Current through Register Vol. XLI, No. 38, September 20, 2024
6.1. General.
6.1.a. Policies with a secondary guarantee
include:
6.1.a.1. 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;
6.1.a.2. A policy in which the minimum premium at
any future 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 adopted after
the effective date of this rule by the NAIC and promulgated by rule by the
commissioner for this purpose; or
6.1.a.3. A policy with any combination of the
features described in paragraphs 1 and 2 of this subdivision.
6.1.b. 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 subsections 6.2 and
6.3 of this rule shall be recalculated from issue to reflect these
changes.
6.1.c. 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.
6.1.d. For purposes of this subdivision, 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.
6.1.e. 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 subdivisions b, c and d, of subsection 4.2
of this rule may not be used to calculate the one-year valuation premiums.
6.1.f. 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.
6.2. 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 subsection 3.2 of this rule.
6.3. 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
subsection 5.2 of this rule with gross premiums set equal to the specified premiums,
if any, or otherwise to the minimum premiums that keep the policy in
force.
6.4. Minimum Reserves. -- The
minimum reserves during the secondary guarantee period are the greater of:
6.4.a. The basic reserves for the secondary
guarantee plus the deficiency reserve, if any, for the secondary guarantees;
or
6.4.b. The minimum reserves required
by other rules governing universal life plans.
