Current through Supplement No. 394, October, 2024
1. General.
a. Policies with a secondary guarantee
include:
(1) 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;
(2) 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 national association of insurance
commissioners and promulgated by rule by the commissioner for this purpose; or
(3) A policy with any combination
of paragraphs 1 and 2.
b. 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 2 and 3 shall be recalculated from issue to reflect
these changes.
c. 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.
d. 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.
e. 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 subdivisions b, c, and d of subsection 2 of section
45-04-12-03 may not be used to
calculate the one-year valuation premiums.
f. 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.
2. 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 subsection 2 of section
45-04-12-02.
3. 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 subsection 2 of section
45-04-12-04 with gross premiums
set equal to the specified premiums, if any, or otherwise to the minimum
premiums that keep the policy in force.
4. Minimum reserves. The minimum reserves
during the secondary guarantee period are the greater of:
a. The basic reserves for the secondary
guarantee plus the deficiency reserve, if any, for the secondary guarantees; or
