S.C. Code Regs. 69-81 - Term and Universal Life Insurance Reserve Financing
The purpose and intent of this regulation is to establish uniform, national standards governing reserve financing arrangements pertaining to life insurance policies containing guaranteed nonlevel gross premiums, guaranteed nonlevel benefits and universal life insurance policies with secondary guarantees; and to ensure that, with respect to each such financing arrangement, funds consisting of Primary Security and Other Security, as defined in Section IV, are held by or on behalf of ceding insurers in the forms and amounts required herein. In general, reinsurance ceded for reserve financing purposes has one or more of the following characteristics: some or all of the assets used to secure the reinsurance treaty or to capitalize the reinsurer (1) are issued by the ceding insurer or its affiliates; or (2) are not unconditionally available to satisfy the general account obligations of the ceding insurer; or (3) create a reimbursement, indemnification or other similar obligation on the part of the ceding insurer or any if its affiliates (other than a payment obligation under a derivative contract acquired in the normal course and used to support and hedge liabilities pertaining to the actual risks in the policies ceded pursuant to the reinsurance treaty).
This regulation shall apply to reinsurance treaties that cede liabilities pertaining to Covered Policies, as that term is defined in Section IV.B, issued by any life insurance company domiciled in this state. This regulation and Regulation 69-53 shall both apply to such reinsurance treaties; provided, that in the event of a direct conflict between the provisions of this regulation and Regulation 69-53, the provisions of this regulation shall apply, but only to the extent of the conflict.
This regulation does not apply to the situations described in Subsections A through F.
The Actuarial Method to establish the Required Level of Primary Security for each reinsurance treaty subject to this regulation shall be VM-20, applied on a treaty-by-treaty basis, including all relevant definitions, from the Valuation Manual as then in effect, applied as follows:
It is possible for any combination of Subparagraphs (a), (b), (c), and (d) above to apply. Such adjustments to the Required Level of Primary Security will be done in the sequence that accurately reflects the portion of the risk ceded via the treaty. The ceding insurer should document the rationale and steps taken to accomplish the adjustments to the Required Level of Primary Security due to the cession of less than one hundred percent (100%) of the risk.
The Adjustments for other reinsurance will be made only with respect to reinsurance treaties entered into directly by the ceding insurer. The ceding insurer will make no adjustment as a result of a retrocession treaty entered into by the assuming insurers.
For the purposes of both calculating the Required Level of Primary Security pursuant to the Actuarial Method and determining the amount of Primary Security and Other Security, as applicable, held by or on behalf of the ceding insurer, the following shall apply:
Subject to the exemptions described in Section III and the provisions of Section VI.B, credit for reinsurance shall be allowed with respect to ceded liabilities pertaining to Covered Policies pursuant to Sections 38-9-200 and 38-9-210 of the Code of Laws of South Carolina 1976, as amended, if, and only if, in addition to all other requirements imposed by law or regulation, the following requirements are met on a treaty-by- treaty basis:
If any provision of this regulation is held invalid, the remainder shall not be affected.
No insurer that has Covered Policies as to which this regulation applies (as set forth in Section II) shall take any action or series of actions, or enter into any transaction or arrangement or series of transactions or arrangements if the purpose of such action, transaction or arrangement or series thereof is to avoid the requirements of this regulation, or to circumvent its purpose and intent, as set forth in Section I.
This regulation shall become effective upon publication in the State Register and shall pertain to all Covered Policies in force as of and after that date.
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