Illinois Administrative Code › Title 50 - INSURANCE › Part 1411 - UNIVERSAL LIFE INSURANCE › Section 1411.30 - Valuation

Current through Register Vol. 48, No. 28, July 12, 2024
a) Requirements
The minimum valuation standard for individual and group
				universal life insurance policies shall be the Commissioners Reserve Valuation
				Method, as described in this Section for those policies, and the tables and
				interest rates specified in this Section. The terminal reserve for the basic
				policy or group certificate and any benefits and/or riders for which premiums
				are not paid separately as of any policy or group certificate anniversary shall
				be equal to the net level premium reserves less the quantity (C) and less the
				quantity (D), where reserves by the net level premium method shall be equal to
				((A)-(B))r, where the quantities (A), (B), (C), (D), and "r" are as defined,
				respectively, in subsections (a)(1), (a)(2), (a)(3), (a)(4), and
				(a)(2)(D):
1) (A) is the present value
			 of all future guaranteed benefits at the date of valuation.
2) (B) is the quantity
			 (PVFB)(ax+t)/ax
A) Where PVFB is the present value of all
			 benefits guaranteed at issue assuming future guaranteed maturity premiums are
			 paid by the policyowner or group certificateholder and taking into account all
			 guarantees contained in the policy or declared by the insurer.
B) ax and
			 ax+t are present values of an annuity of 1 per year
			 payable on policy or group certificate anniversaries beginning at ages x and
			 x+t, respectively, and continuing until the highest attained age at which a
			 premium may be paid under the policy. The letter "x" is defined as the issue
			 age and the letter "t" is defined as the duration of the policy or group
			 certificate.
C) The guaranteed
			 maturity premium for flexible premium universal life insurance policies shall
			 be that level gross premium, paid at issue and periodically thereafter over the
			 period during which premiums are allowed to be paid, which will mature the
			 policy or group certificate on the latest maturity date, if any, permitted
			 under the policy or group certificate (otherwise at the highest age in the
			 valuation mortality table), for an amount that is in accordance with the policy
			 or group certificate structure. (The maturity amount shall be the initial death
			 benefit where the death benefit is level over the lifetime of the policy or
			 group certificate except for the existence of a minimum-death-benefit corridor,
			 or shall be the specified amount where the death benefit equals a specified
			 amount plus the policy value or cash surrender value except for the existence
			 of a minimum-death-benefit corridor.) The guaranteed maturity premium is
			 calculated at issue based on all policy guarantees at issue (excluding
			 guarantees linked to an external referent). The guaranteed maturity premium for
			 fixed premium universal life insurance policies shall be the premium defined in
			 the policy or group certificate that at issue provides the minimum policy or
			 group certificate guarantees. (The guaranteed maturity premium for both
			 flexible and fixed premium policies shall be adjusted for death benefit
			 corridors provided by the policy. The guaranteed maturity premium may be less
			 than the premium necessary to pay all charges. This can especially happen in
			 the first year for policies or group certificates with large first year expense
			 charges.)
D) The letter "r" is
			 equal to 1, unless the policy is a flexible premium policy and the policy value
			 is less than the guaranteed maturity fund, in which case "r" is the ratio of
			 the policy value to the guaranteed maturity fund.
E) The guaranteed maturity fund at any
			 duration is that amount which, together with future guaranteed maturity
			 premiums, will mature the policy or group certificate based on all policy or
			 group certificate guarantees at issue.
3) (C) is the quantity
			 ((a)-(b))(ax+t)(r)/ax where
			 (a)-(b) is as described in Section 223 of the Code for the plan of insurance
			 defined at issue by the guaranteed maturity premiums and all guarantees
			 contained in the policy or group certificate or declared by the insurer.
			 ax+t and ax are defined in
			 subsection (a)(2)(B).
4) (D) is the
			 sum of any additional quantities analogous to subsection (a)(3) that arise
			 because of structural changes in the policy or group certificate, with each
			 such quantity being determined on a basis consistent with that of subsection
			 (a)(3) using the maturity date in effect at the time of the change. (Structural
			 changes are those changes which are separate from the automatic workings of the
			 policy or group certificate. These changes usually would be initiated by the
			 policyholder or group certificateholder and include changes in the guaranteed
			 benefits, changes in latest maturity date, or changes in allowable premium
			 payment period. For fixed premium universal life policies with redetermination
			 of all credits and charges no more frequently than annually, on policy or group
			 certificate anniversaries, structural changes also include changes in
			 guaranteed benefits, or in fixed premiums, unanticipated by the guaranteed
			 maturity premium for these policies or group certificates at the date of issue,
			 even if the changes arise from automatic workings of the policy or group
			 certificate. The recomputation of subsection (a)(2), for fixed premium
			 universal life structural changes, shall exclude from PVFB, the present value
			 of future guaranteed benefits, those guaranteed benefits which are funded by
			 the excess of the insurer's declared guarantees of interest, mortality and
			 expenses, over the guarantees contained in the policy or group certificate at
			 the date of issue.)
5) The
			 guaranteed maturity premium, the guaranteed maturity fund and subsection (a)(2)
			 shall be recalculated to reflect any structural changes in the policy or group
			 certificate. This recalculation shall be done in a manner consistent with the
			 descriptions in subsections (a)(1) through (4).
6) Future guaranteed benefits are determined
			 by:
A) Projecting the greater of the
			 guaranteed maturity fund and the policy value, taking into account future
			 guaranteed maturity premiums, if any, and using all guarantees of interest,
			 mortality, expense deductions, etc., contained in the policy or group
			 certificate or declared by the insurer; and
B) Taking into account any benefits
			 guaranteed in the policy or group certificate or by declaration that do not
			 depend on the policy value.
7) All present values shall be determined
			 using:
A) An interest rate (or rates)
			 specified by Section 223 of the Code for policies or group certificates issued
			 in the same year;
B) The mortality
			 rates specified by Section 223 for policies or group certificates issued in the
			 same year or contained in such other table as may be approved by the Director
			 for this purpose; and
C) Any other
			 tables needed to value supplementary benefits provided by a rider that is being
			 valued together with the policy or group certificate.