(1)
General.
(a)
Policies with a secondary guarantee include:
1. 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;
2. 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 any other table adopted after the
effective date of
211 CMR 29.00 by the NAIC and
promulgated by regulation by the commissioner for this purpose; or
3. A policy with any combination of 211 CMR
29.07(1)(a)1. or 211 CMR 29.07(1)(a)2.
(b) 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
carrier after issue shall be considered to have been made at issue. Reserves
described in 211 CMR 29.07(2) and 211 CMR 29.07(3) shall be recalculated from
issue to reflect these changes.
(c)
Specified premiums means 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.
(d) For purposes of
211 CMR 29.07, 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 shall use the policy cost factors (including
mortality charges, loads and expense charges) and the interest crediting rate,
which are all guaranteed at issue.
(e) 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
211
CMR 29.05(2)(b), (c), and
(d) may not be used to calculate the one-year
valuation premiums.
(f) 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 mortality charges to the fund.
(2)
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
211 CMR
29.04.
(3)
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
211
CMR 29.06(2) with gross
premiums set equal to the specified premiums, if any, or otherwise to the
minimum premiums that keep the policy in force.
(4)
Minimum
Reserves. The minimum reserves during the secondary guarantee
period are the greater of:
(a) The basic
reserves for the secondary guarantee plus the deficiency reserve, if any, for
the secondary guarantees; or
(b)
The minimum reserves required by other rules or regulations governing universal
life plans.
