Connecticut Administrative Code
Title 38a - Insurance Department
459 - Synthetic Guaranteed Investment Contracts
Section 38a-459-2 - Definitions
Current through March 14, 2024
As used in sections 38a-459-1 to 38a-459-9, inclusive, of the Regulations of Connecticut State Agencies:
(1) "Account assets" means the assets in the segregated portfolio plus any assets held in the general account or a separate account to meet the asset maintenance requirements.
(2) "Actuarial opinion and memorandum" means the opinion and memorandum of the valuation actuary required pursuant to section 38a-459-8(h) of the Regulations of Connecticut State Agencies.
(3) "Affirmatively approved" means approval of an insurance company's plan of operation for a class of contracts containing the form of contract under review, after the plan of operation associated with the class of contracts has been reviewed by the insurance company's domiciliary insurance department, and the plan of operation has been found to be in compliance with requirements substantially similar to those contained in sections 38a-459-1 to 38a-459-9, inclusive, of the Regulations of Connecticut State Agencies by the domiciliary insurance department. Affirmatively approved does not mean approval as a result of an expiration of the time for review, such as when a plan of operation is "deemed approved" as set forth in section 38a-459-3(c) or 38a-459-4(b) of the Regulations of Connecticut State Agencies.
(4) "Appointed actuary" means the qualified actuary appointed or retained either directly by or by the authority of the board of directors through an executive officer of the insurance company to prepare the annual statement of actuarial opinion for the insurance company as a whole pursuant to section 38a-78 of the Connecticut General Statutes.
(5) "Asset maintenance requirement" means the requirement to maintain assets to fund contract benefits in accordance with section 38a-459-8(a) of the Regulations of Connecticut State Agencies.
(6) "Class of contracts" means the set of all contracts to which a given plan of operation pertains.
(7) "Contract value record" means an accounting record, provided by the contract in relation to a segregated portfolio of assets, that is credited with a fixed rate of return over regular periods, and that is used to measure the extent of the insurance company's obligation to the contract holder. The fixed rate of return credited to the contract value record is determined by means of a crediting rate formula or declared at the inception of the contract and valid for the entire term of the contract.
(8) "Crediting rate formula" means a mathematical formula used to calculate the fixed rate of return credited to the contract value record during any rate period and based in part upon the difference between the contract value record and the market value record amortized over an appropriate period. The fixed rate of return calculated by means of this formula may reflect prior and current market conditions with respect to the segregated portfolio, but shall not be based on future changes in market conditions.
(9) "Date of filing," with respect to a filing for approval of a contract form, means the date the form is filed pursuant to section 38a-8-14 of the Regulations of Connecticut State Agencies.
(10) "Duration" means, with respect to the segregated portfolio assets or guaranteed contract liabilities, a measure of price sensitivity to changes in interest rates, such as the Macaulay duration or option-adjusted duration.
(11) "Fair market value" means a reasonable estimate of the amount that a buyer of an asset would be willing to pay, and a seller of an asset would be willing to accept, for the asset without duress in an arm's length transaction. In the case of a publicly traded security, the "fair market value" is the price at which the security is traded or, if no price is available, a price that appropriately reflects the latest bid and asked prices for the security. In the case of a debt instrument that is not publicly traded, the "fair market value" is the discounted present value of the asset calculated at a reasonable discount rate. For all other non-publicly traded assets, "fair market value" shall be determined in accordance with valuation practices customarily used within the financial industry.
(12) "Guaranteed minimum benefits" means contract benefits on a specified date that shall be either:
(13) "Hedging instrument" means:
(14) "Investment guidelines" means a set of written guidelines, established in advance by the person with investment authority over the segregated portfolio, to be followed by the investment manager. The guidelines shall include a description of:
(15) "Investment manager" means the person (including the contract holder) responsible for managing the assets in the segregated portfolio in accordance with the investment guidelines in a fiduciary capacity to the owner of the assets.
(16) "Market value record" means an accounting record provided by the contract to reflect the fair market value of the segregated portfolio.
(17) "Permitted custodial institution" means a bank, trust company, or other corporate entity providing trust or custodial services.
(18) "Plan of operation" means a written plan meeting the requirements of section 38a-459-3(c) of the Regulations of Connecticut State Agencies.
(19) "Qualified actuary" means an individual who meets the qualification standards set forth in section 38a-53-1 of the Regulations of Connecticut State Agencies.
(20) "Rate period" means the period of time during which the fixed rate of return credited to the contract value record is applicable between crediting rate formula adjustments.
(21) "Segregated portfolio" means:
(22) "Treasury-based spot rate" corresponding to a given time of benefit payment means the yield on a zero-coupon, non-callable, non-indexed, and non-prepayable United States government obligation maturing at that time, or the zero-coupon yield implied by the price of a representative sampling of coupon-bearing, non-callable, non-indexed, and non-prepayable United States government obligations in accordance with a formula set forth in the plan of operation. If a zero-coupon, non-callable, non-indexed, and non-prepayable United States government obligation maturing at the time of payment does not exist, then the "treasury-based spot rate" for such benefit payment shall be the yield on the zero-coupon, non-callable, non-indexed, and non-prepayable United States government obligation maturing at the date closest to the benefit payment or the yield determined through a methodology set forth in the plan of operation designed to reach a comparable result.
(23) "Index spot rate" corresponding to a given time of benefit payment means the zero-coupon yield implied by the (A) Barclays Short Term Corporate Index (for a given time benefit payment under one year), or (B) zero-coupon yield implied by the Barclays U.S. Corporate Investment Grade Bond Index (for a given time of benefit payment greater than or equal to one year).
(24) "Blended spot rate" corresponding to a given time of benefit payment means a blend of 50 percent each of the (A) treasury-based spot rate, and (B) index spot rate. To the extent that guaranteed contract liabilities are denominated in the currency of a foreign country rated in one of the two highest rating categories by an independent, nationally-recognized United States rating agency acceptable to the insurance commissioner and are supported by investments denominated in the currency of the foreign country, the treasury-based spot rate component of the "blended spot rate" may be determined by reference to substantially similar obligations of the government of the foreign country. For liabilities other than those described above, the "blended spot rate" shall be determined on a basis mutually agreed upon by the insurance company and the insurance commissioner.
(25) "Synthetic guaranteed investment contract" or "contract" means a group annuity contract or other agreement that establishes the insurance company's obligations by reference to a segregated portfolio of assets that is not owned by the insurance company. The contract functions as an accounting record for an accumulation fund and the fixed rate of return credited to the fund reflects an amortization of the segregated portfolio's market gains and losses based on the period specified in the crediting rate formula, subject to any minimum interest rate guarantee.
(26) "Unilateral contract termination event" means an event allowing the insurance company to unilaterally and immediately terminate the contract without future liability or obligation to the contract holder.
(27) "United States government obligation" means a direct obligation issued, assumed, guaranteed or insured by the United States or by an agency or instrumentality of the United States government.
(28) "Valuation actuary" means the appointed actuary or, alternatively, a qualified actuary designated by the appointed actuary to render the actuarial opinion. Written documentation of any such designation shall be on file at the insurance company and available for review by the insurance commissioner upon request.
(29) "Withdrawal hierarchy" means a protocol establishing the order of payment of amounts payable from the segregated portfolio and other funding arrangements other than at contract termination.
