Louisiana Administrative Code › Title 37 - INSURANCE › Part XIII - Regulations › Chapter 85 - Regulation 36-Universal Life Insurance Model Regulation › Section XIII-8509 - Nonforfeiture

Current through Register Vol. 50, No. 6, June 20, 2024
A. Minimum Cash
				Surrender Values for Flexible Premium Universal Life Insurance Policies
1. Minimum cash surrender values for flexible
				premium universal life insurance policies shall be determined separately for
				the basic policy and any benefits and riders for which premiums are paid
				separately. The following requirements pertain to a basic policy and any
				benefits and riders for which premiums are not paid separately.
2. The minimum cash surrender value (before
				adjustment for indebtedness and dividend credits) available on a date as of
				which interest is credited to the policy shall be equal to the accumulation to
				that date as of which interest is credited to the policy shall be equal to the
				accumulation to that date of the premiums paid minus the accumulations to that
				date of:
a. the benefit charges;
b. the averaged administrative expense
				charges for the first policy year and any insurance increase years;
c. actual administrative expense charges for
				other years;
d. initial and
				additional acquisition expense charges not exceeding the initial or additional
				expense allowances, respectively;
e. any service charges actually made
				(excluding charges for cash surrender or election of a paid-up nonforfeiture
				benefit); and
f. any deductions
				made for partial withdrawals; all accumulations being at the actual rate or
				rates of interest at which interest credits have been made unconditionally to
				the policy (or have been made conditionally, but for which the conditions have
				since been met), and minus any unamortized unused initial and additional
				expense allowances.
3.
				Interest on the premiums and on all charges referred to in §8509. A.2 a-f shall
				be accumulated from and to such dates as are consistent with the manner in
				which interest is credited in determining the policy value.
4. The benefit charges shall include the
				charges made for mortality and any charges made for riders or supplementary
				benefits for which premiums are not paid separately. If benefit charges are
				substantially level by duration and develop low or no cash values, then the
				commissioner shall have the right to require higher cash values unless the
				insurer provides adequate justification that the cash values are appropriate in
				relation to the policy's other
				characteristics.4
5. The administrative expense charges shall
				include charges per premium payment, charges per dollar of premium paid,
				periodic charges per thousand dollars of insurance, periodic per policy
				charges, and any other charges permitted by the policy to be imposed without
				regard to the policyowner's request for services.
6. The averaged administrative expense
				charges for any year shall be those which would have been imposed in that year
				if the charge rate or rates for each transaction or period within the year had
				been equal to the arithmetic average of the corresponding charge rates which
				the policy states will be imposed in policy years 2 through 20 in determining
				the policy value.
7. The initial
				acquisition expense charges shall be the excess of the expense charges, other
				than service charges actually made in the first policy year over the averaged
				administrative expense charges for that year. Additional acquisition expense
				charges shall be the excess of the expense charges, other than service charges,
				actually made in an insurance-increase year over the averaged administrative
				expense charges for that year. An insurance-increase year shall be the year
				beginning on the date of increase in the amount of insurance by policyowner
				request (or by the terms of the policy).
8. Service charges shall include charges
				permitted by the policy to be imposed as the result of a policyowner's request
				for a service by the insurer (such as the furnishing of future benefit
				illustrations) or of special transactions.
9. The initial expense allowance shall be the
				allowance provided by [Items (ii), (iii) and (iv) of Section 5] or by [Items
				(ii) and (iii) of Section 5-c(l)], as applicable, of the
Standard
				Non-Forfeiture Law for Life Insurance, as amended in 1980
for a fixed
				premium, fixed benefit endowment policy with a face amount equal to the initial
				face amount of the flexible premium universal life insurance policy, with level
				premiums paid annually until the highest attained age at which a premium may be
				paid under the flexible premium universal life insurance policy, and maturing
				on the latest maturity date permitted under the policy, if any, otherwise at
				the highest age in the valuation mortality table. The unused initial expense
				allowance shall be the excess, if any, of the initial expense allowance over
				the initial acquisition expense charges, as defined above.
10. If the amount of insurance is
				subsequently increased upon request of the policyowner (or by the terms of the
				policy), an additional expense allowance and an unused additional expense
				allowance shall be determined on a basis consistent with the above and with
				[Section 5-c(5) of the
Standard Nonforfeiture Law for Life Insurance,
				as amended in 1980
, using the face amount and the latest maturity date
				permitted at that time under the policy.
11. The unamortized unused initial expense
				allowance during the policy year beginning on the policy anniversary at age x +
				t (where "x" is the same issue age) shall be the unused initial expense
				allowance multiplied by:
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where:
äx + t and äx +
				  t and äx are present values of an annuity of one per
				  year payable on policy anniversaries beginning at ages x + t and x,
				  respectively, and continuing until the highest attained age at which a premium
				  may be paid under the policy, both on the mortality and interest bases
				  guaranteed in the policy. An unamortized unused additional expense allowance
				  shall be the unused additional expense allowance multiplied by a similar ratio
				  of annuities, with äx replaced by an annuity beginning
				  on the date as of which the additional expense allowance was determined.
4Because this product is still
				  developing, it is recommended that benefit charges not be restricted and
				  regulatory treatment of cash values be limited to that contained in this
				  Section for several reasons.
First, further restrictions would limit the development of
				  the product.
Second, added restrictions would discourage insurers from
				  reducing non-guaranteed current benefit charges because such reductions could
				  require reduced future benefit charges that could be financially unsound for
				  the insurer.
Third, market pressures will encourage insurers to limit
				  benefit charges.