Utah Admin. Code R590-289-2 - Purpose and Scope

(1) The purpose of this rule is to:

(a) establish among NAIC members uniform standards governing reserve financing arrangements that pertain to:

(i) a life insurance policy containing guaranteed nonlevel gross premiums;

(ii) a life insurance policy containing guaranteed nonlevel benefits; and

(iii) a universal life insurance policy with secondary guarantees; and

(b) ensure that, with respect to each such financing arrangement, funds consisting of primary security and other security, as defined in this rule, are held by or on behalf of each ceding insurer in the forms and amounts required in this rule.

(2) This rule applies to a reinsurance treaty that cedes liabilities pertaining to a covered policy, as that term is defined in this rule, issued by any life insurance company domiciled in this state.

(3) In the event of a conflict between this rule and Rule R590-173, this rule applies to the extent of the conflict.

(4) This rule does not apply to a transaction described in this subsection.

(a) Reinsurance of:

(i) a policy that satisfies the criteria for exemption set forth in Sections R590-198-6.F and R590-198-6.G and is issued before the later of:

(A) the effective date of this rule; or

(B) the date on which the ceding insurer begins to apply the provisions of VM-20 to establish the ceded policies' statutory reserves, but in no event later than January 1, 2020;

(ii) a portion of a policy that satisfies the criteria for exemption set forth in Section R590-198-6.E and is issued before the later of:

(A) the effective date of this rule; or

(B) the date on which the ceding insurer begins to apply the provisions of VM-20 to establish the ceded policies' statutory reserves, but in no event later than January 1, 2020;

(iii) a universal life policy that meets the following requirements:

(A) the secondary guarantee period, if any, is five years or less;

(B) the specified premium for the secondary guarantee period is not less than the net level reserve premium for the secondary guarantee period based on the Commissioners Standard Ordinary (CSO) valuation tables and valuation interest rate applicable to the issue year of the policy; and

(C) the initial surrender charge is not less than 100% of the first year annualized specified premium for the secondary guarantee period;

(iv) a credit life insurance policy;

(v) a variable life insurance policy where the amount of insurance or duration of coverage varies according to the investment experience of a separate account; or

(vi) a group life insurance certificate, unless the certificate provides for a stated or implied schedule of maximum gross premiums required to continue coverage in force for a period in excess of one year.

(b) Reinsurance ceded to an assuming insurer that meets the applicable requirements of Subsection 31A-17-404(6).

(c) Reinsurance ceded to an assuming insurer that:

(i) meets the applicable requirements of Subsections 31A-17-404(3), 31A-17-404(4), and 31A-17-404(5);

(ii) prepares statutory financial statements in compliance with the NAIC Accounting Practices and Procedures Manual, without any departures from NAIC statutory accounting practices and procedures pertaining to the admissibility or valuation of assets or liabilities that increase the assuming insurer's reported surplus and are material enough that they need to be disclosed in the financial statement of the assuming insurer pursuant to Statement of Statutory Accounting Principles No. 1 ("SSAP 1"); and

(iii) is not in a Company Action Level Event, Regulatory Action Level Event, Authorized Control Level Event, or Mandatory Control Level Event as those terms are defined in Title 31A, Chapter 17, Part 6, Risk-Based Capital, when its risk-based capital, (RBC) is calculated in accordance with the life risk-based capital report including overview and instructions for companies, which may be amended by the NAIC from time to time, without deviation.

(d) Reinsurance ceded to an assuming insurer that:

(i) meets the applicable requirements of Section 31A-17-404;

(ii) is not an affiliate, as that term is defined in Section 31A-1-301, of:

(A) the insurer ceding the business to the assuming insurer; or

(B) an insurer that directly or indirectly ceded the business to that ceding insurer;

(iii) prepares statutory financial statements in compliance with the NAIC Accounting Practices and Procedures Manual;

(iv) is both:

(A) licensed or accredited in at least ten states including its state of domicile; and

(B) not licensed in any state as a captive, special purpose vehicle, special purpose financial captive, special purpose life reinsurance company, limited purpose subsidiary, or any other similar licensing regime; and

(v) is not, or would not be, below 500% of the Authorized Control Level RBC as that term is defined in Title 31A, Chapter 17, Part 6, Risk-Based Capital, when its RBC is calculated in accordance with the life risk-based capital report including overview and instructions for companies, which may be amended by the NAIC from time to time, without deviation, and without recognition of any departures from NAIC statutory accounting practices and procedures pertaining to the admission or valuation of assets or liabilities that increase the assuming insurer's reported surplus.

(e) Reinsurance ceded to an assuming insurer that meets the requirements of Subsection 31A-17-404.3(5).

(f) Reinsurance not otherwise exempt under Subsections (4)(a) through (4)(e) if the commissioner, after consulting with the NAIC Financial Analysis Working Group or other group of regulators designated by the NAIC, as applicable, determines under all the facts and circumstances that the following apply:

(i) the risks are clearly outside of the intent and purpose of this rule;

(ii) the risks are included within the scope of this rule only as a technicality; and

(iii) the application of this rule to those risks is not necessary to provide appropriate protection to policyholders.

(5) A decision to exempt a reinsurance treaty under Subsection (4)(f) shall be written and shall include the general basis for the decision and a summary description of the treaty.

Notes

Utah Admin. Code R590-289-2

Adopted by Utah State Bulletin Number 2022-23, effective 11/22/2022