20 CSR 400-1.100 - Universal Life
(1) Definitions.
(A) Universal life insurance policy means a
life insurance policy where separately identified interest credits (other than
in connection with dividend accumulations, premium deposit funds or other
supplementary accounts) and mortality and expense charges are made to the
policy. A universal life insurance policy may provide for other credits and
charges, such as charges for the cost of benefits provided by rider.
(B) Flexible premium universal life insurance
policy means a universal life insurance policy which permits the policyholder
to vary, independently of each other, the amount or timing of one (1) or more
premium payments or the amount of insurance.
(C) Fixed premium universal life insurance
policy means a universal life insurance policy other than a flexible premium
universal life insurance policy.
(D) Interest-indexed universal life insurance
policy means any universal life insurance policy where the interest credits are
linked to an external referent.
(E)
Net cash surrender value means the maximum amount payable to the policy owner
upon surrender.
(F) Cash surrender
value means the net cash surrender value plus any amounts outstanding as policy
loans.
(G) Policy value means the
amount to which separately identified interest credits and mortality, expense
or other charges are made under a universal life insurance policy.
(H) Director means the insurance director of
this state.
(2) This
regulation applies to all individual universal life insurance policies except
variable universal life.
(3)
Valuation.
(A) Requirements. The minimum
valuation standard for universal life insurance policies shall be the
Commissioners Reserve Valuation Method, as described below for such policies,
and the tables and interest rates specified below. The terminal reserve for the
basic policy and any benefits and/or riders for which premiums are not paid
separately as of any policy anniversary shall be equal to the net level premium
reserves less C and less D where-
1. Reserves by the net level premium method
shall be equal to (A-B)r; where A, B
and r are defined below;
2.
A is the present value of
all future guaranteed benefits at the date of valuation;
3.
B is the quantity
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where PVFB is the present value of all benefits guaranteed at issue assuming future guaranteed maturity premiums are paid by the policy owner and taking into account all guarantees contained in the policy or declared by the insurer;
4.
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are present values of an annuity of one (1) year payable on policy anniversaries beginning at ages x and x+t, respectively, and continuing until the highest attained age at which a premium may be paid under the policy. x is defined as the issue age and t is defined as the duration of the policy;
5.
The guaranteed maturity premium for flexible premium universal life insurance
policies shall be that level gross premium, paid at issue and periodically
thereafter over the period during which premiums are allowed to be paid, which
will mature the policy on the latest maturity date, if any, permitted under the
policy (otherwise at the highest age in the valuation mortality table), for an
amount which is in accordance with the policy structure. The guaranteed
maturity premium is calculated at issue based on all policy guarantees at issue
(excluding guarantees linked to an external referent). The guaranteed maturity
premium for fixed premium universal life insurance policies shall be the
premium defined in the policy which at issue provides the minimum policy
guarantees;
6.
r
is equal to one (1), unless the policy is a flexible premium policy and the
policy value is less than the guaranteed maturity fund, in which case
r is the ratio of the policy value to the guaranteed maturity
fund;
7. The guaranteed maturity
fund at any duration is that amount which, together with future guaranteed
maturity premiums, will mature the policy based on all policy guarantees at
issue;
8.
C is the
quantity
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where a-b is as described in section 376.380.1(3)b, RSMo 1986 for the plan of insurance defined at issue by the Guaranteed Maturity Premiums and all guarantees contained in the policy or declared by the insurer;
9.
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x
are defined in paragraphs (3)(A)3. and 4.;
10.
D is the sum of any
additional quantities analogous to C which arise because of
structural changes in the policy, with each such quantity being determined on a
basis consistent with that of C using the maturity date in
effect at the time of the change;
11. The Guaranteed Maturity Premium, the
Guaranteed Maturity Fund and B shall be recalculated to reflect any structural
changes in the policy. This recalculation shall be done in a manner consistent
with the preceding descriptions;
12. Future guaranteed benefits are determined
by-1) projecting the greater of the Guaranteed Maturity Fund and the policy
value, taking into account future Guaranteed Maturity Premiums, if any, and
using all guarantees of interest, mortality, expense deductions, etc.,
contained in the policy or declared by the insurer and 2) taking into account
any benefits guaranteed in the policy or by declaration which do not depend on
the policy value; and
13. All
present values shall be determined using-1) an interest rate(s) specified in
section 376.380 RSMo, for policies
issued in the same year; 2) the mortality rates specified in section
376.380, RSMo for policies
issued in the same year or contained in such other table as may be approved by
the director for this purpose and 3) any other tables needed to value
supplementary benefits provided by a rider which is being valued together with
the policy.
(B)
Alternative Minimum Reserves. If, in any policy year, the Guaranteed Maturity
Premium on any universal life insurance policy is less than the valuation net
premium for the policy, calculated by the valuation method actually used in
calculating the reserve on it but using the minimum valuation standards of
mortality and rate of interest, the minimum reserve required for the contract
shall be the greater of-
1. The reserve
calculated according to the method, the mortality table and the rate of
interest actually used; or
2. The
reserve calculated according to the method actually used but using the minimum
valuation standards of mortality and rate of interest and replacing the
valuation net premium by the Guaranteed Maturity Premium in each policy year
for which the valuation net premium exceeds the Guaranteed Maturity Premium;
and
3. For universal life insurance
reserves on a net level premium basis, the valuation net premium is
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and for reserves on a Commissioners Reserve Valuation Method the valuation net premium is
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(4) Nonforfeiture.
(A) Minimum cash surrender values for
flexible premium universal life insurance policies shall be determined
separately for the basic policy and any benefits and riders for which premiums
are paid separately. The following requirements pertain to a basic policy and
any benefits and riders for which premiums are not paid separately:
1. The minimum cash surrender value (before
adjustment for indebtedness and dividend credits) available on a date as of
which interest is credited to the policy shall be equal to the accumulation to
that date of the premiums paid minus the accumulations to that date of-
A. The benefit charges;
B. The averaged administrative expense
charges for the first policy year and any insurance-increase years,
C. Actual administrative expense charges for
other years;
D. Initial and
additional acquisition expense charges not exceeding the initial or additional
expense allowances, respectively;
E. Any service charges actually made
(excluding charges for cash surrender or election of a paid-up nonforfeiture
benefit); and
F. Any deductions
made for partial withdrawals; all accumulations being the actual rate(s) of
interest at which interest credits have been made unconditionally to the policy
(or have been made conditionally, but for which the conditions have since been
met), and minus any unamortized unused initial and additional expense
allowances;
2. Interest
on the premiums and on all charges referred to in subparagraphs (4)(A)1.A.-F.
shall be accumulated from and to the dates that are consistent with the manner
in which interest is credited in determining the policy value;
3. The benefit charges shall include the
charges made for mortality and any charges made for riders or supplementary
benefits for which premiums are not paid separately. If benefit charges are
substantially level by duration and develop low or no cash values, then the
director shall have the right to require higher cash values unless the insurer
provides adequate justification that the cash values are appropriate in
relation to the policy's other characteristics;
4. The administrative expenses charges shall
include charges per premium payment, charges per dollar of premium paid,
periodic charges per thousand dollars of insurance, periodic per policy charges
and any other charges permitted by the policy to be imposed without regard to
the policyholder's request for services;
5. The averaged administrative expense
charges for any year shall be those which would have been imposed in that year
if the charge rate(s) for each transaction or period within the year had been
equal to the arithmetic average of the corresponding charge rates which the
policy states will be imposed in policy years two through twenty (2-20) in
determining the policy value;
6.
The initial acquisition expense charges shall be the excess of the expense
charges, other than service charges, actually made in the first policy year
over the averaged administrative expense charges for that year.
Additional acquisition expense charges shall be the excess of the expense charges, other than service charges, actually made in an insurance-increase year over the averaged administrative expense charges for that year. An insurance-increase year shall be the year beginning on the date of increase in the amount of insurance by policy owner request (or by the terms of the policy);
7. Service
charges shall include charges permitted by the policy to be imposed as the
result of a policy owner's request for a service by the insurer (such as the
furnishing of future benefit illustrations) or of special
transactions;
8. The initial
expense allowance shall be the allowance provided in section 376.670.6(2)-(4)
or 376.670.10b(1)(b) and (c), RSMo, as applicable for a fixed premium, fixed
benefit endowment policy with a face amount equal to the initial face amount of
the flexible premium universal life insurance policy, with level premiums paid
annually until the highest attained age at which a premium may be paid under
the flexible premium universal life insurance policy, and maturing on the
latest maturity date permitted under the policy, if any, otherwise at the
highest age in the valuation mortality table. The unused initial expense
allowance shall be the excess, if any, of the initial expense allowance over
the initial acquisition expense charges as defined;
9. If the amount of insurance is subsequently
increased upon request of the policy owner (or by the terms of the policy), an
additional expense allowance and an unused additional expense allowance shall
be determined on a basis consistent with paragraph (4)(A)8. and section
376.670.10b(5), RSMo, using the face amount and the latest maturity date
permitted at that time under the policy; and
10. The unamortized unused initial expense
allowance during the policy year beginning on the policy anniversary at age
x+t (where x is the same
issue age) shall be unused initial expense allowance multiplied by
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where äx+t and äx are present values of an annuity of one (1) per year payable on policy anniversaries beginning at ages x+t and x, respectively, and continuing until the highest attained age at which a premium may be paid under the policy, both on the mortality and interest bases guaranteed in the policy. An unamortized unused additional expense allowance shall be the unused additional expense allowance multiplied by a similar ratio of annuities, with
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replaced by an annuity beginning on the date as of which the additional expense allowance was determined.
(B) For fixed premium universal life
insurance policies, the minimum cash surrender values shall be determined
separately for the basic policy and any benefits and riders for which premiums
are paid separately. The following requirements pertain to a basic policy and
any benefits and riders for which premiums are not paid separately:
1. The minimum cash surrender value (before
adjustment for indebtedness and dividend credits) available on a date as of
which interest is credited to the policy shall be equal to A-B-C-D, where-
A.
A is the present value of
future guaranteed benefits;
B.
B is the present value of future adjusted premiums. The
adjusted premiums are calculated as described in section 376.670.6 and
376.670.10 or in 376.670.10b(1), RSMo, as applicable. If section
376.670.10b(1), RSMo, is applicable, the nonforfeiture net level premium is
equal to the quantity
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where PVFB is the present value of all benefits guaranteed at issue assuming future premiums are paid by the policyholder and all guarantees contained in the policy or declared by the insurer;
C.
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is the present value of an annuity of one (1) per year payable on policy anniversaries beginning at age x and continuing until the highest attained age at which a premium may be paid under the policy;
D.
C is the
present value of any quantities analogous to the nonforfeiture net level
premium which arise because of guarantees declared by the insurer after the
issue date of the policy.
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shall be replaced by an annuity beginning on the date as of which the declaration became effective and payable until the end of the period covered by the declaration; and
E.
D is the sum of any
quantities analogous to B which arise because of structural
changes in the policy;
2. Future guaranteed benefits are determined
by-1) projecting the policy value, taking into account future premiums, if any,
and using all guarantees of interest, mortality, expense deductions, etc.,
contained in the policy or declared by the insurer and 2) taking into account
any benefits guaranteed in the policy or by declaration which do not depend on
the policy value; and
3. All
present values shall be determined using-1) an interest rate(s) specified by
section 376.670, RSMo for policies
issued in the same year and 2) the mortality rates specified by section
376.670, RSMo for policies
issued in the same year or contained in another table as may be approved by the
director for this purpose.
(C) Minimum Paid-Up Nonforfeiture Benefits.
If a universal life insurance policy provides for the optional election of a
paid-up nonforfeiture benefit, it shall be such that its present value shall be
at least equal to the cash surrender value provided for by the policy on the
effective date of the election. The present value shall be based on mortality
and interest standards at least as favorable to the policy owner as-1) in the
case of a flexible premium universal life insurance policy, the mortality and
interest basis guaranteed in the policy for determining the policy value or 2)
in the case of a fixed premium policy, the mortality and interest standards
permitted for paid-up nonforfeiture benefits by section
376.670, RSMo. In lieu of the
paid-up nonforfeiture benefit, the insurer may substitute, upon proper request
no later than sixty (60) days after the due date of the premium in default, an
actuarially equivalent alternative paid-up nonforfeiture benefit which provides
a greater amount or longer period of death benefits or, if applicable, a
greater amount or earlier payment of endowment benefits.
(5) Mandatory Policy Provisions.
(A) Periodic Disclosure to Policy Owner. The
policy shall provide that the policy owner will be sent, without charge, at
least annually, a report which will serve to keep the policy owner advised as
to the status of the policy. The end of the current report period must be not
more than three (3) months previous to the date of the mailing of the report.
Specific requirements of this report are detailed in section (6).
(B) Current Illustrations. The annual report
shall provide notice that the policyholder may request an illustration of
current and future benefits and values.
(C) Policy Guarantees. The policy shall
provide guarantees of minimum interest credits and maximum mortality and
expense charges. All values and data shown in the policy shall be based on
guarantees. No figures based on nonguarantees shall be included in the
policy.
(D) Calculation of Cash
Surrender Values. The policy shall contain at least a general description of
the calculation of cash surrender values including the following information:
1. The guaranteed maximum expense charges and
loads;
2. Any limitation on the
crediting of additional interest. Interest credits shall not remain conditional
for a period longer than twenty-four (24) months;
3. The guaranteed minimum rate(s) of
interest;
4. The guaranteed maximum
mortality charges;
5. Any other
guaranteed charges; and
6. Any
surrender or partial withdrawal charges.
(E) Changes in Basic Coverage. If the policy
owner has the right to change the basic coverage, any limitation on the amount
or timing of this change shall be stated in the policy. If the policy owner has
the right to increase the basic coverage, the policy shall state whether a new
period of contestability and/or suicide is applicable to the additional
coverage.
(F) Grace Period and
Lapse.
1. The policy shall provide for written
notice to be sent to the policyowner's last known address at least thirty (30)
days prior to the termination of coverage.
2. A flexible premium policy shall provide
for a grace period of at least thirty (30) days (or as required by state
statute) after lapse. Unless otherwise defined in the policy, lapse shall occur
on that date on which the net cash surrender value first equals zero
(0).
(G) Misstatement of
Age or Sex. If there is a misstatement of age or sex in the policy, the amount
of the death benefit shall be that which would be purchased by the most recent
mortality charge at the correct age or sex. The director may approve other
methods which are deemed satisfactory.
(H) Maturity Date. If a policy provides for a
maturity date, end date or similar date, then the policy shall also contain a
statement, in close proximity to that date, that it is possible that coverage
may not continue to the maturity date even if scheduled premiums are paid in a
timely manner, if this is the case.
(6) Disclosure of information about the
policy being applied for shall follow the standards in section
375.1500 to
375.1530, RSMo.
(7) Periodic Disclosure to Policy Owner.
(A) Requirements. The policy shall provide
that the policy owner will be sent, without charge, at least annually, a report
which will serve to keep the policy owner advised of the status of the policy.
The end of the current report period shall be not more than three (3) months
previous to the date of the mailing of the report.
1. This report shall include the following:
A. The beginning and end of the current
report period;
B. The policy value
at the end of the previous report period and at the end of the current report
period;
C. The total amounts which
have been credited or debited to the policy value during the current report
period, identifying each by type (for example, interest, mortality, expense and
riders);
D. The current death
benefit at the end of the current report period on each life covered by the
policy;
E. The net cash surrender
value of the policy as of the end of the current report period;
F. The amount of outstanding loans, if any,
at the end of the current report period;
G. For fixed premium policies-If assuming
guaranteed interest, mortality and expense loads and continued scheduled
premium payments, the policy's net cash surrender value is such that it would
not maintain insurance in force until the end of the next reporting period, a
notice to this effect shall be included in the report; and
H. For flexible premium policies-If, assuming
guaranteed interest, mortality and expense loads, the policy's net cash
surrender value will not maintain insurance in force until the end of the next
reporting period, unless further premium payments are made, a notice to this
effect shall be included in the report.
(8) Interest-Indexed Universal
Life Insurance Policies.
(A) Initial Filing
Requirements. The following information shall be submitted in connection with
any filing of interest-indexed universal life insurance policies
(interest-indexed policies). All this information received shall be treated
confidentially to the extent permitted by law:
1. A description of how the interest credits
are determined, including:
A. A description of
the index;
B. The relationship
between the value of the index and the actual interest rate to be
credited;
C. The frequency and
timing of determining the interest rate; and
D. The allocation of interest credits, if
more than one (1) rate of interest applies to different portions of the policy
value;
2. The insurer's
investment policy, which includes a description of the following:
A. How the insurer addressed the reinvestment
risks;
B. How the insurer plans to
address the risk of capital loss on cash outflows;
C. How the insurer plans to address the risk
that appropriate investments may not be available or not available in
sufficient quantities;
D. How the
insurer plans to address the risk that the indexed interest rate may fall below
the minimum contractual interest rate guaranteed in the policy;
E. The amount and type of assets currently
held for interest-indexed policies; and
F. The amount and type of assets expected to
be acquired in the future;
3. If policies are linked to an index for a
specified period less than to the maturity date of the policy, a description of
the method used (or currently contemplated) to determine interest credits upon
the expiration of this period;
4. A
description of any interest guaranteed in addition to or in lieu of the index;
and
5. A description of any maximum
premium limitations and the conditions under which they apply.
(B) Additional Filing
Requirements.
1. Annually, every insurer shall
submit a Statement of Actuarial Opinion by the insurer's actuary similar to the
example contained in subsection (8)(C).
2. Annually, every insurer shall submit a
description of the amount and type of assets currently held by the insurer with
respect to its interest-indexed policies.
3. Prior to implementations, every domestic
insurer shall submit a description of any material change in the insurer's
investment strategy or method of determining the interest credits. A change is
considered to be material if it would affect the form or definition of the
index (that is, any change in the information supplied in paragraphs (8)(A)1.
and 2. of this rule) or if it would significantly change the amount or type of
assets held for interest-indexed policies.
(C) Statement of Actuarial Opinion for
Investment-Indexed Universal Life Insurance Policies.
I___________________________________,
(Name)
am__________________________________
(Position or Relationship to Insurer)
for the XYZ Life Insurance Company (The Insurer) in the state of.
(State of Domicile of Insurer)
I am a member of the American Academy of Actuaries (or if not, state other qualifications to sign annual statement actuarial opinions).
I have examined the interest-indexed universal life insurance policies of the Insurer in force as of December 31, 20XX, encompassing__________________number of policies
and $_____________of insurance in force.
I have considered the provisions of the policies. I have considered any reinsurance agreements pertaining to such policies, the characteristics of the identified assets and the investment policy adopted by the Insurer as they affect future insurance and investment cash flows under such policies and related assets. My examination included such tests and calculations as I considered necessary to form an opinion concerning the insurance and investment cash flows arising from the policies and related assets.
I relied on the investment policy of the Insurer and on projected investment cash flows as provided by ___________________.
(Chief Investment Officer of the Insurer)
Tests were conducted under various assumptions as to future interest rates, and particular attention was given to those provisions and characteristics that might cause future insurance and investment cash flows to vary with changes in the level of prevailing interest rates.
In my opinion, the anticipated insurance and investment cash flows referred to make good and sufficient provision for the contractural obligations of the Insurer under these insurance policies.
________________________________________________
(Signature of Actuary)
Notes
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