Iowa Administrative Code › Agency 191 - Insurance Division › Life and Health Insurance › Chapter 33 - Variable Life Insurance Model Regulation › Rule 191-33.5 - Reserve Liabilities for Variable Life Insurance

Current through Register Vol. 47, No. 3, July 24, 2024
(1) Reserve liabilities for variable life
				insurance policies shall be established under the Standard Valuation Law (Iowa
				Code section
				50836.) in
				accordance with actuarial procedures that recognize the variable nature of the
				benefits provided and any mortality guarantees.
(2) For scheduled premium policies, 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:
a. 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
b. The aggregate total of
				the "attained age level" reserved 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 subrule
				33.5(2), paragraph
"b,"
subparagraph (1), 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 subrule 33.5(2), paragraph
"b,"
subparagraph (2).
(1) 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 in 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 claim payments over the year.
(2) The payment referred to in subrule
				33.5(2), paragraph
"b,"
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 subrule 33.5(2),
				paragraph
"b, "
subparagraph (1), 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 or the
				valuation interest but in no event may exceed the maximum interest rate
				permitted for the valuation of life contracts.
c. The valuation interest rate and mortality
				table used in computing the two minimum reserves described in subrules 33.5(2),
				paragraphs
"a"
and
"b,"
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.