For purposes of this regulation:
(1) "Basic reserves" means reserves
calculated in accordance with
RCW
48.74.040(1).
(2) "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 (6) of this section (or any other valuation mortality table adopted
by the National Association of Insurance Commissioners (NAIC) after the
operative date of this regulation and promulgated by regulation by the
commissioner for this purpose), and, if elected for the plan, the optional
minimum mortality standard for deficiency reserves stipulated in WAC
284-74-340(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:
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GPx+k+t
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Gt =
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GPx+k+t-1
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where:
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x =
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original issue age;
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k =
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the number of years from the date of issue to the
beginning of the segment;
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t =
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1, 2, ...; t is reset to 1 at the beginning of each
segment;
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GPx+k+t-1
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=
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Guaranteed maximum 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.
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qx+k+t
,
qx+k+t-1
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Rt =
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However, Rt may be increased
or decreased by one percent in any policy year, at the company's option, but
Rt shall not be less than one;
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where:
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x, k and t are as defined above, and
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qx+k+t-1
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=
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valuation mortality rate for deficiency reserves in
policy year k+t but using the mortality of WAC
284-74-340(2)(b)
if WAC 284-74-340(2)(c)
is elected for deficiency reserves.
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However, if GPx+k+t is greater than 0
and GPx+k+t-1 is equal to 0, Gt
shall be deemed to be 1000. If GPx+k+t and
GPx+k+t-1 are both equal to 0, Gt
shall be deemed to be 0.
(3) "Deficiency reserves" means the excess,
if greater than zero, of
(a) Minimum reserves
calculated in accordance with
RCW
48.74.070 over
(b) Basic reserves.
(4) "Guaranteed maximum gross premiums" means
the premiums guaranteed and determined at issue that the actual gross premiums
under a policy of life insurance cannot exceed.
(5) "Maximum valuation interest rates" means
the interest rates defined in
RCW
48.74.030(3) that are to be
used in determining the minimum standard for the valuation of life insurance
policies.
(6) "1980 CSO valuation
tables" means the commissioners 1980 standard ordinary mortality table (1980
CSO table) without ten-year select mortality factors, incorporated into the
1980 amendments to the NAIC model 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.
(7)
"Scheduled gross premium" means the smallest illustrated gross premium at issue
for other than universal life insurance policies. For universal life insurance
policies, scheduled gross premium means the smallest specified premium
described in WAC
284-74-360(1)(c),
if any, or else the minimum premium described in WAC
284-74-360(1)(d).
(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 maximum 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 WAC
284-74-350(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 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 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 nineteen-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 this section.
(c) 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 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 mortality factors" means the select factors adopted with the
1980 amendments to the NAIC standard valuation law.
(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 maximum 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 nineteen-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
any individual life insurance policy under the provisions of 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.
