Rhode Island Code of Regulations › Title 230 - Department of Business Regulation › Chapter 20 - Insurance › Subchapter 25 - LIFE AND ANNUITIES › Part 8 - Valuation of Life Insurance Policies (230-RICR-20-25-8) › Section 230-RICR-20-25-8.4 - Definitions

Current through June 14, 2024
A. For purposes of this Part:
1. "Basic reserves" means reserves calculated
				  in accordance with R.I. Gen. Laws §
											27-4.5-5.
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, as defined in
				  Subsection  6   of this section, (or any other valuation mortality table adopted
				  by the National Association of Insurance Commissioners (NAIC) after the
				  effective date of this Part and promulgated by Part by the commissioner for
				  this purpose), and, if elected, the optional minimum mortality standard for
				  deficiency reserves stipulated in §
											8.5(B)   of this Part.
a. 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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where:
x = original issue age;
k = the number of years from the date of issue to
								the beginning of the segment;
t = 1, 2, ...; t is reset to 1 at the beginning of
								each segment;
GPx+k+t-1 = Guaranteed gross premium per thousand
								of face amount for year t of the segment, ignoring policy fees only if level
								for the premium paying period of the policy.
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However, Rt may be increased or decreased by one
								percent in any policy year, at the company's option, but Rt shall not be less
								than one;
where:
x, k and t are as defined above, and
qx+k+t-1 = valuation mortality rate for deficiency
								reserves in policy year k+t but using the mortality of §
																	8.5(B)(2)   if
								§
																	8.5B(3)   is elected for deficiency reserves.
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 R.I. Gen. Laws §
												27-4.5-8, over
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 R.I. Gen. Laws §
											27-4.5-4.1 (Computation of Minimum
				  Standard by Calendar Year of Issue) that 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 NAIC
				  Standard Valuation Law, and variations of the 1980 CSO Table approved by the
				  NAIC, 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 §
											8.7(A)(3)   of
				  this Part, if any, or else the minimum premium described in §
											8.7(A)(4)   of
				  this Part.
8. "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, where 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:
a. The present value of the death benefits
				  within the segment, plus
b. The
				  present value of any unusual guaranteed cash value (see §
												8.6(D)   of this
				  Part) occurring at the end of the segment, less
c. Any unusual guaranteed cash value
				  occurring at the start of the segment, plus
d. For the first segment only, the excess of
				  the Item (1) over Item (2), as follows:
(1) 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.
(2) A net one year term premium for the
				  benefits provided for in the first policy year.
e. The length of each segment is determined
				  by the "contract segmentation method," as defined in this section.
f. 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.
g. 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 NAIC Standard Valuation
				  Law.
11. "Unitary reserves" means
				  the present value of all future guaranteed benefits less the present value of
				  all future modified net premiums, where:
a.
				  Guaranteed benefits and modified net premiums are considered to the mandatory
				  expiration of the policy; and
b.
				  Modified net premiums are a uniform percentage of the respective guaranteed
				  gross premiums, where 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 Item (1) over Item (2), as
				  follows:
(1) 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.
(2) A net one year term premium for the
				  benefits provided for in the first policy year.
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 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.