North Dakota Administrative Code › Title 45 - Insurance, Commissioner of › Article 45-04 - Life Insurance › Chapter 45-04-04 - Variable Life Insurance › Section 45-04-04-04 - Reserve liabilities for variable life insurance

Current through Supplement No. 393, July, 2024
1. Reserve liabilities for variable life
				insurance policies must be established under North Dakota Century Code chapter
				26.1-33 in accordance with actuarial procedures that recognize the variable
				nature of the benefits provided and any mortality guarantees.
2. For scheduled premium policies, reserve
				liabilities for the guaranteed minimum death benefit must 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 must be maintained in the general account of the insurer,
				and may not be less than the greater of the following minimum reserves:
a. 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
b. 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 may not
				be less than zero and must equal the "residue", as described in paragraph 1, 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 paragraph 2:
(1) The
				"residue" of the prior year's "attained age level" reserve on each variable
				life insurance contract may not be less than zero and must 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
				must 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.
(2) The payment referred to in subdivision b
				must 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 the 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 paragraph 1, 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 or the valuation interest rate but in no event may exceed the maximum
				interest rate permitted for the valuation of life contracts.
The valuation interest rate and mortality table used in
				  computing the two minimum reserves described in a and b above 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.