Requirements in Certain Applications of Pre-need Companies

August 17, 1992 SEC-BED * MEMORANDUM CIRCULAR NO. 01-92 TO : All Pre-Need Companies RE : Requirements in Certain Applications of Pre-need Companies To facilitate the review of applications of pre-need companies, including pending ones, for original and additional registration of plans; increase in price; and amendment or revision of provisions and plan benefits, the following should be attached with the application: cdlex 1. Registration statement properly filled-up for applications for original and additional registration of plans. No items must be left unanswered. Items which are not really applicable must be filled with "n.a.". For Item 11, if the registrant is selling two or more types of pre-need plans, the amount and number for each type of plan to be registered or licensed must be specified. For Items 12 to 16, the answers must be consistent with those stated in the actuarial report. 2. For increase in selling price of different types of plans, the corresponding amount and number for each type of plan to be sold must be clearly stated. 3. Detailed report signed by a SEC Accredited Actuary for the issuer which shall contain the following: a. actuarial notes on the plan description, formulations, and assumptions used in the viability studies for the complete duration of the plan; b. a statement certifying that the actuarial formulations used are in accordance with applicable sound actuarial principles and practices and with the legal requirements; c. a statement of opinion that the actuarial assumptions used are attainable and appropriate for the plan; d. a statement certifying that the plan price/s, scheduled trust fund contributions, projected reserve liabilities, and termination values are in accordance with the above actuarial formulations and assumptions; e. a statement certifying that he has reviewed the provisions of the plan agreement and all of its benefits and guarantees have been quantified and considered in the pricing, reserve valuation, trust fund contribution, and termination values; f. a statement of opinion that all insurance benefits included in the plan agreement are covered under insurance contract(s) with a duly licensed insurance carrier. 4. A viability study which includes, but is not limited to, the following: a. Pricing schedule with bases and formulations. b. Expenses and loadings, including but not limited to the filing fees, the documentary stamps tax, the tax on dealers in securities, commissions, overrides, bonuses, premiums on insured benefits, etc. c. Amount and costs of plan benefits with basis and formulations including the contingent benefit availment rates assumed for mortuary-type plans. d. Schedule of Termination Values with bases and formulations. llcd e. Schedule of Reserve Liability Values with prospective bases and formulations. f. Schedule of Trust Fund deposits and projections with basis and formulations. g. Interest rate assumptions (if higher than 12% effective annually, must be justified as attainable prospectively, not retrospectively). Actuarial study for fixed cost plans may not be required for additional registration of plans with no changes in pricing, benefits, and/or value of benefits, except for those plans of questionable viability as determined by the SEC Actuarial Staff. For registration of additional actual cost plans, an actuarial study must be submitted. However, a previous study of the same plan submitted less than one year before the date of petition may be used instead by the SEC Actuarial Staff to test for its continued viability, provided that there are no changes in the pricing, benefits, and/or value of benefits. 5. The Plan features which include, but not limited to the following: a. Description and schedule of plan benefits, whether contingent or scheduled, with bases and formulations including projections, as needed. b. Description and schedule of insured benefits with bases and formulations. c. The installment payment term and the modes of payments. 6. Specimen of Plan contracts. 7. Committed insurance benefit contracts issued by a duly licensed insurance company. 8. Committed services contracts for mortuary-type benefits. For immediate strict compliance. (SGD.) ROSARIO N. LOPEZ Chairman Securities and Exchange Commission