005.01 Reserve
liabilities for variable life insurance policies
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.
005.02 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:
005.02A 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; or
005.02B 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
Subsection 005.02B(1), below, 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
Subsection005.02B2 below.
005.02B(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.
005.02B(2) the payment referred to in
Sub section
005.02B 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 Subsection
005.02B, 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.
005.02C
The valuation interest rate and mortality table used in computing the two
minimum reserves described in Subsections
005.02A and
005.02B 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.
005.03 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.
005.04 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.
