Chap. 179.—An ACT to amend and re-enact Section 4257 of the Code of Virginia
as heretofore amended, relating to reserves, and the valuation of policies ans
contracts, of life insurance companies. [H B 237.

Approved March 11, 1942

1. Be it enacted by the General Assembly of Virginia, That sectiot
forty-two hundred and fifty-seven of the Code of Virginia, as heretofor
amended, be amended and re-enacted so as to read as follows:

Section 4257. State Corporation Commission to Value Policies—
Legal Standard of Valuation——(a) The State Corporation Commissiot
shall annually make valuations of all outstanding policies, additions there
to, and all other insurance and annuity contracts of all life insurance com:
panies doing business in this State, except as otherwise provided, and fot
this purpose may require said companies to furnish, under oath, such in-
formation as may be necessary to enable it to make such valuation. The
commission shall keep in its office a record of all valuations made and shal
certify same at the request of any company for which a valuation has beer
made. All valuations made by the commission, or by its authority, shal.
be made upon the net premium basis, and in every case in which the actual
annual premium charged for an insurance is less than the net annua
premium for such insurance, computed as specified in this section, the
company shall set up an additional reserve equal to the value of an an-
nuity of the difference between the actual premium charged and the net
premium required by this section, and the term of which at the date of the
valuation shall equal the period during which future premium payments
are to become due on the insurance, and such annuity shall be valued ac-
cording to the table of mortality with the rate of interest at which such net
annual premium is calculated. 1 t

(b) The legal minimum standard for the valuation of life insur-
ance contracts issued prior to the first day of January, nineteen hundred
and thirty-seven, shall be on the basis of the American Experience Table
of Mortality, with interest at four per centum per annum, and strictly in
accordance with the terms and conditions of said contracts, and for life
insurance contracts issued on and after said date shall be the one year
preliminary term method of valuation, as hereinafter modified, on the
basis of the American Experience Table of. Mortality, with interest at
three and one-half per centum per annum. : , So

(c) If the net renewal premium under a limited payment life pre-
liminary term policy providing for the payment of less than twenty an-
nual premiums thereon, or under an endowment preliminary term policy,
exceeds that under a twenty payment life preliminary term policy, the
reserve for such policy at the end of any year, including the first, shall be
not less than the reserve on a twenty payment life preliminary term policy
issued in the same year and at the same age, together with an amount
which shall be equivalent tothe accumulation of a net level premium
sufficient to provide for a pure endowment maturing one year after the
late on which the last annual premium is due, or at the end of twenty
years if the policy provides for the payment of premiums for more than
wenty years, equal to the difference between the value on such maturity
date of such a twenty payment life preliminary term policy and the full
net level premium reserve at such time of such a limited payment life or
endowment policy. Policies valued by the above method shall contain a
clause specifying either that the reserve thereof shall be computed in ac-
cordance with the twenty payment life modification of the preliminary
term method of valuation, or that the first year’s insurance is term insur-
ance. : :
(d) The legal minimum standard for the valuation of annuities
issued on and after the first day of January, nineteen hundred and thirty-
seven shall be the Combined Annuity Table, with interest at four per
centum per annum, but annuities deferred ten or more years and written
in connection with life insurance shall be valued on the same basis as
that used in computing the consideration or premiums therefor, or upon
any higher standard, at the option of the company.

~ (e) The legal minimum standard for the calculation of the reserve
liability for insurance against disability incorporated in life insurance
policies issued on and after the first day of January, nineteen hundred and
thirty-seven, shall be on the basis of any table adopted by the company
and approved by the State Corporation Commission, with interest at three
and one-half per centum per annum; provided, that in no case shall said
liability be less than one-half of the net annual premium for the disability
benefit computed by such table. The commission may. accept a certificate
of valuation from the company for the reserve liability for the disability
provision if the commission is satisfied (by the use of general averages and
percentages) that such reserve has been computed in accordance with
the foregoing rule.

, (f{) The legal standard for the valuation of group insurance written
as yearly renewable term insurance issued on and after the first day of
January, nineteen hundred and thirty-seven, shall be on the basis of the
American Men Ultimate Table of Mortality, with interest at three and
one-half per centum per annum. Ee ,

(g) The legal minimum standard for the valuation of industrial
policies, issued on and after the first day of January, nineteen hundred
and thirty-seven, shall be the American Experience Table of Mortality,
with interest at three and one-half per centum per annum, provided, that
any life insurance company may voluntarily value its industrial policies
on the basis of the standard industrial mortality table or the substandard
industrial mortality table, and by level net premium method or in accord-
ance with their terms by the modified preliminary term method herein-
above described, or the full preliminary term method. oo :

All industrial policies issued on and after the date set forth herein
shall be valued under the rules set forth in this section, whether or not
such policies provide for surrender values, either in cash, paid up insur-
ance or extended insurance.

(h) Any life insurance company may voluntarily value its policies,
or any class thereof, according to either the American Experience Table
of Mortality or the American Men Ultimate Table of Mortality, and at a
lower tate of interest than that above prescribed ; and upon either the level
net premium or the modified preliminary term method of valuation pro-
cus. 179; 180] ACTS OF ASSEMBLY 235

vided for herein; and in every such case shall report the standards used
by it in making the same to the State Corporation Commission in its
annual statement, provided that no policy valuation standard previously
adopted shall be abandoned for a standard producing a lower aggregate
reserve for the policies to which it applies without the consent of the
commission first obtained in writing. ,

(1) The commission may vary the standards of interest and mor-
tality in the case of alien companies as to contracts issued by such com-
panies in other countries than the United States, and in particular cases
of invalid lives and other extra hazards; may value policies in groups,
use approximate averages for fractions of a year and otherwise, and may
accept the valuation of the insurance department of any other State or
country, if made upon a basis and according to standards producing a
reserve not lower than herein required or authorized, instead of the valu-
ation herein required if the insurance official of such State or country
accept as sufficient and valid for all purposes the certificate of valuation
of the commission of this State. .

(j) The commission is hereby authorized to assess against every
company whose policies are valued, a sum not exceeding one cent for
each one thousand dollars of insurance in force, which shall be paid into
the treasury of the Commonwealth, as provided in section forty-one hun-
dred and ninety-seven, and placed by the State Comptroller to the credit
of the fund for the maintenance of the Bureau of Insurance. Every com-
pany organized under the laws of another State or country shall furnish
to the commission, at the time of filing its annual statement, a certificate
from the Commissioner of Insurance (or similar officer), of that State or
country, that he has made a valuation of the policies of said company in
force on December thirty-first, and that he finds the value of said policies
to be as reported in the company’s annual statement. Any company fail-
ing to furnish such certificate shall have its policies valued by the com-
mission, as above provided.

(k) Nothing in this section shall be construed to apply to fraternal
benefit societies, as defined and regulated in chapter one hundred and
seventy-one, nor to industrial sick benefit companies as defined and regu-
lated in chapter one hundred and seventy-five.