DEPARTMENT OF REGULATORY AGENCIES
Division of Insurance
3 CCR 702-4
Life, accident and health
Amended Regulation 3-1-8
CONCERNING ACTUARIAL OPINIONS AND MEMORANDUMS FOR LIFE COMPANIES AND FRATERNAL BENEFIT SOCIETIES
Section 1	Authority
Section 2	Scope and Purpose
Section 3	Applicability
Section 4	Definitions
Section 5	General Requirements
Section 6	Statement of Actuarial Opinion Based On Asset Adequacy Analysis
Section 7	Description of Actuarial Memorandum Including an Asset Adequacy Analysis and Regulatory Asset Adequacy Issues Summary
Section 8	Severability
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 §§10-1-108(7), 10-1-109, 10-7-114, and 10-14-505, C.R.S.
Section 2	Scope and Purpose
The purpose of this regulation is to prescribe:
A.	Guidelines and standards for statements of actuarial opinion, which are to be submitted in accordance with §§10-7-114 and 10-14-602, C.R.S. and for memorandums submitted in support thereof; 
B.	Rules applicable to the appointment of an appointed actuary; and
C.	Guidance as to the meaning of “adequacy of reserves.”
Section 3	Applicability
This regulation shall apply to all life insurance companies and fraternal benefit societies doing business in this State and to all life insurance companies and fraternal benefit societies that are authorized to reinsure life insurance, annuities or accident and health insurance business in this State.  This regulation shall be applied in a manner that allows the appointed actuary to utilize his or her professional judgment in performing the asset adequacy analysis and developing the actuarial opinion and supporting memoranda, consistent with relevant actuarial standards of practice.  However, the Commissioner shall have the authority to specify specific methods of actuarial analysis and actuarial assumptions when, in the Commissioner’s judgment, these specifications are necessary for an acceptable opinion to be rendered relative to the adequacy of reserves and related items; see Section 7D of this regulation for requirements specific to companies domiciled in the State of Colorado. 
This regulation shall be applicable to all annual statements filed with the office of the Commissioner after the effective date of this regulation.  A statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with Section 6 of this regulation, and a memorandum in support thereof in accordance with Section 7 of this regulation, shall be required each year.
Section 4	Definitions
A.	“Actuarial Opinion” means the opinion of an appointed actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with Section 6 of this regulation and with applicable Actuarial Standards of Practice.
B.	“Actuarial Standards Board” means the board established by the American Academy of Actuaries to develop and promulgate actuarial standards of practice.  
C.	“Actuarial Standards of Practice” means the Actuarial Standards of Practice and Compliance Guidelines as promulgated by the Actuarial Standards Board.  
D.	“Annual statement” means that statement required by §§10-3-208 and 10-14-602, C.R.S. to be filed annually, by the company, with the Commissioner.
E.	“Appointed actuary” means an individual who is appointed or retained in accordance with the requirements set forth in Section 5B of this regulation to provide the actuarial opinion and supporting memorandum as required by this regulation and §10-7-114, C.R.S.  
F.	“Asset adequacy analysis” means an analysis that meets the standards and other requirements referred to in Section 5C of this regulation.  It may take many forms, including, but not limited to, cash flow testing, sensitivity testing or applications of risk theory.   
G.	“Commissioner” means the Insurance Commissioner of the State of Colorado.
H.	“Company” means a life insurance company, fraternal benefit society or reinsurer subject to the provisions of this regulation.
I.	“Qualified actuary” means an individual who meets the requirements set forth in §10-7-114 (1)(e), C.R.S.
Section 5	General Requirements
A.	Submission of Statement of Actuarial Opinion 
1.	There is to be included on or attached to Page 1 of the annual statement for each year beginning with the year in which this regulation becomes effective the statement of an appointed actuary, entitled “Statement of Actuarial Opinion,” setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with Section 6 of this regulation.
2.	Upon written request and showing adequate justification by the company, the Commissioner may grant an extension of the date for submission of the Statement of Actuarial Opinion.  Actuarial Opinions not received by the required filing date, or approved extended date, shall be subject to a penalty of up to $100.00 per day.
B.	Appointed Actuary.  An “appointed actuary” is a qualified actuary who is appointed or retained to prepare the Statement of Actuarial Opinion required by this regulation, either directly by or by the authority of the board of directors through an executive officer of the company other than the qualified actuary.  The company shall give the Commissioner timely written notice of the name, title (and, in the case of a consulting actuary, the name of the firm) and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in the notice that the person meets the requirements set forth in §10-7-114(1)(e), C.R.S.  Once notice is furnished, no further notice is required with respect to this person, provided that the company shall give the Commissioner timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements set forth in §10-7-114(1)(e), C.R.S.  If any person appointed or retained as an appointed actuary replaces a previously appointed actuary, the notice shall so state and give the reasons for replacement. 
C.	Standards for Asset Adequacy Analysis. The asset adequacy analysis required by this regulation:
1.	Shall conform to the Standards of Practice as promulgated from time to time by the Actuarial Standards Board, and on any additional standards under this regulation, which standards are to form the basis of the Statement of Actuarial Opinion in accordance with this regulation; and
2.	Shall be based on methods of analysis as are deemed appropriate for such purposes by the Actuarial Standards Board.
D.	Liabilities to be Covered.
1.	Under authority of §10-7-114(1)(b), C.R.S., the Statement of Actuarial Opinion shall apply to all in force business on the statement date, whether directly issued or assumed, regardless of when or where issued, e.g., reserves of Exhibits 5, 6 and 7, and claim liabilities in Exhibit 8, Part 1 of the Annual Statement and equivalent items in the separate account statement or statements.
2.	If the appointed actuary determines, as the result of asset adequacy analysis, that a reserve should be held in addition to the aggregate reserve held by the company, and calculated in accordance with methods set forth in Article 7 of Title 10, C.R.S., the company shall establish the additional reserve.
3.	Additional reserves established under Paragraph (2) above and deemed not necessary in subsequent years may be released.  Any amounts released shall be disclosed in the actuarial opinion for the applicable year.  The release of such reserves would not be deemed an adoption of a lower standard of valuation.
Section 6	Statement of Actuarial Opinion Based On Asset Adequacy Analysis
A.	General Description. The Statement of Actuarial Opinion submitted in accordance with this section shall consist of:
1.	A paragraph identifying the appointed actuary and his or her qualifications (see Subsection B(1) of this regulation);
2.	A scope paragraph identifying the subjects on which an opinion is to be expressed, and describing the scope of the appointed actuary’s work, including a tabulation delineating the reserves and related actuarial items that have been analyzed for asset adequacy and the method of analysis, (see Subsection B(2) of this regulation) and identifying the reserves and related actuarial items covered by the opinion that have not been so analyzed;
3.	A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, (e.g., anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios (see Subsection B(3)), supported by a statement of each such expert in the form prescribed by Subsection E; and
4.	An opinion paragraph expressing the appointed actuary’s opinion with respect to the adequacy of the supporting assets to mature the liabilities (see Subsection B(4) of this regulation).
5.	One or more additional paragraphs will be needed in individual company cases as follows:
a.	If the appointed actuary considers it necessary to state a qualification of his or her opinion;
b.	If the appointed actuary must disclose an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for this opinion;
c.	If the appointed actuary must disclose whether additional reserves as of the prior opinion date are released as of this opinion date, and the extent of the release; and/or
d.	If the appointed actuary chooses to add a paragraph briefly describing the assumptions that form the basis for the actuarial opinion.
B.	Recommended Language. The following paragraphs are to be included in the Statement of Actuarial Opinion in accordance with this section.  Language is that which in typical circumstances should be included in a Statement of Actuarial Opinion.  The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary should use language that clearly expresses his or her professional judgment.  However, in any event the opinion shall retain all pertinent aspects of the language provided in this section.
1.	The opening paragraph should generally indicate the appointed actuary’s relationship to the company and his or her qualifications to sign the opinion.  For a company actuary, the opening paragraph of the actuarial opinion should include a statement such as:
“I, [name], am [title] of [insurance company name] and a member of the American Academy of Actuaries.  I was appointed by, or by the authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the Commissioner dated [insert date].  I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”
For a consulting actuary, the opening paragraph should include a statement such as:
“I, [name], a member of the American Academy of Actuaries, am associated with the firm of [name of consulting firm].  I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the Commissioner dated [insert date].  I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”
2.	The scope paragraph should include a statement such as:
“I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, 20[ ].  Tabulated below are those reserves and related actuarial items which have been subjected to asset adequacy analysis.
3.	If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph should include a statement such as:
“I have relied on [name], [title] for [e.g., “anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios” or “certain critical aspects of the analysis performed in conjunction with forming my opinion”], as certified in the attached statement.  I have reviewed the information relied upon for reasonableness.”
A statement of reliance on other experts should be accompanied by a statement by each of the experts in the form prescribed by Section 6E.
4.	If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph should include a statement such as:
“My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and such tests of the actuarial calculations as I considered necessary.  I also reconciled the underlying basic asset and liability records to [exhibits and schedules listed as applicable] of the company’s current annual statement.”
5.	If the appointed actuary has not examined the underlying records, but has relied upon data (e.g., listings and summaries of policies in force or asset records) prepared by the company, the reliance paragraph should include a statement such as:
“In forming my opinion on [specify types of reserves], I relied upon data prepared by [name and title of company officer certifying in force records or other data] as certified in the attached statements.  I evaluated that data for reasonableness and consistency.  I also reconciled that data to [exhibits and schedules to be listed as applicable] of the company’s current annual statement.  In other respects, my examination included review of the actuarial assumptions and actuarial methods used and tests of the calculations I considered necessary.”
The section shall be accompanied by a statement by each person relied upon in the form prescribed by Subsection 6E of this regulation.
6.	The opinion paragraph should include a statement such as:
“In my opinion the reserves and related actuarial values concerning the statement items identified above:
a.	Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;
b.	Are based on actuarial assumptions that produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;
c.	Meet the requirements of the Insurance Law and Regulation of the State of [state of domicile]; and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;
d.	Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end (with any exceptions noted below); and
e.	Include provision for all actuarial reserves and related statement items which ought to be established.
The reserves and related items, when considered in light of the assets held by the company with respect to such 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, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company.
The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Actuarial Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion.
This opinion is updated annually as required by statute.  To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion.”
or
“The following material change(s) which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: (Describe the change or changes.)”
Note: Choose one of the above two paragraphs, whichever is applicable.
“The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion.  The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company’s future experience may not follow all the assumptions used in the analysis.”

________________________________________
Signature of Appointed Actuary

_______________________________________
Address of Appointed Actuary

_______________________________________
Telephone Number of Appointed Actuary

_______________________________________
Date
Note: This table must be included in the actuarial opinion filed.  

Asset Adequacy Tested Amounts—Reserves and Liabilities	

Statement Item	
Formula Reserves (1)	(a)
Additional Actuarial Reserves  (2)	(b)
Analysis Method 	
Other Amount (3)	Total Amount (1)+(2)+(3)
(4)	
Exhibit 5
A Life Insurance						
B Annuities						
C Supplementary Contracts Involving Life Contingencies						
D Accidental Death Benefit						
E Disability – Active						
F Disability – Disabled						
G Miscellaneous						
Total (Exhibit 5, Item 1, Page 3)						
Exhibit 6
A Active Life Reserve						
B Claim Reserve						
Total (Exhibit 6, Item 2, Page 3)						
Exhibit 7
Premium and Other Deposit Funds (Column 5, Line 14)						
Guaranteed Interest Contracts (Column 2, Line 14)						
Other (Column 6, Line 14)						
Supplemental Contracts and Annuities Certain (Column 3, Line 14)						
Dividend Accumulations or Refunds (Column 4, Line 14)						
Total (Exhibit 7, Column 1, Line 14)						
Exhibit 8, Part 1
Life (Page 3, Line 4.1)						
Health (Page 3, Line 4.2)						
Total (Exhibit 11, Part 1)						
Separate Accounts
(Page 3 of the Annual Statement, Line 27)						
TOTAL RESERVES						

IMR (General Account, Page 3, Line 9.4)		
Separate Accounts, (Page 3, Line 27)		
AVR (Page 3, Line 24.1)	(c)	
Net Deferred and Uncollected Premium, (Page 2, Lines 13.1 and 13.2)		

Notes: 
(a)	The additional actuarial reserves are the reserves established under Paragraph (3) of Section 5D.
(b)	The appointed actuary should indicate the method of analysis, determined in accordance with the standards for asset adequacy analysis referred to in Section 5C of this regulation, by means of symbols that should be defined in footnotes to the table.
(c)	Allocated amount of Asset Valuation Reserve (AVR).
C.	Assumptions for New Issues
The adoption for new issues or new claims or other new liabilities of an actuarial assumption that differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of this Section 6.
D.	Adverse Opinions
If the appointed actuary is unable to form an opinion, then he or she shall refuse to issue a Statement of Actuarial Opinion.  If the appointed actuary’s opinion is adverse or qualified, then he or she shall issue an adverse or qualified actuarial opinion explicitly stating the reasons for the opinion.  This statement should follow the scope paragraph and precede the opinion paragraph.
E.	Reliance on Information Furnished by Other Persons
If the appointed actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the actuarial opinion, or the appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, the actuarial opinion should so indicate the persons the actuary is relying upon and a precise identification of the items subject to such reliance.  In addition, the persons on whom the appointed actuary relies shall provide a certification that precisely identifies the items on which the person is providing information and a statement as to the accuracy, completeness or reasonableness, as applicable, of the items.  This certification shall include the signature, title, company, address and telephone number of the person rendering the certification, as well as the date on which it is signed.
F.	Alternate Option
1.	The Standard Valuation Law gives the Commissioner broad authority to accept the valuation of a foreign insurer when that valuation meets the requirements applicable to a company domiciled in this state in the aggregate.  As an alternative to the requirements of Subsection (6)(B)(6)(c) of this regulation, the opining actuary may state that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have verified that the company’s request to file an opinion based on the laws of the state of domicile has been approved and that any conditions required by the Commissioner for approval of that request have been met.”
The foreign insurer should request a written statement from the Commissioner seeking this approval, prior to March 31 of the year it is to be effective.  The statement should be issued no later than March 31 of this year.  It shall remain valid until rescinded or modified by the Commissioner.  The rescission or modifications shall be issued no later than March 31 of the year they are first effective.  Subsequent to that statement being issued, if a company chooses to use this alternative, the company shall file a request to do so, along with justification for its use, no later than April 30 of the year of the opinion to be filed.  The request shall be deemed approved on October 1 of that year if the Commissioner has not denied the request by that date.
2.	Notwithstanding the above, the Commissioner may reject an opinion based on the laws and regulations of the state of domicile and require an opinion based on the laws of this state.  If a company is unable to provide the opinion within sixty (60) days of the request or such other period of time determined by the Commissioner after consultation with the company, the Commissioner may contract an independent actuary at the company’s expense to prepare and file the opinion.
Section 7	Description of Actuarial Memorandum Including an Asset Adequacy Analysis and Regulatory Asset Adequacy Issues Summary
A.	General
1.	In accordance with §§10-7-114 and 10-14-602, C.R.S., the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of his or her opinion regarding the reserves.  The memorandum shall be made available for examination by the Commissioner upon his or her request, but shall be destroyed by the Division of Insurance, or returned to the company, if a written request accompanies the filing of the memorandum, after such examination and shall not be considered a record of the Division of Insurance or subject to automatic filing with the Commissioner.
2.	In preparing the memorandum, the appointed actuary may rely on, and include as a part of his or her own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of §10-7-114(1)(e), C.R.S., with respect to the areas covered in such memoranda, and so state in the appointed actuary’s  memorandum.
3.	If the Commissioner requests a memorandum and no such memorandum exists or if the Commissioner finds that the analysis described in the memorandum fails to meet the standards of the Actuarial Standards Board or the standards and requirements of this regulation, the Commissioner may designate a qualified actuary to review the opinion and prepare such supporting memorandum as is required for review.  The reasonable and necessary expense of the independent review shall be paid by the company but shall be directed and controlled by the Commissioner.
4.	The reviewing actuary shall have the same status as the Commissioner for purposes of obtaining data from the company and the work papers and documentation of the reviewing actuary shall be retained by the Commissioner; provided, however, that any information provided by the company to the reviewing actuary and included in the work papers shall be considered as material provided by the company to the Commissioner and shall be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the Commissioner pursuant to the statute governing this regulation.  The reviewing actuary shall not be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer pursuant to this regulation for any one of the current year or the preceding three (3) years.
5.	In accordance with §10-7-114(2), C.R.S, the appointed actuary shall prepare a regulatory asset adequacy issues summary, the contents of which are specified in Section 7C of this regulation.  The regulatory asset adequacy issues summary will be submitted no later than March 15 of the year following the year for which a Statement of Actuarial Opinion based on asset adequacy is required.  The regulatory asset adequacy issues summary is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.
B.	Details of the Memorandum Section Documenting Asset Adequacy Analysis
When an actuarial opinion is provided, the memorandum shall demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in Section 5C of this regulation and any additional standards under this regulation.  It shall specify:
1.	For reserves:
a.	Product descriptions including market description, underwriting and other aspects of a risk profile and the specific risks the appointed actuary deems significant;
b.	Source of liability in force;
c.	Reserve method and basis;
d.	Investment reserves;
e.	Reinsurance arrangements;
f.	Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis; and
g.	Documentation of assumptions to test reserves for the following:
(1)	Lapse rates (both base and excess);
(2)	Interest crediting rate strategy;
(3)	Mortality;
(4)	Policyholder dividend strategy;
(5)	Competitor or market interest rate; 
(6)	Annuitization rates;
(7)	Commissions and expenses; and
(8)	Morbidity.
The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions;
2.	For assets:
a.	Portfolio descriptions, including a risk profile disclosing the quality, distribution and types of assets;
b.	Investment and disinvestment assumptions;
c.	Source of asset data;
d.	Asset valuation bases; and
e.	Documentation of assumptions made for:
(1)	Default costs;
(2)	Bond call function;
(3)	Mortgage prepayment function;
(4)	Determining market value for assets sold due to disinvestment strategy; and
(5)	Determining yield on assets acquired through the investment strategy.
The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions;
3.	For the analysis basis:
a.	Methodology;
b.	Rationale for inclusion or exclusion of different blocks of business and how pertinent risks were analyzed;
c.	Rationale for degree of rigor in analyzing different blocks of business (include in the rationale the level of “materiality” that was used in determining how rigorously to analyze different blocks of business);
d.	Criteria for determining asset adequacy (include in the criteria the precise basis for determining if assets are adequate to cover reserves under “moderately adverse conditions” or other conditions as specified in relevant actuarial standards of practice); and
e.	Whether the impact of federal income taxes was considered and the method of treating reinsurance in the asset adequacy analysis;
4.	Summary of material changes in methods, procedures, or assumptions from prior year’s asset adequacy analysis;
5.	Summary of results; and 
6.	Conclusions.
C.	Details of the Regulatory Asset Adequacy Issues Summary
1.	The regulatory asset adequacy issues summary shall include:
a.	Descriptions of the scenarios tested (Section 7D of this regulation) and the sensitivity testing done relative to those scenarios.  If negative ending surplus results under certain tests in the aggregate, the actuary should describe those tests and the amount of additional reserve as of the valuation date which, if held, would eliminate the negative aggregate surplus values.  Ending surplus values shall be determined by either extending the projection period until the in-force and associated assets and liabilities at the end of the projection period are immaterial or by adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in-force;
b.	The extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different than the assumptions used in the previous asset adequacy analysis;
c.	The amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but were not subject to analysis for the current opinion;
d.	Comments on any interim results that may be of significant concern to the appointed actuary.  For example, the impact of the insufficiency of assets to support the payment of benefits and expenses and the establishment of statutory reserves during one or more interim periods;
e.	The methods used by the actuary to recognize the impact of reinsurance on the company’s cash flows, including both assets and liabilities, under each of the scenarios tested; and
f.	Whether the actuary has been satisfied that all options whether explicit or embedded, in any asset or liability (including but not limited to those affecting cash flows embedded in fixed income securities) and equity-like features in any investments have been appropriately considered in the asset adequacy analysis.
2.	The regulatory asset adequacy issues summary shall contain the name of the company for which the regulatory asset adequacy issues summary is being supplied and shall be signed and dated by the appointed actuary rendering the actuarial opinion.
D.	Required Interest Scenarios
For the purpose of performing the asset adequacy analysis required by this regulation, the qualified actuary is expected to follow all appropriate Actuarial Standards of Practice.  In addition, the appointed actuary, for each Colorado domestic insurer, must consider, in any analysis incorporating cash flow testing as the basis for the asset adequacy analysis, the effect of at least the following interest rate scenarios:
1.	Level with no deviation;
2. 	Uniformly increasing over ten (10) years at a half percent per year and then level;
3.	Uniformly increasing at one percent per year over five (5) years and then uniformly decreasing at one percent per year to the original level at the end of ten (10) years and then level;
4.	An immediate increase of three percent (3%) and then level;
5.	Uniformly decreasing over ten (10) years at a half percent per year and then level;
6.	Uniformly decreasing at one percent per year over five (5) years and then uniformly increasing at one percent per year to the original level at the end of ten (10) years and then level; and
7.	An immediate decrease of three percent (3%) and then level.
For these and other scenarios that may be used, projected interest rates for a five (5) year Treasury Note need not be reduced beyond the point where such five (5) year Treasury Note yield would be at fifty percent (50%) of its initial level.
The beginning interest rates may be based on interest rates for new investments as of the valuation date similar to recent investments allocated to support the product being tested or be based on an outside index, such as Treasury yields, of assets of the appropriate length on a date close to the valuation date.  Whatever method is used to determine the beginning yield curve and associated interest rates should be specifically defined.  The beginning yield curve and associated interest rates should be consistent for all interest rate scenarios.
E.	Conformity to Standards of Practice.
The memorandum shall include this statement:
“Actuarial methods, considerations and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum.”
F.	Use of Assets Supporting the Interest Maintenance Reserve and the Asset Valuation Reserve.
An appropriate allocation of assets in the amount of the interest maintenance reserve (IMR), whether positive or negative, shall be used in any asset adequacy analysis.  Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the asset valuation reserve (AVR); these AVR assets may not be applied for any other risks with respect to reserve adequacy.  Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support.
The amount of the assets used for the AVR shall be disclosed in the Table of Reserves and Liabilities of the opinion and in the memorandum.  The method used for selecting particular assets or allocated portions of assets shall be disclosed in the memorandum.
G.	Documentation.
The appointed actuary shall retain on file, for at least seven (7) years, sufficient documentation so that it will be possible to determine the procedures followed, the analyses performed, the bases for assumptions and the results obtained.
Section 8	Severability
If any provision of this regulation or the application of it to any person or circumstance is for any reason held to be invalid, the remainder of this regulation shall not be affected.
Section 9	Enforcement
Noncompliance with this 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 license.  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 September 1, 1992.
Amended regulation effective September 1, 1994.
Amended regulation effective January 1, 2004.
Amended regulation effective November 1, 2010.