Rhode Island Code of Regulations
Title 230 - Department of Business Regulation
Chapter 20 - Insurance
Subchapter 25 - LIFE AND ANNUITIES
Part 8 - Valuation of Life Insurance Policies (230-RICR-20-25-8)
Section 230-RICR-20-25-8.4 - Definitions
Universal Citation: 230 RI Code of Rules 20 25 8.4
Current through September 18, 2024
A. For purposes of this Part:
1. "Basic reserves" means reserves calculated
in accordance with R.I. Gen. Laws §
27-4.5-5.
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
Subsection 6 of this section, (or any other valuation mortality table adopted
by the National Association of Insurance Commissioners (NAIC) after the
effective date of this Part and promulgated by Part by the commissioner for
this purpose), and, if elected, the optional minimum mortality standard for
deficiency reserves stipulated in §
8.5(B) of this Part.
a. 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:
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= 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. |
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= |
However, Rt may be increased or decreased by one percent in any policy year, at the company's option, but Rt shall not be less than one; |
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where: x, k and t are as defined above, and qx+k+t-1 = valuation mortality rate for deficiency reserves in policy year k+t but using the mortality of § 8.5(B)(2) if §8.5B(3) 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. |
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3. "Deficiency reserves" means the excess, if
greater than zero, of
a. Minimum reserves
calculated in accordance with R.I. Gen. Laws §
27-4.5-8, 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 R.I. Gen. Laws §
27-4.5-4.1 (Computation of Minimum
Standard by Calendar Year of Issue) 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 §
8.7(A)(3) of
this Part, if any, or else the minimum premium described in §
8.7(A)(4) of
this Part.
8. "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:
a. The present value of the death benefits
within the segment, plus
b. The
present value of any unusual guaranteed cash value (see §
8.6(D) of this
Part) occurring at the end of the segment, less
c. Any unusual guaranteed cash value
occurring at the start of the segment, plus
d. For the first segment only, the excess of
the Item (1) over Item (2), as follows:
(1) 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.
(2) A net one year term premium for the
benefits provided for in the first policy year.
e. The length of each segment is determined
by the "contract segmentation method," as defined in this section.
f. 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.
g. 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. "Unitary reserves" means
the present value of all future guaranteed benefits less the present value of
all future modified net premiums, where:
a.
Guaranteed benefits and modified net premiums are considered to the mandatory
expiration of the policy; and
b.
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 (1) over Item (2), as
follows:
(1) 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.
(2) A net one year term premium for the
benefits provided for in the first policy year.
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 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.
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