(1) Applicability. This rule shall apply to
all life insurance policies, with or without nonforfeiture values, issued on or
after the effective date of this rule, subject to the following exceptions and
conditions:
(A) Exceptions.
1. This rule shall not apply to any
individual life insurance policy issued on or after the effective date of this
rule if the policy is issued in accordance with and as a result of the exercise
of a reentry provision contained in the original life insurance policy of the
same or greater face amount, issued before the effective date of this rule,
that guarantees the premium rates of the new policy. This rule also shall not
apply to subsequent policies issued as a result of the exercise of such a
provision, or a derivation of the provision, in the new policy.
2. This rule shall not apply to any universal
life policy that meets all the following requirements:
A. Secondary guarantee period, if any, is
five (5) years or less;
B.
Specified premium for the secondary guarantee period is not less than the net
level reserve premium for the secondary guarantee period based on the CSO
valuation tables as defined in subsection (2)(F) and the applicable valuation
interest rate; and
C. The initial
surrender charge is not less than one hundred percent (100%) of the first year
annualized specified premium for the secondary guarantee period.
3. This rule shall not apply to
any variable life insurance policy that provides for life insurance, the amount
or duration of which varies according to the investment experience of any
separate account or accounts.
4.
This rule shall not apply to any variable universal life insurance policy that
provides for life insurance, the amount or duration of which varies according
to the investment experience of any separate account or accounts.
5. This rule shall not apply to a group life
insurance certificate unless the certificate provides for a stated or implied
schedule of maximum gross premiums required in order to continue coverage in
force for a period in excess of one (1) year.
(B) Conditions.
1. Calculation of the minimum valuation
standard for policies with guaranteed nonlevel gross premiums or guaranteed
nonlevel benefits (other than universal life policies), or both, shall be in
accordance with the provisions of section (4).
2. Calculation of the minimum valuation
standard for flexible premium and fixed premium universal life insurance
policies that contain provisions resulting in the ability of a policyholder to
keep a policy in force over a secondary guarantee period shall be in accordance
with the provisions of section (5).
(2) Definitions. For purposes of this rule:
(A) "Basic reserves" means reserves
calculated pursuant to section 376.380.1(2)(b), RSMo.
(B) "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 below. All
calculations are made using the 1980 CSO valuation tables, as defined in
subsection (F) of this section (or any other valuation mortality table adopted
by the National Association of Insurance Commissioners (NAIC), after the
effective date of this rule and promulgated by rule by the director for this
purpose) and, if elected, the optional minimum mortality standard for
deficiency reserves stipulated in subsection (3)(B) of this rule. The length of
a particular contract segment shall be 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 t be the number of
years from the beginning of the segment to the mandatory expiration date of the
policy), where G and R are defined as t t follows:
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where:
x =original issue age;
k =the number of years from the date of issue to the
beginning of the segment;
t =1, 2, ...; tis 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.
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However, R may be in t creased or decreased by one percent in
any policy year, at the company's option, but R shall not be less than t
one;
where:
x, k and t are as defined above, and q = valuation mortality
rate for x+k+t-1
deficiency reserves in policy year k+t but using the
mortality of paragraph (3)(B)2. if paragraph (3)(B)3. is elected for deficiency
reserves.
However, if GP is greater than 0 and x+k+t
GP is equal to 0, G shall be x+k+t-1 t deemed to be 1000. If
GP and x+k+t
GP are both equal to 0, G shall be x+k+t-1 t deemed to be
0.
(C) "Deficiency
reserves" means the excess, if greater than zero, of-
1. Minimum reserves calculated pursuant to
section 376.380.1(2)(h), RSMo, over
2. Basic reserves.
(D) "Guaranteed gross premiums" means the
premiums under a policy of life that are insurance guaranteed and determined at
issue.
(E) "Maximum valuation
interest rates" means the interest rates defined in section 376.380.2, RSMo,
that are to be used in determining the minimum standard for the valuation of
life insurance policies.
(F) "1980
CSO valuation tables" means the Commissioners' 1980 Standard Ordinary Mortality
Table (1980 CSO Table) without ten-year selection factors, incorporated into
section
376.380,
RSMo, and 20 CSR 400-1.110, 20 CSR 400-1.120, and 20 CSR 400-1.130.
(G) "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 paragraph (5)(A)3.,
if any, or else the minimum premium described in paragraph (5)(A)4.;
(H) Segmented Reserves.
1. "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:
A.
The present value of the death benefits within the segment, plus
B. The present value of any unusual
guaranteed cash value (see subsection (4)(D)) occurring at the end of the
segment, less
C. Any unusual
guaranteed cash value occurring at the start of the segment, plus
D. For the first segment only, the excess of
part (I) over part (II) as follows:
(I) A net
level annual premium equal to the present value, at the date of issue, of the
benefits provided for in the first segment after the first policy year, divided
by the present value, at the date of issue, of an annuity of one (1) per year
payable on the first and each subsequent anniversary within the first segment
on which a premium falls due. However, the net level annual premium shall not
exceed the net level annual premium on the nineteen (19)-year premium whole
life plan of insurance of the same renewal year equivalent level amount at an
age one (1)-year higher than the age at issue of the policy.
(II) A net one (1)-year term premium for the
benefits provided for in the first policy year.
2. The length of each segment is determined
by the "contract segmentation method," as defined in this section.
3. The interest rates used in the present
value calculations for any 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.
4. 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.
(I) "Tabular cost of insurance," means the
net single premium at the beginning of a policy year for one (1)-year term
insurance in the amount of the guaranteed death benefit in that policy
year.
(J) "Ten-year select
factors," means the select factors adopted with section
376.380,
RSMo and 20 CSR 400-1.110, 20 CSR 400-1.120, and 20 CSR 400-1.130.
(K) Unitary Reserves.
1. "Unitary reserves" means the present value
of all future guaranteed benefits less the present value of all future modified
net premiums, where:
A. Guaranteed benefits
and modified net premiums are considered to the mandatory expiration of the
policy; and
B. Modified net
premiums are a uniform percentage of the respective guaranteed gross premiums,
where the uniform percentage is such that, at issue, the present value of the
net premiums equals the present value of all death benefits and pure
endowments, plus the excess of part (I) over part (II), as follows:
(I) A net level annual premium equal to the
present value, at the date of issue, of the benefits provided for after the
first policy year, divided by the present value, at the date of issue, of an
annuity of one (1) per year payable on the first and each subsequent
anniversary of the policy on which a premium falls due. However, the net level
annual premium shall not exceed the net level annual premium on the nineteen
(19)-year premium whole life plan of insurance of the same renewal year
equivalent level amount at an age one (1) year higher than the age at issue of
the policy.
(II) A net one (1)-year
term premium for the benefits provided for in the first policy year.
2. The interest rates
used in the present value calculations for any 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.
(L) "Universal life insurance
policy" means any 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.
(3) General Calculation Requirements for
Basic Reserves and Premium Deficiency Reserves.
(A) At the election of the company for any
one (1) or more specified plans of life insurance, the minimum mortality
standard for basic reserves may be calculated using the 1980 CSO valuation
tables with select mortality factors (or any other valuation mortality table
adopted by the NAIC after the effective date of this rule and promulgated by
rule by the director for this purpose). If select mortality factors are
elected, they may be:
1. The ten (10)-year
select mortality factors incorporated into section
376.380,
RSMo, and 20 CSR 400-1.100, 20 CSR 400-1.120, and 20 CSR 400-1.130;
2. The select mortality factors in the
Appendix, included herein; or
3.
Any other table of select mortality factors adopted by the NAIC after the
effective date of this rule and promulgated by rule by the director for the
purpose of calculating basic reserves.
(B) Deficiency reserves, if any, are
calculated for each policy as the excess, if greater than zero, of the quantity
A over the basic reserve. The quantity A is obtained by recalculating the basic
reserve for the policy using guaranteed gross premiums instead of net premiums
when the guaranteed gross premiums are less than the corresponding net
premiums. At the election of the company for any one (1) or more specified
plans of insurance, the quantity A and the corresponding net premiums used in
the determination of quantity A may be based upon the 1980 CSO valuation tables
with select mortality factors (or any other valuation mortality table adopted
by the NAIC after the effective date of this rule and promulgated by rule by
the director). If select mortality factors are elected, they may be-
1. The ten (10)-year select mortality factors
incorporated into section
376.380,
RSMo, and 20 CSR 400-1.110, 20 CSR 400-1.120, and 20 CSR 400-1.130;
2. The select mortality factors in the
Appendix, included herein;
3. For
durations in the first segment, X percent of the select mortality factors in
the Appendix, subject to the following:
A. X
may vary by policy year, policy form, underwriting classification, issue age,
or any other policy factor expected to affect mortality experience;
B. X is such that, when using the valuation
interest rate used for basic reserves, part (I) is greater than or equal to
part (II):
(I) The actuarial present value of
future death benefits, calculated using the mortality rates resulting from the
application of X;
(II) The
actuarial present value of future death benefits calculated using anticipated
mortality experience without recognition of mortality improvement beyond the
valuation date;
C. X is
such that the mortality rates resulting from the application of X are at least
as great as the anticipated mortality experience, without recognition of
mortality improvement beyond the valuation date, in each of the first five (5)
years after the valuation date;
D.
The appointed actuary shall increase X at any valuation date where it is
necessary to continue to meet all the requirements of paragraph
(3)(B)3.;
E. The appointed actuary
may decrease X at any valuation date as long as X continues to meet all the
requirements of paragraph (3)(B)3.;
F. The appointed actuary shall specifically
take into account the adverse effect on expected mortality and lapsation of any
anticipated or actual increase in gross premiums; and
G. If X is less than one hundred percent
(100%) at any duration for any policy, the following requirements shall be met:
(I) The appointed actuary shall annually
prepare an actuarial opinion and memorandum for the company in conformance with
the requirements of section 20 CSR 200-1.116(6);
(II) The appointed actuary shall annually
opine for all policies subject to this rule as to whether the mortality rates
resulting from the application of X meet the requirements of paragraph (3)(B)3.
This opinion shall be supported by an actuarial report, subject to appropriate
Actuarial Standards of Practice promulgated by the Actuarial Standards Board of
the American Academy of Actuaries. The X factors shall reflect anticipated
future mortality, without recognition of mortality improvement beyond the
valuation date, taking into account relevant emerging experience;
(III) The appointed actuary shall disclose,
in the regulatory asset adequacy issues summary, the impact of the
insufficiency of assets to support the payment of benefits and expenses and the
establishment of statutory reserves during one (1) or more interim periods;
and
(IV) The company shall file any
opinion(s) required by parts (I), (II), or (III) of this subparagraph with the
director of the Department of Insurance, Financial Institutions and
Professional Registration as an attachment or attachments to and at the same
time as the company's annual statement to which such opinion(s) relate;
and
4. Any
other table of select mortality factors adopted by the NAIC after the effective
date of this rule and promulgated by rule by the director for the purpose of
calculating deficiency reserves.
(C) This subsection applies to both basic
reserves and deficiency reserves. Any set of select mortality factors may be
used only for the first segment. However, if the first segment is less than ten
(10) years, the appropriate ten-year select mortality factors incorporated into
section
376.380,
RSMo, and 20 CSR 400-1.110, 20 CSR 400-1.120, and 20 CSR 400-1.130 may be used
thereafter through the tenth policy year from the date of issue.
(D) In determining basic reserves or
deficiency reserves, guaranteed gross premiums without policy fees may be used
where the calculation involves the guaranteed gross premium, but only if the
policy fee is a level dollar amount after the first policy year. In determining
deficiency reserves, policy fees may be included in guaranteed gross premiums,
even if not included in the actual calculation of basic reserves.
(E) Reserves for policies that have changes
to guaranteed gross premiums, guaranteed benefits, guaranteed charges, or
guaranteed credits that are unilaterally made by the insurer after issue and
that are effective for more than one (1) year after the date of the change
shall be the greatest of the following:
1.
Reserves calculated ignoring the guarantee;
2. Reserves assuming the guarantee was made
at issue; and
3. Reserves assuming
that the policy was issued on the date of the guarantee.
(F) The director may require that the company
document the extent of the adequacy of reserves for specified blocks,
including, but not limited to policies issued prior to the effective date of
this rule. This documentation may include a demonstration of the extent to
which aggregation with other non-specified blocks of business is relied upon in
the formation of the appointed actuary opinion pursuant to and consistent with
the requirements of section 20 CSR 200-1.116(6).
(4) Calculation of Minimum Valuation Standard
for Policies with Guaranteed Nonlevel Gross Premiums or Guaranteed Nonlevel
Benefits (Other than Universal Life Policies).
(A) Basic Reserves. Basic reserves shall be
calculated as the greater of the segmented reserves and the unitary reserves.
Both the segmented reserves and the unitary reserves for any policy shall use
the same valuation mortality table and selection factors. At the option of the
insurer, in calculating segmented reserves and net premiums, either of the
adjustments described in paragraph 1. or 2. of this subsection may be made:
1. Treat the unitary reserve, if greater than
zero, applicable at the end of each segment as a pure endowment and subtract
the unitary reserve, if greater than zero, applicable at the beginning of each
segment from the present value of guaranteed life insurance and endowment
benefits for each segment;
2. Treat
the guaranteed cash surrender value, if greater than zero, applicable at the
end of each segment as a pure endowment; and subtract the guaranteed cash
surrender value, if greater than zero, applicable at the beginning of each
segment from the present value of guaranteed life insurance and endowment
benefits for each segment.
(B) Deficiency Reserves.
1. The deficiency reserve at any duration
shall be calculated:
A. On a unitary basis if
the corresponding basic reserve determined by subsection (A) of this section is
unitary;
B. On a segmented basis if
the corresponding basic reserve determined by subsection (A) of this section is
segmented; or
C. On the segmented
basis if the corresponding basic reserve determined by subsection (A) of this
section is equal to both the segmented reserve and the unitary
reserve.
2. This
subsection shall apply to any policy for which the guaranteed gross premium at
any duration is less than the corresponding modified net premium calculated by
the method used in determining the basic reserves, but using the minimum
valuation standards of mortality (specified in subsection (3)(B)) and rate of
interest.
3. Deficiency reserves,
if any, shall be calculated for each policy as the excess if greater than zero,
for the current and all remaining periods, of the quantity A over the basic
reserve, where A is obtained as indicated in subsection (3)(B).
4. For deficiency reserves determined on a
segmented basis, the quantity A is determined using segment lengths equal to
those determined for segmented basic reserves.
(C) Minimum Value. Basic reserves may not be
less than the tabular cost of insurance for the balance of the policy year, if
mean reserves are used. Basic reserves may not be less than the tabular cost of
insurance for the balance of the current modal period or to the paid to date,
if later, but not beyond the next policy anniversary, if mid-terminal reserves
are used. The tabular cost of insurance shall use the same valuation mortality
table and interest rates as that used for the calculation of the segmented
reserves. However, if select mortality factors are used, they shall be the ten
(10)-year select factors incorporated into section
376.380,
RSMo, and 20 CSR 400-1.110, 20 CSR 400-1.120, and 20 CSR 400-1.130. In no case
may total reserves (including basic reserves, deficiency reserves, and any
reserves held for supplemental benefits that would expire upon contract
termination) be less than the amount that the policy owner would receive
(including the cash surrender value of the supplemental benefits, if any,
referred to above), exclusive of any deduction for policy loans, upon
termination of the policy.
(D)
Unusual Pattern of Guaranteed Cash Surrender Values.
1. For any policy with an unusual pattern of
guaranteed cash surrender values, the reserves actually held prior to the first
unusual guaranteed cash surrender value shall not be less than the reserves
calculated by treating the first unusual guaranteed cash surrender value as a
pure endowment and treating the policy as an n year policy
providing term insurance plus a pure endowment equal to the unusual cash
surrender value, where n is the number of years from the date
of issue to the date the unusual cash surrender value is scheduled.
2. The reserves actually held subsequent to
any unusual guaranteed cash surrender value shall not be less than the reserves
calculated by treating the policy as an
n year policy
providing term insurance plus a pure endowment equal to the next unusual
guaranteed cash surrender value, and treating any unusual guaranteed cash
surrender value at the end of the prior segment as a net single premium, where:
A.
n is the number of years
from the date of the last unusual guaranteed cash surrender value prior to the
valuation date to the earlier of:
(I) The
date of the next unusual guaranteed cash surrender value, if any, that is
scheduled after the valuation date; or
(II) The mandatory expiration date of the
policy; and
B. The net
premium for a given year during the n year period is equal to
the product of the net to gross ratio and the respective gross premium;
and
C. The net to gross ratio is
equal to part (I) divided by part (II) as follows:
(I) The present value, at the beginning of
the n year period, of death benefits payable during the
n year period plus the present value, at the beginning of the
n year period, of the next unusual guaranteed cash surrender
value, if any, minus the amount of the last unusual guaranteed cash surrender
value, if any, scheduled at the beginning of the n year
period.
(II) The present value, at
the beginning of the n year period, of the scheduled gross
premiums payable during the n year period.
3. For purposes of this
subsection, a policy is considered to have an unusual pattern of guaranteed
cash surrender values if any future guaranteed cash surrender value exceeds the
prior year's guaranteed cash surrender value by more than the sum of:
A. One hundred ten percent (110%) of the
scheduled gross premium for that year;
B. One hundred ten percent (110%) of one
(1)-year's accrued interest on the sum of the prior year's guaranteed cash
surrender value and the scheduled gross premium using the nonforfeiture
interest rate used for calculating policy guaranteed cash surrender values;
and
C. Five percent (5%) of the
first policy year surrender charge, if any.
(E) Optional Exemption for Yearly Renewable
Term Reinsurance (YRT). At the option of the company, the following approach
for reserves on YRT reinsurance may be used:
1. Calculate the valuation net premium for
each future policy year as the tabular cost of insurance for that future
year;
2. Basic reserves shall never
be less than the tabular cost of insurance for the appropriate period, as
defined in subsection (4)(C);
3.
Deficiency reserves.
A. For each policy year,
calculate the excess, if greater than zero, of the valuation net premium over
the respective maximum guaranteed gross premium.
B. Deficiency reserves shall never be less
than the sum of the present values, at the date of valuation, of the excesses
determined in accordance with subparagraph A. of this paragraph.
4. For purposes of this
subsection, the calculations use the maximum valuation interest rate and the
1980 CSO mortality tables with or without ten (10)-year select mortality
factors, or any other table adopted by the NAIC after the effective date of
this rule and promulgated by rule of the director for this purpose.
5. A reinsurance agreement shall be
considered YRT reinsurance for purposes of this subsection if only the
mortality risk is reinsured.
6. If
the assuming company chooses this optional exemption, the ceding company's
reinsurance reserve credit shall be limited to the amount of reserve held by
the assuming company for the affected policies.
(F) Optional Exemption for Attained-Age-Based
Yearly Renewable Term Life Insurance Policies. At the option of the company,
the following approach for reserves for attained-age-based YRT life insurance
policies may be used:
1. Calculate the
valuation net premium for each future policy year as the tabular cost of
insurance for that future year.
2.
Basic reserves shall never be less than the tabular cost of insurance for the
appropriate period, as defined in subsection (4)(C);
3. Deficiency reserves.
A. For each policy year, calculate the
excess, if greater than zero, of the valuation net premium over the respective
maximum guaranteed gross premium.
B. Deficiency reserves shall never be less
than the sum of the present values, at the date of valuation, of the excesses
determined in accordance with subparagraph A. of this paragraph.
4. For purposes of this
subsection, the calculations use the maximum valuation interest rate and the
1980 CSO valuation tables with or without ten (10)-year select mortality
factors, or any other table adopted by the NAIC after the effective date of
this rule and promulgated by rule by the director for this purpose.
5. A policy shall be considered an
attained-age-based YRT life insurance policy for purposes of this subsection
if:
A. The premium rates (on both the initial
current premium scale and the guaranteed maximum premium scale) are based upon
the attained age of the insured such that the rate for any given policy at a
given attained age of the insured is independent of the year the policy was
issued; and
B. The premium rates
(on both the initial current premium scale and the guaranteed maximum premium
scale) are the same as the premium rates for policies covering all insured
persons of the same sex, risk class, plan of insurance and attained
age.
6. For policies
that become attained-age-based YRT policies after an initial period of
coverage, the approach of this subsection may be used after the initial period
if:
A. The initial period is constant for all
insured persons of the same sex, risk class, and plan of insurance;
or
B. The initial period runs to a
common attained age for all insureds of the same sex, risk class, and plan of
insurance; and
C. After the initial
period of coverage, the policy meets the conditions of paragraph 5. of this
subsection.
7. If this
election is made, this approach shall be applied in determining reserves for
all attained-age-based YRT life insurance policies issued on or after the
effective date of this rule.
(G) Exemption for Unitary Reserves for
Certain
n-Year Renewable Term Life Insurance Policies. Unitary
basic reserves and unitary deficiency reserves need not be calculated for a
policy if the following conditions are met:
1. The policy consists of a series of
n-year periods, including the first period and all renewal
periods, where n is the same for each period, except that for
the final renewal period, n may be truncated or extended to
reach the expiry age, provided that this final renewal period is less than ten
(10) years and less than twice the size of the earlier n-year
periods, and for each period, the premium rates on both the initial current
premium scale and the guaranteed maximum premium scale are level;
2. The guaranteed gross premiums in all
n-year periods are not less than the corresponding net
premiums based upon the 1980 CSO Table with or without the ten (10)-year select
mortality factors; and
3. There are
no cash surrender values in any policy year.
(H) Exemption from Unitary Reserves for
Certain Juvenile Policies. Unitary basic reserves and unitary deficiency
reserves need not be calculated for a policy if the following conditions are
met, based upon the initial current premium scale at issue:
1. At issue, the insured is age twenty-four
(24) or younger;
2. Until the
insured reaches the end of the juvenile period, which shall occur at or before
age twenty-five (25), the gross premiums and death benefits are level, and
there are no cash surrender values; and
3. After the end of the juvenile period,
gross premiums are level for the remainder of the premium paying period, and
death benefits are level for the remainder of the life of the policy.
(5) Calculation of
Minimum Valuation Standard for Flexible Premium and Fixed Premium Universal
Life Insurance Policies That Contain Provisions Resulting in the
Ability of a Policyowner to Keep a Policy in Force Over a
Secondary Guarantee Period.
(A)
General.
1. Policies with a secondary
guarantee include:
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 (1)-year valuation premium,
calculated using the maximum valuation interest rate and the 1980 CSO valuation
tables with or without ten (10)-year select mortality factors, or any other
table adopted after the effective date of this rule by the NAIC and promulgated
by regulation by the director for this purpose; or
C. A policy with any combination of
subparagraphs A. and B. of this paragraph.
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 shall be considered to have been made at issue. Reserves
described in subsections (B) and (C) below shall be recalculated from issue to
reflect these changes.
3. Specified
premiums mean 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.
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 shall 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
(1)-year valuation premium means the net one (1) year premium based upon the
original schedule of benefits for a given policy year. The one (1)-year
valuation premiums for all policy years are calculated at issue. The select
mortality factors defined in paragraphs (3)(B)2., 3., and 4. may not be used to
calculate the one (1)-year valuation premiums.
6. The one (1)-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.
(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 subsection (2)(B).
(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 (4)(B) 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 other rules or regulations governing universal life plans.
(6) This rule includes
herein the Appendix containing tables of select mortality factors.
(7) Effective Date. This rule shall become
effective thirty (30) days after publication in the
Code of State
Regulations or on January 1, 2001, whichever later occurs.
Appendix to Rule 20 CSR 200-1.160 Valuation of Life
Insurance Policies