Louisiana Administrative Code
Title 37 - INSURANCE Part
Part XIII - Regulations
Chapter 85 - Regulation 36-Universal Life Insurance Model Regulation
Section XIII-8509 - Nonforfeiture
Universal Citation: LA Admin Code XIII-8509
Current through Register Vol. 50, No. 9, September 20, 2024
A. Minimum Cash Surrender Values for Flexible Premium Universal Life Insurance Policies
1. Minimum cash surrender values for flexible
premium universal life insurance policies shall be determined separately for
the basic policy and any benefits and riders for which premiums are paid
separately. The following requirements pertain to a basic policy and any
benefits and riders for which premiums are not paid separately.
2. The minimum cash surrender value (before
adjustment for indebtedness and dividend credits) available on a date as of
which interest is credited to the policy shall be equal to the accumulation to
that date as of which interest is credited to the policy shall be equal to the
accumulation to that date of the premiums paid minus the accumulations to that
date of:
a. the benefit charges;
b. the averaged administrative expense
charges for the first policy year and any insurance increase years;
c. actual administrative expense charges for
other years;
d. initial and
additional acquisition expense charges not exceeding the initial or additional
expense allowances, respectively;
e. any service charges actually made
(excluding charges for cash surrender or election of a paid-up nonforfeiture
benefit); and
f. any deductions
made for partial withdrawals; all accumulations being at the actual rate or
rates of interest at which interest credits have been made unconditionally to
the policy (or have been made conditionally, but for which the conditions have
since been met), and minus any unamortized unused initial and additional
expense allowances.
3.
Interest on the premiums and on all charges referred to in
§8509. A.2 a-f shall
be accumulated from and to such dates as are consistent with the manner in
which interest is credited in determining the policy value.
4. The benefit charges shall include the
charges made for mortality and any charges made for riders or supplementary
benefits for which premiums are not paid separately. If benefit charges are
substantially level by duration and develop low or no cash values, then the
commissioner shall have the right to require higher cash values unless the
insurer provides adequate justification that the cash values are appropriate in
relation to the policy's other
characteristics.4
5. The administrative expense charges shall
include charges per premium payment, charges per dollar of premium paid,
periodic charges per thousand dollars of insurance, periodic per policy
charges, and any other charges permitted by the policy to be imposed without
regard to the policyowner's request for services.
6. The averaged administrative expense
charges for any year shall be those which would have been imposed in that year
if the charge rate or rates for each transaction or period within the year had
been equal to the arithmetic average of the corresponding charge rates which
the policy states will be imposed in policy years 2 through 20 in determining
the policy value.
7. The initial
acquisition expense charges shall be the excess of the expense charges, other
than service charges actually made in the first policy year over the averaged
administrative expense charges for that year. Additional acquisition expense
charges shall be the excess of the expense charges, other than service charges,
actually made in an insurance-increase year over the averaged administrative
expense charges for that year. An insurance-increase year shall be the year
beginning on the date of increase in the amount of insurance by policyowner
request (or by the terms of the policy).
8. Service charges shall include charges
permitted by the policy to be imposed as the result of a policyowner's request
for a service by the insurer (such as the furnishing of future benefit
illustrations) or of special transactions.
9. The initial expense allowance shall be the
allowance provided by [Items (ii), (iii) and (iv) of Section 5] or by [Items
(ii) and (iii) of Section 5-c(l)], as applicable, of the Standard
Non-Forfeiture Law for Life Insurance, as amended in 1980 for a fixed
premium, fixed benefit endowment policy with a face amount equal to the initial
face amount of the flexible premium universal life insurance policy, with level
premiums paid annually until the highest attained age at which a premium may be
paid under the flexible premium universal life insurance policy, and maturing
on the latest maturity date permitted under the policy, if any, otherwise at
the highest age in the valuation mortality table. The unused initial expense
allowance shall be the excess, if any, of the initial expense allowance over
the initial acquisition expense charges, as defined above.
10. If the amount of insurance is
subsequently increased upon request of the policyowner (or by the terms of the
policy), an additional expense allowance and an unused additional expense
allowance shall be determined on a basis consistent with the above and with
[Section 5-c(5) of the Standard Nonforfeiture Law for Life Insurance,
as amended in 1980, using the face amount and the latest maturity date
permitted at that time under the policy.
11. The unamortized unused initial expense
allowance during the policy year beginning on the policy anniversary at age x +
t (where "x" is the same issue age) shall be the unused initial expense
allowance multiplied by:
where:
äx + t and äx + t and äx are present values of an annuity of one per year payable on policy anniversaries beginning at ages x + t and x, respectively, and continuing until the highest attained age at which a premium may be paid under the policy, both on the mortality and interest bases guaranteed in the policy. An unamortized unused additional expense allowance shall be the unused additional expense allowance multiplied by a similar ratio of annuities, with äx replaced by an annuity beginning on the date as of which the additional expense allowance was determined.
4Because this product is still developing, it is recommended that benefit charges not be restricted and regulatory treatment of cash values be limited to that contained in this Section for several reasons.
First, further restrictions would limit the development of the product.
Second, added restrictions would discourage insurers from reducing non-guaranteed current benefit charges because such reductions could require reduced future benefit charges that could be financially unsound for the insurer.
Third, market pressures will encourage insurers to limit benefit charges.
B. Minimum Cash Surrender Values for Fixed Premium Universal Life Insurance Policies
1.
For fixed premium universal life insurance policies, the minimum cash surrender
values shall be determined separately for the basic policy and any benefits and
riders for which premiums are paid separately. The following requirements
pertain to a basic policy and any benefits and riders for which premiums are
not paid separately.
a. The minimum cash
surrender value (before adjustment for indebtedness and dividend credits)
available on a date as of which interest is credited to the policy shall be
equal to:
((A)-(B)-(C)-(D))
where:
(A) is the
present value of all future guaranteed benefits.
(B) is the present value of future adjusted
premiums. The adjusted premiums are calculated as described in (Sections 5 and
5-a or in Paragraph (1) of Section 5-c], as applicable, of the Standard
Nonforfeiture Law for Life Insurance, as amended in 1980. If Section 5-c,
Paragraph (1) is applicable, the nonforfeiture net level premium is equal to
the quantity:
where:
PVFB is the present value of a benefits guaranteed at issue assuming future premiums are paid by the policyowner and all guarantees contained in the policy or declared by the insurer.
äx is the present value of an annuity of one per year payable on policy anniversaries beginning at age x and continuing until the highest attained age at which a premium may be paid under the policy.
(C) is the
present value of any quantities analogous to the nonforfeiture net level
premium which arise because of guarantees declared by the insurer after the
issue date of the policy. ax shall be replaced by an
annuity beginning on the date as of which the declaration became effective and
payable until the end of the period covered by the declaration.
(D) is the sum of any quantities analogous to
(B) which arise because of structural changes5 in
the policy.
b. Future
guaranteed benefits are determined by:
i.
projecting the policy value taking into account future premiums, if any, and
using all guarantees of interest, mortality, expense deductions, etc.,
contained in the policy or declared by the insurer; and
ii. taking into account any benefits
guaranteed in the policy or by declaration which do not depend on the policy
value.
c. All present
values shall be determined using:
i. an
interest rate (or rates) specified by the Standard Nonforfeiture Law for Life
Insurance, as amended in 1980 for policies issued in the same year;
and
ii. the mortality rates
specified by the Standard Nonforfeiture Law for Life Insurance, as amended in
1980 for policies issued in the same year or contained in such other table as
may be approved by the commissioner for this purpose.
5See Footnote 3 (§8507)
C. Minimum Paid-Up Nonforfeiture Benefits
1. If a universal life insurance policy
provides for the optional election of a paid-up nonforfeiture benefit, it shall
be such that its present value shall be at least equal to the cash surrender
value provided for by the policy on the effective date of the election. The
present value shall be based on mortality and interest standards at least as
favorable to the policyowner as:
a. in the
case of a flexible premium universal life insurance policy, the mortality and
interest basis guaranteed in the policy for determining the policy value;
or
b. in the case of fixed premium
policy the mortality and interest standards permitted for paid-up nonforfeiture
benefits by the Standard Nonforfeiture Law for Life Insurance, as
amended in 1980. In lieu of the paid-up nonforfeiture benefit, the
insurer may substitute, upon proper request not later than 60 days after the
due date of the premium in default, an actuarially equivalent alternative
paid-up nonforfeiture benefit which provides a greater amount or longer period
of death benefits, or, if applicable, a greater amount or earlier payment of
endowment benefits.
AUTHORITY NOTE: Promulgated in accordance with Title 22, Section 2 and Title 36, Section 682 of the Insurance Laws of the State of Louisiana.
Disclaimer: These regulations may not be the most recent version. Louisiana 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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