Current through Register Vol. 63, No. 9, September 1, 2024
(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 as follows 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; or
(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:
(A) On a unitary basis if
the corresponding basic reserve determined by section (1) of this rule is
unitary;
(B) On a segmented basis
if the corresponding basic reserve determined by section (1) of this rule is
segmented; or
(C) On the segmented
basis if the corresponding basic reserve determined by section (1) of this rule
is equal to both the segmented reserve and the unitary reserve.
(b) This subsection applies 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 OAR 836-031-0565(2)) 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 OAR 836-031-0565(2).
(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 above), 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, when
(A)
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:
(i) The date of the next unusual guaranteed
cash surrender value, if any, that is scheduled after the valuation date;
or
(ii) The mandatory expiration
date of the policy; and
(B) 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
(C) The net to gross ratio is equal to
subparagraph (i) divided by subparagraph (ii) as follows:
(i) 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.
(ii) The present value, at
the beginning of the n year period, of the scheduled gross
premiums payable during the n year period.
(c) For purposes of this
subsection, 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:
(A) 110 percent of the scheduled gross
premium for that year;
(B) 110
percent 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
(C) Five
percent of the first policy year surrender charge, if any.
(5) This section creates an
optional exemption for yearly renewable term reinsurance. At the option of the
insurer, the following approach for reserves on yearly renewable term
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 section (3) of this rule.
(c) Deficiency reserves.
(A) For each policy year, calculate the
excess, if greater than zero, of the valuation net premium over the respective
maximum guaranteed gross premium.
(B) 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 (A) of this subsection.
(d) For purposes of this section,
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, and adopted by the Director of the
Department of Consumer and Business Services by rule for this
purpose.
(e) A reinsurance
agreement shall be considered yearly renewable term reinsurance for purposes of
this subsection if only the mortality risk is reinsured.
(f) If the assuming insurer chooses the
optional exemption described in this section, the ceding insurer's reinsurance
reserve credit shall be limited to the amount of reserve held by the assuming
insurer for the affected policies.
(6) This section creates an optional
exemption for attained-age-based yearly renewable term life insurance policies.
At the option of the insurer, the following approach for reserves for
attained-age-based yearly renewable term 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 section (3) of this rule.
(c) Deficiency reserves.
(A) For each policy year, calculate the
excess, if greater than zero, of the valuation net premium over the respective
maximum guaranteed gross premium.
(B) 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 (A) of this subsection.
(d) For purposes of this
subsection, 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 adopted by the
Director of the Department of Consumer and Business Services by rule for this
purpose.
(e) A policy shall be
considered an attained-age-based yearly renewable term life insurance policy
for purposes of this subsection if:
(A) 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
(B) 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 yearly renewable term policies after an initial period of
coverage, the approach of this section may be used after the initial period
if::
(A) The initial period is constant for
all insureds of the same sex, risk class and plan of insurance, or the initial
period runs to a common attained age for all insureds of the same sex, risk
class and plan of insurance; and
(B) After the initial period of coverage, the
policy meets the conditions of subsection (e) of this section.
(g) If the election under this
section is made, the approach in this section shall be applied in determining
reserves for all attained-age-based yearly renewable term life insurance
policies issued on or after January 1, 2000.
(7) This section creates an 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 10 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 Table with or without the ten-year select mortality factors;
and
(c) There are no cash surrender
values in any policy year.
(8) This section creates an 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 24 or
younger;
(b) Until the insured
reaches the end of the juvenile period, which shall occur at or before age 25,
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.
Stat. Auth.: ORS
731.244
Stats. Implemented: ORS
733.030, ORS
733.210 & ORS
733.300 - ORS
733.322
