Current through September 24, 2024
(1)
Any variable contract providing benefits payable in variable amounts delivered
or issued for delivery in this State shall contain a statement of the essential
features of the procedures to be followed by the insurance company in
determining the dollar amount of such variable benefits. Any such contract,
including a group contract and any certificate in evidence of variable benefits
issued thereunder, shall state that such dollar amount will vary to reflect
investment experience and shall contain on its first page a clear statement to
the effect that the benefits thereunder are on a variable basis.
(2) Illustrations of benefits payable under
immediate variable contracts shall not include projections of past investment
experience into the future or attempted predictions of future investment
experience; provided that nothing contained herein is intended to prohibit the
use of hypothetical assumed investment results to illustrate possible levels of
benefits. If an illustration is used, it shall contain three standard rates: 0,
4 and 8%. These are gross rates before asset charges against the separate
account (and also before asset charges against the fund in the case of a unit
investment trust) but after taxes, and the illustration should state this
clearly. As long as the illustration showed results at these three standard
rates, results at other rates not in excess of 8% may be included to assist the
buyer in his understanding.
(3) No
individual variable annuity contract calling for the payment of periodic
stipulated payments shall be delivered or issued for delivery in this State
unless it contains in substance the following provisions or provisions which in
the opinion of the Commissioner are more favorable to the holders of such
contracts:
(a) A provision that there shall be
a period of grace of 30 days or of one month, within which any periodic
stipulated payment to the insurer falling due after the first may be made,
during which period of grace the contract shall continue in force. The contract
may include a statement of the basis for determining the date as of which any
such payment received during the period of grace shall be applied to produce
the values under the contract arising therefrom;
(b) A provision that, at any time within
three (3) years from the date of default, in making periodic stipulated
payments to the insurer during the life of the annuitant and unless the cash
surrender value has been paid, the contract may be reinstated upon payment to
the insurer of such overdue payments as required by the contract, and of all
indebtedness to the insurer on the contract, including interest. The contract
may include a statement of the basis for determining the date as of which the
amount to cover such overdue payments and indebtedness shall be applied to
produce the values under the contract arising therefrom;
(c) A provisions specifying the options
available in the event of default in a periodic stipulated payment. Such
options may include an option to surrender the contract for a cash value as
determined by the contract, and shall include an option to receive a paid-up
annuity if the contract is not surrendered for cash, the amount of such a
paid-up annuity being determined by applying the value of the contract at the
annuity commencement date in accordance with the terms of the
contract.
(4) No
individual variable life insurance policy shall be delivered or issued for
delivery in this state unless it contains in substance the following provisions
or provisions which in the opinion of the Commissioner are more favorable to
the holders of such policies:
(a) A provision
that there shall be a period of grace of 30 days or of one month, within which
payment of any premium after the first may be made, during which period of
grace the policy shall continue in force, but if a claim arises under the
policy during such period of grace before the overdue premiums or the deferred
premiums of the current policy year, if any, are paid, the amount of such
premiums, together with interest, may be deducted from any amount payable under
the policy in settlement. The policy may contain a statement of the basis for
determining any variation in benefits that may occur as a result of the payment
of premium during the period of grace.
(b) A provision that the policy will be
reinstated at any time within three (3) years from the date of default, unless
the cash surrender value has been paid or unless the period of extended
insurance has expired, upon the application of the insured and the production
of evidence of insurability, including good health, satisfactory to the insurer
and the payment of an amount not exceeding the greater of 1. all overdue
premiums and the payment of any other indebtedness to the insurer upon said
policy with interest, or 2. 110% of the increase in cash surrender value
resulting from reinstatement.
(c) A
provision for cash surrender values and paid-up insurance benefits available as
nonforfeiture options under the policy in the event of default in a premium
payment after premiums have been paid for a specified period. If the policy
does not include a table of figures for the options so available, the policy
shall provide that the company will furnish at least once in each policy year a
statement showing the cash value as of a date no earlier than the prior policy
anniversary. The method of computation of cash values and other nonforfeiture
benefits, as described either in the policy or in a statement filed with the
Commissioner of the jurisdiction in which the policy is delivered, shall be in
accordance with actuarial procedures that recognize the variable nature of the
policy. The method of computation must be such that, if the net investment
return credited to the contract at all times from the date of issue should be
equal to the assumed investment increment factor if the contract provides for
such a factor, or 31/2% if not, with premiums and benefits determined
accordingly under the terms of the policy, the resulting cash values and other
nonforfeiture benefits would be at least equal to the minimum values required
by T.C.A. §
56-7-401, (Standard Non-Forfeiture
Law), for a fixed dollar policy with such premiums and benefits. The method of
computation may disregard incidental minimum guarantees as to the dollar
amounts payable. Incidental minimum guarantees include, for example, but are
not to be limited to, a guarantee under a policy which provides for an assumed
investment increment factor that the amount payable at death or maturity shall
be at least equal to the amount that otherwise would have been payable if the
net investment return credited to the contract at all times from the date of
issue had been equal to such factor.
(5) Any variable annuity contract delivered
or issued for delivery in this State shall stipulate the investment increment
factors to be used in computing the dollar amount of variable benefits or other
variable contractual payments or values thereunder, and may guarantee that
expense and/or mortality results shall not adversely affect such dollar
amounts. In the case of an individual variable annuity contract under which the
expense and mortality results may adversely affect the dollar amount of
benefits, the expense and mortality factors shall be stipulated in the
contract. In computing the dollar amount of variable benefits or other
contractual payments or values under an individual variable annuity contract:
(a) The annual net investment increment
assumption shall not exceed 5%, except with the approval of the
Commissioner;
(b) To the extent
that the level of benefits may be affected by future mortality results, the
mortality factor shall be determined from the Annuity Mortality Table for 1949,
Ultimate, or any modifications of that table not having a lower life expectancy
at any age, or, if approved by the Commissioner, from another table.
"Expense", as used in this Paragraph, may exclude some or all
taxes, as stipulated in the contract.
(6) Any individual variable life insurance
policy delivered or issued for delivery in this State shall stipulate the
investment increment factor to be used in computing the dollar amount of
variable benefits or other variable contractual payments or values thereunder
and shall guarantee that expense and mortality results shall not adversely
affect such dollar amounts.
(7) The
reserve liability for variable contracts shall be established pursuant to the
requirements of T.C.A. §
56-1-402, in accordance with
actuarial procedures that recognize the variable nature of the benefits
provided and any mortality guarantees.
(8) A company issuing variable life insurance
contracts with a stated amount of guaranteed minimum death benefit shall hold
in a separate account assets at least equal to the entire reserve for the death
benefit (such reserve being determined in accordance with paragraph (7) above),
except that additional assets supporting the reserve described in (a) below
shall be maintained in the company's general account.
(a) The portion of the reserve in the general
account is to provide for the contingency of death occurring when the
guaranteed minimum death benefit exceeds the death benefit that would have been
paid in the absence of such guarantee. Such additional reserve shall be
accumulated from amounts regularly allocated by the company for this purpose
and shall be charged with any excess of the actual death benefits paid by the
company on such variable life insurance contracts over the death benefits that
would have been payable in the absence of the guaranteed minimum death
benefit.
(b) In no event, however,
may the portion of the reserve maintained in the general ac-count be less than
either of the two minimum reserves described in (c) and (d) below.
(c) The first minimum reserve equals the
aggregate total of the term costs, if any, covering a period of one full year
from the valuation date, of the guarantee on each such variable life insurance
contract, assuming an immediate one-third depreciation in the current value of
the assets of the separate account followed by a net investment return equal to
the assumed investment increment factor.
(d) The second minimum reserve equals the
aggregate total of the "attained age level" reserves on each such variable life
insurance contract. The "attained age level" reserve on each such variable life
insurance contract shall not be less than zero and shall equal the "residue",
as described in (e) below, of the prior year's "attained age level" reserve on
the contract, with any such "residue" increased or decreased by a payment
computed on an attained age basis as described in (f) below.
(e) The "residue" of the prior year's
"attained age level" reserve on each such variable life insurance contract
shall not be less than zero and shall be determined by adding interest at the
valuation interest rate to such prior year's reserve, deducting the tabular
claims based on the "excess", if any, of the guaranteed minimum death benefit,
over the death benefit that would be payable in the absence of such guarantee,
and dividing the net result by a tabular probability of survival. The "excess"
referred to in the preceding sentence shall be based on the actual level of
death benefits that would have been in effect during the preceding year in the
absence of the guarantee, taking appropriate account of the reserve assumptions
regarding the distribution of death claim payments over the year.
(f) The payment referred to in (d) above
shall be computed so that the present value of a level payment of that amount
each year over the future premium paying period of the contract is equal to (i)
minus (ii) minus (iii), where (i) is the present value of the future guaranteed
minimum death benefits, (ii) is the present value of the future death benefits
that would be payable in the absence of such guarantee and (iii) is any
"residue", as described in (e) above, of the prior year's "attained age level"
reserve on such variable life insurance contract. If the contract is paid-up,
the payment shall equal (i) minus (ii) minus (iii). The amounts of future death
benefits referred to in (ii) shall be computed assuming a net investment return
of the separate account which may differ from the assumed investment increment
factor and/or the valuation interest rate but in no event may exceed the
maximum interest rate permitted for the valuation of life insurance
contracts.
(g) The valuation
interest rate and mortality table used in computing the two minimum reserves
described in (c) and (d) above shall conform to permissible standards for the
valuation of life insurance contracts. In determining such minimum reserves,
the company may employ suitable approximations and estimates, including but not
limited to groupings and averages.
Authority: T.C.A. §
56-3-508.
