1. Reserve liabilities for variable life
insurance policies shall be established under the Standard Valuation Law in
accordance with actuarial procedures that recognize the variable nature of the
benefits provided and any mortality guarantees.
2. For scheduled premium policies, 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:
a. 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; of
b. 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 paragraph (1),
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 paragraph (2) below.
(1) 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 claim payments over the year; and
(2) the payment referred to in Subsection 2 b
of this Article 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 paragraph (1), 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
contracts.
c. The
valuation interest rate and mortality table used in computing the two minimum
reserves described in (a) and (b) 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.
3. For flexible premium policies, reserve
liabilities for any guaranteed minimum death benefit shall be maintained in the
general account of the insurer and shall be not less than the aggregate total
of the term costs, if any, covering the period provided for in the guarantee
not otherwise provided for by the reserves held in the separate account
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
valuation interest rate.
The valuation interest rate and mortality table used in
computing this additional reserve, if any, 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.
4. Reserve liabilities for all fixed
incidental insurance benefits and any guarantees associated with variable
incidental insurance benefits shall be maintained in the general account and
reserve liabilities for all variable aspects of the variable incidental
insurance benefits shall be maintained in a separate account, in amounts
determined in accordance with the actuarial procedures appropriate to such
benefit.
