Current through Register Vol. 56, No. 18, September 16, 2024
(a) At the
election of the insurer for any one 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 January 1, 2000 and promulgated by
the Commissioner for this purpose). If select mortality factors are elected,
they may be:
1. The Ten Year Select Mortality
Factors incorporated into the 1980 amendments to the NAIC Standard Valuation
Law;
2. The select factors in the
subchapter Appendix, incorporated herein by reference; or
3. Any other table of select mortality
factors adopted by the NAIC after January 1, 2000 and promulgated by regulation
by the Commissioner 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 insurer for any one 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 January 1, 2000 and promulgated by the Commissioner). If
select mortality factors are elected, they may be:
1. The Ten Year Select Mortality Factors
incorporated into the 1980 amendments to the NAIC Standard Valuation
Law;
2. The select mortality
factors in the Appendix to this subchapter; or
3. For durations in the first segment, X
percent of the select mortality factors in the Appendix, subject to the
following:
i. X may vary by policy year,
policy form, underwriting classification, issue age, or any other policy factor
expected to affect mortality experience;
ii. X is such that, when using the valuation
interest rate used for basic reserves, item (1) below is greater than or equal
to item (2) below:
(1) The actuarial present
value of future death benefits, calculated using the mortality rates resulting
from the application of X;
(2) The
actuarial present value of future death benefits calculated using anticipated
mortality experience without recognition of mortality improvement beyond the
valuation date;
iii. 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
years after the valuation date;
iv.
The appointed actuary shall increase X at any valuation date where it is
necessary to continue to meet all the requirements of this paragraph and (b)4
below;
v. The appointed actuary may
decrease X at any valuation date as long as X continues to meet all the
requirements of this paragraph and (b)4 below; and
vi. 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.
4. If X in (b)3 above is less than 100
percent 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 insurer in conformance with
the requirements of
11:1-21A.6;
ii. The appointed actuary shall disclose, in
the Regulatory Asset Adequacy Issues Summary required pursuant to
11:1-21A.5(e),
the impact of the insufficiency of assets to support the payment of benefits
and expenses and the establishment of statutory reserves during one or more
interim periods; and
iii. The
appointed actuary shall annually opine for all policies subject to this
subchapter as to whether the mortality rates resulting from the application of
X meet the requirements of (b)3 and 4. 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.
5. Any other table of select mortality
factors adopted by the NAIC after January 1, 2000 and promulgated by the
Commissioner 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 10 years, the appropriate Ten Year Select Mortality Factors
incorporated into the 1980 amendments to the NAIC Standard Valuation Law may be
used thereafter through the 10th 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 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 Commissioner may require that the
insurer document the extent of the adequacy of reserves for specified blocks,
including but not limited to policies issued prior to January 1, 2000. 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 17B:19-10 and N.J.A.C.
11:1-21A.
