Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) Reserve liabilities for variable life
insurance policies shall be established under Section 10489.1 et seq. of the
California Insurance Code (Standard Valuation Law) in accordance with actuarial
procedures that recognize the variable nature of the benefits provided and any
mortality guarantees.
(b) Reserve
liabilities for the guaranteed minimum death benefit shall be the reserve needed to
provide for the contingency of death occurring when the guaranteed minimum death
benefit exceeds the death benefit that would be paid in the absence of the
guarantee, and shall be maintained in the general account of the insurer and shall
be not less than the greater of the following minimum reserves:
(1) The aggregate total of the term costs, if any,
covering a period of one full year from the valuation date, of the guarantee on each
variable life insurance contract, assuming an immediate one-third depreciation in
the current value of the assets of the separate account followed by a net investment
return equal to the assumed investment rate, or
(2) The aggregate total of the "attained age
level" reserves on each variable life insurance contract. The "attained age level"
reserve on each variable life insurance contract shall not be less than zero and
shall equal the "residue," as described in subparagraph (A), of the prior year's
"attained age level" reserve on the contract, with any such "residue" increased or
decreased by a payment computed on an attained age basis as described in
subparagraph (B) below.
(A) The "residue" of the
prior year's "attained age level" reserve on each variable life insurance contract
shall not be less than zero and shall be determined by adding interest at the
valuation interest rate to such prior year's reserve, deducting the tabular claims
based on the "excess," if any, of the guaranteed minimum death benefit over the
death benefit that would be payable in the absence of such guarantee, and dividing
the net result by the tabular probability of survival. The "excess" referred to in
the preceding sentence shall be based on the actual level of death benefits that
would have been in effect during the preceding year in the absence of the guarantee,
taking appropriate account of the reserve assumptions regarding the distribution of
death payments over the year;
(B) The
payment referred to in subsection (b)(2) of this Section shall be computed so that
the present value of a level payment of that amount each year over the future
premium paying period of the contract is equal to (A) minus (B) minus (C), where (A)
is the present value of the future guaranteed minimum death benefits, (B) is the
present value of the future death benefits that would be payable in the absence of
such guarantee and (C) is any "residue," as described in subparagraph (A), of the
prior year's "attained age level" reserve on such variable life insurance contract.
If the contract is paid-up, the payment shall equal (A) minus (B) minus (C). The
amounts of future death benefits referred to in (B) shall be computed assuming a net
investment return of the separate account which may differ from the assumed
investment rate and/or the valuation interest rate but in no event may exceed the
maximum interest rate permitted for the valuation of life insurance
contracts.
(3) The valuation
interest rate and mortality table used in computing the two minimum reserves
described in (1) and (2) above shall conform to permissible standards for the
valuation of life insurance contracts. In determining such minimum reserve, the
company may employ suitable approximations and estimates, including but not limited
to groupings and averages.
(c)
Reserve liabilities for all fixed incidental insurance benefits shall be maintained
in the general account in amounts determined in accordance with the actuarial
procedures appropriate to such benefit.
