DEPARTMENT OF REGULATORY AGENCIES
Division of Insurance
3 CCR 702-4
Life, accident and health
Amended Regulation 4-1-13
PERMITTING THE RECOGNITION OF PREFERRED MORTALITY TABLES FOR USE IN DETERMINING MINIMUM RESERVE LIABILITIES
Section 1	Authority
Section 2	Scope and Purpose
Section 3	Applicability
Section 4	Definitions
Section 5	2001 CSO Preferred Class Structure Table
Section 6	Conditions
Section 7	Severability
Section 8	Incorporated Materials
Section 9	Enforcement
Section 10	Effective Date
Section 11	History
Section 1	Authority
This regulation is promulgated and adopted by the Commissioner of Insurance under the authority of §§ 10-1-109 and 10-7-309(1)(a)(III), C.R.S. and Sections 5A and 5B of Colorado Insurance Regulation 4-1-9.
Section 2	Scope and Purpose
The purpose of this regulation is to recognize, permit and prescribe the use of mortality tables that reflect differences in mortality between preferred and standard lives in determining minimum reserve liabilities in accordance with §10-7-309(1)(a)(III), C.R.S. and Sections 5A and 5B of Colorado Insurance Regulation 4-1-9.
Section 3	Applicability
This regulation is applicable to all foreign or domestic life and fraternal insurers.
Section 4	Definitions
A.	“2001 CSO Mortality Table” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the National Association of Insurance Commissioners (NAIC) in December 2002. The 2001 CSO Mortality Table is included in the Proceedings of the NAIC (2nd Quarter 2002) and supplemented by the 2001 CSO Preferred Class Structure Mortality Table defined below in Subsection B of this section. Unless the context indicates otherwise, the “2001 CSO Mortality Table” includes both the ultimate form of that table and the select and ultimate form of that table and includes both the smoker and nonsmoker mortality tables and the composite mortality tables. It also includes both the age-nearest-birthday and age-last-birthday bases of the mortality tables. Mortality tables in the 2001 CSO Mortality Table include the following:
1.	“2001 CSO Mortality Table (F)” means that mortality table consisting of the rates of mortality for female lives from the 2001 CSO Mortality Table.
2.	“2001 CSO Mortality Table (M)” means that mortality table consisting of the rates of mortality for male lives from the 2001 CSO Mortality Table.
3.	“Composite mortality tables” means mortality tables with rates of mortality that do not distinguish between smokers and nonsmokers.
4.	“Smoker and nonsmoker mortality tables” means mortality tables with separate rates of mortality for smokers and nonsmokers.
B.	“2001 CSO Preferred Class Structure Mortality Table” means mortality tables with separate rates of mortality for super preferred nonsmoker, preferred nonsmoker, residual standard nonsmoker, preferred smoker, and residual standard smoker splits of the 2001 CSO Nonsmoker and Smoker Tables as adopted by the NAIC at the September, 2006 National Meeting and published in the NAIC Proceedings (3rd Quarter 2006). Unless the context indicates otherwise, the “2001 CSO Preferred Class Structure Mortality Table” includes both the ultimate form of that table and the select and ultimate form of that table. It includes both the smoker and nonsmoker mortality tables. It includes both the male and female mortality tables and the gender composite mortality tables. It also includes both the age-nearest-birthday and age-last-birthday bases of the mortality table.
C.	“Statistical agent” means an entity with proven systems for protecting the confidentiality of individual insured and insurer information; demonstrated resources for and history of ongoing electronic communications and data transfer ensuring data integrity with insurers, which are its members or subscribers; and a history of and means for aggregation of data and accurate promulgation of the experience modifications in a timely manner.
Section 5	2001 CSO Preferred Class Structure Table
At the election of the company, for each calendar year of issue, for any one or more specified plans of insurance and subject to satisfying the conditions stated in this regulation, the 2001 CSO Preferred Class Structure Mortality Table may be substituted in place of the 2001 CSO Smoker or Nonsmoker Mortality Table as the minimum valuation standard for policies issued on or after January 1, 2007.  For policies issued on or after February 1, 2004 and prior to January 1, 2007, the 2001 CSO Preferred Class Structure Mortality Table may be substituted with the consent of the Commissioner and subject to the conditions of Section 6 of this regulation.  In determining such consent, the Commissioner shall consider the consent of the insurance regulatory authority of the company’s state of domicile.  No such election shall be made until the company demonstrates at least 20% of the business to be valued on this table is in one or more of the preferred classes. A table from the 2001 CSO Preferred Class Structure Mortality Table used in place of a 2001 CSO Mortality Table, pursuant to the requirements of this rule, will be treated as part of the 2001 CSO Mortality Table only for purposes of reserve valuation pursuant to the requirements of Colorado Insurance Regulation 4-1-10.
Section 6	Conditions
A.	For each plan of insurance with separate rates for preferred and standard nonsmoker lives, an insurer may use the super preferred nonsmoker, preferred nonsmoker, and residual standard nonsmoker tables to substitute for the nonsmoker mortality table found in the 2001 CSO Mortality Table to determine minimum reserves. At the time of election and annually thereafter, except for business valued under the residual standard nonsmoker table, the appointed actuary shall certify that:
1.	The present value of death benefits over the next ten years after the valuation date, using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the valuation basic table corresponding to the valuation table being used for that class.
2.	The present value of death benefits over the future life of the contracts, using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the valuation basic table corresponding to the valuation table being used for that class.
B.	For each plan of insurance with separate rates for preferred and standard smoker lives, an insurer may use the preferred smoker and residual standard smoker tables to substitute for the smoker mortality table found in the 2001 CSO Mortality Table to determine minimum reserves. At the time of election and annually thereafter, for business valued under the preferred smoker table, the appointed actuary shall certify that:
1.	The present value of death benefits over the next ten years after the valuation date, using the anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the preferred smoker valuation basis table.
2.	The present value of death benefits over the future life of the contracts, using anticipated mortality experience without recognition of mortality improvement beyond the valuation date for each class, is less than the present value of death benefits using the preferred smoker valuation basic table.
C.	Unless exempted by the Commissioner, every authorized insurer using the 2001 CSO Preferred Class Structure Table shall annually file with the Commissioner, with the NAIC, or with a statistical agent designated by the NAIC and acceptable to the Commissioner, statistical reports showing mortality and such other information as the Commissioner may deem necessary or expedient for the administration of the provisions of this regulation.  The form of the reports shall be established by the Commissioner or the Commissioner may require the use of a form established by the NAIC or by a statistical agent designated by the NAIC and acceptable to the Commissioner.
Section 7	Severability
If any provision of this regulation or its application to any person or circumstance is for any reason held to be invalid, the remainder of the regulation shall not be affected.
Section 8	Incorporated Materials
The 2001 CSO Mortality Table and 2001 CSO Preferred Class Structure Mortality Table shall mean the 2001 CSO Mortality Table and 2001 CSO Preferred Class Structure Mortality Table as adopted on the effective date of this regulation and does not include later amendments to or editions of the 2001 CSO Mortality Table and 2001 CSO Preferred Class Structure Mortality Table.  A copy of the 2001 CSO Mortality Table and 2001 CSO Preferred Class Structure Mortality Table may be examined at any state publications depository library.  For additional information regarding how the 2001 CSO Mortality Table and 2001 CSO Preferred Class Structure Mortality Table may be obtained or examined contact the Chief Actuary, Colorado Division of Insurance, 1560 Broadway, Suite 850, Denver, Colorado, 80202.
Section 9	Enforcement
Noncompliance with the Regulation may result, after proper notice and hearing, in the imposition of any of the sanctions made available in the Colorado statutes pertaining to the business of insurance or other laws, which include the imposition of fines, issuance of cease and desist orders, and/or suspensions or revocation of licenses.  Among others, the penalties provided for in §10-3-1108, C.R.S. may be applied.
Section 10	Effective Date
This amended regulation is effective November 1, 2010.
Section 11	History
New regulation, effective February 1, 2007.
Amended regulation 4-1-13, effective March 2, 2010.
Amended regulation 4-1-13, effective November 1, 2010.