Pennsylvania Code › Title 31 - INSURANCE › Part IV - Life Insurance › Chapter 82 - VARIABLE LIFE INSURANCE › RESERVE LIABILITIES FOR VARIABLE LIFE INSURANCE › Section 82.32 - Reserve liabilities for the guaranteed minimum death benefit

Current through Register Vol. 54, No. 28, July 13, 2024
(a) 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 guarantee, shall be maintained in the general account of the
				  insurer, and may not be less than the greater of the following minimum
				  reserves:
(1) The aggregate total of the term
				  costs, if any, covering a period of 1 full year from the valuation date, or, if
				  less, covering the period provided for in the guarantee not otherwise provided
				  for by the reserves held in the separate account, on each variable life
				  insurance contract, assuming an immediate 1/3 depreciation in the current value
				  of the assets of the separate account followed by a net investment return equal
				  to the assumed investment rate.
(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 may not be less than zero and shall equal the "residue," as
				  described in subparagraph (i), of the prior year's "attained age level" reserve
				  on the contract, with any "residue" increased or decreased by a "payment
				  computed on an attained age basis," as described in subparagraph (ii).
(i) The "residue" of the prior year's
				  "attained age level" reserve on each variable life insurance contract may not
				  be less than zero and shall be determined by adding interest at the valuation
				  interest rate to the 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 the guarantee, and by 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.
(ii) The "payment computed on an attained age
				  basis" shall be computed so that the present value of a level payment of that
				  amount each year over the future period for which charges for this risk will be
				  collected under 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 the
				  guarantee, and C is any "residue," as described in subparagraph (i), of the
				  prior year's "attained age level" reserve on the variable life insurance
				  contract. If no further charges for this risk shall be collected under the
				  contract, the payment shall equal A minus B minus C.
(iii) The present value of future death
				  benefits that would be payable in the absence of a minimum guarantee, as
				  referred to in subparagraph (ii) of this paragraph, 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, or both, but may not
				  exceed the maximum interest rate permitted for the valuation of life insurance
				  contracts.