year of issue. (a) The interest
rates used in determining the minimum standard for the valuation of the following shall be the
calendar year statutory valuation interest rates as defined in this subdivision:
(1) all life insurance policies issued in a particular calendar year, on or after the operative
date of section 61A.24, subdivision 12;
(2) all individual annuity and pure endowment contracts issued in a particular calendar year
on or after January 1, 1982;
(3) all annuities and pure endowments purchased in a particular calendar year on or after
January 1, 1982, under group annuity and pure endowment contracts; and
(4) the net increase, if any, in a particular calendar year after January 1, 1982, in amounts
held under guaranteed interest contracts.
(b) The calendar year statutory valuation interest rates, I, shall be determined as follows and
the results rounded to the nearer one-quarter of one percent:
(1) for life insurance, I = .03 + W (R1 - .03) + (W/2) (R2 - .09);
(2) for single premium immediate annuities and for annuity benefits involving life
contingencies arising from other annuities with cash settlement options and from guaranteed
interest contracts with cash settlement options, I = .03 + W (R - .03) where R1 is the lesser of R
and .09, R2 is the greater of R and .09, R is the reference interest rate defined in this subdivision,
and W is the weighting factor defined in this subdivision;
(3) 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 clause (2), the formula
for life insurance stated in clause (1) shall apply to annuities and guaranteed interest contracts
with guarantee durations in excess of ten years and the formula for single premium immediate
annuities stated in clause (2) shall apply to annuities and guaranteed interest contracts with
guarantee duration of ten years or less;
(4) 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
clause (2) shall apply;
(5) 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 clause (2) shall apply.
However, if the calendar year statutory valuation interest rate for life insurance policies
issued in a 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, the calendar year statutory valuation interest rate for the life
insurance policies shall be equal to the corresponding actual rate for the immediately preceding
calendar year.
For purposes of applying the immediately preceding sentence, the calendar year statutory
valuation interest rate for life insurance policies issued in a calendar year shall be determined
for 1980 using the reference interest rate defined for 1979 and shall be determined for each
subsequent calendar year regardless of when section 61A.24, subdivision 12 becomes operative.
(c) The weighting factors referred to in the formulas stated above are as follows:
(1) The weighting factors for life insurance are:
Guarantee Duration (Years)
Weighting Factors
ten or less
.50
more than ten, 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;
(2) The 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 is .80; and
(3) The weighting factors for other annuities and for guaranteed interest contracts, except
as stated in clause (2), shall be as specified in tables (i), (ii), and (iii), according to the rules
and definitions in (iv), (v), and (vi):
(i) For annuities and guaranteed interest contracts valued on an issue year basis:
Guarantee Duration (Years)
Weighting Factor for Plan Type
A
B
C
five or less:
.80
.60
.50
more than five, but not more than ten:
.75
.60
.50
more than ten, but not more than 20:
.65
.50
.45
more than 20:
.45
.35
.35
(ii)
Plan Type
A
B
C
For annuities and guaranteed interest
contracts valued on a change in fund
basis, the factors shown in (i) increased
by:
.15
.25
.05
(iii)
Plan Type
A
B
C
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 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 12 months beyond the valuation
date, the factors shown in (i) or derived
in (ii) increased by:
.05
.05
.05
(iv) For other annuities with cash settlement options and guaranteed interest contracts with
cash settlement options, the guarantee duration is the number of years for which the contract
guarantees interest rates in excess of the calendar year statutory valuation interest rate for life
insurance policies with guarantee duration in excess of 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.
(v) Plan type as used in the above tables is defined as follows:
Plan Type A: At any time policyholders 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, (2) without the adjustment but in installments over five years or more, or (3) as an
immediate life annuity.
Plan Type B: Before expiration of the interest rate guarantee, policyholders 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 the adjustment but in installments over
five years or more. At the end of interest rate guarantee, funds may be withdrawn without the
adjustment in a single sum or installments over less than five years.
Plan Type C: Policyholders may withdraw funds before expiration of interest rate guarantee
in a single sum or installments over less than five 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.
(vi) 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 must be valued on an issue year basis. As used in this subdivision, 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 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.
(d) The reference interest rate referred to in paragraph (b) shall be defined as follows:
(1) for all life insurance, the lesser of the average over a period of 36 months and the average
over a period of 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.;
(2) 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 12 months, ending on
June 30 of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield
Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.;
(3) for other annuities with cash settlement options and guaranteed interest contracts with
cash settlement options, valued on a year of issue basis, except as stated in clause (2), with
guarantee duration in excess of ten years, the lesser of the average over a period of 36 months
and the average over a period of 12 months, ending on June 30 of the calendar year of issue or
purchase, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published
by Moody's Investors Service, Inc.;
(4) for other annuities with cash settlement options and guaranteed interest contracts with
cash settlement options, valued on a year of issue basis, except as stated in clause (2), with
guarantee duration of ten years or less, the average over a period of 12 months, ending on June 30
of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly
Average Corporates, as published by Moody's Investors Service, Inc.;
(5) for other annuities with no cash settlement options and for guaranteed interest contracts
with no cash settlement options, the average over a period of 12 months, ending on June 30 of the
calendar year of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly Average
Corporates, as published by Moody's Investors Service, Inc.; and
(6) 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 clause (2), the
average over a period of 12 months, ending on June 30 of the calendar year of the change in the
fund, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published
by Moody's Investors Service, Inc.
(e) In the event that Moody's Corporate Bond Yield Average-Monthly Average Corporates is
no longer published by Moody's Investors Service, Inc., or in the event that the commissioner
determines that Moody's Corporate Bond Yield Average-Monthly Average Corporates as
published by Moody's Investors Service, Inc. is no longer appropriate for the determination of the
reference interest rate, then an alternative method for determination of the reference interest rate,
which has been approved by rule adopted by the commissioner, may be substituted.
    Subd. 4. Reserve valuation of life insurance and endowment benefits; modified
premiums. (a) Except as otherwise provided in paragraph (b) and subdivisions 4a and 7, reserves
according to the commissioners reserve valuation method, for the life insurance and endowment
benefits of policies providing for a uniform amount of insurance and requiring the payment of
uniform premiums shall be the excess, if any, of the present value at the date of valuation of future
guaranteed benefits provided for by the policies over the then present value of any future modified
net premiums therefor. The modified net premiums for a policy shall be the uniform percentage of
the respective contract premiums for the benefits that the present value, at the date of issue of the
policy, of all the modified net premiums shall be equal to the sum of the then present value of the
benefits provided for by the policy and the excess of clause (1) over clause (2) as follows:
(1) a net level annual premium equal to the present value, at the date of issue, of the 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 the policy on
which a premium falls due; but the net level annual premium shall not exceed the net level annual
premium on the 19 year premium whole life plan for insurance of the same amount at an age one
year higher than the age at issue of the policy;
(2) a net one year term premium for the benefits provided for in the first policy year.
(b) For a life insurance policy issued on or after January 1, 1985, 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 the excess and which provides an endowment
benefit or a cash surrender value or a combination thereof in an amount greater than the excess
premium, the reserve according to the commissioners reserve valuation method as of a 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 the excess premium shall, except as otherwise provided in subdivision 7,
be the greater of the reserve as of the policy anniversary calculated as described in paragraph (a)
and the reserve as of the policy anniversary calculated as described in that paragraph, but with the
value defined in clause (1) of that paragraph being reduced by 15 percent of the amount of the
excess first year premium; all present values of benefits and premiums being determined without
reference to premiums or benefits provided for by the policy after the assumed ending date; the
policy being assumed to mature on that date as an endowment; and the cash surrender value
provided on that date being considered as an endowment benefit. In making the above comparison
the mortality and interest bases stated in subdivisions 3 and 3b shall be used.
(c) Reserves according to the commissioners reserve valuation method for (1) life insurance
policies providing for a varying amount of insurance or requiring the payment of varying
premiums, (2) group annuity and pure endowment contracts purchased under a retirement plan
or plan of deferred compensation, established or maintained by an employer, including but not
limited to 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 amended, (3) disability and accidental death benefits
in all policies and contracts, and (4) all other benefits, except life insurance and endowment
benefits in life insurance policies and benefits provided by all other annuity and pure endowment
contracts, shall be calculated by a method consistent with the principles of paragraphs (a) and
(b), except that any extra premiums charged because of impairments or special hazards shall be
disregarded in the determination of modified net premiums.
(d) For a universal life insurance policy that guarantees coverage to remain in force
as long as the accumulation of premiums paid satisfies a secondary guarantee requirement,
reserves according to the commissioners reserve valuation method may be calculated using
a lapse assumption only in accordance with and in the circumstances described in the National
Association of Insurance Commissioners' accounting practices and procedures manual for policies
issued on or after January 1, 2007, and on or before December 31, 2010.
    Subd. 4a. Annuity and pure endowment contracts. This subdivision 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 but not limited to 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 amended.
Reserves according to the commissioner's annuity reserve method for benefits under annuity
or pure endowment contracts, excluding any disability and accidental death benefits in the
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 the 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 the contract, that become payable prior to the end of the 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 the contracts for determining guaranteed benefits.
The valuation considerations are the portions of the respective gross considerations applied under
the terms of the contracts to determine nonforfeiture values.
    Subd. 5. Minimum aggregate reserves. A company's aggregate reserves for all life
insurance policies, excluding disability and accidental death benefits, issued on or after the
operative date of Laws 1947, chapter 182, shall not be less than the aggregate reserves calculated
in accordance with the methods set forth in subdivisions 4, 4a, 7, and 8, and the mortality table or
tables and rate or rates of interest used in calculating nonforfeiture benefits for the policies.
In no event shall the aggregate reserves for all policies, contracts, and benefits be less than
the aggregate reserves determined by the qualified actuary to be necessary to render the opinion
required under subdivision 2a.
    Subd. 6. Calculation of reserves. (1) Reserves for all policies and contracts issued prior to
the operative date of Laws 1947, chapter 182, may be calculated, at the option of the company,
according to any standards which produce greater aggregate reserves for all such policies and
contracts than the minimum reserves required by the laws in effect immediately prior to such date.
(2) Reserves for any category of policies, contracts or benefits as established by the
commissioner, issued on or after the operative date of Laws 1947, chapter 182, may be calculated,
at the option of the company, according to any standards which produce greater aggregate reserves
for such category than those calculated according to the minimum standard herein provided, but
the rate or rates of interest used for policies and contracts, other than annuity and pure endowment
contracts, shall not be higher than the corresponding rate or rates of interest used in calculating
any nonforfeiture benefits provided for therein.
(3) Any such company which at any time shall have adopted any standard of valuation
producing greater aggregate reserves than those calculated according to the minimum standard
herein provided may, with the approval of the commissioner, adopt any lower standard of
valuation, but not lower than the minimum herein provided. For purposes of this section, the
holding of additional reserves previously determined by a qualified actuary to be necessary to
give the opinion required under subdivision 2a shall not be considered the adoption of a higher
standard of valuation.
    Subd. 7. Reserve calculation; valuation net premium exceeding the gross premium
charged. If in a contract year the gross premium charged by a life insurance company on a policy
or contract is less than the valuation net premium for the policy or contract calculated by the
method used in calculating the reserve thereon, but using the minimum valuation standards of
mortality and rate of interest, the minimum reserve required for the 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 the policy or contract, or the reserve calculated by the method actually
used for the 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 subdivision are those
standards stated in subdivisions 3 and 3b. However, for a life insurance policy issued on or after
January 1, 1985 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 the excess
and which provides an endowment benefit or a cash surrender value or a combination thereof
in an amount greater than the excess premium, the foregoing provisions of this subdivision
shall be applied as if the method actually used in calculating the reserve for the policy was the
method described in subdivision 4, ignoring subdivision 4, paragraph (b). The minimum reserve
at each policy anniversary of the policy shall be the greater of the minimum reserve calculated in
accordance with subdivision 4, including subdivision 4, paragraph (b), and the minimum reserve
calculated in accordance with this subdivision.
    Subd. 8. Reserve calculation; plans not covered by other subdivisions. In the case of a
plan of life insurance or annuity for which the minimum reserves cannot be determined by the
methods described in subdivisions 4, 4a, and 7, the reserves which are held under any plan must:
(a) be appropriate in relation to the benefits and the pattern of premiums for that plan, and
(b) be computed by a method which is consistent with the principles of this section as
determined by rules adopted by the commissioner.
    Subd. 9. Minimum standards for health, disability, accident, and sickness plans. The
commissioner may adopt a rule containing the minimum standards applicable to the valuation of
health, disability, accident, and sickness plans.
History: 1967 c 395 art 2 s 25; 1974 c 433 s 3,4; 1978 c 662 s 7-13; 1982 c 589 s 15-21;
1986 c 444; 1991 c 325 art 7 s 1-5; 2007 c 104 s 4