Current through Register Vol. 41, No. 3, September 23, 2024
A.
General provisions are:
1. Policies with a
secondary guarantee include, but are not limited to, the following:
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
10-year select mortality factors, or any other table adopted on or after
January 1, 2000, by the NAIC and promulgated by regulation by the commission
for this purpose; or
c. A policy
with any combination of subdivisions 1 a and 1 b of this subsection.
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 company after issue shall be considered to have been made at
issue. Reserves described in subsections B and C of this section 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
0 account value at the beginning of the policy year, produces a 0 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
14VAC5-319-40 B 1 b, c, and d 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 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
14VAC5-319-10.
C. Deficiency reserves, if any, for the
secondary guarantees shall be calculated for the secondary guarantee period in
the same manner as described in
14VAC5-319-50 B with gross
premiums set equal to the specified premiums, if any, or otherwise to the
minimum premiums that keep the policy in force.
D. 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.
