S.D. Admin. R. 20:06:30:18

Current through Register Vol. 51, page 57, November 12, 2024

Section 20:06:30:18 - Exemptions

Sections 20:06:30:13 to 20:06:30:20, inclusive, do not apply to the reinsurance situations described in the following :

(1) Reinsurance of:

(a) A policy that satisfy the criteria for an exemption under the attained-age-based yearly renewable term life insurance policies exemption or the unitary reserves for certain yearly renewable term life insurance policies, as defined and set forth in Appendix A-830 of the Accounting Practices and Procedures Manual, as adopted under SDCL 58-6-75 and § 20:06:25:01, and which are issued before the later of:

(i) The effective date of §§ 20:06:30:13 to 20:06:30:20, inclusive; and

(ii) The date on which the ceding insurer begins to apply the provisions of VM-20 to establish the ceded policy's statutory reserves;

(b) Portions of a policy that satisfy the criteria for an exemption the yearly renewable term reinsurance exemption as defined and set forth in in Appendix A-830 of the Accounting Practices and Procedures Manual, as adopted under SDCL 58-6-75 and § 20:06:25:01, and which are issued before the later of:

(i) The effective date of §§ 20:06:30:13 to 20:06:30:20, inclusive; and

(ii) The date on which the ceding insurer begins to apply the provisions of VM-20 to establish the ceded policy's statutory reserves;

(c) Any universal life policy that meets all of the following requirements:

(i) Secondary guarantee period, if any, is five years or less;

(ii) Specified premium for the secondary guarantee period is not less than the net level reserve premium for the secondary guarantee period based on the Commissioners Standard Ordinary valuation tables and valuation interest rate, as listed in the NAIC Valuation Manual, adopted under SDCL 58-26-45.1, applicable to the issue year of the policy; and

(iii) The initial surrender charge is not less than one hundred percent of the first year annualized specified premium for the secondary guarantee period;

(d) Credit life insurance;

(e) Any variable life insurance policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts; or

(f) Any group life insurance certificate unless the certificate provides for a stated or implied schedule of maximum gross premiums required in order to continue coverage in force for a period in excess of one year;

(2) Reinsurance ceded to an assuming insurer that meets the applicable requirements of SDCL 58-14-11 to 58-14-15, inclusive;

(3) Reinsurance ceded to an assuming insurer that meets the applicable requirements of SDCL 58-14-8 to 58-14-10, inclusive, and that, in addition:

(a) Prepares statutory financial statements in compliance with the Accounting Practices and Procedures Manual, as adopted by the director under SDCL 58-6-75 and § 20:06:25:01, without any departures from NAIC statutory accounting practices and procedures pertaining to the admissibility or valuation of assets or liabilities that increase the assuming insurer's reported surplus and are material enough that they need to be disclosed in the financial statement of the assuming insurer pursuant to Statement of Statutory Accounting Principles No. 1; and

(b) Is not in a company action level event, regulatory action level event, authorized control level event, or mandatory control level event as those terms are defined in §§ 20:06:36:01 to 20:06:36:28, inclusive, when its risk-based capital (RBC) is calculated in accordance with the life RBC report including overview and instructions for companies, as adopted by the director under SDCL 58-4-48 and chapter 20:06:36, as the same may be amended by the NAIC from time to time, without deviation;

(4) Reinsurance ceded to an assuming insurer that meets the applicable requirements of SDCL 58-14-8 to 58-14-10, inclusive, and that, in addition:

(a) Is not an affiliate, as that term is defined in § 20:06:36:01, of:

(i) The insurer ceding the business to the assuming insurer; or

(ii) Any insurer that directly or indirectly ceded the business to that ceding insurer;

(b) Prepares statutory financial statements in compliance with the Accounting Practices and Procedures Manual, as adopted under SDCL 58-6-75 and § 20:06:25:01;

(c) Is both:

(i) Licensed or accredited in at least ten states, including its state of domicile; and

(ii) Not licensed in any state as a captive, special purpose vehicle, special purpose financial captive, special purpose life reinsurance company, limited purpose subsidiary, or any other similar licensing regime; and

(d) Is not, or would not be, below five hundred percent of the authorized control level RBC as that term is defined in §§ 20:06:36:01 to 20:06:36:28, inclusive, when its RBC is calculated in accordance with the life RBC report including overview and instructions for companies, as adopted by the director under SDCL 58-4-48 and chapter 20:06:36, as the same may be amended by the NAIC from time to time, without deviation, and without recognition of any departures from NAIC statutory accounting practices and procedures pertaining to the admission or valuation of assets or liabilities that increase the assuming insurer's reported surplus;

(5) Reinsurance ceded to an assuming insurer that meets the requirements of SDCL 5814-16.24 to 58-14-16.34, inclusive, or the assuming insurer is operating in accordance with provisions sustainably equivalent to SDCL 58-14-16.24 to 58-14-16.34, inclusive, in a minimum of five other states; or

(6) Reinsurance not otherwise exempt under subdivisions 20:06:30:18(1) to 20:06:30:18(5), inclusive, if the director, after consulting with the NAIC Financial Analysis Working Group (FAWG) or other group of regulators designated by the NAIC, as applicable, determines under all the facts and circumstances that all of the following apply:

(a) The risks are clearly outside of the intent and purpose of §§ 20:06:30:13 to 20:06:30:20, inclusive;

(b) The risks are included within the scope of §§ 20:06:30:13 to 20:06:30:20, inclusive, only as a technicality; and

(c) The application of §§ 20:06:30:13 to 20:06:30:20, inclusive, to those risks is not necessary to provide appropriate protection to policyholders. The director shall publicly disclose any decision made pursuant to this subdivision to exempt a reinsurance treaty from §§ 20:06:30:13 to 20:06:30:20, inclusive, as well as the general basis therefor, including a summary description of the treaty.

S.D. Admin. R. 20:06:30:18

49 SDR 009, effective 8/9/2022

General Authority: SDCL 58-14-17.

Law Implemented: SDCL 58-14-17.