Ala. Code § 27-36A-16 (1975) Requirements of a Principle-Based Valuation

• Library: Alabama Statutes
• Edition: 2023
• Currency: Current with legislation from the 2023 Regular and Special Sessions.
• Year: 2023
• Citation: Ala. Code § 27-36A-16 (1975)

(a) A company must establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:

(1) Quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For polices or contracts with significant tail risk, reflects conditions appropriately adverse to quantify the tail risk.

(2) Incorporate assumptions, risk analysis methods and financial models, and management techniques that are consistent with, but not necessarily identical to, those utilized within the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods.

(3) Incorporate assumptions that are derived in one of the following manners:

a. The assumption is prescribed in the valuation manual.

b. For assumptions that are not prescribed, the assumptions shall either:

1. Be established utilizing the company's available experience, to the extent it is relevant and statistically credible.

2. To the extent that company data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience.