New Jersey Administrative Code › Title 11 - INSURANCE › Chapter 4 - ACTUARIAL SERVICES › Subchapter 46 - SYNTHETIC GUARANTEED INVESTMENT CONTRACT FORMS › Section 11:4-46.4 - Plan of operation requirements

Current through Register Vol. 56, No. 14, July 15, 2024
(a) An acceptable plan of operation submitted in support of the Department's review of the contract shall include at least the following:
1. A description of all contingencies and circumstances under the contract that would require the insurer to make payments or perform any other obligation to the contractholder in support of the contract value record;
2. A discussion of the consideration (risk premium and/or fee) indicating expected allocations (expressed in either specific amounts or ranges) to risk, administration and profit, and a demonstration that the consideration is appropriate in view of the risks to the insurer with respect to the contract.
i. A demonstration of how the crediting rate shall be affected by changes in interest rates and withdrawal experience. The demonstration shall include at least three hypothetical interest rate scenarios (level, increasing and decreasing), and for each scenario at least three withdrawal scenarios (zero, moderate and high) shall be modeled. Additional scenarios may be required if the Department determines it to be necessary to fully understand the risks of the contract or agreement. The demonstration period shall be for the lesser of 15 years or the maximum potential life of the contract;
3. A description of how the market value shall be calculated, including a summary description of the procedures to be followed by the insurer in verifying, through periodic spot audits or otherwise, any market value reporting performed by the contractholder or the custodian that the insurer may use as the basis for calculating the market value record. In performing the market value calculation, the method of valuation selected shall conform to the requirements of 17B:28-10;
4. A description of how the contract value record shall be determined and, where applicable, adjusted by experience rating;
5. A description of any crediting rate formula, the extent to which it shall operate to take into account differences between the market value and contract value records, and whether such rate shall be periodically adjusted to reflect experience rating. If there is no crediting rate formula, a description of the method by which the crediting rate shall be determined;
6. A statement describing in detail how the guaranteed contract liabilities are to be valued in accordance with 11:4-46.7;
7. A discussion of the investment guidelines that are acceptable to the insurer, together with a description of the procedures that will be followed by the insurer in evaluating the appropriateness of the investment guidelines, including the manner in which the insurer shall monitor the segregated portfolio and verify that it is being managed in accordance with the investment guidelines;
8. A description of any requirement for plans purchasing synthetic guaranteed investment contracts to establish a buffer fund or an allocation procedure that limits the allocable share of benefit payments made from the segregated portfolio;
9. A description of all termination events, discontinuance triggers and options, notice requirements, corrective action procedures and all other contractual safeguards, including events that allow the insurer to terminate the contract immediately, and any special termination features of the contract whereby interest rate movements or participant withdrawal activity (or any combinations thereof) might terminate the insurer's contractual obligations;
10. A description of the procedures to be followed when a termination event occurs, but the insurer waives its right to terminate the contract;
11. A statement as to whether the assets in the segregated portfolio may be chargeable with liabilities unrelated to the assets of and services performed under the contract, together with a full explanation of the conditions under which such assets would be so chargeable; and
12. A description of the procedures to be followed in reporting in the Annual Statement for any risk charges.