Terms used in this rule are defined in Section
31A-1-301. Additional terms are
defined as follows:
(1) "1980 CSO
valuation tables" means the Commissioners' 1980 Standard Ordinary Mortality
Table, 1980 CSO Table, without ten-year selection factors, incorporated into
the 1980 amendments to the NAIC Standard Valuation Law, and variations of the
1980 CSO Table approved by the NAIC, such as the smoker and nonsmoker versions
approved in December 1983.
(2)
"Basic reserves" means reserves calculated in accordance with Section
31A-17-504.
(3) "Contract segmentation method" means the
method of dividing the period from issue to mandatory expiration of a policy
into successive segments, with the length of each segment being defined as the
period from the end of the prior segment, from policy inception, for the first
segment, to the end of the latest policy year as determined below. All
calculations are made using the 1980 CSO valuation tables, as defined in
Subsection (1), or any other valuation mortality table adopted by the NAIC
after January 4, 2000 and promulgated by rule by the commissioner for this
purpose, and, if elected, the optional minimum mortality standard for
deficiency reserves stipulated in Subsection
R590-198-4(2).
The length of a particular contract segment shall be set
equal to the minimum of the value t for which Gt is
greater than Rt, if Gt never
exceeds Rt 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 Gt and Rt are
defined as follows: Gt = GPx+k+t
/ GPx+k+t-1 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;
GPx+k+t-1 = 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.
Rt = qx+k+t /
qx+k+t-1, However, Rt may be
increased or decreased by 1% in any policy year, at the insurer's option, but
Rt shall not be less than one; where: x, k and t are as
defined above, and qx+k+t-1 =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 GPx+k+t is greater than 0
and GPx+k+t-1 is equal to 0, Gt
shall be deemed to be 1,000. If GPx+k+t and
GPx+k+t-1 are both equal to 0, Gt
shall be equal to 0.
(4)
"Deficiency reserves" means the excess, if greater than zero, of minimum
reserves calculated in accordance with Section
31A-17-507 over basic
reserves.
(5) "Guaranteed gross
premiums" means the premiums under a life insurance policy that are guaranteed
and determined at issue.
(6)
"Maximum valuation interest rates" means the interest rates defined in Section
31A-17-506 that are to be used in
determining the minimum standard for the valuation of life insurance
policies.
(7)
(a) "Scheduled gross premium" for a universal
life insurance policy means the smallest specified premium described in
Subsection
R590-198-6(1)(c),
if any, or else the minimum premium described in Subsection
R590-198-6(1)(d).
(b) "Scheduled gross premium" for a policy
other than a universal life insurance policy means the smallest illustrated
gross premium at issue.
(8)
(a)
"Segmented reserves" means reserves, calculated using segments produced by the
contract segmentation method, equal to the present value of all future
guaranteed benefits less the present value of all future net premiums to the
mandatory expiration of a policy, where the net premiums within each segment
are a uniform percentage of the respective guaranteed gross premiums within the
segment. The uniform percentage for each segment is such that, at the beginning
of the segment, the present value of the net premiums within the segment
equals:
(i) The present value of the death
benefits within the segment, plus
(ii) The present value of any unusual
guaranteed cash value, see Subsection
R590-198-5(4),
occurring at the end of the segment, less
(iii) Any unusual guaranteed cash value
occurring at the start of the segment, plus
(iv) For the first segment only, the excess
of the Subsection (A) over Subsection (B), as follows:
(A) A net level annual premium equal to the
present value, at the date of issue, of the benefits provided for in the first
segment after the first policy year, divided by the present value, at the date
of issue, of an annuity of one per year payable on the first and each
subsequent anniversary within the first segment on which a premium falls due.
However, the net level annual premium shall not exceed the net level annual
premium on the 19-year premium whole life plan of insurance of the same renewal
year equivalent level amount at an age one-year higher than the age at issue of
the policy.
(B) A net one-year term
premium for the benefits provided for in the first policy year.
(b) The length of each
segment is determined by the contract segmentation method, as defined in
Subsection (3).
(c) The interest
rates used in the present value calculations for a policy may not exceed the
maximum valuation interest rate, determined with a guarantee duration equal to
the sum of the lengths of all segments of the policy.
(d) For both basic reserves and deficiency
reserves computed by the segmented method, present values shall include future
benefits and net premiums in the current segment and in all subsequent
segments.
(9) "Tabular
cost of insurance" means the net single premium at the beginning of a policy
year for one-year term insurance in the amount of the guaranteed death benefit
in that policy year.
(10) "Ten-year
select factors" means the select factors adopted with the 1980 amendments to
the NAIC Standard Valuation L aw.
(11)
(a)
"Unitary reserves" means the present value of all future guaranteed benefits
less the present value of all future modified net premiums, where:
(i) guaranteed benefits and modified net
premiums are considered to the mandatory expiration of the policy;
and
(ii) modified net premiums are
a uniform percentage of the respective guaranteed gross premiums, where the
uniform percentage is such that, at issue, the present value of the net
premiums equals the present value of all death benefits and pure endowments,
plus the excess of Item (A) over Item (B), as follows:
(A) A net level annual premium equal to the
present value, at the date of issue, of the benefits provided for after the
first policy year, divided by the present value, at the date of issue, of an
annuity of one per year payable on the first and each subsequent anniversary of
the policy on which a premium falls due. However, the net level annual premium
shall not exceed the net level annual premium on the 19-year premium whole life
plan of insurance of the same renewal year equivalent level amount at an age
one-year higher than the age at issue of the policy.
(B) A net one-year term premium for the
benefits provided for in the first policy year.
(b) The interest rates used in the present
value calculations for any policy may not exceed the maximum valuation interest
rate, determined with a guarantee duration equal to the length from issue to
the mandatory expiration of the policy.
(12) "Universal life insurance policy" means
an individual life insurance policy under which separately identified interest
credits, other than in connection with dividend accumulations, premium deposit
funds, or other supplementary accounts, and mortality or expense charges are
made to the policy.
