Waiver of premium reserves involves several special
considerations. The disability valuation tables promulgated by the National
Association of Insurance Commissioners, or a successor thereto, are based on
exposures that include contracts on premium waiver as in-force contracts.
Therefore, contract reserves based on these tables are not reserves on "active
lives" but rather reserves on contracts "in force." This is true for the 1964
CDT, 1985 CIDA and 1985 CIDB tables.
(1) Tabular reserves using one of these
tables shall value reserves on the following basis:
(i) Claim reserves shall include reserves for
premiums expected to be waived, valuing as a minimum the valuation net premium
being waived.
(ii) Premium reserves
shall include contracts on premium waiver as in-force contracts, valuing as a
minimum the unearned modal valuation net premium being waived.
(iii) Contract reserves shall include
recognition of the waiver of premium benefit in addition to other contract
benefits provided for, valuing as a minimum the valuation net premium to be
waived.
(2) If an insurer
is, instead, valuing reserves on what is truly an active life table, or if the
specific valuation table is not being used but the insurer's gross premiums are
calculated on a basis that includes in the projected exposure only those
contracts for which premiums are being paid, it may not be necessary to provide
specifically for waiver of premium reserves. An insurer using a true "active
life" basis shall carefully consider whether or not additional liability should
be recognized on account of premiums waived during periods of disability or
during claim continuation.
