# S.C. Code Regs. 69-57 - Valuation of Life Insurance Policies

This regulation is issued under the authority of Section 38-9-180 of the Insurance Laws of South Carolina.

This regulation shall apply to all life insurance policies, with or without nonforfeiture values, issued on or after the effective date of this regulation, subject to the following exceptions and conditions.

For purposes of this regulation:

The length of a particular contract segment shall be set equal to
the minimum of the value t for which G_{t} is greater than
Rt (if G_{t} never exceeds R_{t} the
segment length is deemed to be the number of years from the beginning of the
segment to the mandatory expiration date of the policy), where
G_{t} and R_{t} are defined as
follows:

G_{t} = GP_{x+k+t}

-----------

GP_{x+k+t-l}

where:

x= original issue age;

k = the number of years from the date of issue to the beginning of the segment;

t= 1, 2, ...; t is reset to 1 at the beginning of each segment;

GP_{x+" k+" t-l} = Guaranteed gross premium
per thousand of face amount for year t of the segment, ignoring policy fees
only if level for the premium paying period of the policy.

R_{t} = q_{x+k+t} ,
However, R_{t} may be increased or decreased by

one

----------

q_{x+k+t-l} percent in any policy year, at
the company's

option, but R_{t} shall not be less than
one;

where:

x, k and t are as defined above, and

q_{x+" k+" t-l} =valuation mortality rate for
deficiency reserves in policy year k+" t but using the mortality of Section
5B(2) if Section 5B(3) is elected for deficiency reserves.

However, if GP_{x+" k+" t} is greater than 0
and GP_{x+" k+" t-l} is equal to 0, Gt shall be deemed to
be 1000. If GP_{x+" k+" t} and GP_{x+" k+"
t-l} are both equal to 0, G_{t} shall be deemed
to be 0.

Basic reserves shall be calculated as the greater of the segmented reserves and the unitary reserves. Both the segmented reserves and the unitary reserves for any policy shall use the same valuation mortality table and selection factors. At the option of the insurer, in calculating segmented reserves and net premiums, either of the adjustments described in Paragraph (1) or (2) below may be made:

Basic reserves may not be less than the tabular cost of insurance for the balance of the policy year, if mean reserves are used. Basic reserves may not be less than the tabular cost of insurance for the balance of the current modal period or to the paid-to-date, if later, but not beyond the next policy anniversary, if mid-terminal reserves are used. The tabular cost of insurance shall use the same valuation mortality table and interest rates as that used for the calculation of the segmented reserves. However, if select mortality factors are used, they shall be the ten-year select factors incorporated into the 1980 amendments of the NAIC Standard Valuation Law. In no case may total reserves (including basic reserves, deficiency reserves and any reserves held for supplemental benefits that would expire upon contract termination) be less than the amount that the policyowner would receive (including the cash surrender value of the supplemental benefits, if any, referred to above), exclusive of any deduction for policy loans, upon termination of the policy.

Unitary basic reserves and unitary deficiency reserves need not be calculated for a policy if the following conditions are met, based upon the initial current premium scale at issue:

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 Section 4B.

Deficiency reserves, if any, for the secondary guarantees shall be calculated for the secondary guarantee period in the same manner as described in Section 6B with gross premiums set equal to the specified premiums, if any, or otherwise to the minimum premiums that keep the policy in force.

The minimum reserves during the secondary guarantee period are the greater of:

Appendix

SELECT MORTALITY FACTORS

This appendix contains tables of select mortality factors that are the bases to which the respective percentage of Section 5A(2), 5B(2) and 5B(3) are applied.

The six tables of select mortality factors contained herein include: (1) male aggregate, (2) male nonsmoker, (3) male smoker, (4) female aggregate, (5) female nonsmoker, and (6) female smoker.

These tables apply to both age last birthday and age nearest birthday mortality tables.

For sex-blended mortality tables, compute select mortality factors in the same proportion as the underlying mortality. For example, for the 1980 CSO-B Table, the calculated select mortality factors are eighty percent (80%) of the appropriate male table in this Appendix, plus twenty percent (20%) of the appropriate female table in this Appendix.

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## Notes

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