Ohio Administrative Code
Title 3901 - Department of Insurance
Chapter 3901-6 - Life Insurance
Section 3901-6-10 - Valuation of life insurance policies
Universal Citation: OH Admin Code 3901-6-10
Current through all regulations passed and filed through September 16, 2024
(A) Purpose
(1) The purpose of this rule is to provide:
(a) Tables of select mortality factors and
rules for their use;
(b) Rules
concerning a minimum standard for the valuation of plans with nonlevel premiums
or benefits; and
(c) Rules
concerning a minimum standard for the valuation of plans with secondary
guarantees.
(2) The
method for calculating basic reserves defined in this rule will constitute the
"Commissioners' Reserve Valuation Method" for policies to which this regulation
is applicable.
(B) Authority
This rule is promulgated pursuant to the authority vested in the superintendent under section 3901.041 of the Revised Code.
(C) Applicability
This rule shall apply to all life insurance policies, with or without nonforfeiture values, issued on or after January 1, 2000, subject to the following exceptions and conditions.
(1) Exceptions
(a) This rule
does not apply
to any individual life insurance policy issued on or after January 1, 2000 if
the policy is issued in accordance with and as a result of the exercise of a
reentry provision contained in the original life insurance policy of the same
or greater face amount, issued before January 1, 2000, that guarantees the
premium rates of the new policy. This rule also
does not apply
to subsequent policies issued as a result of the exercise of such a provision,
or a derivation of the provision, in the new policy.
(b) This rule
does not apply
to any universal life policy that meets all the following
conditions:
(i)
Secondary guarantee period, if any, is five years or less;
(ii) Specified premium for the secondary
guarantee period is not less than the net level reserve premium for the
secondary guarantee period based on the CSO valuation tables as defined in
paragraph (D)(6) of this rule and the applicable valuation interest rate;
and
(iii) The initial surrender
charge is not less than one hundred per cent of the first year annualized
specified premium for the secondary guarantee period.
(c) This rule
does not apply
to any variable life insurance policy that provides for life insurance, the
amount or duration of which varies according to the investment experience of
any separate account or accounts.
(d) This rule
does not apply
to any variable universal life insurance policy that provides for life
insurance, the amount or duration of which varies according to the investment
experience of any separate account or accounts.
(e) This rule
does not apply
to a group life insurance certificate unless the certificate provides for a
stated or implied schedule of maximum gross premiums
necessary to continue coverage in force for a period
in excess of one year.
(2) Conditions
(a) Calculation of the minimum valuation
standard for policies with guaranteed non-level gross premiums or guaranteed
non-level benefits (other than universal life policies), or both, shall be in
accordance with the provisions of paragraph (F) of this rule.
(b) Calculation of the minimum valuation
standard for flexible premium and fixed premium universal life insurance
policies, that contain provisions resulting in the ability of a policyholder to
keep a policy in force over a secondary guarantee period, shall be in
accordance with the provisions of paragraph (G) of this rule.
(D) Definitions
For purposes of this rule:
(1) "Basic reserves" means reserves
calculated in accordance with divisions (E), (F), and (G) of section
3903.723 of the Revised
Code.
(2) "Contract segmentation
method" means the method of dividing the period from issue to mandatory
expiration of a policy into successive segments, with the length of each
segment being defined as the period from the end of the prior segment (from
policy inception, for the first segment) to the end of the latest policy year
as determined below. All calculations are made using the 1980 CSO valuation
tables, as defined in paragraph (D)(6) of this rule, (or any other valuation
mortality table adopted by the "National Association of Insurance
Commissioners" (NAIC) after January 1, 2000 and promulgated by rule by the
superintendent for this purpose), and, if elected, the optional minimum
mortality standard for deficiency reserves stipulated in paragraph (E)(2) of
this rule.
The length of a particular contract segment shall be set equal to the minimum of the value t for which Gt is greater than Rt (if Gt never exceeds Rt the segment length is deemed to be the number of years from the beginning of the segment to the mandatory expiration date of the policy), where Gt and Rt are defined as follows:
Gt = GPx+k+t / GPx+k+t-1
Where:
x = Original issue age;
k = The number of years from the date of issue to the beginning of the segment;
t = 1, 2, ...; t is reset to 1 at the beginning of each segment;
GPx+k+t-1 = Guaranteed gross premium per thousand of face amount for year t of the segment, ignoring policy fees only if level for the premium paying period of the policy.
Rt = Qx+k+t / Qx+k+t-1
However, Rt may be increased or decreased by one per cent in any policy year, at the company's option, but Rt shall not be less than one;
Where:
x, k, and t are defined above, and
Qx+k+t-1 = Valuation mortality rate for deficiency reserves in policy year k+t but using the mortality of paragraph (E)(2)(b) of this rule if paragraph (E)(2)(c) of this rule is elected for deficiency reserves.
However, if GPx+k+t is greater than 0 and GPx+k+t-1 is equal to 0, Gt shall be deemed to be 1000. If GPx+k+t and GPx+k+t-1 are both equal to 0, Gt shall be deemed to be 0.
(3)
"Deficiency reserves" means the excess, if greater than zero, of
(a) Minimum reserves calculated in accordance
with division (K) of section
3903.723 of the Revised Code
over
(b) Basic reserves.
(4) "Guaranteed gross premiums"
means the premiums under a policy of life insurance that are guaranteed and
determined at issue.
(5) "Maximum
valuation interest rates" means the interest rates defined in section
3903.724 of the Revised Code
("Determination of valuation interest rate") that are to be used in determining
the minimum standard for the valuation of life insurance policies.
(6) "1980 CSO valuation tables" means the
"Commissioners' 1980 Standard Ordinary Mortality Table" (1980 CSO Table)
without ten-year selection factors, incorporated into the 1980 amendments to
the "NAIC Standard Valuation Law", and variations of the 1980 CSO table
approved by the NAIC, such as the smoker and nonsmoker versions approved in
December 1983.
(7) "Scheduled gross
premium" means the smallest illustrated gross premium at issue for other than
universal life insurance policies. For universal life insurance policies,
scheduled gross premium means the smallest specified premium described in
paragraph (G)(1)(c) of this rule, if any, or else the minimum premium described
in paragraph (G)(1)(d) of this rule.
(8)
(a)
"Segmented reserves" means reserves, calculated using segments produced by the
contract segmentation method, equal to the present value of all future
guaranteed benefits less the present value of all future net premiums to the
mandatory expiration of a policy, where the net premiums within each segment
are a uniform percentage of the respective guaranteed gross premiums within the
segment. The uniform percentage for each segment is such that, at the beginning
of the segment, the present value of the net premiums within the segment
equals:
(i) The present value of the death
benefits within the segment, plus
(ii) The present value of any unusual
guaranteed cash value (see paragraph (F)(4) of this rule) occurring at the end
of the segment, less
(iii) Any
unusual guaranteed cash value occurring at the start of the segment,
plus
(iv) For the first segment
only, the excess of the item (a) over item (b), as follows:
(a) A net level annual premium equal to the
present value, at the date of issue, of the benefits provided for in the first
segment after the first policy year, divided by the present value, at the date
of issue, of an annuity of one per year payable on the first and each
subsequent anniversary within the first segment on which a premium falls due.
However, the net level annual premium shall not exceed the net level annual
premium on the nineteen-year premium whole life plan of insurance of the same
renewal year equivalent level amount at an age one year higher than the age at
issue of the policy.
(b) A net one
year term premium for the benefits provided for in the first policy
year.
(b) The
length of each segment is determined by the "contract segmentation method," as
defined in this paragraph.
(c) The
interest rates used in the present value calculations for any policy may not
exceed the maximum valuation interest rate, determined with a guarantee
duration equal to the sum of the lengths of all segments of the
policy.
(d) For both basic reserves
and deficiency reserves computed by the segmented method, present values shall
include future benefits and net premiums in the current segment and in all
subsequent segments.
(9)
"Tabular cost of insurance" means the net single premium at the beginning of a
policy year for one-year term insurance in the amount of the guaranteed death
benefit in that policy year.
(10)
"Ten-year select factors" means the select factors adopted with the 1980
amendments to the "NAIC Standard Valuation Law."
(11)
(a)
"Unitary reserves" means the present value of all future guaranteed benefits
less the present value of all future modified net premiums where:
(i) Guaranteed benefits and modified net
premiums are considered to the mandatory expiration of the policy;
and
(ii) Modified net premiums are
a uniform percentage of the respective guaranteed gross premiums, where the
uniform percentage is such that, at issue, the present value of the net
premiums equals the present value of all death benefits and pure endowments,
plus the excess of item (a) over item (b), as follows:
(a) A net level annual premium equal to the
present value, at the date of issue, of the benefits provided for after the
first policy year, divided by the present value, at the date of issue, of an
annuity of one per year payable on the first and each subsequent anniversary of
the policy on which a premium falls due. However, the net level annual premium
shall not exceed the net level annual premium on the nineteen-year premium
whole life plan of insurance of the same renewal year equivalent level amount
at an age one year higher than the age at issue of the policy.
(b) A net one year term premium for the
benefits provided for in the first policy year.
(b) The interest rates used in the present
value calculations for any policy may not exceed the maximum valuation interest
rate, determined with a guarantee duration equal to the length from issue to
the mandatory expiration of the policy.
(12) "Universal life insurance policy" means
any individual life insurance policy under the provisions of which separately
identified interest credits (other than in connection with dividend
accumulations, premium deposit funds, or other supplementary accounts) and
mortality or expense charges are made to the policy.
(E) General calculation requirements for basic reserves and premium deficiency reserves
(1) At the election of the company 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 rule by the superintendent for
this purpose). 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 the appendix to this rule; or
(c) Any other table of select mortality
factors adopted by the NAIC after January 1, 2000 and promulgated by rule by
the superintendent for the purpose of calculating basic reserves.
(2) 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 company 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 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 the appendix to this rule;
(c) For durations in the first segment, X per
cent of the select mortality factors in the appendix to this rule, 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 (a) is greater than or equal to
item (b):
(a) The actuarial present value of
future death benefits, calculated using the mortality rates resulting from the
application of X;
(b) 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 paragraph (E)(2)(c) of this
rule;
(v) The appointed actuary may
decrease X at any valuation date as long as X continues to meet all the
requirements of paragraph (E)(2)(c) of this rule; 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.
(vii) If X is less than one hundred per cent
at any duration for any policy, the following requirements shall be met:
(a) The appointed actuary shall annually
prepare an actuarial opinion and memorandum for the company in conformance with
the requirements of section VM-30 of the current edition of the "Valuation
Manual" published by the NAIC; and
(b) The appointed actuary shall annually
opine for all policies subject to this rule as to whether the mortality rates
resulting from the application of X meet the requirements of paragraph
(E)(2)(c) of this rule. 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.
(d)
Any other table of select mortality factors adopted by the NAIC after January
1, 2000 and promulgated by rule by the superintendent for the purpose of
calculating deficiency reserves.
(3) This paragraph 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 ten
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 tenth policy year from the date of issue.
(4) 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.
(5) 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:
(a) Reserves
calculated ignoring the guarantee,
(b) Reserves assuming the guarantee was made
at issue, and
(c) Reserves assuming
that the policy was issued on the date of the guarantee.
(6) The commissioner may
order
that the company 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 nonspecified blocks of business is relied upon in the
formation of the appointed actuary opinion pursuant to and consistent with the
requirements of section VM-30 of the current edition of the "Valuation
Manual" published by the NAIC.
(F) Calculation of minimum valuation standard for policies with guaranteed non-level gross premiums or guaranteed non-level benefits (other than universal life policies)
(1) Basic reserves
Basic reserves shall be calculated as the greater of the segmented reserves and the unitary reserves. Both the segmented reserves and the unitary reserves for any policy shall use the same valuation mortality table and selection factors. At the option of the insurer, in calculating segmented reserves and net premiums, either of the adjustments described in paragraph (F)(1)(a) or (F)(1)(b) of this rule may be made:
(a) Treat the unitary reserve, if greater
than zero, applicable at the end of each segment as a pure endowment; and
subtract the unitary reserve, if greater than zero, applicable at the beginning
of each segment from the present value of guaranteed life insurance and
endowment benefits for each segment.
(b) Treat the guaranteed cash surrender
value, if greater than zero, applicable at the end of each segment as a pure
endowment; and subtract the guaranteed cash surrender value, if greater than
zero, applicable at the beginning of each segment from the present value of
guaranteed life insurance and endowment benefits for each segment.
(2) Deficiency reserves
(a) The deficiency reserve at any duration
shall be calculated:
(i) On a unitary basis if
the corresponding basic reserve determined by paragraph (F)(1) of this rule is
unitary;
(ii) On a segmented basis
if the corresponding basic reserve determined by paragraph (F)(1) of this rule
is segmented; or
(iii) On the
segmented basis if the corresponding basic reserve determined by paragraph
(F)(1) of this rule is equal to both the segmented reserve and the unitary
reserve.
(b) This
paragraph shall apply to any policy for which the guaranteed gross premium at
any duration is less than the corresponding modified net premium calculated by
the method used in determining the basic reserves, but using the minimum
valuation standards of mortality (specified in paragraph (E)(2) of this rule)
and rate of interest.
(c)
Deficiency reserves, if any, shall be calculated for each policy as the excess
if greater than zero, for the current and all remaining periods, of the
quantity A over the basic reserve, where A is obtained as indicated in
paragraph (E)(2) of this rule.
(d)
For deficiency reserves determined on a segmented basis, the quantity A is
determined using segment lengths equal to those determined for segmented basic
reserves.
(3) Minimum
value
Basic reserves may not be less than the tabular cost of insurance for the balance of the policy year, if mean reserves are used. Basic reserves may not be less than the tabular cost of insurance for the balance of the current modal period or to the paid-to-date, if later, but not beyond the next policy anniversary, if mid-terminal reserves are used. The tabular cost of insurance shall use the same valuation mortality table and interest rates as that used for the calculation of the segmented reserves. However, if select mortality factors are used, they shall be the ten-year select factors incorporated into the 1980 amendments of the "NAIC Standard Valuation Law." In no case may total reserves (including basic reserves, deficiency reserves and any reserves held for supplemental benefits that would expire upon contract termination) be less than the amount that the policyowner would receive (including the cash surrender value of the supplemental benefits, if any, referred to in this rule), exclusive of any deduction for policy loans, upon termination of the policy.
(4) Unusual pattern of guaranteed cash
surrender values
(a) For any policy with an
unusual pattern of guaranteed cash surrender values, the reserves actually held
prior to the first unusual guaranteed cash surrender value shall not be less
than the reserves calculated by treating the first unusual guaranteed cash
surrender value as a pure endowment and treating the policy as an n year policy
providing term insurance plus a pure endowment equal to the unusual cash
surrender value, where n is the number of years from the date of issue to the
date the unusual cash surrender value is scheduled.
(b) The reserves actually held subsequent to
any unusual guaranteed cash surrender value shall not be less than the reserves
calculated by treating the policy as an n year policy providing term insurance
plus a pure endowment equal to the next unusual guaranteed cash surrender
value, and treating any unusual guaranteed cash surrender value at the end of
the prior segment as a net single premium, where
(i) n is the number of years from the date of
the last unusual guaranteed cash surrender value prior to the valuation date to
the earlier of:
(a) The date of the next
unusual guaranteed cash surrender value, if any, that is scheduled after the
valuation date; or
(b) The
mandatory expiration date of the policy; and
(ii) The net premium for a given year during
the n year period is equal to the product of the net to gross ratio and the
respective gross premium; and
(iii)
The net to gross ratio is equal to item (a) divided by item (b) as follows:
(a) The present value, at the beginning of
the n year period, of death benefits payable during the n year period plus the
present value, at the beginning of the n year period, of the next unusual
guaranteed cash surrender value, if any, minus the amount of the last unusual
guaranteed cash surrender value, if any, scheduled at the beginning of the n
year period.
(b) The present value,
at the beginning of the n year period, of the schedule gross premiums payable
during the n year period.
(c) For purposes of this paragraph, a policy
is considered to have an unusual pattern of guaranteed cash surrender values if
any future guaranteed cash surrender value exceeds the prior year's guaranteed
cash surrender value by more than the sum of:
(i) One hundred ten per cent of the scheduled
gross premium for that year;
(ii)
One hundred ten per cent of one year's accrued interest on the sum of the prior
year's guaranteed cash surrender value and the scheduled gross premium using
the nonforfeiture interest rate used for calculating policy guaranteed cash
surrender values; and
(iii) Five
per cent of the first policy year surrender charge, if any.
(5) Optional exemption
for yearly renewable term reinsurance
At the option of the company, the following approach for reserves on YRT reinsurance may be used:
(a) Calculate the valuation net premium for
each future policy year as the tabular cost of insurance for that future
year.
(b) Basic reserves shall
never be less than the tabular cost of insurance for the appropriate period, as
defined in paragraph (F)(3) of this rule.
(c) Deficiency reserves:
(i) For each policy year, calculate the
excess, if greater than zero, of the valuation net premium over the respective
maximum guaranteed gross premium.
(ii) Deficiency reserves shall never be less
than the sum of the present values, at the date of valuation, of the excesses
determined in accordance with paragraph
(F)(5)(c)(i) of this rule.
(d) For purposes of this subsection, the
calculations use the maximum valuation interest rate and the 1980 CSO mortality
tables with or without ten-year select mortality factors, or any other table
adopted after January 1, 2000 by the NAIC and promulgated by rule by the
superintendent for this purpose.
(e) A reinsurance agreement shall be
considered YRT reinsurance for purposes of this paragraph if only the mortality
risk is reinsured.
(f) If the
assuming company chooses this optional exemption, the ceding company's
reinsurance reserve credit shall be limited to the amount of reserve held by
the assuming company for the affected policies.
(6) Optional exemption for attained-age-based
yearly renewable term life insurance policies
At the option of the company, the following approach for reserves for attained-age-based YRT life insurance policies may be used:
(a) Calculate the valuation net premium for
each future policy year as the tabular cost of insurance for that future
year.
(b) Basic reserves shall
never be less than the tabular cost of insurance for the appropriate period, as
defined in paragraph (F)(3) of this rule.
(c) Deficiency reserves.
(i) For each policy year, calculate the
excess, if greater than zero, of the valuation net premium over the respective
maximum guaranteed gross premium.
(ii) Deficiency reserves shall never be less
than the sum of the present values, at the date of valuation, of the excesses
determined in accordance with paragraph (F)(6)(c)(i) of this rule.
(d) For purposes of this
paragraph, the calculations use 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
rule by the superintendent for this purpose.
(e) A policy shall be considered an
attained-age-based YRT life insurance policy for purposes of this paragraph if:
(i) The premium rates (on both the initial
current premium scale and the guaranteed maximum premium scale) are based upon
the attained age of the insured such that the rate for any given policy at a
given attained age of the insured is independent of the year the policy was
issued; and
(ii) The premium rates
(on both the initial current premium scale and the guaranteed maximum premium
scale) are the same as the premium rates for policies covering all insureds of
the same sex, risk class, plan of insurance and attained age.
(f) For policies that become
attained-age-based YRT policies after an initial period of coverage, the
approach of this paragraph may be used after the initial period if:
(i) The initial period is constant for all
insureds of the same sex, risk class and plan of insurance; or
(ii) The initial period runs to a common
attained age for all insureds of the same sex, risk class and plan of
insurance; and
(iii) After the
initial period of coverage, the policy meets the conditions of paragraph
(F)(6)(e) of this rule.
(g) If this election is made, this approach
shall be applied in determining reserves for all attained-age-based YRT life
insurance policies issued on or after January 1, 2000.
(7) Exemption from unitary reserves for
certain n-year renewable term life insurance policies
Unitary basic reserves and unitary deficiency reserves need not be calculated for a policy if the following conditions are met:
(a) The policy consists of a series of n-year
periods, including the first period and all renewal periods, where n is the
same for each period, except that for the final renewal period, n may be
truncated or extended to reach the expiry age, provided that this final renewal
period is less than ten years and less than twice the size of the earlier
n-year periods, and for each period, the premium rates on both the initial
current premium scale and the guaranteed maximum premium scale are
level;
(b) The guaranteed gross
premiums in all n-year periods are not less than the corresponding net premiums
based upon the 1980 CSO valuation tables with or without the ten-year select
mortality factors; and
(c) There
are no cash surrender values in any policy year.
(8) Exemption from unitary reserves for
certain juvenile policies
Unitary basic reserves and unitary deficiency reserves need not be calculated for a policy if the following conditions are met, based upon the initial current premium scale at issue:
(a) At issue, the insured is age twenty-four
or younger;
(b) Until the insured
reaches the end of the juvenile period, which shall occur at or before age
twenty-five, the gross premiums and death benefits are level, and there are no
cash surrender values; and
(c)
After the end of the juvenile period, gross premiums are level for the
remainder of the premium paying period, and death benefits are level for the
remainder of the life of the policy.
(G) Calculation of minimum valuation standard for flexible premium and fixed premium universal life insurance policies that contain provisions resulting in the ability of the policyowner to keep a policy in force over a secondary guarantee period
(1)
General
(a) Policies with a secondary
guarantee include:
(i) 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;
(ii) 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 rule by the
superintendent for this purpose; or
(iii) A policy with any combination of
paragraphs (G)(1)(a)(i) and (G)(1)(a)(ii) of this rule.
(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 paragraphs (G)(2) and (G)(3) of this rule 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 paragraph, 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 paragraphs (E)(2)(b), (E)(2)(c) and (E)(2)(d) of this rule
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 paragraph (D)(2) of this rule.
(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 paragraph (F)(2) of this rule 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
(b) The
minimum reserves required by other rules or regulations governing universal
life plans.
(H) Severability
If any portion of this rule or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the rule or related rules which can be given effect without the invalid portion or application, and to this end the provisions of this rule are severable.
Disclaimer: These regulations may not be the most recent version. Ohio may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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