Regulation 3-1-3	CONCERNING ACTUARIAL OPINIONS
Section 1	Authority
Section 2	Background And Purpose
Section 3	Definitions
Section 4	Statement Of Opinion Of Reserves And Other Actuarial Items
Section 5	Requirements/Limitations On Domestic Company Opinions
Section 6	Exemption Or Extension
Section 7	Severability
Section 8	Enforcement
Section 9	Effective Date
Section 10	History
Section 1	Authority
This regulation is promulgated under the authority of §§ 10-1-109, 10-5-117, 10-6-129, 10-16-109, C.R.S.
Section 2	Background And Purpose
The purpose of this regulation is to improve the Colorado Insurance Division's surveillance of the financial condition of companies, for the protection of all policyholders, contractholders and the general public, by requiring an annual opinion of a qualified actuary as to the adequacy of a company's reserves and other actuarial items which ought to be established in the required annual statement filings.  This regulation shall apply to all companies defined in Section 3 below, excluding those filing pursuant to Colorado Insurance Regulation 3-1-8 (3CCR 702-3).  Domestic mutual protective and pure assessment associations operating under Part 1 of Article 12 of Title 10, C.R.S. are exempted from this filing requirement unless an actuarial opinion is specifically requested by the Commissioner.
Section 3	Definitions
The following terms used in this regulation shall have the following meanings:
A.	"Company" means a licensed insurance company, captive insurance company, non-profit hospital, medical-surgical and health service corporation, health maintenance organization, foreign authorized surplus lines insurance company, Pinnacol Assurance, foreign risk retention group operating in this state, title company, or foreign authorized non-admitted reinsurer.
B.	"Qualified actuary" generally means an actuary meeting the qualifications set forth in Colorado Insurance Regulation 1-1-1 (3CCR 702-1). However, for opinions submitted with any financial statement filing required of Property and Casualty insurers, a qualified actuary is a person who is either a member in good standing of the Casualty Actuarial Society or a member in good standing of the American Academy of Actuaries who has been approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the American Academy of Actuaries. 
Section 4	Statement Of Opinion Of Reserves And Other Actuarial Items
Each company shall submit with the annual financial statement filing an opinion of a qualified actuary, in a form acceptable to the Commissioner, which must at a minimum meet the recommended standards contained in the NAIC Annual Statement Instructions as to the adequacy of the company's reserves.  A non-domestic company that files an opinion with the NAIC in conformity with the requirements of this section shall be exempted from filing a separate opinion with the Colorado Division of Insurance. The actuary shall consider provisions of Colorado statutes, regulations and generally accepted actuarial standards in forming such opinion. Companies that have not filed the actuarial opinion by the due date of the annual financial statement, or written extension date if granted, shall be assessed a late fee of up to $100.00 per day for each day the opinion is received beyond such date. Such late fee shall be assessed in addition to any other fines relating to the annual financial statement filing requirement.
Section 5	Requirements/Limitations On Domestic Company Opinions
Opinions submitted for Colorado domestic companies must comply with the following:
A.	A company's loss and loss adjustment expense reserves reported in any required financial filing to the Commissioner shall reflect the company's best estimate of its insurance obligations, derived from reasonable assumptions, calculated in accordance with appropriate actuarial standards of practice and verified by the opining actuary. A company that establishes an amount less than the actuary's best estimate as indicated in the underlying actuarial report, if applicable, shall submit the underlying actuarial report supporting the actuary's opinion to the Commissioner no later than 30 days following the due date of the opinion. Failure to file the actuarial report within 30 days of a request by the Commissioner shall result in a penalty of up to $100.00 per day.  The actuarial report shall be confidential and not available for public inspection. 
In addition, any summary which is required to be filed in accordance with the appropriate NAIC Property and Casualty Annual Statement instructions shall be confidential and not available for public inspection.
B.	In addition to the items required by any applicable annual statement filing instructions, all company balance sheet amounts that are established through actuarial principles, including loss analysis, mortality, morbidity, discounting or estimation techniques, must be included within the actuarial opinion.  These amounts include, but are not limited to: contingent reinsurance commissions, retrospective premium adjustments, premium deficiency reserves, claims-made free tail coverage, and unearned premium reserves which are determined in a manner other than pro-rata.
All items required by the applicable annual statement instructions must be included as part of the opinion’s scope, even if the required item has a value of zero.
C.	The actuary should be familiar with the material reinsurance arrangements of the insurer when determining the reasonableness of net reserves. The company shall not reflect any credit for reinsurance ceded in any financial statement filed, unless the reinsurance arrangements comply with the provisions of §10-3-118, C.R.S. and Colorado Insurance Regulation 3-3-2 (3CCR 702-3). The actuary's opinion shall not reflect any credit taken for reinsurance ceded if the actuary is aware that reinsurance arrangements violate any provision of  § 10-3-118, C.R.S. or Colorado Insurance Regulation 3-3-2 (3CCR 702-3).
D.	Unless otherwise specified by statute, reserves for outstanding losses may not be discounted, with the exception of reserves established for losses with fixed and determinable future payments, such as those emanating from workers' compensation tabular indemnity reserves and long-term disability claims. The rate of interest, at each valuation date, used in the calculation of the discount shall not exceed the lesser of (i) the company's rate of return on statutory invested assets, and (ii) the 20 year duration valuation rate determined pursuant to §10-7-309.5, C.R.S., rate available upon request from the Actuarial Section of the Colorado Division of Insurance.
E.	Reserves shall not be reduced for anticipated salvage and subrogation unless such reduction has been evaluated, analyzed and opined upon by the actuary as being reasonable based upon the company's past experience, current and reasonably anticipated activities, and has made due provision for the collection and other expenses associated with the receipt of the salvage and subrogation amounts. The actuary may analyze the reserve data net of salvage and subrogation so long as the actuary is satisfied that such treatment of the data will cause no material distortion.
F.	Actuarial Opinions submitted by health insurers or HMOs who have entered into any kind of risk-sharing, usually contractual, arrangements with provider groups providing medical services to enrollees shall include comments as required by Actuarial Standard of Practice No 16 and §10-16-705(5)(a) C.R.S.
Section 6	Exemption Or Extension
A.	The Commissioner may consider a written request for exemption or extension for the filing of the statement of actuarial opinion. Any such request must be made no later than 15 days before the due date of such opinion for which the exemption or extension is sought. Such request must contain a statement which sets forth the basis on which such exemption or extension is sought.
B.	Requests for exemptions and extensions will be considered for the following reasons:
1.	supervision or conservatorship;
2.	financial hardship;
3.	nature of insurance;
4.	less than $1,000,000 of direct and assumed premium and less than  $1,000,000 of direct and assumed loss and loss adjustment expense reserves at year-end;
5.	other circumstances that may render an opinion either unnecessary, or unavoidably delayed.
C.	In all cases, however, an exception or extension will only be granted after the commissioner has determined that the non-submission or delay of the actuarial opinion would result in minimal potential harm to policyholders.
Section 7	Severability
If any provision of this regulation or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of this regulation shall not be affected thereby.
Section 8	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 suspension or revocation of license.  Among others, the penalties provided for in §10-3-1108, C.R.S. may be applied.
Section 9	Effective Date
This regulation is hereby amended and restated and shall be effective on December 1, 2005.
Section 10	History
New Regulation 90-1, effective December 31, 1994.
Amended Regulation, effective August 31, 1998.
Amended Regulation, effective December 1, 2005.