211 CMR 29.05 - General Calculation Requirements for Basic Reserves and Premium Deficiency Reserves
(1) At the election
of the carrier 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 after the effective date of
211 CMR 29.00 and promulgated
by regulation by the commissioner for this purpose). If select mortality
factors are elected, they may be:
(a) The
ten-year select mortality factors incorporated into the 1980 amendments to the
NAIC Standard Valuation Law;
(b)
The select mortality factors in
211 CMR 29.100:
Appendix; or
(c)
Any other table of select mortality factors adopted by the NAIC after the
effective date of
211 CMR 29.00 and promulgated
by regulation by the commissioner for the purpose of calculating basic
reserves.
(2) Deficiency
reserves, if any, are calculated for each policy as the excess, if greater than
zero, 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 carrier 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 after the effective date of
211 CMR 29.00 and promulgated
by regulation by the commissioner). If select mortality factors are elected,
they may be:
(a) The ten-year select
mortality factors incorporated into the 1980 amendments to the NAIC Standard
Valuation Law;
(b) The select
mortality factors in
211 CMR 29.100:
Appendix;
(c) For durations in the
first segment, X percent of the select mortality factors in
211 CMR 29.100:
Appendix, subject to the following:
1. X may vary by policy year, policy form,
underwriting classification, issue age, or any other policy factor expected to
affect mortality experience;
2. X
is such that, when using the valuation interest rate used for basic reserves,
a. is greater than or equal to b. as follows:
a. The actuarial present value of future
death benefits, calculated using the mortality rates resulting from the
application of X;
b. The actuarial
present value of future death benefits calculated using anticipated mortality
experience without recognition of mortality improvement beyond the valuation
date;
3. 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;
4. The
appointed actuary shall increase X at any valuation date where it is necessary
to continue to meet all the requirements of 211 CMR 29.05(2)(c);
5. The appointed actuary may decrease X at
any valuation date as long as X continues to meet all the requirements of 211
CMR 29.05(2)(c); and
6. The
appointed actuary shall specifically take into account the adverse effect on
expected mortality and lapsation of any anticipated or actual increase in gross
premiums.
7. If X is less than 100
percent at any duration for any policy, the following requirements shall be
met:
a. The appointed actuary shall annually
prepare an actuarial opinion and memorandum for the carrier in conformance with
the requirements of
211 CMR 132.08 and 211
CMR 132.09;
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 shall annually opine for all policies subject to
211 CMR 29.00 as to whether
the mortality rates resulting from the application of X meet the requirements
of 211 CMR 29.05(2)(c). 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.
(d) Any other table of select mortality
factors adopted by the NAIC after the effective date of
211 CMR 29.00 and promulgated
by regulation by the commissioner for the purpose of calculating deficiency
reserves.
(3)211 CMR
29.05 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 ten years, the appropriate ten-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.
(4) In determining basic
reserves or deficiency reserves, guaranteed gross premiums without policy fees
may be used where the calculation involves the guaranteed gross premium but
only 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.
(5) Reserves for policies
that have changes to guaranteed gross premiums, guaranteed benefits, guaranteed
charges, or guaranteed credits that are unilaterally made by the carrier after
issue and that are effective for more than one year after the date of the
change shall be the greatest of the following:
(a) reserves calculated ignoring the
guarantee,
(b) reserves assuming
the guarantee was made at issue, and
(c) reserves assuming that the policy was
issued on the date of the guarantee.
(6) The commissioner may require that the
carrier document the extent of the adequacy of reserves for specified blocks,
including but not limited to policies issued prior to the effective date of
211 CMR 29.00. This
documentation may include a demonstration of the extent to which aggregation
with other non-specified blocks of business is relied upon in the formation of
the appointed actuary opinion pursuant to and consistent with the requirements
of
211 CMR
132.08.
Notes
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