Code of Maryland Regulations › Title 31 - MARYLAND INSURANCE ADMINISTRATION › Subtitle 05 - ASSETS, LIABILITIES, RESERVES, AND INVESTMENTS OF INSURERS › Chapter 31.05.08 - Credit for Reinsurance › Section 31.05.08.29 - Term and Universal Life Insurance Reserve Financing

Current through Register Vol. 51, No. 14, July 12, 2024
A. The purpose and intent of this regulation is to establish uniform, national standards governing reserve financing arrangements pertaining to life insurance policies containing guaranteed nonlevel gross premiums, guaranteed nonlevel benefits, and universal life insurance policies with secondary guarantees; and to ensure that, with respect to each such financing arrangement, funds consisting of primary security and other security, as defined in Regulation .02 of this chapter, are held by or on behalf of ceding insurers in the forms and amounts required herein.
B. Applicability of this Regulation.
(1) This regulation shall apply to reinsurance treaties that cede liabilities pertaining to covered policies, as that term is defined in Regulation .02B(4) of this chapter, issued by a life insurance company domiciled in this State.
(2) This regulation and Regulations .03-.28 of this chapter shall both apply to such reinsurance treaties; provided that, in the event of a direct conflict between the provisions of this regulation and Regulations .03 -.28 of this chapter, the provisions of this regulations shall apply, but only to the extent of the conflict.
(3) This regulation does not apply to:
(a) Reinsurance of:
(i) Policies that satisfy the criteria for exemption set forth in COMAR 31.05.03.11F or G and which are issued before the effective date of this regulation;
(ii) Portions of policies that satisfy the criteria for exemption set forth in COMAR 31.05.03.11E and which are issued before the effective date of this regulation;
(iii) Any universal life insurance policy that has a secondary guarantee period, if any, of 5 years or less, has specified premium for the secondary guarantee period that is not less than the net level reserve premium for the secondary guarantee period based on the Commissioners Standard Ordinary valuation tables and valuation interest rate applicable to the issue year of the policy, and has an initial surrender charge that is not less than 100 percent of the first year annualized specified premium for the secondary guarantee period;
(iv) Credit life insurance;
(v) Any variable life insurance policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts; or
(vi) Any group life insurance certificate unless the certificate provides for a stated or implied schedule of maximum gross premiums required in order to continue coverage in force for a period in excess of 1 year;
(b) Reinsurance ceded to an assuming insurer that meets the applicable requirements of Insurance Article, §§
											5-904(e)  and  5-907, Annotated Code of Maryland;
(c) Reinsurance ceded to an assuming insurer that meets the applicable requirements of Insurance Article, §
											5-904(c)  or (d) or § 5-906, Annotated Code of Maryland, and that:
(i) Prepares statutory financial statements in compliance with the NAIC Accounting Practices and Procedures Manual, without any departure from NAIC statutory accounting practices and procedures pertaining to the admissibility or valuation of assets or liabilities that increase the assuming insurer's reported surplus and are material enough that they need to be disclosed in the financial statement of the assuming insurer pursuant to Statement of Statutory Accounting Principles No. 1; and
(ii) Is not in a company action level event, regulatory action level event, authorized control level event, or mandatory control level event as those terms are defined in Insurance Article, §§ 4-305-4 -308, Annotated Code of Maryland, when its risk-based capital is calculated in accordance with the life risk-based capital report including overview and instructions for companies, as the same may be amended by the NAIC from time to time, without deviation;
(d) Reinsurance ceded to an assuming insurer that meets the applicable requirements of Insurance Article, §
											5-904(c)  or (d) or § 5-906, Annotated Code of Maryland, and that:
(i) Is not an affiliate, as that term is defined in Insurance Article, §
												7-101, Annotated Code Maryland, of the insurer ceding the business to the assuming insurer or any insurer that directly or indirectly ceded the business to that ceding insurer;
(ii) Prepares statutory financial statements in compliance with the NAIC Accounting Practices and Procedures Manual;
(iii) Is both licensed or accredited in at least ten states including its state of domicile and not licensed in any state as a captive, special purpose vehicle, special purpose financial captive, special purpose life reinsurance company, limited purpose subsidiary, or any other similar licensing regime; and
(iv) Is not, or would not be below 500 percent of the authorized control level RBC as that term is defined in Insurance Article, §
												4-301, Annotated Code of Maryland, when its risk-based capital is calculated in accordance with the life risk-based capital reporting including overview and instructions for companies, as the same may be amended by the NAIC from time to time, without deviation, and without recognition of any departures from NAIC statutory accounting practices and procedures pertaining to the admission or valuation of assets or liabilities that increase the assuming insurer's reported surplus;
(e) Reinsurance ceded to an assuming insurer that meets the requirements of Insurance Article, §
											5-916(b)  (4), Annotated Code of Maryland; or
(f) Reinsurance not otherwise exempt under §B(3)(a)-(e) of this regulation if the Commissioner, after consulting with the NAIC Financial Analysis Working Group or other group of regulators designated by the NAIC, as applicable, determines under all the facts and circumstances that all of the following apply:
(i) The risks are clearly outside of the intent and purpose of this regulation;
(ii) The risks are included within the scope of this regulation only as a technicality; and
(iii) The application of this regulation to those risks is not necessary to provide appropriate protection to policyholders.
(4) The Commissioner shall publicly disclose any decision made pursuant to §B(3)(f) of this regulation to exempt a reinsurance treaty from this regulation, as well as the general basis for the decision, including a summary description of the treaty.