.11 Claim Reserves.

A. General Claim Reserve Requirements.

(1) An insurer shall establish a claim reserve for all incurred but unpaid claims on all long-term care insurance.

(2) An insurer shall establish an appropriate claim expense reserve with respect to the estimated expense of settlement of all incurred but unpaid claims under long-term care insurance.

(3) An insurer shall test the long-term care claim reserve and claim expense reserve for prior valuation years 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) In establishing claim reserve for long-term care insurance, an insurer shall include reserves for premiums expected to be waived, valuing as a minimum the valuation net premium being waived.

B. Minimum Standards for Claim Reserves.

(1) The maximum interest rate for claim reserves for long-term care insurance is the maximum rate permitted by Insurance Article, Title 5, Subtitle 3, Annotated Code of Maryland, in the valuation of whole life insurance issued on the same date as the claim incurral date.

(2) An insurer's long-term care insurance claim reserve shall be based on the insurer's experience, if the experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

C. Claim Reserve Methods Generally.

(1) An insurer may use a generally accepted or reasonable actuarial reserving method or a combination of methods to estimate all claim liabilities for long-term care insurance.

(2) The methods used for estimating liabilities generally may be aggregate methods, or various reserve items may be separately valued.

(3) Approximations based on groupings and averages may also be employed.

(4) Adequacy of the claim reserves, however, shall be determined in the aggregate.