Iowa Administrative Code › Agency 191 - Insurance Division › Insurance Holding Company Systems › Chapter 47 - Valuation of Life Insurance Policies › Rule 191-47.3 - Definitions

Current through Register Vol. 47, No. 3, July 24, 2024
As used in this chapter, the following definitions
				  apply:
"Basic reserves"
means reserves calculated
				  in accordance with Iowa Code section 508.36(6).
"Contract segmentation method"
means the
				  method of dividing the period from issue 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 determined below. All
				  calculations are made using the 1980 CSO valuation tables, as defined in this
				  rule (or any other valuation mortality table adopted by the National
				  Association of Insurance Commissioners (NAIC) after January 1, 2000, and
				  promulgated by rule by the commissioner for this purpose), and, if elected, the
				  optional minimum mortality standard for deficiency reserves stipulated in
				  subrule 47.4(2).
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:
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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 1 percent 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
				  47.4(2)
"b"
if paragraph 47.4(2)
"c"
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
1. Minimum
				reserves calculated in accordance with Iowa Code section 508.36(10)
				over
2. 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 Iowa Code section 508.36(5) that are to be used in
				  determining the minimum standard for the valuation of life insurance
				  policies.
"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.
"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
				  47.6(1)
"c,"
if any, or else the minimum premium described in
				  paragraph 47.6(1)
"d."
"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 subrule 47.5(4))
				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"
below, 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 19-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 rule. 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 segmentation method, present values shall include future benefits and net
				  premiums in the current segment and in all subsequent segments.