North Carolina Administrative Code › Title 11 - INSURANCE › Chapter 12 - LIFE AND HEALTH DIVISION › Section .0400 - LIFE: GENERAL NATURE › Section 12 .0437 - RESERVE LIABILITIES FOR VARIABLE LIFE INSURANCE

Current through Register Vol. 39, No. 2, July 15, 2024
(a)
				Reserve liabilities for variable life insurance policies shall be established
				pursuant to
				G.S.
				58-58-50 accordance with actuarial procedures
				that recognize the variable nature of the benefits provided and any mortality
				guarantees.
(b) 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 full year from the valuation date, of the
				guarantee on each variable life insurance contract, assuming an immediate
				one-third 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 and shall equal the "residue," as described in (A) of this
				Subsection 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 (B) of this Subsection:
(A) The residue of the prior year's "attained
				age level" reserve on each variable life insurance contract shall not be less
				than zero 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 this
				Subsection (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 the present value of
				the future guaranteed minimum death benefits, "B" is 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 (A) of this Subsection 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
				insurance contracts;
(3)
				The valuation interest rate and mortality table used in computing the two
				minimum reserves described in (1) and (2) of this Subsection 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.