Minnesota Administrative Rules
Agency 120 - Commerce Department
Chapter 2747 - VALUATION OF LIFE INSURANCE POLICIES
Part 2747.0020 - DEFINITIONS
Current through Register Vol. 49, No. 13, September 23, 2024
Subpart 1. Scope.
For purposes of this chapter, the terms defined in this part have the meanings given them.
Subp. 2. Basic reserves.
"Basic reserves" means reserves calculated according to Minnesota Statutes, section 61A.25, subdivision 4.
Subp. 3. Contract segmentation method.
"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 in this subpart. All calculations are made using the 1980 CSO valuation tables, as defined in subpart 7, or any other valuation mortality table adopted by the National Association of Insurance Commissioners after January 1, 2000, and adopted by rule by the commissioner for this purpose, and, if elected, the optional minimum mortality standard for deficiency reserves stipulated in part 2747.0030, subpart 2.
The length of a particular contract segment must 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:
| Gt = | GPx+k+t --------- 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. | |
| Rt = | qx+k+t ---------, qx+k+t-1 | However, Rt may be increased or decreased by one 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 in this subpart; and | ||
| qx+k+t-1 = | valuation mortality rate for deficiency reserves in policy year k+t but using the mortality of part 2747.0030, subpart 2, item B, if part 2747.0030, subpart 2, item C, 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 1,000. If GPx+k+t and GPx+k+t-1 are both equal to 0, Gt shall be deemed to be 0.
Subp. 4. Deficiency reserves.
"Deficiency reserves" means the excess, if greater than zero, of:
Subp. 5. Guaranteed gross premiums.
"Guaranteed gross premiums" means the premiums under a policy of life insurance that are guaranteed and determined at issue.
Subp. 6. Maximum valuation interest rates.
"Maximum valuation interest rates" means the interest rates defined in Minnesota Statutes, section 61A.25, subdivision 3b, that are to be used in determining the minimum standard for the valuation of life insurance policies.
Subp. 7. 1980 CSO valuation tables.
"1980 CSO valuation tables" means the Commissioners 1980 Standard Ordinary Mortality Table (1980 CSO Table) without ten-year selection factors, incorporated into the 1980 amendments to the National Association of Insurance Commissioners Standard Valuation Law, and variations of the 1980 CSO Table approved by the National Association of Insurance Commissioners, such as the smoker and nonsmoker versions approved in December 1983.
Subp. 8. Scheduled gross premium.
"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 part 2747.0050, subpart 1, item C, if any, or else the minimum premium described in part 2747.0050, subpart 1, item D.
Subp. 9. Segmented reserves.
"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:
The length of each segment is determined by the contract segmentation method, as defined in this part.
The interest rates used in the present value calculations for a policy may 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.
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.
Subp. 10. Tabular cost of insurance.
"Tabular cost of insurance" means the net single premium at the beginning of a policy year for one-year term insurance in the amount of the guaranteed death benefit in that policy year.
Subp. 11. Ten-year select factors.
"Ten-year select factors" means the select factors adopted with the 1980 amendments to the National Association of Insurance Commissioners Standard Valuation Law.
Subp. 12. Unitary reserves.
"Unitary reserves" means the present value of all future guaranteed benefits less the present value of all future modified net premiums, where:
The interest rates used in the present value calculations for a policy may 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.
Subp. 13. Universal life insurance policy.
"Universal life insurance policy" means an 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.
Statutory Authority: MS s 45.023; 61A.25
