Kentucky Administrative Regulations › Title 806 - PUBLIC PROTECTION CABINET - DEPARTMENT OF INSURANCE › Chapter 6 - Assets and Liabilities › Section 806 KAR 6:075 - Valuation of life insurance policies

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO:
				KRS
				304.2-290, 304.6-130-304.6-180,
				304.15-410
NECESSITY, FUNCTION, AND CONFORMITY: EO 2004-731, signed July
				9, 2004, created the Office of Insurance.
				KRS
				304.2-110 authorizes the Commissioner of
				Insurance to promulgate reasonable administrative regulations necessary for or
				as an aid to the effectuation of the Kentucky Insurance Code as defined in
				KRS
				304.1-010.
				KRS
				304.6-130 requires the commissioner to
				annually value the reserve liabilities for all outstanding life insurance
				policies and annuity and pure endowment contracts, as shown in the National
				Association of Insurance Commissioners Life and Accident and Health Annual
				Statement Form whether or not itemized in Exhibit 5 of that statement. This
				administrative regulation establishes the use of new select mortality factors,
				mortality tables, and minimum reserving requirements for life insurance
				policies with nonlevel premiums and benefits or secondary guarantees. The new
				select mortality factors, mortality tables, and minimum reserving requirements
				are necessary to ensure that insurers maintain adequate reserves for nonlevel
				premium and benefit policies and policies with secondary guarantees.
Section 1. Definitions.
(1) "1980 CSO valuation tables" means the
			 Commissioners 1980 Standard Ordinary Mortality Table (1980 CSO Table) without
			 ten (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.
(2) "2001 CSO Mortality
			 Table" means a mortality table, consisting of separate rates of mortality for
			 male and female lives, developed by the American Academy of Actuaries CSO Task
			 Force from the Valuation Basic Mortality Table developed by the Society of
			 Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted
			 by the NAIC in December 2002.
(3)
			 "Basic reserves" means reserves calculated in accordance with
			 KRS
			 304.6-150.
(4) "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 to the end of the latest policy year
			 as determined by section 2(1)
(5)
			 "Deficiency reserves" means the excess, if greater than zero, of minimum
			 reserves calculated in accordance with
			 KRS
			 304.6-180 over basic reserves.
(6) "Guaranteed gross premiums" means the
			 premiums under a policy of life insurance that are guaranteed and determined at
			 issue.
(7) "Maximum valuation
			 interest rates" means the interest rates defined in
			 KRS
			 304.6-145 that are to be used in determining
			 the minimum standard for the valuation of life insurance policies.
(8) "Scheduled gross premium" means the
			 smallest illustrated gross premium set forth at issue for each policy
			 year.
(9) "Segmented reserves"
			 means reserves, calculated pursuant to Section 2(2).
(10) "Tabular cost of insurance" means the
			 net single premium at the beginning of a policy year for one (1) year term
			 insurance in the amount of the guaranteed death benefit in that policy
			 year.
(11) "Ten (10) year select
			 factors" means the select factors adopted with the 1980 amendments to the NAIC
			 Standard Valuation Law.
(12)
			 "Unitary reserves" means the reserves calculated pursuant to Section
			 2(3).
(13) "Universal life
			 insurance policy" means 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.