North Dakota Administrative Code › Title 45 - Insurance, Commissioner of › Article 45-04 - Life Insurance › Chapter 45-04-12 - Valuation of Life Insurance Policies › Section 45-04-12-02 - Definitions

Current through Supplement No. 393, July, 2024
For purposes of this chapter:
1. "Basic reserves" means reserves calculated in accordance
				  with North Dakota Century Code section 26.1-35-05.
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 or any other
				  valuation mortality table adopted by the national association of insurance
				  commissioners after January 1, 2000, and promulgated by rule by the
				  commissioner for this purpose, and, if elected, the optional minimum mortality
				  standard for deficiency reserves stipulated in subsection 2 of section
				  45-04-12-03.
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:
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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.
3. "Deficiency reserves" means the excess, if greater than
				  zero, of:
a. Minimum reserves calculated in accordance with North
				  Dakota Century Code section 26.1-35-09.
b. 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 defined in North Dakota Century Code section 26.1-35-04, computation of
				  minimum standard by calendar year of issue, which 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 national association of
				  insurance commissioners standard valuation law, and variations of the 1980 CSO
				  table approved by the national association of insurance commissioners, 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 subdivision c of subsection 1 of section
				  45-04-12-05, if any, or else the
				  minimum premium described in subdivision d of subsection 1 of section
				  45-04-12-05.
8.
a."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, when 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:
(1) The present value of the death benefits within the
				  segment; plus
(2) The present value of any unusual guaranteed cash value
				  (see subsection 4 of section
				  45-04-12-04) occurring at the end
				  of the segment; less
(3) Any unusual guaranteed cash value occurring at the start
				  of the segment; plus
(4) For the first segment only, the excess of subparagraph a
				  over subparagraph 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.
(b) A net one-year term premium for the benefits provided for
				  in the first policy year.
b. The length of each segment is determined by the contract
				  segmentation method, as defined in this section.
c. 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.
d. 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.
9. "Tabular cost of insurance" means 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.
10. "Ten-year select factors" means the select factors
				  adopted with the 1980 amendments to the national association of insurance
				  commissioners standard valuation law.
11.
a. "Unitary reserves" means the present value of all future
				  guaranteed benefits less the present value of all future modified net premiums,
				  when:
(1) Guaranteed benefits and modified net premiums are
				  considered to the mandatory expiration of the policy; and
(2) Modified net premiums are a uniform percentage of the
				  respective guaranteed gross premiums, when 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 subparagraph a over
				  subparagraph 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 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.
(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.
12. "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.
General Authority: NDCC 28-32-02
Law Implemented: NDCC
					 26.1-35