Indiana Administrative Code › Title 760 - DEPARTMENT OF INSURANCE › Article 1 - GENERAL PROVISIONS › Rule 33 - Variable Life Insurance › Section 33-5 - Reserve liabilities for variable life insurance

Current through July 10, 2024
Authority: IC
				  27-1-3-7
Affected: IC
				  27-1-12-7
Sec. 5.
(a) Reserve
				liabilities for variable life insurance policies shall be established under the
				standard valuation law 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, and shall be maintained in the general
				account of the insurer and shall be not less than the greater of the following
				minimum reserves:
(1) the aggregate total of
				the term costs, if any, covering a period of one (1) full year from the
				valuation date, of the guarantee on each variable life insurance contract,
				assuming an immediate one-third (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; or
(2) 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 (0) and shall equal the
				"residue," as described in (2)(A), 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 (2)(B);
(A) The "residue" of the prior year's
				"attained age level" reserve on each variable life insurance contract shall not
				be less than zero (0) 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 distribution of death claim payments over the
				year.
(B) The payment referred to
				in (b)(2) 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 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 (2)(A), 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
				and/or the valuation interest rate but in no event may exceed the maximum
				interest rate permitted for the valuation of life contracts.
(3) The valuation interest rate
				and mortality table used in computing the two minimum reserves described in (1)
				and (2) above 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.