(a) Basic reserves for a secondary guarantee
in a universal life insurance policy with a secondary guarantee must equal the
segmented reserves for the secondary guarantee period in the policy and, in
calculating the segments and the segmented reserves,
(1) the segments are determined according to
the contract segmentation method; and
(2) the gross premiums are set equal to the
specified premiums in the policy, if any, or to the minimum premiums that keep
the policy in force for a policy without specified premiums.
(b) Deficiency reserves for a
secondary guarantee in a universal life insurance policy with a secondary
guarantee must be calculated for the secondary guarantee period as described in
3
AAC 21.910(b) with gross premiums
equal to
(1) the specified premiums in the
policy, if any; or
(2) the minimum
premiums that keep the policy in force.
(c) Minimum reserves
(1) during the secondary guarantee period are
the larger of basic reserves for the secondary guarantee plus the deficiency
reserve for the secondary guarantee and the minimum reserves required by other
law; and
(2) are the largest of the
minimum reserves calculated as of the valuation date of each secondary
guarantee that has not expired, if a policy contains more than one secondary
guarantee.
(d) If a
secondary guarantee can be unilaterally changed by the insurer after issue,
then the insurer must calculate reserves under this section assuming that the
secondary guarantee was made at the issue date of the policy.
(e) In this section,
(1) "minimum premium" means the amount paid
into a life insurance policy with a zero account value at the beginning of the
policy year that results in a zero account value at the end of the policy year
and calculated using guaranteed
(A) policy
cost factors including mortality charges, loads, and expense charges;
and
(B) interest credit
rates;
(2) "one-year
valuation premium" means the net one-year premium based upon the original
schedule of benefits that
(A) is calculated
at issue for all policy years;
(B)
is calculated without using select mortality factors as described under
3
AAC 21.905(g) (2) - (4);
and
(C) reflects the frequency of
fund processing and using the same assumption for the distribution of death
that is used to calculate the monthly mortality charges assessed the
fund;
(3) "policy with a
secondary guarantee" means
(A) a policy with
a guarantee that the policy will remain in force at the original schedule of
benefits subject only to the payment of specified premiums;
(B) a policy in which the minimum premium at
any duration is less than the corresponding one-year valuation premium
calculated using the maximum valuation interest rate and
(i) for policies issued before January 1,
2009, the Commissioner's 1980 Standard Ordinary Mortality Tables with or
without 10-year Select Mortality Factors or other valuation mortality tables
under 3 AAC 28.600 -
3
AAC 28.690; or
(ii) for policies issued on or after January
1, 2009, valuation mortality tables under
3
AAC 28.600 -
3
AAC 28.690, as required under
3
AAC 28.620(c); or
(C) a policy with any combination
of elements set out in (A) and (B) of this paragraph;
(4) "secondary guarantee period" means the
time period for which the policy is guaranteed to remain in force subject only
to a secondary guarantee;
(5)
"specified premiums" means the premiums specified in the policy guaranteeing
that, if paid, the policy will remain in force at the original schedule of
benefits even if the premiums are insufficient to keep the policy in force
assuming that maximum mortality charges, maximum expense charges, minimum
interest rate credits, and applicable surrender charges are made.
