Current through Register Vol. 54, No. 44, November 2, 2024
(a)
General requirements.
(1) Each of the following shall be considered
a policy with a secondary guarantee:
(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 1-year
valuation premium, calculated using the maximum valuation interest rate and the
1980 CSO valuation tables with or without 10-year select mortality factors, or
any other table adopted after May 6, 2000, by the NAIC and promulgated by
regulation by the Commissioner for this purpose.
(2) 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 1 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 (b) and (c) shall be recalculated from issue to
reflect these changes.
(3)
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.
(4) 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.
(5) The 1-year valuation
premium means the net 1-year premium based upon the original schedule of
benefits for a given policy year. The 1-year valuation premiums for all policy
years are calculated at issue. The select mortality factors defined in §
84c.5(b)(2)-(4)
(relating to general requirements for basic reserves and premium deficiency
reserves) may not be used to calculate the 1-year valuation premiums.
(6) The 1-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.
(b)
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 §
84c.4(b)
(relating to segmented and unitary reserve methods).
(c)
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 §
84c.6(b)
(relating to minimum valuation standard for policies with guaranteed nonlevel
gross premiums or guaranteed nonlevel benefits (other than universal life
policies)) with gross premiums set equal to the specified premiums, if any, or
otherwise to the minimum premiums that keep the policy in force.
(d)
Minimum reserves. The
minimum reserves during the secondary guarantee period are the greater of the
basic reserves for the secondary guarantee plus the deficiency reserve, if any,
for the secondary guarantees or the minimum reserves required by other rules or
regulations governing universal life plans.
This section cited in 31 Pa. Code §
84c.3 (relating to
definitions).
