3 Colo. Code Regs. § 702-3-1-9-8

Current through Register Vol. 47, No. 24, December 25, 2024

Section 3 CCR 702-3-1-9-8 - Claim Reserves

A. General

1. Claim reserves are required for all incurred but unpaid claims on all health insurance policies. For contracts with an elimination period, the duration of disablement shall be measured as dating from the time that benefits would have begun to accrue had there been no elimination period.

2. Appropriate claim expense reserves are required with respect to the estimated expense of settlement of all incurred but unpaid claims.

3. All such reserves for prior valuation years are to be tested for adequacy and reasonableness along the lines of claim runoff schedules in accordance with the statutory financial statement including consideration of any residual unpaid liability.

4. For claim reserves on policies that require contract reserves, the claim incurral date is to be considered the "issue date" for determining the table and interest rate to be used for claim reserves.

5. The maximum interest rate for claim reserves is specified in Appendix A.

6. With respect to claim reserves for policies issued before the operative date of the Valuation Manual, the requirements for claim reserves on claims incurred after that date shall be as described in the Valuation Manual based on the incurred date of the claim.

B. Minimum Standards for Claim Reserves

1. Disability Income

a. Interest. The maximum interest rate for claim reserves is specified in Appendix A.

b. Morbidity. Minimum standards with respect to morbidity are those specified in Appendix A, except that, at the option of the insurer:

(1) For all claims with a duration from date of disablement of less than two (2) years, reserves may be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

(2) For group disability income claims with a duration from date of disablement of at least two (2) years but less than five (5) years, reserves may, with the prior written approval of the Commissioner, be based on the insurer's experience for which the insurer maintains underwriting and claim administration control. The request for such approval of a plan of modification to the reserve basis must include:

(a) An analysis of the credibility of the experience;

(b) A description of how all of the insurer's experience is proposed to be used in setting reserves;

(c) A description and quantification of the contingent risk margins in the reserves;

(d) A summary of the financial impact that the proposed plan of modification would have had on the insurer's last filed annual statement;

(e) A copy of the approval of the proposed plan of modification by the commissioner of the state of domicile; and

(f) Any other information deemed necessary by the Commissioner.

(3) Each insurer may elect which of the following to use as the minimum morbidity standard for group long-term disability income claim reserves:

(a) The minimum morbidity standard in effect for claim reserves as of the date the claim was incurred, or

(b) The standards with respect to morbidity may be based on the 2012 GLTD termination table with considerations of:

(i) The insurer's own experience computed in accordance with Actuarial Guideline XLVII, and

(ii) An adjustment to include an own experience measurement margin derived in accordance with Actuarial Guideline XLVII, and

(iii) A credibility factor derived in accordance with Actuarial Guideline XLVII.

Once an insurer elects to calculate reserves for all open claims on a more recent standard then all future valuations must be on that basis.

c. Duration of Disablement. For contracts with an elimination period, the duration of disablement should be measured as dating from the time that benefits would have begun to accrue had there been no elimination period.

2. All Other Benefits

a. Interest. The maximum interest rate for claim reserves is specified in Appendix A.

b. Morbidity or Other Contingency. The reserve should be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

C. Claim Reserve Methods Generally

Any generally accepted or reasonable actuarial method or combination of methods may be used to estimate all claim liabilities. The methods used for estimating liabilities generally may be aggregate methods, or various reserve items may be separately valued. Approximations based on groupings and averages may also be employed. Adequacy of the claim reserves, however, shall be determined in the aggregate.

3 CCR 702-3-1-9-8

37 CR 20, October 25,2014, effective 11/15/2014

37 CR 20, October 25,2014, effective 1/1/2015

37 CR 23, December 10, 2014, effective 1/1/2015

38 CR 17, September 10, 2015, effective 10/1/2015

39 CR 05, March 10, 2016, effective 4/1/2016

39 CR 14, July 25, 2016, effective 8/15/2016

39 CR 23, December 10, 2016, effective 1/1/2017

40 CR 03, February 10, 2017, effective 3/15/2017

40 CR 05, March 10, 2017, effective 4/1/2017

40 CR 13, July 10, 2017, effective 8/1/2017

40 CR 17, September 10, 2017, effective 11/1/2017

43 CR 06, March 25, 2020, effective 4/15/2020

44 CR 03, February 10, 2021, effective 3/15/2021

44 CR 23, December 10, 2021, effective 1/1/2022

46 CR 03, February 10, 2023, effective 3/2/2023