South Carolina Code of Regulations
Chapter 69 - DEPARTMENT OF INSURANCE
Section 69-57 - Valuation of Life Insurance Policies
Current through Register Vol. 48, 12, December 27, 2024
Section 1. Purpose.
Section 2. Authority.
This regulation is issued under the authority of Section 38-9-180 of the Insurance Laws of South Carolina.
Section 3. Applicability.
This regulation shall apply to all life insurance policies, with or without nonforfeiture values, issued on or after the effective date of this regulation, subject to the following exceptions and conditions.
Section 4. Definitions.
For purposes of this regulation:
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:
Gt = GPx+k+t
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GPx+k+t-l
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-l = 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.
Rt = qx+k+t , However, Rt may be increased or decreased by
one
----------
qx+k+t-l percent in any policy year, at the company's
option, but Rt shall not be less than one;
where:
x, k and t are as defined above, and
qx+" k+" t-l =valuation mortality rate for deficiency reserves in policy year k+" t but using the mortality of Section 5B(2) if Section 5B(3) is elected for deficiency reserves.
However, if GPx+" k+" t is greater than 0 and GPx+" k+" t-l is equal to 0, Gt shall be deemed to be 1000. If GPx+" k+" t and GPx+" k+" t-l are both equal to 0, Gt shall be deemed to be 0.
Section 5. General Calculation Requirements for Basic Reserves and Premium Deficiency Reserves.
Section 6. Calculation of Minimum Valuation Standard for Policies with Guaranteed Nonlevel Gross Premiums or Guaranteed Nonlevel Benefits (Other than Universal Life Policies).
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 in Paragraph (1) or (2) below may be made:
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.
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:
Section 7. Calculation of Minimum Valuation Standard for Flexible Premium and Fixed Premium Universal Life Insurance Policies That Contain Provisions Resulting in the Ability of a Policyowner to Keep a Policy in Force Over a Secondary Guarantee Period.
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 Section 4B.
Deficiency reserves, if any, for the secondary guarantees shall be calculated for the secondary guarantee period in the same manner as described in Section 6B with gross premiums set equal to the specified premiums, if any, or otherwise to the minimum premiums that keep the policy in force.
The minimum reserves during the secondary guarantee period are the greater of:
Section 8. This regulation will take effect January 1, 2002.
Appendix
SELECT MORTALITY FACTORS
This appendix contains tables of select mortality factors that are the bases to which the respective percentage of Section 5A(2), 5B(2) and 5B(3) are applied.
The six tables of select mortality factors contained herein include: (1) male aggregate, (2) male nonsmoker, (3) male smoker, (4) female aggregate, (5) female nonsmoker, and (6) female smoker.
These tables apply to both age last birthday and age nearest birthday mortality tables.
For sex-blended mortality tables, compute select mortality factors in the same proportion as the underlying mortality. For example, for the 1980 CSO-B Table, the calculated select mortality factors are eighty percent (80%) of the appropriate male table in this Appendix, plus twenty percent (20%) of the appropriate female table in this Appendix.