A. General
1. Policies with a secondary guarantee
include:
a. 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;
b. 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 the effective date of this Part by the NAIC and promulgated by by
the commissioner for this purpose; or
c. A policy with any combination of
§§
8.7(A)(1)(a) and (b) of this Part.
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 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 §§
8.7(B) and (C) of this Part below 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. For purposes of this section, 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 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
§§
8.5(B)(2), (3), and (4) of this Part may not be used to calculate
the one-year valuation premiums.
6.
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.
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 §
8.4(B) of this Part.
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 §
8.6(B) of this Part 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:
1. The basic reserves for the secondary
guarantee plus the deficiency reserve, if any, for the secondary guarantees;
or
2. The minimum reserves required
by other rules or regulations governing universal life plans.
