007.01 General
007.01(1) Policies with a secondary guarantee
include:
007.01(1)(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;
007.01(1)(b) 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 January 1, 2000 by the NAIC and promulgated by
regulation by the director for this purpose; or
007.01(1)(c) A policy with any combination of
Subparagraph
007.01(1)(a) and
007.01(1)(b).
007.01(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 007.02 and 007.03 below
shall be recalculated from issue to reflect these changes.
007.01(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.
007.01(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.
007.01(5) 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 Section
005.02(2),
005.02(3), and
005.02(4)may not
be used to calculate the one-year valuation premiums.
007.01(6) 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.
007.02
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 Section 004.02.
007.03 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 Section 006.02 with gross premiums set equal to the specified
premiums, if any, or otherwise to the minimum premiums that keep the policy in
force.
007.04 Minimum
Reserves
The minimum reserves during the secondary guarantee period
are the greater of:
007.04(1) The
basic reserves for the secondary guarantee plus the deficiency reserve, if any,
for the secondary guarantees; or
007.04(2) The minimum reserves required by
other rules or regulations governing universal life plans.
