Current through Register Vol. 35, No. 6, March 26, 2024
Deficiency reserves, if any, are calculated for each policy
as the excess, if greater than zero, of the quantity z over the basic reserve.
The quantity z 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 or more specified plans of insurance, the quantity z
and the corresponding net premiums used in the determination of quantity z 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 superintendent). If select
mortality factors are elected, they may be:
A. the ten-year select mortality factors
incorporated into the 1980 amendments to the NAIC Standard Valuation
Law;
B. the select mortality
factors in 13 nmac 9.13.25 through 9.13.30 [now 13.9.13.25 through 13.9.13.30
NMAC];
C. for durations in the
first segment, x percent of the select mortality factors in 13 nmac 9.13.25
through 9.13.30 [now 13.9.13.25 through 13.9.13.30 NMAC], subject to the
following:
(1) x may vary by policy year,
policy form, underwriting classification, issue age, or any other policy factor
expected to affect mortality experience;
(2) x shall not be less than twenty percent
(20%);
(3) x shall not decrease in
any successive policy years;
(4) x
is such that, when using the valuation interest rate used for basic reserves,
item E is greater than or equal to item F;
(a)
Item E: The actuarial present value of future death benefits,
calculated using the mortality rates resulting from the application of
x;
(b)
Item F: The
actuarial present value of future death benefits calculated using anticipated
mortality experience without recognition of mortality improvement beyond the
valuation date;
(5) 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;
(6)
the appointed actuary shall increase x at any valuation date where it is
necessary to continue to meet all the requirements of this
subsection;
(7) The appointed
actuary may decrease x at any valuation date as long as x does not decrease in
any successive policy years and as long as it continues to meet all the
requirements of this subsection; and
(8) 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.
(9) If x is less than 100 percent at any
duration for any policy, the appointed actuary shall annually prepare an
actuarial opinion and memorandum for the company in conformance with the
requirements of 13 NMAC 2.6 [now 13.2.6 NMAC], actuarial opinions and
memoranda, stating whether the mortality rates resulting from the application
of x meet the requirements of this subsection for all policies subject to this
rule. This opinion shall be supported by an actuarial report, subject to the
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;
D. any other
table of select mortality factors adopted by the NAIC after the effective date
of this rule and promulgated by rule by the superintendent for the purpose of
calculating deficiency reserves.
