North Carolina Administrative Code › Title 11 - INSURANCE › Chapter 11 - FINANCIAL EVALUATION DIVISION › Subchapter F - ACTUARIAL › Section .0400 - COMMISSIONER'S RESERVE VALUATION METHOD › Section 11F .0402 - DEFINITIONS

Current through Register Vol. 39, No. 2, July 15, 2024
As used in this Section:
(1) "Basic reserves" means reserves
				  calculated in accordance with
				  G.S.
				  58-58-50(d).
(2) "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 (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
				  11 NCAC
				  11F .0402(6) (or any other
				  valuation mortality table adopted by the NAIC after January 1, 2000, and
				  adopted as a rule by the Commissioner for this purpose), and, if elected, the
				  optional minimum mortality standard for deficiency reserves stipulated in
				  11 NCAC
				  11F .0403(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:
Gt = GPx+k+t
_______
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.
Rt = qx+k+t
________
qx+k+t-1
However, Rt may be increased or 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
					 11 NCAC
					 11F .0403(b)(2) if
					 11 NCAC
					 11F .0403(b)(3) is elected
					 for deficiency reserves.
However, if GPx+k+t is greater than zero (0) and GPx+k+t-1
					 is equal to zero (0), Gt shall be deemed to be one thousand (1,000). If GPx+k+t
					 and GPx+k+t-1 are both equal to zero (0), Gt shall be deemed to be zero
					 (0).
(3) "Deficiency
				  reserves" means the excess, if greater than zero, of minimum reserves
				  calculated in accordance with
				  G.S.
				  58-58-50(g) over basic
				  reserves.
(4) "Guaranteed gross
				  premiums" means the premiums under a policy of life insurance that are
				  guaranteed and determined at issue.
(5) "Maximum valuation interest rates" means
				  the interest rates specified in
				  G.S.
				  58-58-50(c)(4) that are to
				  be used in determining the minimum standard for the valuation of life insurance
				  policies.
(6) "1980 CSO valuation
				  tables" means the Commissioners' 1980 Standard Ordinary Mortality Table (1980
				  CSO Table) without ten-year selection factors, incorporated into the 1980
				  amendments to the NAIC Standard Valuation Law, and variationsof the 1980 CSO
				  Table approved by the NAIC, such as the smoker and nonsmoker versions approved
				  in December 1983.
(7) "Scheduled
				  gross premium" means 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
				  11 NCAC
				  11F .0405(a)(3), if any, or
				  else the minimum premium described in
				  11 NCAC
				  11F .0405(a)(4).
(8) "Segmented reserves" means 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.
(a) 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:
(i) The
				  present value of the death benefits within the segment, plus;
(ii) The present value of any unusual
				  guaranteed cash value (see
				  11 NCAC
				  11F .0404(d)) occurring at
				  the end of the segment, less;
(iii)
				  Any unusual guaranteed cash value occurring at the start of the segment, plus;
				  and
(iv) For the first segment
				  only, the excess of the Item (A) over Item (B), as follows:
(A) 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 nineteen-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; and
(B) A net
				  one-year term premium for the benefits provided for in the first policy
				  year.