3 AAC 21.910 - Minimum valuation standard for policies with guaranteed non-level gross premiums or guaranteed non-level benefits

(a) Basic reserves for policies with guaranteed non-level gross premiums or guaranteed non-level benefits, other than universal life insurance policies, must be the larger of segmented reserves and unitary reserves subject to the following:

(1) segmented reserves and unitary reserves must use the same valuation mortality table and selection factor;

(2) in calculating segmented reserves and net premiums, the insurer may elect to either

(A) if the unitary reserve applicable at the end of each segment is greater than zero, treat that unitary reserve as a pure endowment and subtract the unitary reserve applicable at the beginning of each segment from the present value of guaranteed life insurance and endowment benefits for each segment; or

(B) if the guaranteed cash surrender value applicable at the end of each segment is greater than zero, treat that guaranteed cash surrender value as a pure endowment and subtract the guaranteed cash surrender value applicable at the beginning of each segment from the present value of guaranteed life insurance and endowment benefits for each segment.

(b) Deficiency reserves for policies with guaranteed non-level gross premiums or guaranteed non-level benefits, other than universal life insurance policies, in which the guaranteed gross premium at any duration is less than the corresponding modified net premium calculated by the method used to determine the basic reserves using the mortality table specified in 3 AAC 21.905(f) and (g) and the minimum interest rate required under AS 21.18.110 must be calculated

(1) on a unitary basis if the corresponding basic reserve under (a) of this section is a unitary reserve;

(2) on a segmented basis if the corresponding basic reserve under (a) of this section is a segmented reserve; or

(3) on a segmented basis if the segmented reserve is equal to the unitary reserve under (a) of this section.

(c) If deficiency reserves are calculated on a segmented basis under (b) of this section, then the minimum reserves used in determining the deficiency reserves must be calculated using segment lengths equal to the segment lengths used in determining basic segmented reserves.

(d) Basic reserves calculated under this section

(1) may not be less than the tabular cost of insurance for the balance of the policy year, if mean reserves are used; and

(2) may not be less than the tabular cost of insurance for the balance of the current modal period or, if later, the date to which premiums are paid, but not beyond that next policy anniversary, if mid-terminal reserves are used;

(e) In determining the tabular cost of insurance under (d) of this section, the insurer shall

(1) use the valuation mortality table and interest rates used to calculate the segmented reserves; and

(2) if select mortality factors are used, use the 10-year select mortality factors incorporated into the Commissioner's 1980 Standard Ordinary Mortality Table with 10-year Select Mortality Factors;

(f) Total reserves including basis reserves, deficiency reserves, and any reserves for supplemental benefits that expire upon contract termination may not be less than the amount that the policyholder would receive, including the cash surrender value of the supplemental benefits that expire upon termination of the policy, minus a deduction for policy loans.

Notes

3 AAC 21.910

Eff. 1/1/2011, Register 196

Authority:AS 21.06.090

AS 21.18.110

AS 21.18.160