New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter IV - Financial Condition Of Insurer and Reports to Superintendent › Subchapter B - Life Insurers › Part 98 - Valuation Of Life Insurance Reserves › Section 98.7 - Minimum reserves for universal life insurance policies

Current through Register Vol. 46, No. 28, July 10, 2024
(a)
General requirements.
(1) In addition to the requirements of this
				  subdivision, the requirements of section
				  98.4(a)(1)(i),
				  (2)-(3), (5), (b)(4)-(7), (c)-(d), (i) and
				  (k)-(u)  of this Part shall apply to universal
				  life insurance policies. Variable universal life insurance policies are also
				  subject to section
				  98.8 
				  of this Part.
(2) Fixed premium
				  universal life insurance policy means a universal life insurance policy other
				  than a flexible premium universal life insurance policy.
(3) Flexible premium universal life insurance
				  policy means a universal life insurance policy that permits the policyholder to
				  vary, independently of each other, the amount or timing of one or more premium
				  payments.
(4) Guaranteed maturity
				  premium for flexible premium universal life insurance policies shall be that
				  level gross premium, paid at issue and periodically thereafter over the period
				  during which premiums are allowed to be paid, which will mature the policy on
				  the latest maturity date, if any, permitted under the policy (otherwise at the
				  highest age in the valuation mortality table), for an amount which is in
				  accordance with the policy structure. The guaranteed maturity premium is
				  calculated at issue based on all policy guarantees at issue. The guaranteed
				  maturity premium for fixed premium universal life insurance policies shall be
				  the premium defined in the policy which at issue provides the minimum policy
				  guarantees.
(5) Guaranteed maturity
				  fund at any duration is that amount which, together with future guaranteed
				  maturity premiums, will mature the policy based on all policy guarantees at
				  issue.
(6) Account value for
				  purposes of this section means the amount to which interest credits and/or
				  mortality charges and/or expense charges are made under a universal life
				  insurance policy.
(7) Basic
				  reserves.
(i) Basic reserves shall never be
				  less than the greater of:
(a) net level
				  premium reserves less the unamortized expense allowance; or
(b) the cash surrender value.
(ii) Net level premium reserves
				  for the purpose of this subdivision shall equal (A-B)r where A, B, and r are
				  defined in this subparagraph.
(a) A = the
				  present value of all future guaranteed benefits at the date of
				  valuation.
(b) B =
				  (PVFB/ax) ax+t where:
(1) PVFB is the present value of all benefits
				  guaranteed at issue assuming future guaranteed maturity premiums are paid by
				  the policyholder and taking into account all guarantees contained in the policy
				  or declared by the insurer;
(2)
				  ax and ax+t are present values of
				  an annuity of one per year payable on policy anniversaries beginning at ages x
				  and x+t, respectively, and continuing until the highest attained age at which a
				  premium may be paid under the policy;
(3) x is the issue age; and
(4) t is the duration of the
				  policy;
(c) r = one,
				  unless the policy is a flexible premium policy and the account value is less
				  than the guaranteed maturity fund, in which case r is the ratio of the account
				  value to the guaranteed maturity fund.
(iii) The unamortized expense allowance shall
				  equal (C-D)(ax+t /ax)r where:
(a) ax+t,
				  ax and r are as defined in subparagraph (ii) of this
				  paragraph;
(b) C = a net level
				  annual premium equal to the present value, at the date of issue based on the
				  plan of insurance defined at issue by the guaranteed maturity premiums and all
				  guarantees contained in the policy or declared by the insurer, of life
				  insurance and endowment benefits provided for after the first policy year,
				  divided by the present value, at the date of issue, of an annuity of one per
				  annum payable on the first and each subsequent anniversary of such policy on
				  which a premium is allowed to be paid; provided, however, that such net level
				  annual premium shall not exceed the net level annual premium on the 19-year
				  premium whole life plan for insurance of the same amount at an age one year
				  higher than the age at issue of such policy; and
(c) D = a net one-year term premium for such
				  benefits provided for in the first policy year.
(iv) In the case of structural changes
				  initiated by the policyholder which are separate from the automatic workings of
				  the policy, expense allowances associated with such changes shall be amortized
				  on a basis consistent with subparagraph (iii) of this paragraph.
(v) Future guaranteed benefits are determined
				  by:
(a) projecting the greater of the
				  guaranteed maturity fund and the account value, taking into account future
				  guaranteed maturity premiums, if any, and using all guarantees of interest,
				  mortality, and expense deductions contained in the policy or declared by the
				  insurer; and
(b) taking into
				  account any benefits guaranteed in the policy or by declaration which do not
				  depend on the account value.
(vi) All present values shall be determined
				  using:
(a) the maximum valuation interest
				  rate based on the date of issue of the policy; and
(b) the minimum mortality standards allowable
				  for calculating basic reserves.
(vii) In lieu of the methods described in
				  subparagraphs (i) through (vi) of this paragraph, for policies issued prior to
				  January 1, 2000, a company may use the mean of the cash surrender value and the
				  account value as the basic reserve.
(8) Deficiency reserves.
(i) This paragraph shall apply to any
				  universal life insurance policy for which the guaranteed maturity premium at
				  any future duration is less than the corresponding valuation net premium
				  calculated as (PVFB + C-D)/ax using the maximum
				  allowable valuation interest rate and the minimum mortality standards allowable
				  for calculating deficiency reserves.
(ii) Deficiency reserves shall be calculated
				  as the excess, if any, of alternate minimum reserves as defined in subparagraph
				  (iii) of this paragraph, over basic reserves.
(iii) Alternate minimum reserves shall be
				  determined by calculating the basic reserves as described in subparagraphs
				  (7)(i) through (vi) of this subdivision for the policy:
(a) using:
(1) the method described in subparagraphs
				  (7)(i) through (vi) of this subdivision;
(2) the maximum allowable valuation interest
				  rate; and
(3) the minimum mortality
				  standards allowable for calculating deficiency reserves; and
(b) replacing the valuation net
				  premium by the guaranteed maturity premium in each contract year for which the
				  valuation net premium exceeds the guaranteed maturity premium.