Current through Register Vol. 48, No. 12, March 22, 2024
a)
General.
1) Policies with a secondary
guarantee include, but are not limited to:
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 the
1980 CSO valuation tables with or without ten-year select mortality factors;
or
C) A policy with any combination
of (a)(1)(A) and (B) above.
2) A secondary guarantee period is the period
for which the policy is guaranteed to remain in force subject only to a
secondary guarantee. 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. Secondary guarantees that are unilaterally changed by the
insurer after issue, whether by rider or otherwise, shall be considered to have
been made at issue. Reserves described in subsections (b) and (c) below must be
recalculated from issue to reflect the extensions.
3) Specified premiums mean the premiums
specified in the policy (or imputable by the terms of 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)
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. The minimum premium calculation must use the policy cost factors
(including mortality charges, loads and expense charges) and the interest
crediting rate, which are all guaranteed at issue.
5) The one-year valuation premium means the
net one-year premium based upon the original schedule of benefits for a given
policy year. The one-year valuation premiums for all policy years are
calculated at issue. The select mortality factors defined in Section
1409.40(b)(3) and
(4) may not be used to calculate the one-year
valuation premiums.
6) The one-year
valuation premium should reflect the frequency of fund processing, as well as
the distribution of deaths assumption employed in the calculation of the
monthly charges to the fund.
b) Basic Reserves for the Secondary
Guarantees.
Basic reserves for the secondary guarantees shall be the
segmented reserves for the secondary guarantee period. 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 and the segments will be determined according to the
contract segmentation method as defined in Section
1409.30
of this Part.
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 subsection (b) of Section
1409.50 of
this Part 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 the NAIC's Universal Life Insurance Model
Regulation.