Section 3.21.915. Additional valuation standard for policies with guaranteed non-level gross premiums or guaranteed non-level benefits.

	(a)  For a policy with guaranteed non-level gross premiums or guaranteed non-level benefits, other than a universal life policy, and with an unusual pattern of guaranteed cash surrender values,  
		(1) the reserves held before the first unusual guaranteed cash surrender value may not be less than the reserves calculated by treating the first unusual guaranteed cash surrender value as a pure endowment and treating the policy as a term policy plus an endowment equal to the unusual cash surrender value, where the term of the policy is the number of years from the date of issue to the date the unusual cash surrender value is scheduled; or  
		(2) the reserves held after an unusual guaranteed cash surrender value may not be less than the reserves calculated by treating the policy as a term policy plus a pure endowment equal to the next unusual guaranteed cash surrender value and treating any unusual guaranteed cash surrender value at the end of the previous segment as a net single premium in which  
			(A) the term of the policy is the number of years from the date of the last unusual guaranteed cash surrender value before the valuation date to the earlier of  
				(i) the date of the next unusual guaranteed cash surrender value, if any, that is scheduled after the valuation date; or  
				(ii) the mandatory expiration date of the policy; or  
			(B) the net premium for a given year during the term of the policy is equal to the respective gross premium multiplied by the net-to-gross ratio; for purposes of this subparagraph, the net-to-gross ratio is calculated by adding together the present value at the beginning of the term of the policy of death benefits payable during the term of the policy and the present value at the beginning of the term of the policy of the next unusual guaranteed cash surrender value, if any, subtracting from that figure the amount of the last unusual guaranteed cash surrender value, if any, scheduled at the beginning of the term of the policy, and dividing the resulting figure by the present value at the beginning of the term of the policy of the scheduled gross premiums payable during the term of the policy.  
	(b)  For purposes of this section, a policy with an unusual pattern of cash surrender values is a policy in which any future guaranteed cash surrender value exceeds the previous year's guaranteed cash surrender value by more than the sum of  
		(1) 1.1 times the scheduled gross premium for that year;  
		(2) 1.1 times one year's accrued interest on the sum of the guaranteed cash surrender value in the previous year and the scheduled gross premium using the nonforfeiture interest rate used in calculating policy guaranteed cash surrender values; and  
		(3) .05 times the first policy year surrender charge, if any.  
	(c)  An insurer may elect to calculate reserves for yearly renewable term reinsurance in which only mortality risk is reinsured by  
		(1) setting the valuation net premium for each future policy year equal to the tabular cost of insurance for that year;  
		(2) setting basic reserves to an amount not less than the tabular cost of insurance for the period as described in 3 AAC 21.910(d);  
		(3) setting deficiency reserves equal to the present value at the date of valuation of the greater of the following amounts:  
			(A) zero;  
			(B) the valuation net premium minus the maximum guaranteed gross premium in each policy year;  
		(4) using the maximum valuation interest rate and the Commissioner's 1980 Standard Ordinary Mortality Tables with or without 10-year Select Mortality Factors; or  
		(5) using the mortality table specified in 3 AAC 21.905(f) and (g) and minimum interest rate required under AS 21.18.110.  
	(d)  An insurer that elects to calculate reserves under (c) of this section may not take a reinsurance reserve credit for an amount greater than the amount of reserve held by the assuming insurer for the same insurance policies.  
	(e)  An insurer may elect to calculate reserves for an attained-age-based yearly renewable term life insurance policy by  
		(1) setting the valuation net premium for each future policy year equal to the tabular cost of insurance for that year;  
		(2) setting basic reserves to an amount not less than the tabular cost of insurance for the appropriate period as described in 3 AAC 21.910(d);  
		(3) setting deficiency reserves equal to the present value at the date of valuation of the greater of the following amounts:  
			(A) zero;  
			(B) the valuation net premium minus the maximum guaranteed gross premium in each policy year; and  
		(4) using the maximum valuation interest rate and the Commissioner's 1980 Standard Ordinary Mortality Tables with or without 10-year Select Mortality Factors, or using the mortality table specified in 3 AAC 21.905(f) and (g) and minimum interest rate specified in AS 21.18.110.  
	(f)  If a policy becomes an attained-age-based yearly renewable term life insurance policy after an initial period of coverage, an insurer may elect to calculate reserves under (e) of this section if  
		(1) the initial period is constant for all insureds of the same gender, risk class, and plan of insurance; or  
		(2) the initial period runs to a common attained age for all insureds of the same gender, risk class, and plan of insurance.  
	(g)  In (e) of this section, a life insurance policy is an "attained-age-based yearly renewable term" life insurance policy if  
		(1) the premium rates on both the initial current premium scale and the guaranteed maximum premium scale are based on the attained age of the insured such that the premium rate for each policy and attained age is independent of the year the policy was issued; and  
		(2) the premium rates on both the initial current premium scale and the guaranteed maximum premium scale are equal to the premium rates for policies covering insureds of the same gender, risk class, plan of insurance, and attained age.  
	(h)  An insurer is not required to calculate unitary basic reserves and unitary deficiency reserves for a renewable term life insurance policy if  
		(1) the policy contains a series of equal length periods, except for the final period; the final period may be truncated or extended as needed to meet the expiration date, if  
			(A) the final period is less than 10 years and less than twice the length of the previous periods; and  
			(B) for each period, the premium rates on both the initial current premium scale and the guaranteed maximum premium scale are level;  
		(2) the guaranteed gross premiums in all periods are not less than the corresponding net premiums based on the Commissioner's 1980 Standard Ordinary Mortality Tables with or without 10-year Select Mortality Factors; and  
		(3) the policy does not develop cash surrender values in any policy year.  
	(i)  An insurer is not required to calculate unitary basic reserves and unitary deficiency reserves for a juvenile life insurance policy if, based upon the initial current premium scale at issue,  
		(1) the insured is under 25 years of age at issue;  
		(2) until the insured reaches the end of the juvenile period, at or before 25 years of age,  
			(A) the gross premiums and death benefits are level; and  
			(B) the policy does not develop cash surrender values; or  
		(3) after the end of the juvenile period, at or before 25 years of age,  
			(A) gross premiums are level for the remainder of the premium payment period; and  
			(B) death benefits are level for the remainder of the life of the policy.  

Authorities

21.06.090;21.18.110;21.18.160

Notes

Reference

3 AAC 21.930
3 AAC 28.635

Authority

AS 21.06.090 AS 21.18.110 AS 21.18.160

History

Eff. 1/1/2011, Register 196