Hawaii Administrative Rules › Title 16 - DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS › Chapter 171 - MISCELLANEOUS INSURANCE RULES › Subchapter 9 - VALUATION OF LIFE INSURANCE POLICIES › Section 16-171-903 - Definitions

Current through June, 2024
For purposes of this subchapter:
"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.
"Basic reserves" means reserves calculated in accordance with
				  subsection
				  431:5-307(h),
				  HRS.
"Contract segmentation method" means the method of dividing
				  the period from issuance 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 described in this definition. All calculations
				  are made using the 1980 CSO valuation tables, as defined in this section, or
				  any other valuation mortality table adopted by the NAIC for this purpose and,
				  if elected, the optional minimum mortality standard for deficiency reserves
				  stipulated in section 16-171-904(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:
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 one per cent in any policy year at the company'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 paragraph
				  16-171-904(b)(2), if section 16-171-904(b)(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 1000. If GPx+k+t and
				  GPx+k+t-1 are both equal to 0, Gt shall be deemed to be
				  0.
"Deficiency reserves" means the excess, if greater than zero,
				  of minimum reserves over basic reserves.
"Guaranteed gross premiums" means the premiums under a policy
				  of life insurance that are guaranteed and determined at issue.
"Maximum valuation interest rates" means the interest rates
				  defined in subsection
				  431:5-307(g),
				  HRS, that are to be used in determining the minimum standard for the valuation
				  of life insurance policies.
"Minimum reserves" means reserves calculated in accordance
				  with subsection
				  431:5-307(e),
				  HRS.
"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 paragraph 16-171-906(a)(3), if any, or else the
				  minimum premium described in paragraph 16-171-906(a)(4).
"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:
(1) The present value of the death benefits within the
				  segment, plus;
(2) The present value of any unusual guaranteed cash value
				  (see subsection 16-171-905(d) ) occurring at the end of the segment,
				  less;
(3) Any unusual guaranteed cash value occurring at the start
				  of the segment, plus;
(4) For the first segment only, the excess of (A) over (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.
The length of each segment is determined by the "contract
				  segmentation method," as defined in this section. 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 shall
				  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" means the select factors adopted
				  with the 1980 amendments to the NAIC Standard Valuation Law.
"Unitary reserves" means the present value of all future
				  guaranteed benefits less the present value of all future modified net premiums,
				  where:
(1) Guaranteed benefits and modified net premiums are
				  considered to the mandatory expiration of the policy; and
(2) 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 (A) over (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. The net level annual premium, however, 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; and
(B) A net one year term premium for the benefits provided for
				  in the first policy year.
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.