Illinois Administrative Code › Title 50 - INSURANCE › Part 1409 - VALUATION OF LIFE INSURANCE POLICIES INCLUDING THE USE OF SELECT MORTALITY FACTORS › Section 1409.30 - Definitions

Current through Register Vol. 48, No. 28, July 12, 2024
"1980 CSO Valuation Tables" means the Commissioner's 1980
				Standard Ordinary Mortality Table (1980 CSO Table) without ten-year selection
				factors, incorporated into the 1980 amendments to the National Association of
				Insurance Commissioners (NAIC) Standard Valuation Law, and the smoker and
				nonsmoker variations of the 1980 CSO Table approved by the NAIC in December
				1983, as published in the 1984 Proceedings for the NAIC, Vol. 1, p. 31 and
				approved by the Director for use in determining the minimum standards of
				valuation pursuant to 50 Ill. Adm. Code 934. No later amendments or editions
				shall be included.
"2001 CSO Mortality Table" means that mortality table,
				consisting of separate rates of mortality for male and female lives found in 50
				Ill. Adm. Code 1412. Appendix A, developed by the American Academy of Actuaries
				CSO Task Force from the Valuation Basic Mortality Table developed by the
				Society of Actuaries Individual Life Insurance Valuation Mortality Task Force,
				and adopted by the NAIC in December 2002. Unless the context indicates
				otherwise, the 2001 CSO Mortality Table includes both the ultimate form of that
				table and the select and ultimate form of that table and includes both the
				smoker and nonsmoker mortality tables and the composite mortality tables. It
				also includes both the age-nearest-birthday and age-last-birthday bases of the
				mortality tables.
"2001 CSO Preferred Class Structure Mortality Table" means
				mortality tables with separate rates of mortality for Super Preferred
				Nonsmokers, Preferred Nonsmokers, Residual Standard Nonsmokers, Preferred
				Smokers, and Residual Standard Smoker splits of the 2001 CSO Nonsmoker and
				Smoker approved by the NAIC in September 2006, as published in the 2006
				Proceedings for the NAIC (3rd Quarter), Vol. III, p.
				2219 and approved by the Director for use pursuant to 50 Ill. Adm. Code 1413.
				Unless the context indicates otherwise, the 2001 CSO Preferred Class Structure
				Mortality Table includes both the ultimate form of that table and the select
				and ultimate form of that table. It includes both the smoker and nonsmoker
				mortality tables. It includes both the male and female mortality tables and the
				gender composite mortality tables. It also includes both the
				age-nearest-birthday and age-last-birthday bases of the mortality table.
"Basic Reserves" mean reserves calculated in accordance with
				Section 223(3)(b) of the Code.
"Code" means the Illinois Insurance Code [ 215 ILCS 5 ].
"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 in the procedure set forth below in this
				definition. All calculations are made using the 1980 CSO valuation tables, and
				if elected, the optional minimum mortality standard for deficiency reserves
				found in Section
				1409.40(b).
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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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:
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 l 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, for year t of the segment
qx+k+t-1
=
Valuation mortality rate for deficiency reserves in
						  policy year k+t but using the select mortality factors found in Section
						  1409.40(b)(3)
						  if Section
						  1409.40(b)(4)
						  is elected for deficiency reserves
However, if GPx+k+t is greater
						  than 0 and GPx+k+t-l is equal to 0,
						  Gt shall be deemed to be 1000. If
						  GPx+k+t and GPx+k+t-l are both
						  equal to 0, Gt shall be deemed to be 0
"Deficiency Reserves" mean the excess, if greater than zero,
				of:
Minimum reserves calculated in accordance with Section
				223(3)(f) of the Code, over
Basic reserves.
"Guaranteed Gross Premiums" mean the premiums under a policy of
				life insurance that are guaranteed and determined at issue.
"Maximum Valuation Interest Rates" mean the interest rates
				defined in Section 223(6)(b) of the Code that are to be used in determining the
				minimum standard for the valuation of life insurance policies.
"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 Section
				1409.60(a)(3),
				if any, or else the minimum premium described in Section
				1409.60(a)(4).
"Segmented Reserves" mean 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:
The present value of the death benefits within the segment,
				plus
The present value of any unusual guaranteed cash value (Section
				1409.50(d)
				) occurring at the end of the segment, less
Any unusual guaranteed cash value occurring at the start of the
				segment, plus
For the first segment only as measured from the actual issue
				date, the excess of the net level annual premium (which is 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) over the net
				one year term premium for the benefits provided for in the first policy year.
				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.
The length of each segment is determined by the Contract
				Segmentation Method.
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.
For both basic reserves and deficiency reserves computed by the
				segmented method, present values must include future benefits and net premiums
				in the current segment and in all subsequent segments.
"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.
"Ten-year Select Factors" mean the select factors adopted in
				the 1980 amendments to the NAIC Standard Valuation Law.
"Unitary Reserves" mean the present value of all future
				guaranteed benefits less the present value of all future modified net premiums,
				where:
Guaranteed benefits and modified net premiums are considered to
				the mandatory expiration of the policy; and
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 the 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,
				over the net one year term premium for the benefits provided for in the first
				policy year. 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; and
Any negative terminal reserves are set to zero.
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.
"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.