Current through all regulations passed and filed through September 16, 2024
(A)
Purpose
The purpose of this rule is to amplify
section 3915.073 of the Revised Code and
to define the maturity date used for the purpose of calculating nonforfeiture
values for annuity contracts filed in this state and to establish rules
relative to the calculation of nonforfeiture values for certain product
features and designs used in annuity contracts issued in this state.
(B)
Authority
This rule is promulgated pursuant to
the authority vested in the superintendent under sections
3901.041 and
3901.21 of the Revised
Code.
(C)
Scope
This rule applies to all annuity
contracts issued ninety days after the effective date of this rule and not
specifically excluded in division (B) of section
3915.073 of the Revised
Code.
(D)
No private cause of action
Nothing herein shall be construed to
create or imply a private cause of action for a violation of this rule.
(E)
Definitions
As used in this rule:
(1)
"Prospective
test" is the nonforfeiture test, included in the filed actuarial memorandum,
used to demonstrate compliance with division (F) of section
3915.073 of the Revised
Code.
(2)
"Retrospective test" is the nonforfeiture test,
included in the filed actuarial memorandum, used to demonstrate compliance with
division (D) of section
3915.073 of the Revised
Code.
(F)
Nonforfeiture standards for annuities
(1)
Maturity date.
For the purpose of the prospective test, notwithstanding the language of the
contract, the maturity date shall be the later of the tenth contract
anniversary or the contract anniversary following the annuitant's seventieth
birthday. The contract anniversary used as the maturity date should be
considered as the first day of the year following the contract anniversary (not
including any premium payments for that year) and the discounting process
should be determined on a curtate (full integral year) basis.
(a)
Maturity value
used to demonstrate compliance with the prospective test shall be the contract
account value.
(b)
No surrender charge is permitted on or past the
maturity date.
(2)
Non-level
guaranteed interest rates. If the contract has non-level interest rate
guarantees over the period of time for which interest rates are guaranteed,
then, for the purposes of the prospective test, the maturity value shall be
discounted at an interest rate not to exceed one per cent higher than the level
imputed interest rate that produces a maturity value equal to that produced by
the interest rates specified in the contract. The level imputed interest rate
shall be derived such that gross considerations, net of any expense loads
specified in the contract, accumulated at such level imputed interest rate
equals gross consideration, net of any expense loads specified in the contract
accumulated at the rate or rates specified in the contract.
(3)
Rolling
surrender charges. For contracts where surrender charge scales are measured
from the date of each premium payment, minimum value compliance may be
demonstrated assuming each premium payment is treated as a separate single
premium contract. For purposes of determining the maturity date for each single
premium, that date shall be the later of the tenth anniversary of the payment
or the annuitant's seventieth birthday. If minimum value compliance is to be
demonstrated in this fashion, the retrospective test minimum values shall be
the greater of those based on the contract being treated either as a single
contract providing for flexible premiums or as a single contract with each
premium being considered a single premium contract.
(4)
CD annuities.
Annuity products with surrender charges that periodically renew and credited
interest rate guarantee periods that periodically renew, sometimes referred to
as "CD annuities", are compliant with the nonforfeiture tests provided:
(a)
The contract
provides for a time period of at least thirty days at each renewal, during
which the contract may be surrendered without surrender charges or other
penalties.
(b)
For prospective test compliance, testing should be
performed only once at issue and the surrender charge should be set to zero at
every duration beyond the expiration of the initial interest guarantee
period.
(c)
In demonstrating prospective test compliance, for any
period after the expiration of the initial interest guarantee period, the
guaranteed credited rate assumed should be the minimum rate guaranteed in the
contract.
(d)
For a given interest guarantee period, the surrender
charge percentage applicable at any renewal duration of that guarantee period
should not exceed that for the comparable initial guarantee period
duration.
(5)
Bonus benefits. The following applies to annuity
products that provide an interest bonus, a premium bonus, a persistency bonus
or any other amounts and or percentages that are credited to the premiums paid,
account value, cash value, cash surrender value or maturity value under a
specified condition, other than benefits of the type described above that are
provided through any pattern of non-level interest rate guarantees that may be
similar to but are not specifically referred to as bonuses or additional
credits.
(a)
For purposes of demonstrating nonforfeiture compliance, the following
requirements apply to bonus benefits:
(i)
For purposes of
the retrospective test, any bonus amounts are not to be considered gross
considerations;
(ii)
For purposes, of the prospective test, the bonus
amount, accumulated at interest using the rate or rates specified in the
contract, is to be considered part of the contract maturity value. The maturity
value shall be discounted at an interest rate not to exceed one per cent higher
than the level imputed interest rate that produces a maturity value equal to
that produced by the interest rate or rates specified in the contract. The
level imputed interest rate shall be derived such that gross considerations,
net of any expense loads specified in the contract, accumulated at such level
imputed interest rate equals gross considerations, net of any expense loads
specified in the contract, plus the bonus accumulated at the rate or rates
specified in the contract to the maturity date.
(b)
Conditions under
which bonus benefits may be forfeited; the contract may, at the option of the
company, deduct from the account value the amount of any bonus benefit
credited, provided the following conditions are met:
(i)
The conditions
for forfeiture are described in the contract;
(ii)
Forfeiture of
the bonus will not reduce the cash value below the minimum nonforfeiture
benefit as required under this rule;
(iii)
No bonus will
be forfeited on or after the maturity date.
(c)
Notwithstanding
paragraph (F)(5)(a) of this rule, annuitization bonuses that are simply an
additional percentage applied to the account value at annuitization do not need
to be considered part of the maturity value for the purpose of the prospective
test but shall be disclosed in the contract.
(6)
Market value
adjustments. Contracts that contain a market value adjustment (MVA) must comply
with the retrospective test including application of the MVA. For the purposes
of the prospective test, the MVA may be disregarded.
(G)
Severability
If any paragraph, term or provision of
this rule is adjudged invalid for any reason, the judgment shall not affect,
impair or invalidate any other paragraph, term or provision of this rule, but
the remaining paragraphs, terms and provisions shall be and continue in full
force and effect.
