California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 11.1 - Separate Account or Accounts-Variable Life Insurance Contracts › Section 2534.4 - Reserve Liabilities for Variable Life Insurance

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Reserve liabilities for variable life
				  insurance policies shall be established under Section
				  10489.1 et seq. of the California
				  Insurance Code (Standard Valuation Law) in accordance with actuarial procedures
				  that recognize the variable nature of the benefits provided and any mortality
				  guarantees.
(b) Reserve liabilities
				  for the guaranteed minimum death benefit shall be the reserve needed to provide
				  for the contingency of death occurring when the guaranteed minimum death
				  benefit exceeds the death benefit that would be paid in the absence of the
				  guarantee, and shall be maintained in the general account of the insurer and
				  shall be not less than the greater of the following minimum reserves:
(1) The aggregate total of the term costs, if
				  any, covering a period of one full year from the valuation date, of the
				  guarantee on each variable life insurance contract, assuming an immediate
				  one-third depreciation in the current value of the assets of the separate
				  account followed by a net investment return equal to the assumed investment
				  rate, or
(2) The aggregate total of
				  the "attained age level" reserves on each variable life insurance contract. The
				  "attained age level" reserve on each variable life insurance contract shall not
				  be less than zero and shall equal the "residue," as described in subparagraph
				  (A), of the prior year's "attained age level" reserve on the contract, with any
				  such "residue" increased or decreased by a payment computed on an attained age
				  basis as described in subparagraph (B) below.
(A) The "residue" of the prior year's
				  "attained age level" reserve on each variable life insurance contract shall not
				  be less than zero and shall be determined by adding interest at the valuation
				  interest rate to such prior year's reserve, deducting the tabular claims based
				  on the "excess," if any, of the guaranteed minimum death benefit over the death
				  benefit that would be payable in the absence of such guarantee, and dividing
				  the net result by the tabular probability of survival. The "excess" referred to
				  in the preceding sentence shall be based on the actual level of death benefits
				  that would have been in effect during the preceding year in the absence of the
				  guarantee, taking appropriate account of the reserve assumptions regarding the
				  distribution of death payments over the year;
(B) The payment referred to in subsection
				  (b)(2) of this Section shall be computed so that the present value of a level
				  payment of that amount each year over the future premium paying period of the
				  contract is equal to (A) minus (B) minus (C), where (A) is the present value of
				  the future guaranteed minimum death benefits, (B) is the present value of the
				  future death benefits that would be payable in the absence of such guarantee
				  and (C) is any "residue," as described in subparagraph (A), of the prior year's
				  "attained age level" reserve on such variable life insurance contract. If the
				  contract is paid-up, the payment shall equal (A) minus (B) minus (C). The
				  amounts of future death benefits referred to in (B) shall be computed assuming
				  a net investment return of the separate account which may differ from the
				  assumed investment rate and/or the valuation interest rate but in no event may
				  exceed the maximum interest rate permitted for the valuation of life insurance
				  contracts.
(3) The
				  valuation interest rate and mortality table used in computing the two minimum
				  reserves described in (1) and (2) above shall conform to permissible standards
				  for the valuation of life insurance contracts. In determining such minimum
				  reserve, the company may employ suitable approximations and estimates,
				  including but not limited to groupings and averages.