Requirements in Certain Applications of Pre-Need Companies

December 16, 1994 SEC-BED * MEMORANDUM CIRCULAR NO. 05-94 TO : All Pre-Need Companies RE : Requirements in Certain Applications of Pre-Need Companies To facilitate the review of applications of pre-need companies, 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: 1. Registration statement properly filled-up for applications of pre-need companies 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. prcd 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 existing laws, pertinent rules and regulations of the SEC; c. a statement of opinion that the actuarial assumptions used are reasonable 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 generally accepted actuarial principles; e. a statement certifying that he has reviewed the provisions of the plan agreement relative to its benefits and guarantees which have been quantified and considered in the pricing, reserve valuation, trust fund contribution, and termination values; f. statement of opinion that all insurance benefits included in the plan agreement are covered under insurance contract(s) with a duly licensed insurance carrier. LexLib 4. Availability study which includes, but is not limited to the following: a. Pricing schedule including how the gross pre-need price was generated with actuarial formulations. b. Expenses and loadings, including but not limited to all required fees and taxes, commissions, overrides, bonuses, premiums on insured benefits, and all other charges. c. Amount and costs of plan benefits including the contingent benefit availment rates assumed for mortuary-type plans. d. Schedule of Termination Values. e. Schedule of Projected Reserve Liability Values. f. Schedule of Trust Fund deposits and projections. g. Interest rate assumptions. h. Withdrawal assumptions (lapses and surrenders) Actuarial studies for fixed cost plans shall not be required for all additional registration of plans when there are no changes in pricing, type and value of benefits. However, if new developments would emerge in the more current economic environment when the new petition was submitted such that it would impact on the actuarial assumptions previously utilized when applied under this changed condition as determined by the SEC, a new viability study would be deemed necessary. For the registration of (traditional) actual cost plans, an actuarial study must be submitted unless a previous study of the plan was submitted and approved less than one year before the date of the original petition. The SEC actuary/consulting actuary may use this previous study provided that there are no changes in the pricing, type and value of benefits. 5. Specimen of Plan contracts. 6. Committed insurance benefit contracts issued by a duly licensed insurance company. 7. Committed services contracts for mortuary-type benefits. 8. Other documents or studies which the SEC may require from some companies for a proper evaluation of their petition. For immediate strict compliance. (SGD.) ROSARIO N. LOPEZ Chairman