Florida Administrative Code
69 - DEPARTMENT OF FINANCIAL SERVICES
69O - OIR - Insurance Regulation
Chapter 69O-164 - VALUATION AND NONFORFEITURE
Section 69O-164.020 - Valuation of Life Insurance Policies
Universal Citation: FL Admin Code R 69O-164.020
Current through Reg. 50, No. 187; September 24, 2024
(1) Purpose.
(a) The purpose of this rule is to provide:
1. Tables of select mortality factors,
identified as Appendix to Rule
69O-164.020, F.A.C., which is
hereby adopted and incorporated by reference, and rules for their
use;
2. Rules concerning a minimum
standard for the valuation of plans with nonlevel premiums or benefits;
and
3. Rules concerning a minimum
standard for the valuation of plans with secondary
guarantees.
(b) The
method for calculating basic reserves defined in this rule will constitute the
Commissioners' Reserve Valuation Method for policies to which this rule is
applicable.
(2)
(a) This rule is consistent with Appendix
A-830 of the NAIC Accounting Practices and Procedures Manual as adopted in Rule
69O-137.001, F.A.C.
(b) This rule applies to policies issued
during calendar year 2000 in addition to those issued on or after January 1,
2001.
(3) Applicability. This rule shall apply to all life insurance policies, with or without nonforfeiture values, issued on or after January 1, 2000, subject to the following exceptions and conditions:
(a)
Exceptions.
1. This rule shall not apply to
any individual life insurance policy issued on or after the effective date of
this rule if the policy is issued in accordance with and as a result of the
exercise of a reentry provision contained in the original life insurance policy
of the same or greater face amount, issued before January 1, 2000, that
guarantees the premium rates of the new policy. This rule also shall not apply
to subsequent policies issued as a result of the exercise of such a provision,
or a derivation of the provision, in the new policy.
2. This rule shall not apply to any universal
life policy that meets all the following requirements:
a. Secondary guarantee period, if any, is 5
years or less;
b. Specified premium
for the secondary guarantee period is not less than the net level reserve
premium for the secondary guarantee period based on the CSO valuation tables as
defined in paragraph (4)(f), or the ultimate mortality tables specified in
subsection 69O-162.201(6),
F.A.C., and the applicable valuation interest rate; and
c. The initial surrender charge is not less
than 100 percent of the first year annualized specified premium for the
secondary guarantee period.
3. This rule shall not apply to any variable
life insurance policy that provides for life insurance the amount or duration
of which varies according to the investment experience of any separate account
or accounts.
4. This rule shall not
apply to any variable universal life insurance policy that provides for life
insurance the amount or duration of which varies according to the investment
experience of any separate account or accounts.
5. This rule shall not apply to a group life
insurance certificate unless the certificate provides for a stated or implied
schedule of maximum gross premiums required in order to continue coverage in
force for a period in excess of one year.
(b) Conditions.
1. Calculation of the minimum valuation
standard for policies with guaranteed nonlevel gross premiums or guaranteed
nonlevel benefits (other than universal life policies), or both, shall be in
accordance with the provisions of subsection (6).
2. Calculation of the minimum valuation
standard for flexible premium and fixed premium universal life insurance
policies that contain provisions resulting in the ability of a policyholder to
keep a policy in force over a secondary guarantee period shall be in accordance
with the provisions of subsection (7).
(4) Definitions. For purposes of this rule:
(a) "Basic reserves" means reserves
calculated in accordance with Section
625.121(7),
F.S.
(b)
1. "Contract segmentation method" means the
method of dividing the period from issue to mandatory expiration of a policy
into successive segments, with the length of each segment being defined as the
period from the end of the prior segment (from policy inception for the first
segment) to the end of the latest policy year as determined below. All
calculations are made using the 1980 CSO valuation tables, as defined in
paragraph (f), or the mortality tables specified in subsection
69O-162.201(6),
F.A.C., and, if elected, the optional minimum mortality standard for deficiency
reserves stipulated in paragraph (5)(b) of this rule.
2. The length of a particular contract
segment shall be set equal to the minimum of the value t for which
Gt is greater than Rt (if
Gt never exceeds Rt the segment
length is deemed to be the number of years from the beginning of the segment to
the mandatory expiration date of the policy), where Gt
and Rt are defined as follows:
GPx+k+t
Gt = __________
GPx+k+t-1
where:
x = original issue age;
k = the number of years from the date of issue to the beginning of the segment;
t = 1, 2, ...; t is reset to 1 at the beginning of each segment;
GPx+k+t-1 = Guaranteed gross premium per thousand of face amount for year t of the segment, ignoring policy fees only if level for the premium paying period of the policy.
qx+k+t
Rt = __________; however, Rt may be increased or decreased by one
qx+k+t-1 percent in any policy year, at the company's option, but Rt shall not be less than one;
where:
x, k and t are as defined above, and
qx+k+t-1 = valuation mortality rate for deficiency reserves in policy year k+t but using the mortality of Section 5B(2) if Section 5B(3) is elected for deficiency reserves.
However, if GPx+k+t is greater than 0 and GPx+k+t-1 is equal to 0, Gt shall be deemed to be 1000. If GPx+k+t and GPx+k+t-1 are both equal to 0, Gt shall be deemed to be 0.
(c) "Deficiency reserves" means the excess,
if greater than zero, of
1. Minimum reserves
calculated in accordance with Section
625.121(11),
F.S., over
2. Basic
reserves.
(d) "Guaranteed
gross premiums" means the premiums under a policy of life insurance that are
guaranteed and determined at issue.
(e) "Maximum valuation interest rates" means
the interest rates defined in Section
625.121(6),
F.S., (Computation of Minimum Standard by Calendar Year of Issue) that are to
be used in determining the minimum standard for the valuation of life insurance
policies.
(f) "1980 CSO valuation
tables" means the Commissioners' 1980 Standard Ordinary Mortality Table (1980
CSO Table) without 10-year selection factors, incorporated into the 1980
amendments to the NAIC Standard Valuation Law, and variations of the 1980 CSO
Table approved by the NAIC, such as the smoker and nonsmoker versions approved
in December 1983.
(g) "Scheduled
gross premium" means the smallest illustrated gross premium at issue for other
than universal life insurance policies. For universal life insurance policies,
scheduled gross premium means the smallest specified premium described in
subparagraph (7)(a)3., if any, or else the minimum premium described in
subparagraph (7)(a)4.
(h)
1. "Segmented reserves" means reserves,
calculated using segments produced by the contract segmentation method, equal
to the present value of all future guaranteed benefits less the present value
of all future net premiums to the mandatory expiration of a policy, where the
net premiums within each segment are a uniform percentage of the respective
guaranteed gross premiums within the segment. The uniform percentage for each
segment is such that, at the beginning of the segment, the present value of the
net premiums within the segment equals:
a. The
present value of the death benefits within the segment, plus
b. The present value of any unusual
guaranteed cash value (see paragraph (6)(d)) occurring at the end of the
segment, less
c. Any unusual
guaranteed cash value occurring at the start of the segment, plus
d. For the first segment only, the excess of
the Item (I) over Item (II), as follows:
(I) A
net level annual premium equal to the present value at the date of issue of the
benefits provided for in the first segment after the first policy year; divided
by the present value at the date of issue of an annuity of 1 per year payable
on the first and each subsequent anniversary within the first segment on which
a premium falls due. However, the net level annual premium shall not exceed the
net level annual premium on the 19 year premium whole life plan of insurance of
the same renewal year equivalent level amount at an age one year higher than
the age at issue of the policy.
(II) A net 1 year term premium for the
benefits provided for in the first policy year.
2. The length of each segment is determined
by the "contract segmentation method," as defined in this rule.
3. The interest rates used in the present
value calculations for any policy shall not exceed the maximum valuation
interest rate, determined with a guarantee duration equal to the sum of the
lengths of all segments of the policy.
4. For both basic reserves and deficiency
reserves computed by the segmented method, present values shall include future
benefits and net premiums in the current segment and in all subsequent
segments.
a. The segmentation requirement
shall not be limited to plans with no cash surrender values; otherwise
companies could avoid segmentation entirely by designing policies with minimal
(positive) cash values.
b.
Segmentation for plans with cash surrender values shall be based solely upon
gross premium levels.
c. Basing
segmentation upon the level of cash surrender values introduces complications
because of the inter-relationship between minimum cash surrender values and
gross premium patterns.
d. The
requirements of this rule relating to reserves for plans with unusual cash
values and to reserves if cash values exceed calculated reserves serve to link
required reserves and cash surrender values.
e. The calculation of segmented reserves
shall not be linked to the occurrence of a positive unitary terminal reserve at
the end of a segment.
f. The
requirement of this rule to hold the greater of the segmented reserve or the
unitary reserve eliminates the need for any
linkage.
(i)
"Tabular cost of insurance" means the net single premium at the beginning of a
policy year for 1 year term insurance in the amount of the guaranteed death
benefit in that policy year.
(j)
"Ten-year select factors" means the select factors adopted with the 1980
amendments to the NAIC Standard Valuation Law.
(k)
1.
"Unitary reserves" means the present value of all future guaranteed benefits
less the present value of all future modified net premiums, where:
a. Guaranteed benefits and modified net
premiums are considered to the mandatory expiration of the policy;
and
b. Modified net premiums are a
uniform percentage of the respective guaranteed gross premiums, where the
uniform percentage is such that at issue the present value of the net premiums
equals the present value of all death benefits and pure endowments, plus the
excess of Item (I) over Item (II), as follows:
(I) A net level annual premium equal to the
present value at the date of issue of the benefits provided for after the first
policy year, divided by the present value, at the date of issue, of an annuity
of one per year payable on the first and each subsequent anniversary of the
policy on which a premium falls due. However, the net level annual premium
shall not exceed the net level annual premium on the 19 year premium whole life
plan of insurance of the same renewal year equivalent level amount at an age 1
year higher than the age at issue of the policy.
(II) A net 1 year term premium for the
benefits provided for in the first policy year.
2. The interest rates used in the present
value calculations for any policy shall not exceed the maximum valuation
interest rate, determined with a guarantee duration equal to the length from
issue to the mandatory expiration of the policy.
(l) "Universal life insurance policy" means
any individual life insurance policy under the provisions of which separately
identified interest credits (other than in connection with dividend
accumulations, premium deposit funds, or other supplementary accounts) and
mortality or expense charges are made to the policy.
(5) General Calculation Requirements for Basic Reserves and Premium Deficiency Reserves.
(a) At the election of the insurer for any
one or more specified plans of life insurance, the minimum mortality standard
for basic reserves may be calculated using the 1980 CSO valuation tables with
select mortality factors or the mortality tables specified in subsection
69O-162.201(6),
F.A.C. If select mortality factors are elected for use with the 1980 CSO
valuation tables, they may be:
1. The 10 year
select mortality factors incorporated into the 1980 amendments to the NAIC
Standard Valuation Law; or
2. The
select mortality factors in the Appendix.
(b) Deficiency reserves, if any, are
calculated for each policy as the excess, if greater than zero, of the quantity
A over the basic reserve.
1. The quantity A is
obtained by recalculating the basic reserve for the policy using guaranteed
gross premiums instead of net premiums when the guaranteed gross premiums are
less than the corresponding net premiums.
2. At the election of the insurer for any one
or more specified plans of insurance, the quantity A and the corresponding net
premiums used in the determination of quantity A may be based upon the 1980 CSO
valuation tables with select mortality factors or the mortality tables
specified in subsection
69O-162.201(6),
F.A.C. If select mortality factors are elected for use with the 1980 CSO
valuation tables, they may be:
a. The 10 year
select mortality factors incorporated into the 1980 amendments to the NAIC
Standard Valuation Law;
b. The
select mortality factors in the Appendix of this rule;
c. For durations in the first segment, X
percent of the select mortality factors in the Appendix, subject to the
following:
(I) X may vary by policy year,
policy form, underwriting classification, issue age, or any other policy factor
expected to affect mortality experience;
(II) X is such that, when using the valuation
interest rate used for basic reserves, item (A) is greater than or equal to
Item (B);
(A) The actuarial present value of
future death benefits, calculated using the mortality rates resulting from the
application of X;
(B) The actuarial
present value of future death benefits calculated using anticipated mortality
experience without recognition of mortality improvement beyond the valuation
date;
(III) X is such
that the mortality rates resulting from the application of X are at least as
great as the anticipated mortality experience, without recognition of mortality
improvement beyond the valuation date, in each of the first 5 years after the
valuation date;
(IV) The appointed
actuary shall increase X at any valuation date where it is necessary to
continue to meet all the requirements of subparagraph (b)3.;
(V) The appointed actuary may decrease X at
any valuation date as long as X continues to meet all the requirements of
subparagraph (b)3.; and
(VI) The
appointed actuary shall specifically take into account the adverse effect on
expected mortality and lapsation of any anticipated or actual increase in gross
premiums.
(VII) If X is less than
100 percent at any duration for any policy, the following requirements shall be
met:
(A) The appointed actuary shall annually
prepare an actuarial opinion and memorandum for the company in conformance with
the requirements of rule Chapter 69O-138, F.A.C.; and
(B) The appointed actuary shall annually
opine for all policies subject to this rule as to whether the mortality rates
resulting from the application of X meet the requirements of subparagraph
(b)2.c.
I. The opinion shall be supported by
an actuarial report, subject to appropriate Actuarial Standards of Practice
promulgated by the Actuarial Standards Board of the American Academy of
Actuaries.
II. The X factors shall
reflect anticipated future mortality without recognition of mortality
improvement beyond the valuation date, taking into account relevant emerging
experience.
(C) The
appointed actuary shall disclose, in the Regulatory Asset Adequacy Issues
Summary, the impact of the insufficiency of assets to support the payment of
benefits and expenses and the establishment of statutory reserves during one or
more interim periods;
(c) This subsection applies to both basic
reserves and deficiency reserves. Any set of select mortality factors may be
used only for the first segment. However, if the first segment is less than 10
years, the appropriate 10 year select mortality factors incorporated into the
1980 amendments to the NAIC Standard Valuation Law may be used thereafter
through the tenth policy year from the date of issue.
(d) In determining basic reserves or
deficiency reserves, guaranteed gross premiums without policy fees may be used
where the calculation involves the guaranteed gross premium, but only if the
policy fee is a level dollar amount after the first policy year. In determining
deficiency reserves, policy fees may be included in guaranteed gross premiums
even if not included in the actual calculation of basic reserves.
(e) Reserves for policies that have changes
to guaranteed gross premiums, guaranteed benefits, guaranteed charges, or
guaranteed credits that are unilaterally made by the insurer after issue and
that are effective for more than 1 year after the date of the change shall be
the greatest of the following:
1. Reserves
calculated ignoring the guarantee;
2. Reserves assuming the guarantee was made
at issue; and
3. Reserves assuming
that the policy was issued on the date of the guarantee.
(f) The company shall document the extent of
the adequacy of reserves for material blocks, including policies issued prior
to the effective date of this rule. The documentation shall include:
1. A demonstration of the extent to which
aggregation with immaterial blocks of business is relied upon in the formation
of the appointed actuary opinion pursuant to and consistent with the
requirements of Chapter 69O-138, F.A.C.; and
2. A definition of
material.
(6) Calculation of Minimum Valuation Standard for Policies with Guaranteed Nonlevel Gross Premiums or Guaranteed Nonlevel Benefits (Other than Universal Life Policies).
(a) Basic Reserves. Basic reserves
shall be calculated as the greater of the segmented reserves and the unitary
reserves. Both the segmented reserves and the unitary reserves for any policy
shall use the same valuation mortality table and selection factors. At the
option of the insurer in calculating segmented reserves and net premiums either
of the adjustments described in subparagraph 1. or 2. below may be made:
1. Treat the unitary reserve, if greater than
zero, applicable at the end of each segment as a pure endowment and subtract
the unitary reserve, if greater than zero, applicable at the beginning of each
segment from the present value of guaranteed life insurance and endowment
benefits for each segment.
2. Treat
the guaranteed cash surrender value, if greater than zero, applicable at the
end of each segment as a pure endowment; and subtract the guaranteed cash
surrender value, if greater than zero, applicable at the beginning of each
segment from the present value of guaranteed life insurance and endowment
benefits for each segment.
(b) Deficiency Reserves.
1. The deficiency reserve at any duration
shall be calculated:
a. On a unitary basis if
the corresponding basic reserve determined by paragraph (a) is
unitary;
b. On a segmented basis if
the corresponding basic reserve determined by paragraph (a) is segmented;
or
c. On the segmented basis if the
corresponding basic reserve determined by paragraph (a) is equal to both the
segmented reserve and the unitary reserve.
2. This subsection shall apply to any policy
for which the guaranteed gross premium at any duration is less than the
corresponding modified net premium calculated by the method used in determining
the basic reserves, but using the minimum valuation standards in paragraph
(5)(b) and rate of interest.
3.
Deficiency reserves, if any, shall be calculated for each policy as the excess
if greater than zero, for the current and all remaning periods, of the quantity
A over the basic reserve, where A is obtained as indicated in paragraph
(5)(b).
4. For deficiency reserves
determined on a segmented basis, the quantity A is determined using segment
lengths equal to those determined for segmented basic
reserves.
(c) Minimum
Value.
1. Basic reserves shall not be less
than the tabular cost of insurance for the balance of the policy year if mean
reserves are used.
2. Basic
reserves shall not be less than the tabular cost of insurance for the balance
of the current modal period or to the paid-to-date, if later, but not beyond
the next policy anniversary, if mid-terminal reserves are used.
3. The tabular cost of insurance shall use
the same valuation mortality table and interest rates as that used for the
calculation of the segmented reserves.
4. Mortality tables specified in subsection
69O-162.201(6),
F.A.C., may be used.
5. However, if
select mortality factors are used with the 1980 CSO valuation tables, they
shall be the 10 year select factors incorporated into the 1980 amendments of
the NAIC Standard Valuation Law.
6.
In no case may total reserves (including basic reserves, deficiency reserves
and any reserves held for supplemental benefits that would expire upon contract
termination) be less than the amount that the policyowner would receive
(including the cash surrender value of the supplemental benefits, if any,
referred to above), exclusive of any deduction for policy loans, upon
termination of the policy.
(d) Unusual Pattern of Guaranteed Cash
Surrender Values.
1. For any policy with an
unusual pattern of guaranteed cash surrender values, the reserves actually held
prior to the first unusual guaranteed cash surrender value shall not be less
than the reserves calculated by treating the first unusual guaranteed cash
surrender value as a pure endowment and treating the policy as an n year policy
providing term insurance plus a pure endowment equal to the unusual cash
surrender value, where n is the number of years from the date of issue to the
date the unusual cash surrender value is scheduled.
2. The reserves actually held subsequent to
any unusual guaranteed cash surrender value shall not be less than the reserves
calculated by treating the policy as an n year policy providing term insurance
plus a pure endowment equal to the next unusual guaranteed cash surrender
value, and treating any unusual guaranteed cash surrender value at the end of
the prior segment as a net single premium, where:
a. n is the number of years from the date of
the last unusual guaranteed cash surrender value prior to the valuation date to
the earlier of:
(I) The date of the next
unusual guaranteed cash surrender value, if any, that is scheduled after the
valuation date; or
(II) The
mandatory expiration date of the policy; and
b. The net premium for a given year during
the n year period is equal to the product of the net to gross ratio and the
respective gross premium; and
c.
The net to gross ratio is equal to Item I divided by Item II as follows:
(I)
(A) The
present value at the beginning of the n year period of death benefits payable
during the n year period, plus
(B)
The present value at the beginning of the n year period of the next unusual
guaranteed cash surrender value, if any, minus
(C) The amount of the last unusual guaranteed
cash surrender value, if any, scheduled at the beginning of the n year
period.
(II) The present
value at the beginning of the n year period of the scheduled gross premiums
payable during the n year period.
3. For purposes of this subsection, a policy
is considered to have an unusual pattern of guaranteed cash surrender values if
any future guaranteed cash surrender value exceeds the prior year's guaranteed
cash surrender value by more than the sum of:
a. 110 percent of the scheduled gross premium
for that year;
b. 110 percent of
one year's accrued interest on the sum of the prior year's guaranteed cash
surrender value and the scheduled gross premium using the nonforfeiture
interest rate used for calculating policy guaranteed cash surrender values;
and
c. 5 percent of the first
policy year surrender charge, if any.
(e) Optional Exemption for Yearly Renewable
Term Reinsurance. At the option of the company, the following approach for
reserves on YRT reinsurance may be used:
1.
Calculate the valuation net premium for each future policy year as the tabular
cost of insurance for that future year.
2. Basic reserves shall never be less than
the tabular cost of insurance for the appropriate period, as defined in
paragraph (c).
3. Deficiency
reserves.
a. For each policy year, calculate
the excess, if greater than zero, of the valuation net premium over the
respective maximum guaranteed gross premium.
b. Deficiency reserves shall never be less
than the sum of the present values, at the date of valuation, of the excesses
determined in accordance with paragraph (a) above.
4. For purposes of this subsection, the
calculations use the maximum valuation interest rate and the 1980 CSO mortality
tables with or without 10 year select mortality factors or the mortality tables
specified in subsection
69O-162.201(6),
F.A.C.
5. A reinsurance agreement
shall be considered YRT reinsurance for purposes of this subsection if only the
mortality risk is reinsured.
6. If
the assuming company chooses this optional exemption, the ceding company's
reinsurance reserve credit shall be limited to the amount of reserve held by
the assuming company for the affected policies.
(f) Optional Exemption for Attained-Age-Based
Yearly Renewable Term Life Insurance Policies. At the option of the company,
the following approach for reserves for attained-age-based YRT life insurance
policies may be used:
1. Calculate the
valuation net premium for each future policy year as the tabular cost of
insurance for that future year.
2.
Basic reserves shall never be less than the tabular cost of insurance for the
appropriate period, as defined in paragraph (6)(c).
3. Deficiency reserves.
a. For each policy year, calculate the
excess, if greater than zero, of the valuation net premium over the respective
maximum guaranteed gross premium.
b. Deficiency reserves shall never be less
than the sum of the present values at the date of valuation of the excesses
determined in accordance with sub-subparagraph a. above.
4. For purposes of this subsection, the
calculations use the maximum valuation interest rate and the 1980 CSO valuation
tables with or without 10 year select mortality factors or the mortality tables
specified in subsection
69O-162.201(6),
F.A.C.
5. A policy shall be
considered an attained-age-based YRT life insurance policy for purposes of this
subsection if:
a. The premium rates on both
the initial current premium scale and the guaranteed maximum premium scale are
based upon the attained age of the insured such that the rate for any given
policy at a given attained age of the insured is independent of the year the
policy was issued; and
b. The
premium rates on both the initial current premium scale and the guaranteed
maximum premium scale are the same as the premium rates for policies covering
all insureds of the same sex, risk class, plan of insurance, and attained
age.
6. For policies that
become attained-age-based YRT policies after an initial period of coverage, the
approach of this subsection may be used after the initial period if:
a. The initial period is constant for all
insureds of the same sex, risk class, and plan of insurance; or
b. The initial period runs to a common
attained age for all insureds of the same sex, risk class, and plan of
insurance; and
c. After the initial
period of coverage, the policy meets the conditions of subparagraph 5.
above.
7. If this
election is made, this approach shall be applied in determining reserves for
all attained-age-based YRT life insurance policies issued on or after the
effective date of this rule.
(g) Exemption from Unitary Reserves for
Certain n-Year Renewable Term Life Insurance Polices. Unitary basic reserves
and unitary deficiency reserves need not be calculated for a policy if the
following conditions are met:
1. The policy
consists of a series of n-year periods including the first period and all
renewal periods where n is the same for each period, except that for the final
renewal period, n may be truncated or extended to reach the expiry age,
provided that:
a. This final renewal period is
less than 10 years and less than twice the size of the earlier n-year periods,
and
b. For each period, the premium
rates on both the initial current premium scale and the guaranteed maximum
premium scale are level;
2. The guaranteed gross premiums in all
n-year periods are not less than the corresponding net premiums based upon the
1980 CSO Table with or without the 10 year select mortality factors or the
mortality tables specified in subsection
69O-162.201(6),
F.A.C.; and
3. There are no cash
surrender values in any policy year.
(h) Exemption from Unitary Reserves for
Certain Juvenile Policies. Unitary basic reserves and unitary deficiency
reserves need not be calculated for a policy if the following conditions are
met, based upon the initial current premium scale at issue:
1. At issue, the insured is age 24 or
younger;
2. Until the insured
reaches the end of the juvenile period, which shall occur at or before age 25,
the gross premiums and death benefits are level, and there are no cash
surrender values; and
3. After the
end of the juvenile period, gross premiums are level for the remainder of the
premium paying period, and death benefits are level for the remainder of the
life of the policy.
(7) Calculation of Minimum Valuation Standard for Flexible Premium and Fixed Premium Universal Life Insurance Policies that Contain Provisions Resulting in the Ability of a Policyowner to Keep a Policy in Force Over a Secondary Guarantee Period.
(a) General.
1. Policies with a secondary guarantee
include:
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 1 year valuation premium,
calculated using the maximum valuation interest rate and the 1980 CSO valuation
tables with or without 10 year select mortality factors or the mortality tables
specified in subsection
69O-162.201(6),
F.A.C.; or
c. A policy with any
combination of subparagraph a. and b.
2. A secondary guarantee period is the period
for which the policy is guaranteed to remain in force subject only to a
secondary guarantee.
a. When a policy
contains more than one secondary guarantee, the minimum reserve shall be the
greatest of the respective minimum reserves at that valuation date of each
unexpired secondary guarantee, ignoring all other secondary
guarantees.
b. Secondary guarantees
that are unilaterally changed by the insurer after issue shall be considered to
have been made at issue.
c.
Reserves described in paragraphs (b) and (c) below shall be recalculated from
issue to reflect these changes.
3. Specified premiums mean the premiums
specified in the policy, the payment of which guarantees that the policy will
remain in force at the original schedule of benefits but which otherwise would
be insufficient to keep the policy in force in the absence of the guarantee if
maximum mortality and expense charges and minimum interest credits were made
and any applicable surrender charges were assessed.
4.
a. For
purposes of this section, the minimum premium for any policy year is the
premium that, when paid into a policy with a zero account value at the
beginning of the policy year, produces a zero account value at the end of the
policy year.
b. The minimum premium
calculation shall use the policy cost factors (including mortality charges,
loads, and expense charges) and the interest crediting rate which are all
guaranteed at issue.
5.
a. The 1 year valuation premium means the net
1 year premium based upon the original schedule of benefits for a given policy
year.
b. The 1 year valuation
premiums for all policy years are calculated at issue.
c. The select mortality factors defined in
subparagraphs (5)(b)2., 3., and 4. shall not be used to calculate the 1 year
valuation premiums.
6.
The 1 year valuation premium shall reflect the frequency of fund processing, as
well as the distribution of deaths assumption employed in the calculation of
the monthly mortality charges to the fund.
(b) Basic Reserves for the Secondary
Guarantees.
1. Basic reserves for the
secondary guarantees shall be the segmented reserves for the secondary
guarantee period.
2. In calculating
the segments and the segmented reserves, the gross premiums shall be set equal
to the specified premiums, if any, or otherwise to the minimum premiums that
keep the policy in force.
3. The
segments will be determined according to the contract segmentation method as
defined in paragraph (4)(b).
(c) Deficiency Reserves for the Secondary
Guarantees. Deficiency reserves, if any, for the secondary guarantees shall be
calculated for the secondary guarantee period in the same manner as described
in paragraph (6)(b) with gross premiums set equal to the specified premiums, if
any, or otherwise to the minimum premiums that keep the policy in
force.
(d) Minimum Reserves. The
minimum reserves during the secondary guarantee period are the greater of:
1. The basic reserves for the secondary
guarantee plus the deficiency reserve, if any, for the secondary guarantees;
or
2. The minimum reserves required
by Rule 69O-164.010, F.A.C., governing
universal life plans.
(9) Effective Date.
(a) This rule shall be effective for policies
issued on or after January 1, 2000 for valuation dates on or after the date
this rule is adopted.
(b) For
valuation dates prior to the effective date of this rule, at the option of the
company, the company may report reserves for policies issued in calendar year
2000 based upon this rule.
Rulemaking Authority 624.308(1), 625.121(5) FS. Law Implemented 624.307(1), 625.121(5) FS.
New 12-24-03, Formerly 4-164.020, Amended 6-8-05, 11-2-11.
Disclaimer: These regulations may not be the most recent version. Florida may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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