Current through Register Vol. 41, No. 3, September 23, 2024
A. At
the election of the company for any one or more specified plans of life
insurance, the minimum mortality standard for basic reserves may be calculated
using the 1980 CSO valuation tables with select mortality factors, or any other
valuation mortality table adopted by the NAIC on or after January 1, 2000, and
promulgated by regulation by the commission for this purpose. If select
mortality factors are elected, they may be:
1. The 10-year select mortality factors
incorporated into the 1980 amendments to the NAIC Standard Valuation
Law;
2. The 20-year select
mortality factors in
14VAC5-319-70; or
3. Any other table of select mortality
factors adopted by the NAIC on or after January 1, 2000, and promulgated by
regulation by the commission for the purpose of calculating basic
reserves.
B. Deficiency
reserves, if any, are calculated for each policy as the excess, if greater than
0, of the quantity A over the basic reserve. The quantity A is obtained by
recalculating the basic reserve for the policy using guaranteed gross premiums
instead of net premiums when the guaranteed gross premiums are less than the
corresponding net premiums. At the election of the company for any one or more
specified plans of insurance, the quantity A and the corresponding net premiums
used in the determination of quantity A may be based upon the 1980 CSO
valuation tables with select mortality factors, or any other valuation
mortality table adopted by the NAIC on or after January 1, 2000, and
promulgated by regulation by the commission.
1. If select mortality factors are elected,
they may be:
a. The 10-year select mortality
factors incorporated into the 1980 amendments to the NAIC Standard Valuation
Law;
b. The 20-year select
mortality factors in
14VAC5-319-70;
c. For durations in the first segment, X
percent of the 20-year select mortality factors in
14VAC5-319-70, subject to the
conditions set forth in subdivisions B 2 and B 3 of this section; or
d. Any other table of select mortality
factors adopted by the NAIC after January 1, 2000, and promulgated by
regulation by the commission for the purpose of calculating deficiency
reserves.
2. When
calculating X as provided by this section, the following shall apply:
a. X may vary by policy year, policy form,
underwriting classification, issue age or any other policy factor expected to
affect mortality experience;
b. X
is such that, when using the valuation interest rate used for basic reserves,
subdivision (1) is greater than or equal to subdivision (2), as follows:
(1) The actuarial present value of future
death benefits, calculated using the mortality rates resulting from the
application of X;
(2) The actuarial
present value of future death benefits calculated using anticipated mortality
experience without recognition of mortality improvement beyond the valuation
date;
c. X is such that
the mortality rates resulting from the application of X are at least as great
as the anticipated mortality experience, without recognition of mortality
improvement beyond the valuation date, in each of the first five years after
the valuation date;
d. The
appointed actuary shall increase X at any valuation date where it is necessary
to continue to meet all the requirements of subdivisions B 2 and B 3 of this
section;
e. The appointed actuary
may decrease X at any valuation date as long as X continues to meet all the
requirements of subdivisions B 2 and B 3 of this section; and
f. The appointed actuary specifically shall
take into account the adverse effect on expected mortality and lapsation of any
anticipated or actual increase in gross premiums.
3. If X is less than 100% at any duration for
any policy, the following requirements shall be met:
a. The appointed actuary annually shall
prepare an actuarial opinion and memorandum for the company in conformance with
the requirements of
14VAC5-310-90;
b. The appointed actuary shall disclose, in
the regulatory asset adequacy issues summary, the impact of the insufficiency
of assets to support the payment of benefits and expenses and the establishment
of statutory reserves during one or more interim periods; and
c. The appointed actuary annually shall opine
for all policies subject to this regulation as to whether the mortality rates
resulting from the application of X meet the requirements of subdivisions B 2
and B 3 of this section. This opinion shall be supported by an actuarial
report, subject to appropriate Actuarial Standards of Practice promulgated by
the Actuarial Standards Board of the American Academy of Actuaries. The X
factors shall reflect anticipated future mortality, without recognition of
mortality improvement beyond the valuation date, taking into account relevant
emerging experience.
C. This subsection applies to both basic
reserves and deficiency reserves. Any set of select mortality factors may be
used only for the first segment. However, if the first segment is less than 10
years, the appropriate 10-year select mortality factors incorporated into the
1980 amendments to the NAIC Standard Valuation Law may be used thereafter
through the tenth policy year from the date of issue.
D. In determining basic reserves or
deficiency reserves, guaranteed gross premiums without policy fees may be used
where the calculation involves the guaranteed gross premium if the policy fee
is a level dollar amount after the first policy year. In determining deficiency
reserves, policy fees may be included in guaranteed gross premiums, even if not
included in the actual calculation of basic reserves.
E. Reserves for policies that have changes to
guaranteed gross premiums, guaranteed benefits, guaranteed charges or
guaranteed credits that are unilaterally made by the company after issue and
that are effective for more than one year after the date of the change shall be
the greatest of the following:
(i) reserves
calculated ignoring the guarantee,
(ii) reserves assuming the guarantee was made
at issue, and
(iii) reserves
assuming that the policy was issued on the date of the guarantee.
F. The commission may require that
the company document the extent of the adequacy of reserves for specified
blocks, including but not limited to policies issued prior to January 1, 2000.
This documentation may include a demonstration of the extent to which
aggregation with other nonspecified blocks of business is relied upon in the
formation of the appointed actuary opinion pursuant to and consistent with the
requirements of
14VAC5-310-90.
G. This section is effective for valuations
on and after December 31, 2008.
