Louisiana Administrative Code › Title 37 - INSURANCE › Part XIII - Regulations › Chapter 109 - Regulation Number 85-Valuation of Life Insurance Policies › Section XIII-10907 - Definitions

Current through Register Vol. 50, No. 6, June 20, 2024
A. For purposes of
				this regulation:
Basic Reserves
-reserves calculated in
				  accordance with
				  R.S.
				  22:163.B.(4)(a).
Contract Segmentation Method
-
a. 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 Section, (or any other valuation
				  mortality table adopted by the National Association of Insurance Commissioners
				  (NAIC) after the effective date of this regulation and promulgated by
				  regulation by the commissioner for this purpose), and, if elected, the optional
				  minimum mortality standard for deficiency reserves stipulated in §10909. B of
				  this regulation;
b. 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:
GPx+k+t
Gt = __________
GPx+k+t-1
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.
qx+k+t
Rt = __________, However,
				  Rt  may be increased or
qx+k+t-1 decreased by one 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 §10909B.2 if §10909B.3 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
-the excess, if greater
				  than zero, of:
a. minimum reserves calculated in accordance with
				  R.S.
				  22:163.B.(8)(a); over
b. basic reserves.
Guaranteed Gross Premiums
-the premiums under
				  a policy of life insurance that are guaranteed and determined at issue.
Maximum Valuation Interest Rates
-the
				  interest rates defined in
				  R.S.
				  22:163.B.(3)(a) are to be used in determining
				  the minimum standard for the valuation of life insurance policies.
1980 CSO Valuation Tables
-the Commissioners
				  1980 Standard Ordinary Mortality Table (1980 CSO Table) without 10-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
-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 §10913. A 3, if any, or else the
				  minimum premium described in §10913. A.4
Segmented Reserves
-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:
a. the present value of the death benefits within the
				  segment; plus
b. the present value of any unusual guaranteed cash value
				  (see §10911. D) occurring at the end of the segment; less
c. any unusual guaranteed cash value occurring at the start
				  of the segment; plus
d. for the first segment only, the excess of the Clause i
				  over Clause ii, as follows:
i. 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;
ii. a net one year term premium for the benefits provided for
				  in the first policy year;
e. the length of each segment is determined by the
contract segmentation method
, as defined in this
				  Section;
f. 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;
g. for both basic reserves and deficiency reserves computed
				  by the segmented method, present values shall include future benefits and net
				  premiums in the current segment and in all subsequent segments.
Tabular Cost of Insurance
-the net single
				  premium at the beginning of a policy year for one-year term insurance in the
				  amount of the guaranteed death benefit in that policy year.
Ten-Year Select Factors
-the select factors
				  adopted with the 1980 amendments to the NAIC Standard Valuation Law.
Unitary Reserves
-
a. the present value of all future guaranteed benefits less
				  the present value of all future modified net premiums, where:
i. guaranteed benefits and modified net premiums are
				  considered to the mandatory expiration of the policy; and
ii. modified net premiums are a uniform percentage of the
				  respective guaranteed gross premiums, where the uniform percentage is such
				  that, at issue, the present value of the net premiums equals the present value
				  of all death benefits and pure endowments, plus the excess of Subclause (a)
				  over Subclause (b), as follows:
(a). a net level annual premium equal to the present value,
				  at the date of issue, of the benefits provided for 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 of the policy 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;
b. 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 length from issue to the mandatory
				  expiration of the policy.
Universal Life Insurance Policy
-any
				  individual life insurance policy under the provisions of which separately
				  identified interest credits (other than in connection with dividend
				  accumulations, premium deposit funds, or other supplementary accounts) and
				  mortality or expense charges are made to the policy.
AUTHORITY NOTE:
				  Promulgated in accordance with
				  R.S.22:3,
				  22:163,
				  22:168 and
				  the Administrative Procedure Act,
				  R.S.
				  49:950 et
				  seq.