Section 3.21.920. Minimum valuation standard for a universal life insurance policy with a secondary guarantee.

	(a)  Basic reserves for a secondary guarantee in a universal life insurance policy with a secondary guarantee must equal the segmented reserves for the secondary guarantee period in the policy and, in calculating the segments and the segmented reserves,  
		(1) the segments are determined according to the contract segmentation method; and  
		(2) the gross premiums are set equal to the specified premiums in the policy, if any, or to the minimum premiums that keep the policy in force for a policy without specified premiums.  
	(b)  Deficiency reserves for a secondary guarantee in a universal life insurance policy with a secondary guarantee must be calculated for the secondary guarantee period as described in 3 AAC 21.910(b) with gross premiums equal to  
		(1) the specified premiums in the policy, if any; or  
		(2) the minimum premiums that keep the policy in force.  
	(c)  Minimum reserves  
		(1) during the secondary guarantee period are the larger of basic reserves for the secondary guarantee plus the deficiency reserve for the secondary guarantee and the minimum reserves required by other law; and  
		(2) are the largest of the minimum reserves calculated as of the valuation date of each secondary guarantee that has not expired, if a policy contains more than one secondary guarantee.  
	(d)  If a secondary guarantee can be unilaterally changed by the insurer after issue, then the insurer must calculate reserves under this section assuming that the secondary guarantee was made at the issue date of the policy.  
	(e)  In this section,  
		(1) "minimum premium" means the amount paid into a life insurance policy with a zero account value at the beginning of the policy year that results in a zero account value at the end of the policy year and calculated using guaranteed  
			(A) policy cost factors including mortality charges, loads, and expense charges; and  
			(B) interest credit rates;  
		(2) "one-year valuation premium" means the net one-year premium based upon the original schedule of benefits that  
			(A) is calculated at issue for all policy years;  
			(B) is calculated without using select mortality factors as described under 3 AAC 21.905(g)(2) - (4); and  
			(C) reflects the frequency of fund processing and using the same assumption for the distribution of death that is used to calculate the monthly mortality charges assessed the fund;  
		(3) "policy with a secondary guarantee" means  
			(A) a policy with a guarantee that the policy will remain in force at the original schedule of benefits subject only to the payment of specified premiums;  
			(B) a policy in which the minimum premium at any duration is less than the corresponding one-year valuation premium calculated using the maximum valuation interest rate and  
				(i) for policies issued before January 1, 2009, the Commissioner's 1980 Standard Ordinary Mortality Tables with or without 10-year Select Mortality Factors or other valuation mortality tables under 3 AAC 28.600 - 3 AAC 28.690; or  
				(ii) for policies issued on or after January 1, 2009, valuation mortality tables under 3 AAC 28.600 - 3 AAC 28.690, as required under 3 AAC 28.620(c); or  
			(C) a policy with any combination of elements set out in (A) and (B) of this paragraph;  
		(4) "secondary guarantee period" means the time period for which the policy is guaranteed to remain in force subject only to a secondary guarantee;  
		(5) "specified premiums" means the premiums specified in the policy guaranteeing that, if paid, the policy will remain in force at the original schedule of benefits even if the premiums are insufficient to keep the policy in force assuming that maximum mortality charges, maximum expense charges, minimum interest rate credits, and applicable surrender charges are made.  

Authorities

21.06.090;21.18.110;21.18.160

Notes

Reference

3 AAC 21.949
3 AAC 28.635

Authority

AS 21.06.090 AS 21.18.110 AS 21.18.160

History

Eff. 1/1/2011, Register 196