Virginia Administrative Code › Title 14 - INSURANCE › Agency 5 - STATE CORPORATION COMMISSION, BUREAU OF INSURANCE › Chapter 319 - LIFE INSURANCE RESERVES › Section 14VAC5-319-10 - Definitions

Current through Register Vol. 40, No. 24, July 15, 2024
The following words and terms when used in this regulation
				  shall have the following meanings, unless the context clearly indicates
				  otherwise:
"1980 CSO valuation tables" means the Commissioners' 1980
				  Standard Ordinary Mortality Table (1980 CSO Table) without 10-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.
"Basic reserves" means reserves calculated in accordance
				  with § 38.2-1372 of the Code of Virginia.
"Commission" means the State Corporation Commission when
				  acting pursuant to or in accordance with Title 38.2 of the Code of
				  Virginia.
"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 this section, (or any other
				  valuation mortality table adopted by the NAIC after January 1, 2000, and
				  promulgated by regulation by the commission for this purpose) and, if elected,
				  the optional minimum mortality standard for deficiency reserves stipulated in
				  14VAC5-319-40 B.
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:
Gt = GPx+k+t /
				  GPx+k+t-1
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; and
GPx+k+t-1 = Guaranteed gross premium
				  per $1,000 of face amount for year t of the segment, ignoring policy fees only
				  if level for the premium paying period of the policy.
Rt = qx+k+t/
				  qx+k+t-1
where:
Rt may be increased or decreased by
				  1.0% in any policy year, at the company's option, but Rt
				  shall not be less than one; and 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
				  14VAC5-319-40 B 2 if
				  14VAC5-319-40 B 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 1,000. If GPx+k+t and
				  GPx+k+t-1 are both equal to 0, Gt
				  shall be deemed to be 0.
"Deficiency reserves" means the excess, if greater than 0,
				  of (i) minimum reserves calculated in accordance with § 38.2-1376 of the
				  Code of Virginia over (ii) basic reserves.
"Guaranteed gross premiums" means the premiums under a
				  policy of life insurance that are guaranteed and determined at issue.
"Maximum valuation interest rates" means the interest rates
				  defined in § 38.2-1371 of the Code of Virginia that are to be used in
				  determining the minimum standard for the valuation of life insurance
				  policies.
"NAIC" means the National Association of Insurance
				  Commissioners.
"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
				  14VAC5-319-60 A 3 or, if none is
				  so described, the minimum premium described in
				  14VAC5-319-60 A 4.
"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:
1. The
				present value of the death benefits within the segment, plus
2. The present value of any unusual
				guaranteed cash value (see
				14VAC5-319-50 D) occurring at the
				end of the segment, less
3. Any
				unusual guaranteed cash value occurring at the start of the segment,
				plus
4. For the first segment only,
				the excess of subdivision 4 a over subdivision 4 b of this definition, as
				follows:
a. 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 19-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.
b. A net one-year term
				premium for the benefits provided for in the first policy year.
The length of each segment is determined by the "contract
				  segmentation method," as defined in this section.
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.
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.
"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.
"Ten-year select mortality factors" means the select factors
				  adopted by the NAIC with the 1980 amendments to the NAIC Standard Valuation
				  Law.
"This regulation" means Chapter 319 of Title 14 of the
				  Virginia Administrative Code (14VAC5-319), which also shall be known as the
				  commission's Rules Establishing Minimum Valuation and Reserve Standards for
				  Life Insurance Policies.
"Twenty-year select mortality factors" means the select
				  factors adopted by the NAIC as part of the Valuation of Life Insurance Policies
				  Model Regulation and shown in the tables in
				  14VAC5-319-70.
"Unitary reserves" means the present value of all future
				  guaranteed benefits less the present value of all future modified net premiums,
				  where:
1. Guaranteed benefits and
				modified net premiums are considered to the mandatory expiration of the policy;
				and
2. 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 subdivision 2 a over subdivision 2 b of this definition, as
				follows:
a. 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 19-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.
b. A net one-year term premium for the
				benefits provided for in the first policy year.
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.
"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.
"YRT" means yearly renewable term.