Michigan Administrative Code › Department - Insurance and Financial Services › Insurance › Life Insurance Contracts On Variable Basis › Section R. 500.853 - Reserve liabilities

Current through Vol. 24-12, July 15, 2024
Rule 13. All of the following provisions are applicable to
				  reserve liabilities for variable life insurance:
(a) Reserve liabilities for variable life
				insurance policies shall be established pursuant to section 834 of Act No. 218
				of the Public Acts of 1956, as amended, being S500.834 of the Michigan Compiled
				Laws, in accordance with actuarial procedures that recognize the variable
				nature of the benefits provided and any mortality guarantees.
(b) 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, shall be maintained in the general account of the
				insurer, and shall be not less than the greater of either of the following
				minimum reserves:
(i) The aggregate total of
				the term costs, if any, covering a period of 1 full year from the valuation
				date, of the guarantee on each variable life insurance contract, assuming an
				immediate 1/3 depreciation in the current value of the assets of the separate
				account followed by a net investment return equal to the assumed investment
				rate.
(ii) The aggregate total of
				the attained age level reserves 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 subparagraph (A)
				of this paragraph, 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 subparagraph (B) of this paragraph.
				Subparagraphs (A) and (B) read as follows:
(A)
				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 at 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 distributions of death claim
				payments over the year.
(B) The
				payment referred to in paragraph (ii) of this subdivision 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
				subparagraph (A) of this paragraph, of the prior year's attained age level
				reserve on such variable life insurance contract. 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 rate, or both, but shall not exceed the maximum interest
				rate permitted for the valuation of life insurance contracts; however, if the
				contract is paid up, the payment shall equal A minus B minus C.