New Jersey Administrative Code
Title 11 - INSURANCE
Chapter 4 - ACTUARIAL SERVICES
Subchapter 46 - SYNTHETIC GUARANTEED INVESTMENT CONTRACT FORMS
Section 11:4-46.4 - Plan of operation requirements
Universal Citation: NJ Admin Code 11:4-46.4
Current through Register Vol. 56, No. 6, March 18, 2024
(a) An acceptable plan of operation submitted in support of the Department's review of the contract shall include at least the following:
1. A description of all contingencies and
circumstances under the contract that would require the insurer to make
payments or perform any other obligation to the contractholder in support of
the contract value record;
2. A
discussion of the consideration (risk premium and/or fee) indicating expected
allocations (expressed in either specific amounts or ranges) to risk,
administration and profit, and a demonstration that the consideration is
appropriate in view of the risks to the insurer with respect to the contract.
i. A demonstration of how the crediting rate
shall be affected by changes in interest rates and withdrawal experience. The
demonstration shall include at least three hypothetical interest rate scenarios
(level, increasing and decreasing), and for each scenario at least three
withdrawal scenarios (zero, moderate and high) shall be modeled. Additional
scenarios may be required if the Department determines it to be necessary to
fully understand the risks of the contract or agreement. The demonstration
period shall be for the lesser of 15 years or the maximum potential life of the
contract;
3. A
description of how the market value shall be calculated, including a summary
description of the procedures to be followed by the insurer in verifying,
through periodic spot audits or otherwise, any market value reporting performed
by the contractholder or the custodian that the insurer may use as the basis
for calculating the market value record. In performing the market value
calculation, the method of valuation selected shall conform to the requirements
of 17B:28-10;
4. A description of how the contract value
record shall be determined and, where applicable, adjusted by experience
rating;
5. A description of any
crediting rate formula, the extent to which it shall operate to take into
account differences between the market value and contract value records, and
whether such rate shall be periodically adjusted to reflect experience rating.
If there is no crediting rate formula, a description of the method by which the
crediting rate shall be determined;
6. A statement describing in detail how the
guaranteed contract liabilities are to be valued in accordance with
11:4-46.7;
7. A discussion of the investment guidelines
that are acceptable to the insurer, together with a description of the
procedures that will be followed by the insurer in evaluating the
appropriateness of the investment guidelines, including the manner in which the
insurer shall monitor the segregated portfolio and verify that it is being
managed in accordance with the investment guidelines;
8. A description of any requirement for plans
purchasing synthetic guaranteed investment contracts to establish a buffer fund
or an allocation procedure that limits the allocable share of benefit payments
made from the segregated portfolio;
9. A description of all termination events,
discontinuance triggers and options, notice requirements, corrective action
procedures and all other contractual safeguards, including events that allow
the insurer to terminate the contract immediately, and any special termination
features of the contract whereby interest rate movements or participant
withdrawal activity (or any combinations thereof) might terminate the insurer's
contractual obligations;
10. A
description of the procedures to be followed when a termination event occurs,
but the insurer waives its right to terminate the contract;
11. A statement as to whether the assets in
the segregated portfolio may be chargeable with liabilities unrelated to the
assets of and services performed under the contract, together with a full
explanation of the conditions under which such assets would be so chargeable;
and
12. A description of the
procedures to be followed in reporting in the Annual Statement for any risk
charges.
(b) All data or information submitted to the Department under this section is confidential and shall not be disclosed by the Department to any person.
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