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1 | AN ACT concerning insurance.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Illinois Insurance Code is amended by | ||||||
5 | changing Sections 223 and 531.09 as follows:
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6 | (215 ILCS 5/223) (from Ch. 73, par. 835)
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7 | Sec. 223. Director to value policies - Legal standard of | ||||||
8 | valuation.
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9 | (1) The Director shall annually value, or cause to be | ||||||
10 | valued, the
reserve liabilities (hereinafter called reserves) | ||||||
11 | for all outstanding
life insurance policies and annuity and | ||||||
12 | pure endowment contracts of
every life insurance company doing | ||||||
13 | business in this State, except that
in the case of an alien | ||||||
14 | company, such valuation shall be limited to its
United States | ||||||
15 | business, and may certify the amount of any such reserves,
| ||||||
16 | specifying the mortality table or tables, rate or rates of | ||||||
17 | interest, and
methods (net level premium method or other) used | ||||||
18 | in the calculation of
such reserves. Other assumptions may be | ||||||
19 | incorporated into the reserve calculation to the extent | ||||||
20 | permitted by the National Association of Insurance | ||||||
21 | Commissioners' Accounting Practices and Procedures Manual. In | ||||||
22 | calculating such reserves, he may use group methods
and | ||||||
23 | approximate averages for fractions of a year or otherwise. In |
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1 | lieu
of the valuation of the reserves herein required of any | ||||||
2 | foreign or alien
company, he may accept any valuation made, or | ||||||
3 | caused to be made, by the
insurance supervisory official of any | ||||||
4 | state or other jurisdiction when
such valuation complies with | ||||||
5 | the minimum standard herein provided and if
the official of | ||||||
6 | such state or jurisdiction accepts as sufficient and
valid for | ||||||
7 | all legal purposes the certificate of valuation of the
Director | ||||||
8 | when such certificate states the valuation to have been made in
| ||||||
9 | a specified manner according to which the aggregate reserves | ||||||
10 | would be at
least as large as if they had been computed in the | ||||||
11 | manner prescribed by
the law of that state or jurisdiction.
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12 | Any such company which at any time has adopted any standard | ||||||
13 | of
valuation producing greater aggregate reserves than those | ||||||
14 | calculated
according to the minimum standard herein provided | ||||||
15 | may, with the approval
of the Director, adopt any lower | ||||||
16 | standard of valuation, but not lower
than the minimum herein | ||||||
17 | provided, however, that, for the purposes of this
subsection, | ||||||
18 | the holding of additional reserves previously determined by a
| ||||||
19 | qualified actuary to be necessary to render the opinion | ||||||
20 | required by
subsection (1a) shall not be deemed to be the | ||||||
21 | adoption of a higher standard
of valuation. In the valuation of | ||||||
22 | policies the
Director shall give no consideration to, nor make | ||||||
23 | any deduction because
of, the existence or the possession by | ||||||
24 | the company of
| ||||||
25 | (a) policy liens created by any agreement given or | ||||||
26 | assented to by
any assured subsequent to July 1, 1937, for |
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1 | which liens such assured has
not received cash or other | ||||||
2 | consideration equal in value to the amount of
such liens, | ||||||
3 | or
| ||||||
4 | (b) policy liens created by any agreement entered into | ||||||
5 | in violation
of section 232 unless the agreement imposing | ||||||
6 | or creating such liens has
been approved by a Court in a | ||||||
7 | proceeding under Article XIII, or in the
case of a foreign | ||||||
8 | or alien company has been approved by a court in a
| ||||||
9 | rehabilitation or liquidation proceeding or by the | ||||||
10 | insurance official of
its domiciliary state or country, in | ||||||
11 | accordance with the laws thereof.
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12 | (1a) This subsection shall become operative at the end of | ||||||
13 | the first
full calendar year following the effective date of | ||||||
14 | this amendatory Act of 1991.
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15 | (A) General.
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16 | (1) Every life insurance company doing business in | ||||||
17 | this State shall
annually submit the opinion of a | ||||||
18 | qualified actuary as to whether the
reserves and | ||||||
19 | related actuarial items held in support of the policies | ||||||
20 | and
contracts specified by the Director by regulation | ||||||
21 | are computed
appropriately, are based on assumptions | ||||||
22 | that satisfy contractual
provisions, are consistent | ||||||
23 | with prior reported amounts and comply with
applicable | ||||||
24 | laws of this State. The Director by regulation shall | ||||||
25 | define the
specifics of this opinion and add any other | ||||||
26 | items deemed to be necessary to
its scope.
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1 | (2) The opinion shall be submitted with the annual | ||||||
2 | statement reflecting
the valuation of reserve | ||||||
3 | liabilities for each year ending on or after December | ||||||
4 | 31, 1992.
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5 | (3) The opinion shall apply to all business in | ||||||
6 | force including
individual and group health insurance | ||||||
7 | plans, in form and substance
acceptable to the Director | ||||||
8 | as specified by regulation.
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9 | (4) The opinion shall be based on standards adopted | ||||||
10 | from time to time by
the Actuarial Standards Board and | ||||||
11 | on additional standards as the Director
may by | ||||||
12 | regulation prescribe.
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13 | (5) In the case of an opinion required to be | ||||||
14 | submitted by a foreign or
alien company, the Director | ||||||
15 | may accept the opinion filed by that company
with the | ||||||
16 | insurance supervisory official of another state if the | ||||||
17 | Director
determines that the opinion reasonably meets | ||||||
18 | the requirements applicable to
a company domiciled in | ||||||
19 | this State.
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20 | (6) For the purpose of this Section, "qualified | ||||||
21 | actuary" means a member
in good standing of the | ||||||
22 | American Academy of Actuaries who meets the
| ||||||
23 | requirements set forth in its regulations.
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24 | (7) Except in cases of fraud or willful misconduct, | ||||||
25 | the qualified
actuary shall not be liable for damages | ||||||
26 | to any person (other than the
insurance company and the |
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1 | Director) for any act, error, omission, decision
or | ||||||
2 | conduct with respect to the actuary's opinion.
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3 | (8) Disciplinary action by the Director against | ||||||
4 | the company or the
qualified actuary shall be defined | ||||||
5 | in regulations by the Director.
| ||||||
6 | (9) A memorandum, in form and substance acceptable | ||||||
7 | to the Director as
specified by regulation, shall be | ||||||
8 | prepared to support each actuarial opinion.
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9 | (10) If the insurance company fails to provide a | ||||||
10 | supporting memorandum
at the request of the Director | ||||||
11 | within a period specified by regulation or
the Director | ||||||
12 | determines that the supporting memorandum provided by | ||||||
13 | the
insurance company fails to meet the standards | ||||||
14 | prescribed by the regulations
or is otherwise | ||||||
15 | unacceptable to the Director, the Director may engage a
| ||||||
16 | qualified actuary at the expense of the company to | ||||||
17 | review the opinion and
the basis for the opinion and | ||||||
18 | prepare the supporting memorandum as is
required by the | ||||||
19 | Director.
| ||||||
20 | (11) Any memorandum in support of the opinion, and | ||||||
21 | any other material
provided by the company to the | ||||||
22 | Director in connection therewith, shall be
kept | ||||||
23 | confidential by the Director and shall not be made | ||||||
24 | public and shall
not be subject to subpoena, other than | ||||||
25 | for the purpose of defending an
action seeking damages | ||||||
26 | from any person by reason of any action required by
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1 | this Section or by regulations promulgated hereunder; | ||||||
2 | provided, however,
that the memorandum or other | ||||||
3 | material may otherwise be released by the
Director (a) | ||||||
4 | with the written consent of the company or (b) to the | ||||||
5 | American
Academy of Actuaries upon request stating | ||||||
6 | that the memorandum or other
material is required for | ||||||
7 | the purpose of professional disciplinary
proceedings | ||||||
8 | and setting forth procedures satisfactory to the | ||||||
9 | Director for
preserving the confidentiality of the | ||||||
10 | memorandum or other material. Once
any portion of the | ||||||
11 | confidential memorandum is cited by the company in its
| ||||||
12 | marketing or is cited before any governmental agency | ||||||
13 | other than a state
insurance department or is released | ||||||
14 | by the company to the news media, all
portions of the | ||||||
15 | confidential memorandum shall be no longer | ||||||
16 | confidential.
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17 | (B) Actuarial analysis of reserves and assets | ||||||
18 | supporting those reserves.
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19 | (1) Every life insurance company, except as | ||||||
20 | exempted by or under
regulation, shall also annually | ||||||
21 | include in the opinion required by
paragraph (A)(1) of | ||||||
22 | this subsection (1a), an opinion of the same qualified
| ||||||
23 | actuary as to whether the reserves and related | ||||||
24 | actuarial items held in
support of the policies and | ||||||
25 | contracts specified by the Director by
regulation, | ||||||
26 | when considered in light of the assets held by the |
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1 | company with
respect to the reserves and related | ||||||
2 | actuarial items including, but not
limited to, the | ||||||
3 | investment earnings on the assets and the | ||||||
4 | considerations
anticipated to be received and retained | ||||||
5 | under the policies and contracts,
make adequate | ||||||
6 | provision for the company's obligations under the | ||||||
7 | policies
and contracts including, but not limited to, | ||||||
8 | the benefits under and
expenses associated with the | ||||||
9 | policies and contracts.
| ||||||
10 | (2) The Director may provide by regulation for a | ||||||
11 | transition period for
establishing any higher reserves | ||||||
12 | which the qualified actuary may deem
necessary in order | ||||||
13 | to render the opinion required by this Section.
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14 | (2) This subsection shall apply to only those policies and | ||||||
15 | contracts
issued prior to the operative date of section 229.2 | ||||||
16 | (the Standard
Non-forfeiture Law).
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17 | (a) Except as otherwise in this Article provided, the | ||||||
18 | legal minimum
standard for valuation of contracts issued | ||||||
19 | before January 1, 1908, shall
be the Actuaries or Combined | ||||||
20 | Experience Table of Mortality with interest
at 4% per annum | ||||||
21 | and for valuation of contracts issued on or after that
date | ||||||
22 | shall be the American Experience Table of Mortality with | ||||||
23 | either
Craig's or Buttolph's Extension for ages under 10 | ||||||
24 | and with interest at 3
1/2% per annum. The legal minimum | ||||||
25 | standard for the valuation of group
insurance policies | ||||||
26 | under which premium rates are not guaranteed for a
period |
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1 | in excess of 5 years shall be the American Men Ultimate | ||||||
2 | Table of
Mortality with interest at 3 1/2% per annum. Any | ||||||
3 | life company may, at
its option, value its insurance | ||||||
4 | contracts issued on or after January 1,
1938, in accordance | ||||||
5 | with their terms on the basis of the American Men
Ultimate | ||||||
6 | Table of Mortality with interest not higher than 3 1/2% per | ||||||
7 | annum.
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8 | (b) Policies issued prior to January 1, 1908, may | ||||||
9 | continue to be
valued according to a method producing | ||||||
10 | reserves not less than those
produced by the full | ||||||
11 | preliminary term method. Policies issued on and
after | ||||||
12 | January 1, 1908, may be valued according to a method | ||||||
13 | producing
reserves not less than those produced by the | ||||||
14 | modified preliminary term
method hereinafter described in | ||||||
15 | paragraph (c). Policies issued on and
after January 1, | ||||||
16 | 1938, may be valued either according to a method
producing | ||||||
17 | reserves not less than those produced by such modified
| ||||||
18 | preliminary term method or by the select and ultimate | ||||||
19 | method on the
basis that the rate of mortality during the | ||||||
20 | first 5 years after the
issuance of such contracts | ||||||
21 | respectively shall be calculated according to
the | ||||||
22 | following percentages of rates shown by the American | ||||||
23 | Experience
Table of Mortality:
| ||||||
24 | (i) first insurance year 50% thereof;
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25 | (ii) second insurance year 65% thereof;
| ||||||
26 | (iii) third insurance year 75% thereof;
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1 | (iv) fourth insurance year 85% thereof;
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2 | (v) fifth insurance year 95% thereof;
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3 | (c) If the premium charged for the first policy year | ||||||
4 | under a limited
payment life preliminary term policy | ||||||
5 | providing for the payment of all
premiums thereon in less | ||||||
6 | than 20 years from the date of the policy or
under an | ||||||
7 | endowment preliminary term policy, exceeds that charged | ||||||
8 | for the
first policy year under 20 payment life preliminary | ||||||
9 | term policies of the
same company, the reserve thereon at | ||||||
10 | the end of any year, including the
first, shall not be less | ||||||
11 | than the reserve on a 20 payment life
preliminary term | ||||||
12 | policy issued in the same year at the same age,
together | ||||||
13 | with an amount which shall be equivalent to the | ||||||
14 | accumulation of
a net level premium sufficient to provide | ||||||
15 | for a pure endowment at the
end of the premium payment | ||||||
16 | period, equal to the difference between the
value at the | ||||||
17 | end of such period of such a 20 payment life preliminary
| ||||||
18 | term policy and the full net level premium reserve at such | ||||||
19 | time of such
a limited payment life or endowment policy. | ||||||
20 | The premium payment period
is the period during which | ||||||
21 | premiums are concurrently payable under such
20 payment | ||||||
22 | life preliminary term policy and such limited payment life | ||||||
23 | or
endowment policy.
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24 | (d) The legal minimum standard for the valuations of | ||||||
25 | annuities
issued on and after January 1, 1938, shall be the | ||||||
26 | American Annuitant's
Table with interest not higher than 3 |
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1 | 3/4% per annum, and all annuities
issued before that date | ||||||
2 | shall be valued on a basis not lower than that
used for the | ||||||
3 | annual statement of the year 1937; but annuities deferred
| ||||||
4 | 10 or more years and written in connection with life | ||||||
5 | insurance shall be
valued on the same basis as that used in | ||||||
6 | computing the consideration or
premiums therefor, or upon | ||||||
7 | any higher standard at the option of the company.
| ||||||
8 | (e) The Director may vary the standards of interest and | ||||||
9 | mortality as
to contracts issued in countries other than | ||||||
10 | the United States and may
vary standards of mortality in | ||||||
11 | particular cases of invalid lives and
other extra hazards.
| ||||||
12 | (f) The legal minimum standard for valuation of waiver | ||||||
13 | of premium
disability benefits or waiver of premium and | ||||||
14 | income disability benefits
issued on and after January 1, | ||||||
15 | 1938, shall be the Class (3) Disability
Table (1926) | ||||||
16 | modified to conform to the contractual waiting period, with
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17 | interest at not more than 3 1/2% per annum; but in no event | ||||||
18 | shall the
values be less than those produced by the basis | ||||||
19 | used in computing
premiums for such benefits. The legal | ||||||
20 | minimum standard for the valuation
of such benefits issued | ||||||
21 | prior to January 1, 1938, shall be such as to
place an | ||||||
22 | adequate value, as determined by sound insurance | ||||||
23 | practices, on
the liabilities thereunder and shall be such | ||||||
24 | that the value of the
benefits under each and every policy | ||||||
25 | shall in no case be less than the
value placed upon the | ||||||
26 | future premiums.
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1 | (g) The legal minimum standard for the valuation of | ||||||
2 | industrial
policies issued on or after January 1, 1938, | ||||||
3 | shall be the American
Experience Table of Mortality or the | ||||||
4 | Standard Industrial Mortality Table
or the Substandard | ||||||
5 | Industrial Mortality Table with interest at 3 1/2%
per | ||||||
6 | annum by the net level premium method, or in accordance | ||||||
7 | with their
terms by the modified preliminary term method | ||||||
8 | hereinabove described.
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9 | (h) Reserves for all such policies and contracts may be | ||||||
10 | calculated,
at the option of the company, according to any | ||||||
11 | standards which produce
greater aggregate reserves for all | ||||||
12 | such policies and contracts than the
minimum reserves | ||||||
13 | required by this subsection.
| ||||||
14 | (3) This subsection shall apply to only those policies and | ||||||
15 | contracts
issued on or after January 1, 1948 or such earlier | ||||||
16 | operative date of
Section 229.2 (the Standard Non-forfeiture | ||||||
17 | Law) as shall have been
elected by the insurance company | ||||||
18 | issuing such policies or contracts.
| ||||||
19 | (a) Except as otherwise provided in subsections (4), | ||||||
20 | (6), and (7),
the minimum standard for the valuation of all | ||||||
21 | such policies
and contracts shall be the Commissioners | ||||||
22 | Reserve valuation method defined
in paragraphs (b) and (f) | ||||||
23 | of this subsection and in subsection 5, 3 1/2%
interest for | ||||||
24 | such policies issued prior to September 8, 1977, 5 1/2%
| ||||||
25 | interest for single premium life insurance policies and 4 | ||||||
26 | 1/2% interest for
all other such policies issued on or |
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1 | after September 8, 1977, and the following
tables:
| ||||||
2 | (i) The Commissioners 1941 Standard Ordinary | ||||||
3 | Mortality Table for all
Ordinary policies of life | ||||||
4 | insurance issued on the standard basis,
excluding any | ||||||
5 | disability and accidental death benefits in such | ||||||
6 | policies,
for such policies issued prior to the | ||||||
7 | operative date of subsection (4a)
of Section 229.2 | ||||||
8 | (Standard Non-forfeiture Law); and the Commissioners
| ||||||
9 | 1958 Standard Ordinary Mortality Table for such | ||||||
10 | policies issued on or
after such operative date but | ||||||
11 | prior to the operative date of subsection
(4c) of | ||||||
12 | Section 229.2 provided that for any category of such
| ||||||
13 | policies issued on female risks all modified net | ||||||
14 | premiums and present
values referred to in this Act | ||||||
15 | may, prior to September 8, 1977, be
calculated | ||||||
16 | according to an age not more than 3 years younger than
| ||||||
17 | the actual age of the insured and, after September 8, | ||||||
18 | 1977,
calculated according to an age not more than 6 | ||||||
19 | years younger than the actual
age of the insured; and | ||||||
20 | for such policies issued on or after the operative
date | ||||||
21 | of subsection (4c) of Section 229.2, (i)
the | ||||||
22 | Commissioners 1980 Standard Ordinary Mortality Table, | ||||||
23 | or (ii) at the
election of the company for any one or | ||||||
24 | more specified plans of life insurance,
the | ||||||
25 | Commissioners 1980 Standard Ordinary Mortality Table | ||||||
26 | with Ten-Year
Select Mortality Factors, or (iii) any |
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| |||||||
1 | ordinary mortality table adopted
after 1980 by the | ||||||
2 | National Association of Insurance Commissioners and
| ||||||
3 | approved by regulations promulgated by the Director | ||||||
4 | for use in determining
the minimum standard of | ||||||
5 | valuation for such policies.
| ||||||
6 | (ii) For all Industrial Life Insurance policies | ||||||
7 | issued on the
standard basis, excluding any disability | ||||||
8 | and accidental death benefits
in such policies--the | ||||||
9 | 1941 Standard Industrial Mortality Table for such
| ||||||
10 | policies issued prior to the operative date of | ||||||
11 | subsection 4 (b) of
Section 229.2 (Standard | ||||||
12 | Non-forfeiture Law); and for such policies issued
on or | ||||||
13 | after such operative date the Commissioners 1961
| ||||||
14 | Standard Industrial Mortality Table or any industrial | ||||||
15 | mortality table
adopted after 1980 by the National | ||||||
16 | Association of Insurance Commissioners
and approved by | ||||||
17 | regulations promulgated by the Director for use in | ||||||
18 | determining
the minimum standard of valuation for such | ||||||
19 | policies.
| ||||||
20 | (iii) For Individual Annuity and Pure Endowment | ||||||
21 | contracts, excluding
any disability and accidental | ||||||
22 | death benefits in such policies--the 1937
Standard | ||||||
23 | Annuity Mortality Table--or, at the option of the | ||||||
24 | company, the
Annuity Mortality Table for 1949, | ||||||
25 | Ultimate, or any modification of
either of these tables | ||||||
26 | approved by the Director.
|
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| |||||||
1 | (iv) For Group Annuity and Pure Endowment | ||||||
2 | contracts, excluding any
disability and accidental | ||||||
3 | death benefits in such policies--the Group
Annuity | ||||||
4 | Mortality Table for 1951, any modification of such | ||||||
5 | table
approved by the Director, or, at the option of | ||||||
6 | the company, any of the
tables or modifications of | ||||||
7 | tables specified for Individual Annuity and
Pure | ||||||
8 | Endowment contracts.
| ||||||
9 | (v) For Total and Permanent Disability Benefits in | ||||||
10 | or supplementary
to Ordinary policies or contracts for | ||||||
11 | policies or contracts issued on or
after January 1, | ||||||
12 | 1966, the tables of Period 2 disablement rates and the
| ||||||
13 | 1930 to 1950 termination rates of the 1952 Disability | ||||||
14 | Study of the
Society of Actuaries, with due regard to | ||||||
15 | the type of benefit, or any tables
of disablement rates | ||||||
16 | and termination rates adopted after 1980 by the | ||||||
17 | National
Association of Insurance Commissioners and | ||||||
18 | approved by regulations promulgated
by the Director | ||||||
19 | for use in determining the minimum standard of | ||||||
20 | valuation
for such policies; for policies or contracts | ||||||
21 | issued on or after January 1,
1961, and prior to | ||||||
22 | January 1, 1966, either such tables or, at the option | ||||||
23 | of
the company, the Class (3) Disability Table (1926); | ||||||
24 | and for policies issued
prior to January 1, 1961, the | ||||||
25 | Class (3) Disability Table (1926). Any such
table | ||||||
26 | shall, for active lives, be combined with a mortality |
| |||||||
| |||||||
1 | table permitted
for calculating the reserves for life | ||||||
2 | insurance policies.
| ||||||
3 | (vi) For Accidental Death benefits in or | ||||||
4 | supplementary to
policies--for policies issued on or | ||||||
5 | after January 1, 1966, the 1959
Accidental Death | ||||||
6 | Benefits Table or any accidental death benefits table
| ||||||
7 | adopted after 1980 by the National Association of | ||||||
8 | Insurance Commissioners
and approved by regulations | ||||||
9 | promulgated by the Director for use in
determining the | ||||||
10 | minimum standard of valuation for such policies;
for | ||||||
11 | policies issued on or after January 1, 1961, and prior | ||||||
12 | to January 1,
1966, any of such tables or, at the | ||||||
13 | option of the company, the
Inter-Company Double | ||||||
14 | Indemnity Mortality Table; and for policies issued
| ||||||
15 | prior to January 1, 1961, the Inter-Company Double | ||||||
16 | Indemnity Mortality
Table. Either table shall be | ||||||
17 | combined with a mortality table permitted for
| ||||||
18 | calculating the reserves for life insurance policies.
| ||||||
19 | (vii) For Group Life Insurance, life insurance | ||||||
20 | issued on the
substandard basis and other special | ||||||
21 | benefits--such tables as may be
approved by the | ||||||
22 | Director.
| ||||||
23 | (b) Except as otherwise provided in paragraph (f) of | ||||||
24 | subsection (3),
subsection (5), and subsection (7) | ||||||
25 | reserves according to the Commissioners
reserve valuation | ||||||
26 | method, for the life insurance and endowment benefits of
|
| |||||||
| |||||||
1 | policies providing for a uniform amount of insurance and | ||||||
2 | requiring the
payment of uniform premiums shall be the | ||||||
3 | excess, if any, of the present
value, at the date of | ||||||
4 | valuation, of such future guaranteed benefits
provided for | ||||||
5 | by such policies, over the then present value of any future
| ||||||
6 | modified net premiums therefor. The modified net premiums | ||||||
7 | for any such
policy shall be such uniform percentage of the | ||||||
8 | respective contract premiums
for such benefits that the | ||||||
9 | present value, at the date of issue of the
policy, of all | ||||||
10 | such modified net premiums shall be equal to the sum of the
| ||||||
11 | then present value of such benefits provided for by the | ||||||
12 | policy and the
excess of (A) over (B), as follows:
| ||||||
13 | (A) A net level annual premium equal to the present | ||||||
14 | value, at the
date of issue, of such benefits provided | ||||||
15 | for after the first policy
year, divided by the present | ||||||
16 | value, at the date of issue, of an annuity
of one per | ||||||
17 | annum payable on the first and each subsequent | ||||||
18 | anniversary of
such policy on which a premium falls | ||||||
19 | due; provided, however, that such
net level annual | ||||||
20 | premium shall not exceed the net level annual premium
| ||||||
21 | on the 19 year premium whole life plan for insurance of | ||||||
22 | the same amount
at an age one year higher than the age | ||||||
23 | at issue of such policy.
| ||||||
24 | (B) A net one year term premium for such benefits | ||||||
25 | provided for in
the first policy year.
| ||||||
26 | For any life insurance policy issued on or after |
| |||||||
| |||||||
1 | January 1, 1987, for
which the contract premium in the | ||||||
2 | first policy year exceeds that of the
second year with no | ||||||
3 | comparable additional benefit being provided in that
first | ||||||
4 | year, which policy provides an endowment benefit or a cash | ||||||
5 | surrender
value or a combination thereof in an amount | ||||||
6 | greater than such excess
premium, the reserve according to | ||||||
7 | the Commissioners reserve
valuation method as of any policy | ||||||
8 | anniversary occurring on or before the
assumed ending date, | ||||||
9 | defined herein as the first policy anniversary on which
the | ||||||
10 | sum of any endowment benefit and any cash surrender value | ||||||
11 | then available
is greater than such excess premium, shall, | ||||||
12 | except as otherwise provided
in paragraph (f) of subsection | ||||||
13 | (3), be the greater of the reserve as of
such policy | ||||||
14 | anniversary calculated as described in the preceding part | ||||||
15 | of
this paragraph (b) and the reserve as of such policy | ||||||
16 | anniversary calculated
as described in the preceding part | ||||||
17 | of this paragraph (b) with (i) the value
defined in subpart | ||||||
18 | A of the preceding part of this paragraph (b) being reduced
| ||||||
19 | by 15% of the amount of such excess first year premium, | ||||||
20 | (ii) all present
values of benefits and premiums being | ||||||
21 | determined without reference to
premiums or benefits | ||||||
22 | provided for by the policy after the assumed ending
date, | ||||||
23 | (iii) the policy being assumed to mature on such date as an
| ||||||
24 | endowment, and (iv) the cash surrender value provided on | ||||||
25 | such date being
considered as an endowment benefit. In | ||||||
26 | making the above comparison, the
mortality and interest |
| |||||||
| |||||||
1 | bases stated in paragraph (a) of subsection (3) and
in | ||||||
2 | subsection 6 shall be used.
| ||||||
3 | Reserves according to the Commissioners reserve | ||||||
4 | valuation method for
(i) life insurance policies providing | ||||||
5 | for a varying amount of insurance
or requiring the payment | ||||||
6 | of varying premiums, (ii) group annuity and pure
endowment | ||||||
7 | contracts purchased under a retirement plan or plan of | ||||||
8 | deferred
compensation, established or maintained by an | ||||||
9 | employer (including a partnership
or sole proprietorship) | ||||||
10 | or by an employee organization, or by both, other
than a | ||||||
11 | plan providing individual retirement accounts or | ||||||
12 | individual retirement
annuities under Section 408 of the | ||||||
13 | Internal Revenue Code, as now or hereafter
amended, (iii) | ||||||
14 | disability and accidental death benefits in all policies
| ||||||
15 | and contracts, and (iv) all other benefits, except life
| ||||||
16 | insurance and endowment benefits in life insurance | ||||||
17 | policies and benefits
provided by all other annuity and | ||||||
18 | pure endowment contracts, shall be
calculated by a method | ||||||
19 | consistent with the principles of this paragraph
(b), | ||||||
20 | except that any extra premiums charged because of | ||||||
21 | impairments or
special hazards shall be disregarded in the | ||||||
22 | determination of modified
net premiums.
| ||||||
23 | (c) In no event shall a company's aggregate reserves | ||||||
24 | for all life
insurance policies, excluding disability and | ||||||
25 | accidental death benefits be
less than the aggregate | ||||||
26 | reserves calculated in accordance with the methods
set |
| |||||||
| |||||||
1 | forth in paragraphs (b), (f), and (g) of subsection (3) and | ||||||
2 | in
subsection (5) and the mortality table or tables and | ||||||
3 | rate or rates of
interest used in calculating | ||||||
4 | non-forfeiture benefits for such policies.
| ||||||
5 | (d) In no event shall the aggregate reserves for all | ||||||
6 | policies,
contracts, and benefits be less than the | ||||||
7 | aggregate reserves determined by
the qualified actuary to | ||||||
8 | be necessary to render the opinion required by
subsection | ||||||
9 | (1a).
| ||||||
10 | (e) Reserves for any category of policies, contracts or | ||||||
11 | benefits as
established by the Director, may be calculated, | ||||||
12 | at the option of the
company, according to any standards | ||||||
13 | which produce greater aggregate
reserves for such category | ||||||
14 | than those calculated according to the
minimum standard | ||||||
15 | herein provided, but the rate or rates of interest used
for | ||||||
16 | policies and contracts, other than annuity and pure | ||||||
17 | endowment contracts,
shall not be higher than the | ||||||
18 | corresponding rate or rates of interest
used in calculating | ||||||
19 | any nonforfeiture benefits provided for therein.
| ||||||
20 | (f) If in any contract year the gross premium charged | ||||||
21 | by any life
insurance company on any policy or contract is | ||||||
22 | less than the valuation net
premium for the policy or | ||||||
23 | contract calculated by the method used in
calculating the | ||||||
24 | reserve thereon but using the minimum valuation standards
| ||||||
25 | of mortality and rate of interest, the minimum reserve | ||||||
26 | required for such
policy or contract shall be the greater |
| |||||||
| |||||||
1 | of either the reserve calculated
according to the mortality | ||||||
2 | table, rate of interest, and method actually
used for such | ||||||
3 | policy or contract, or the reserve calculated by the method
| ||||||
4 | actually used for such policy or contract but using the | ||||||
5 | minimum standards
of mortality and rate of interest and | ||||||
6 | replacing the valuation net premium
by the actual gross | ||||||
7 | premium in each contract year for which the valuation
net | ||||||
8 | premium exceeds the actual gross premium. The minimum | ||||||
9 | valuation
standards of mortality and rate of interest | ||||||
10 | referred to in this paragraph
(f) are those standards | ||||||
11 | stated in subsection (6) and paragraph (a) of
subsection | ||||||
12 | (3).
| ||||||
13 | For any life insurance policy issued on or after | ||||||
14 | January 1, 1987, for which
the gross premium in the first | ||||||
15 | policy year exceeds that of the second year
with no | ||||||
16 | comparable additional benefit provided in that first year, | ||||||
17 | which
policy provides an endowment benefit or a cash | ||||||
18 | surrender value or a combination
thereof in an amount | ||||||
19 | greater than such excess premium, the foregoing provisions
| ||||||
20 | of this paragraph (f) shall be applied as if the method | ||||||
21 | actually used in
calculating the reserve for such policy | ||||||
22 | were the method described in paragraph
(b) of subsection | ||||||
23 | (3), ignoring the second paragraph of said paragraph (b).
| ||||||
24 | The minimum reserve at each policy anniversary of such a | ||||||
25 | policy shall be
the greater of the minimum reserve | ||||||
26 | calculated in accordance with paragraph
(b) of subsection |
| |||||||
| |||||||
1 | (3), including the second paragraph of said paragraph
(b), | ||||||
2 | and the minimum reserve calculated in accordance with this | ||||||
3 | paragraph (f).
| ||||||
4 | (g) In the case of any plan of life insurance which | ||||||
5 | provides for future
premium determination, the amounts of | ||||||
6 | which are to be determined by the
insurance company based | ||||||
7 | on then estimates of future experience, or in the
case of | ||||||
8 | any plan of life insurance or annuity which is of such a | ||||||
9 | nature that
the minimum reserves cannot be determined by | ||||||
10 | the methods described in
paragraphs (b) and (f) of | ||||||
11 | subsection (3) and subsection (5), the reserves
which are | ||||||
12 | held under any such plan shall:
| ||||||
13 | (i) be appropriate in relation to the benefits and | ||||||
14 | the pattern of
premiums for that plan, and
| ||||||
15 | (ii) be computed by a method which is consistent | ||||||
16 | with the principles
of this Standard Valuation Law, as | ||||||
17 | determined by regulations promulgated by
the Director.
| ||||||
18 | (4) Except as provided in subsection (6), the minimum | ||||||
19 | standard for
the valuation of all individual annuity and pure | ||||||
20 | endowment contracts issued
on or after the operative date of | ||||||
21 | this subsection, as defined herein, and
for all annuities and | ||||||
22 | pure endowments purchased on or after such operative
date under | ||||||
23 | group annuity and pure endowment contracts shall be the
| ||||||
24 | Commissioners Reserve valuation methods defined in paragraph | ||||||
25 | (b) of
subsection (3) and subsection (5) and the following | ||||||
26 | tables and interest rates:
|
| |||||||
| |||||||
1 | (a) For individual single premium immediate annuity | ||||||
2 | contracts, excluding
any disability and accidental death | ||||||
3 | benefits in such contracts, the 1971
Individual Annuity | ||||||
4 | Mortality Table, any individual annuity mortality table
| ||||||
5 | adopted after 1980 by the National Association of Insurance | ||||||
6 | Commissioners
and approved by regulations promulgated by | ||||||
7 | the Director for use in determining
the minimum standard of | ||||||
8 | valuation for such contracts, or any modification
of those | ||||||
9 | tables approved by the Director, and 7 1/2% interest.
| ||||||
10 | (b) For individual and pure endowment contracts other | ||||||
11 | than single premium
annuity contracts, excluding any | ||||||
12 | disability and accidental death benefits
in such | ||||||
13 | contracts, the 1971 Individual Annuity Mortality Table, | ||||||
14 | any
individual annuity mortality table adopted after 1980 | ||||||
15 | by the National
Association of Insurance Commissioners and | ||||||
16 | approved by regulations
promulgated by the Director for use | ||||||
17 | in determining the minimum standard of
valuation for such | ||||||
18 | contracts, or any modification of those tables
approved by | ||||||
19 | the Director, and 5 1/2% interest for single premium | ||||||
20 | deferred
annuity and pure endowment contracts and 4 1/2% | ||||||
21 | interest for all other such
individual annuity and pure | ||||||
22 | endowment contracts.
| ||||||
23 | (c) For all annuities and pure endowments purchased | ||||||
24 | under group annuity
and pure endowment contracts, | ||||||
25 | excluding any disability and accidental death
benefits | ||||||
26 | purchased under such contracts, the 1971 Group Annuity |
| |||||||
| |||||||
1 | Mortality
Table, any group annuity mortality table adopted | ||||||
2 | after 1980 by the National
Association of Insurance | ||||||
3 | Commissioners and approved by regulations promulgated
by | ||||||
4 | the Director for use in determining the minimum standard of | ||||||
5 | valuation
for such annuities and pure endowments, or any | ||||||
6 | modification of those
tables approved by the Director, and | ||||||
7 | 7 1/2% interest.
| ||||||
8 | After September 8, 1977, any company may file with the | ||||||
9 | Director a written
notice of its election to comply with the | ||||||
10 | provisions of this subsection
after a specified date before | ||||||
11 | January 1, 1979, which shall be the operative
date of this | ||||||
12 | subsection for such company; provided, a company may elect a
| ||||||
13 | different operative date for individual annuity and pure | ||||||
14 | endowment
contracts from that elected for group annuity and | ||||||
15 | pure endowment contracts.
If a company makes no election, the | ||||||
16 | operative date of this subsection for
such company shall be | ||||||
17 | January 1, 1979.
| ||||||
18 | (5) This subsection shall apply to all annuity and pure | ||||||
19 | endowment contracts
other than group annuity and pure endowment | ||||||
20 | contracts purchased under a
retirement plan or plan of deferred | ||||||
21 | compensation, established or maintained
by an employer | ||||||
22 | (including a partnership or sole proprietorship) or by an
| ||||||
23 | employee organization, or by both, other than a plan providing | ||||||
24 | individual
retirement accounts or individual retirement | ||||||
25 | annuities under Section 408
of the Internal Revenue Code, as | ||||||
26 | now or hereafter amended.
|
| |||||||
| |||||||
1 | Reserves according to the Commissioners annuity reserve | ||||||
2 | method for
benefits under annuity or pure endowment contracts, | ||||||
3 | excluding any
disability and accidental death benefits in such | ||||||
4 | contracts, shall be the
greatest of the respective excesses of | ||||||
5 | the present values, at the date of
valuation, of the future | ||||||
6 | guaranteed benefits, including guaranteed
nonforfeiture | ||||||
7 | benefits, provided for by such contracts at the end of each
| ||||||
8 | respective contract year, over the present value, at the date | ||||||
9 | of valuation,
of any future valuation considerations derived | ||||||
10 | from future gross
considerations, required by the terms of such | ||||||
11 | contract, that become payable
prior to the end of such | ||||||
12 | respective contract year. The future guaranteed
benefits shall | ||||||
13 | be determined by using the mortality table, if any, and the
| ||||||
14 | interest rate, or rates, specified in such contracts for | ||||||
15 | determining
guaranteed benefits. The valuation considerations | ||||||
16 | are the portions of the
respective gross considerations applied | ||||||
17 | under the terms of such contracts
to determine nonforfeiture | ||||||
18 | values.
| ||||||
19 | (6) (a) Applicability of this subsection. (i) The interest | ||||||
20 | rates used
in determining the minimum standard for the | ||||||
21 | valuation of
| ||||||
22 | (A) all life insurance policies issued in a | ||||||
23 | particular calendar year,
on or after the operative | ||||||
24 | date of subsection (4c) of Section 229.2 (Standard
| ||||||
25 | Nonforfeiture Law),
| ||||||
26 | (B) all individual annuity and pure endowment |
| |||||||
| |||||||
1 | contracts issued in a
particular calendar year ending | ||||||
2 | on or after December 31, 1983,
| ||||||
3 | (C) all annuities and pure endowments purchased in | ||||||
4 | a particular calendar
year ending on or after December | ||||||
5 | 31, 1983, under group annuity and pure
endowment | ||||||
6 | contracts, and
| ||||||
7 | (D) the net increase in a particular calendar year | ||||||
8 | ending after December
31, 1983, in amounts held under | ||||||
9 | guaranteed interest contracts
| ||||||
10 | shall be the calendar year statutory valuation interest | ||||||
11 | rates, as defined
in this subsection.
| ||||||
12 | (b) Calendar Year Statutory Valuation Interest Rates.
| ||||||
13 | (i) The calendar year statutory valuation interest | ||||||
14 | rates shall be determined
according to the following | ||||||
15 | formulae, rounding "I" to the nearest .25%.
| ||||||
16 | (A) For life insurance,
| ||||||
17 | I = .03 + W (R1 - .03) + W/2 (R2 - .09).
| ||||||
18 | (B) For single premium immediate annuities and | ||||||
19 | annuity benefits
involving life contingencies | ||||||
20 | arising from other annuities with cash
settlement | ||||||
21 | options and from guaranteed interest contracts | ||||||
22 | with cash settlement options,
| ||||||
23 | I = .03 + W (R - .03) or with prior approval of | ||||||
24 | the Director I = .03 + W (Rq - .03).
| ||||||
25 | For the purposes of this subparagraph (i), "I" | ||||||
26 | equals the calendar year
statutory valuation interest |
| |||||||
| |||||||
1 | rate, "R" is the reference interest rate defined
in | ||||||
2 | this subsection, "R1" is the lesser of R and .09, "R2" | ||||||
3 | is the greater
of R and .09, "Rq" is the quarterly | ||||||
4 | reference interest rate defined in
this subsection, | ||||||
5 | and "W" is the weighting factor defined in this | ||||||
6 | subsection.
| ||||||
7 | (C) For other annuities with cash settlement | ||||||
8 | options and guaranteed interest
contracts with | ||||||
9 | cash settlement options, valued on an issue year | ||||||
10 | basis, except
as stated in (B), the formula for | ||||||
11 | life insurance stated in (A) applies to
annuities | ||||||
12 | and guaranteed interest contracts with guarantee | ||||||
13 | durations in
excess of 10 years, and the formula | ||||||
14 | for single premium immediate annuities
stated in | ||||||
15 | (B) above applies to annuities and guaranteed | ||||||
16 | interest contracts
with guarantee durations of 10 | ||||||
17 | years or less.
| ||||||
18 | (D) For other annuities with no cash | ||||||
19 | settlement options and for
guaranteed interest | ||||||
20 | contracts with no cash settlement options, the | ||||||
21 | formula
for single premium immediate annuities | ||||||
22 | stated in (B) applies.
| ||||||
23 | (E) For other annuities with cash settlement | ||||||
24 | options and
guaranteed interest contracts with | ||||||
25 | cash settlement options, valued on a
change in fund | ||||||
26 | basis, the formula for single premium immediate |
| ||||||||||||||
| ||||||||||||||
1 | annuities
stated in (B) applies.
| |||||||||||||
2 | (ii) If the calendar year statutory valuation | |||||||||||||
3 | interest rate for
any life insurance policy issued in | |||||||||||||
4 | any calendar year determined without
reference to this | |||||||||||||
5 | subparagraph differs from the corresponding actual | |||||||||||||
6 | rate
for similar policies issued in the immediately | |||||||||||||
7 | preceding calendar year by
less than .5%, the calendar | |||||||||||||
8 | year statutory valuation interest rate for such
life | |||||||||||||
9 | insurance policy shall be the corresponding actual | |||||||||||||
10 | rate for the
immediately preceding calendar year. For | |||||||||||||
11 | purposes of applying this
subparagraph, the calendar | |||||||||||||
12 | year statutory valuation interest rate for life
| |||||||||||||
13 | insurance policies issued in a calendar year shall be | |||||||||||||
14 | determined for 1980,
using the reference interest rate | |||||||||||||
15 | defined for 1979, and shall be determined
for each | |||||||||||||
16 | subsequent calendar year regardless of when subsection | |||||||||||||
17 | (4c) of
Section 229.2 (Standard Nonforfeiture Law) | |||||||||||||
18 | becomes operative.
| |||||||||||||
19 | (c) Weighting Factors.
| |||||||||||||
20 | (i) The weighting factors referred to in the | |||||||||||||
21 | formulae stated in
paragraph (b) are given in the | |||||||||||||
22 | following tables.
| |||||||||||||
23 | (A) Weighting Factors for Life Insurance.
| |||||||||||||
|
| ||||||||||||||
| ||||||||||||||
| ||||||||||||||
4 | For life insurance, the guarantee duration is | |||||||||||||
5 | the maximum number of
years the life insurance can | |||||||||||||
6 | remain in force on a basis guaranteed in the
policy | |||||||||||||
7 | or under options to convert to plans of life | |||||||||||||
8 | insurance with premium
rates or nonforfeiture | |||||||||||||
9 | values or both which are guaranteed in the original
| |||||||||||||
10 | policy.
| |||||||||||||
11 | (B) The weighting factor for single premium | |||||||||||||
12 | immediate annuities
and for annuity benefits | |||||||||||||
13 | involving life contingencies arising from other
| |||||||||||||
14 | annuities with cash settlement options and | |||||||||||||
15 | guaranteed interest contracts
with cash settlement | |||||||||||||
16 | options is .80.
| |||||||||||||
17 | (C) The weighting factors for other annuities | |||||||||||||
18 | and for guaranteed
interest contracts, except as | |||||||||||||
19 | stated in (B) of this subparagraph (i), shall
be as | |||||||||||||
20 | specified in tables (1), (2), and (3) of this | |||||||||||||
21 | subpart (C), according to
the rules and | |||||||||||||
22 | definitions in (4), (5) and (6) of this subpart | |||||||||||||
23 | (C).
| |||||||||||||
24 | (1) For annuities and guaranteed interest | |||||||||||||
25 | contracts valued on
an issue year basis.
| |||||||||||||
|
| ||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
9 | (2) For annuities and guaranteed interest | |||||||||||||||||||||||||||||||||
10 | contracts valued on a change
in fund basis, the | |||||||||||||||||||||||||||||||||
11 | factors shown in (1) for Plan Types A, B and C are
| |||||||||||||||||||||||||||||||||
12 | increased by .15, .25 and .05, respectively.
| |||||||||||||||||||||||||||||||||
13 | (3) For annuities and guaranteed interest | |||||||||||||||||||||||||||||||||
14 | contracts valued on an issue
year basis, other than | |||||||||||||||||||||||||||||||||
15 | those with no cash settlement options, which do not
| |||||||||||||||||||||||||||||||||
16 | guarantee interest on considerations received more | |||||||||||||||||||||||||||||||||
17 | than one year after
issue or purchase, and for | |||||||||||||||||||||||||||||||||
18 | annuities and guaranteed interest contracts
valued | |||||||||||||||||||||||||||||||||
19 | on a change in fund basis which do not guarantee | |||||||||||||||||||||||||||||||||
20 | interest rates on
considerations received more | |||||||||||||||||||||||||||||||||
21 | than 12 months beyond the valuation date, the
| |||||||||||||||||||||||||||||||||
22 | factors shown in (1), or derived in (2), for Plan | |||||||||||||||||||||||||||||||||
23 | Types A, B and C are
increased by .05.
| |||||||||||||||||||||||||||||||||
24 | (4) For other annuities with cash settlement | |||||||||||||||||||||||||||||||||
25 | options and guaranteed
interest contracts with | |||||||||||||||||||||||||||||||||
26 | cash settlement options, the guarantee duration
is |
| |||||||
| |||||||
1 | the number of years for which the contract | ||||||
2 | guarantees interest rates
in excess of the | ||||||
3 | calendar year statutory valuation interest rate | ||||||
4 | for life
insurance policies with guarantee | ||||||
5 | durations in excess of 20 years. For
other | ||||||
6 | annuities with no cash settlement options, and for | ||||||
7 | guaranteed
interest contracts with no cash | ||||||
8 | settlement options, the guarantee duration
is the | ||||||
9 | number of years from the date of issue or date of | ||||||
10 | purchase to the
date annuity benefits are | ||||||
11 | scheduled to commence.
| ||||||
12 | (5) The plan types used in the above tables are | ||||||
13 | defined as follows.
| ||||||
14 | Plan Type A is a plan under which the | ||||||
15 | policyholder may not withdraw
funds, or may | ||||||
16 | withdraw funds at any time but only (a) with an | ||||||
17 | adjustment to
reflect changes in interest rates or | ||||||
18 | asset values since receipt of the
funds by the | ||||||
19 | insurance company, (b) without such an adjustment | ||||||
20 | but in
installments over 5 years or more, or (c) as | ||||||
21 | an immediate life annuity.
| ||||||
22 | Plan Type B is a plan under which the | ||||||
23 | policyholder may not withdraw
funds before | ||||||
24 | expiration of the interest rate guarantee, or may | ||||||
25 | withdraw
funds before such expiration but only (a) | ||||||
26 | with an adjustment to reflect
changes in interest |
| |||||||
| |||||||
1 | rates or asset values since receipt of the funds by | ||||||
2 | the
insurance company, or (b) without such | ||||||
3 | adjustment but in installments over
5 years or | ||||||
4 | more. At the end of the interest rate guarantee, | ||||||
5 | funds may be
withdrawn without such adjustment in a | ||||||
6 | single sum or installments over less
than 5 years.
| ||||||
7 | Plan Type C is a plan under which the | ||||||
8 | policyholder may withdraw funds
before expiration | ||||||
9 | of the interest rate guarantee in a single sum or
| ||||||
10 | installments over less than 5 years either (a) | ||||||
11 | without adjustment to
reflect changes in interest | ||||||
12 | rates or asset values since receipt of the
funds by | ||||||
13 | the insurance company, or (b) subject only to a | ||||||
14 | fixed surrender
charge stipulated in the contract | ||||||
15 | as a percentage of the fund.
| ||||||
16 | (6) A company may elect to value guaranteed | ||||||
17 | interest contracts
with cash settlement options | ||||||
18 | and annuities with cash settlement options on
| ||||||
19 | either an issue year basis or on a change in fund | ||||||
20 | basis. Guaranteed
interest contracts with no cash | ||||||
21 | settlement options and other annuities with
no | ||||||
22 | cash settlement options shall be valued on an issue | ||||||
23 | year basis. As used
in this Section, "issue year | ||||||
24 | basis of valuation" refers to a valuation
basis | ||||||
25 | under which the interest rate used to determine the | ||||||
26 | minimum valuation
standard for the entire duration |
| |||||||
| |||||||
1 | of the annuity or guaranteed interest
contract is | ||||||
2 | the calendar year valuation interest rate for the | ||||||
3 | year of issue
or year of purchase of the annuity or | ||||||
4 | guaranteed interest contract.
"Change in fund | ||||||
5 | basis of valuation", as used in this Section, | ||||||
6 | refers to a
valuation basis under which the | ||||||
7 | interest rate used to determine the minimum
| ||||||
8 | valuation standard applicable to each change in | ||||||
9 | the fund held under the
annuity or guaranteed | ||||||
10 | interest contract is the calendar year valuation
| ||||||
11 | interest rate for the year of the change in the | ||||||
12 | fund.
| ||||||
13 | (d) Reference Interest Rate. (i) The reference | ||||||
14 | interest rate referred to
in paragraph (b) of this | ||||||
15 | subsection is defined as follows.
| ||||||
16 | (A) For all life insurance, the reference interest | ||||||
17 | rate is the lesser
of the average over a period of 36 | ||||||
18 | months, and the average over a period
of 12 months, | ||||||
19 | with both periods ending on June 30, or with prior | ||||||
20 | approval
of the Director ending on December 31, of the | ||||||
21 | calendar year next
preceding the year of issue, of | ||||||
22 | Moody's Corporate Bond Yield Average - Monthly
Average | ||||||
23 | Corporates, as published by Moody's Investors Service, | ||||||
24 | Inc.
| ||||||
25 | (B) For single premium immediate annuities and for | ||||||
26 | annuity benefits
involving life contingencies arising |
| |||||||
| |||||||
1 | from other annuities with cash
settlement options and | ||||||
2 | guaranteed interest contracts with cash settlement
| ||||||
3 | options, the reference interest rate is the average | ||||||
4 | over a period of 12
months, ending on June 30, or with | ||||||
5 | prior approval of the Director ending on
December 31, | ||||||
6 | of the calendar year of issue or year of purchase, of | ||||||
7 | Moody's
Corporate Bond Yield Average - Monthly Average | ||||||
8 | Corporates, as published by
Moody's Investors Service, | ||||||
9 | Inc.
| ||||||
10 | (C) For annuities with cash settlement options and | ||||||
11 | guaranteed interest
contracts with cash settlement | ||||||
12 | options, valued on a year of issue basis,
except those | ||||||
13 | described in (B), with guarantee durations in excess of | ||||||
14 | 10
years, the reference interest rate is the lesser of | ||||||
15 | the average over a period
of 36 months and the average | ||||||
16 | over a period of 12 months, ending on June
30, or with | ||||||
17 | prior approval of the Director ending on December 31, | ||||||
18 | of
the calendar year of issue or purchase, of Moody's | ||||||
19 | Corporate Bond
Yield Average-Monthly Average | ||||||
20 | Corporates, as published by Moody's Investors
Service, | ||||||
21 | Inc.
| ||||||
22 | (D) For other annuities with cash settlement | ||||||
23 | options and guaranteed
interest contracts with cash | ||||||
24 | settlement options, valued on a year of issue
basis, | ||||||
25 | except those described in (B), with guarantee | ||||||
26 | durations of 10 years
or less, the reference interest |
| |||||||
| |||||||
1 | rate is the average over a period of 12
months, ending | ||||||
2 | on June 30, or with prior approval of the Director | ||||||
3 | ending on
December 31, of the calendar year of issue or | ||||||
4 | purchase, of Moody's
Corporate Bond Yield | ||||||
5 | Average-Monthly Average Corporates, as published by
| ||||||
6 | Moody's Investors Service, Inc.
| ||||||
7 | (E) For annuities with no cash settlement options | ||||||
8 | and for guaranteed
interest contracts with no cash | ||||||
9 | settlement options, the reference interest
rate is the | ||||||
10 | average over a period of 12 months, ending on June 30, | ||||||
11 | or with
prior approval of the Director ending on | ||||||
12 | December 31, of the calendar year
of issue or purchase, | ||||||
13 | of Moody's Corporate Bond Yield Average-Monthly
| ||||||
14 | Average Corporates, as published by Moody's Investors | ||||||
15 | Service, Inc.
| ||||||
16 | (F) For annuities with cash settlement options and | ||||||
17 | guaranteed interest
contracts with cash settlement | ||||||
18 | options, valued on a change in fund basis,
except those | ||||||
19 | described in (B), the reference interest rate is the | ||||||
20 | average
over a period of 12 months, ending on June 30, | ||||||
21 | or with prior approval of
the Director ending on | ||||||
22 | December 31, of the calendar year of the
change in the | ||||||
23 | fund, of Moody's Corporate Bond Yield Average-Monthly | ||||||
24 | Average
Corporates, as published by Moody's Investors | ||||||
25 | Service, Inc.
| ||||||
26 | (G) For annuities valued by a formula based on Rq, |
| |||||||
| |||||||
1 | the quarterly
reference interest rate is, with the | ||||||
2 | prior approval of the Director, the
average within each | ||||||
3 | of the 4 consecutive calendar year quarters
ending on | ||||||
4 | March 31, June 30, September 30 and December 31 of the | ||||||
5 | calendar
year of issue or year of purchase of Moody's | ||||||
6 | Corporate Bond Yield
Average-Monthly Average | ||||||
7 | Corporates, as published by Moody's Investors
Service, | ||||||
8 | Inc.
| ||||||
9 | (e) Alternative Method for Determining Reference | ||||||
10 | Interest Rates.
In the event that the Moody's Corporate | ||||||
11 | Bond Yield Average-Monthly Average
Corporates is no longer | ||||||
12 | published by Moody's Investors Services, Inc., or
in the | ||||||
13 | event that the National Association of Insurance | ||||||
14 | Commissioners
determines that Moody's Corporate Bond Yield | ||||||
15 | Average-Monthly Average
Corporates as published by Moody's | ||||||
16 | Investors Service, Inc. is no longer
appropriate for the | ||||||
17 | determination of the reference interest rate, then an
| ||||||
18 | alternative method for determination of the reference | ||||||
19 | interest rate, which
is adopted by the National Association | ||||||
20 | of Insurance Commissioners and
approved by regulations | ||||||
21 | promulgated by the Director, may be substituted.
| ||||||
22 | (7) Minimum Standards for Health (Disability, Accident and | ||||||
23 | Sickness)
Plans. The Director shall promulgate a regulation | ||||||
24 | containing the minimum
standards applicable to the valuation of | ||||||
25 | health (disability, sickness and
accident) plans.
| ||||||
26 | (Source: P.A. 91-357, eff. 7-29-99 .)
|
| |||||||
| |||||||
1 | (215 ILCS 5/531.09) (from Ch. 73, par. 1065.80-9)
| ||||||
2 | Sec. 531.09. Assessments. | ||||||
3 | (1) For the purpose of providing the funds
necessary to | ||||||
4 | carry out the powers and duties of the Association, the board
| ||||||
5 | of directors shall assess the member insurers, separately for | ||||||
6 | each account, at such
times and for such amounts as the board | ||||||
7 | finds necessary. Assessments shall
be due not less than 30 days | ||||||
8 | after written notice to the member insurers
and shall accrue | ||||||
9 | interest from the due date at such adjusted rate as is
| ||||||
10 | established under Section 6621 of Chapter 26 of the United | ||||||
11 | States Code and
such interest shall be compounded daily.
| ||||||
12 | (2) There shall be 2 classes of assessments, as follows:
| ||||||
13 | (a) Class A assessments shall be made for the purpose | ||||||
14 | of meeting administrative
costs and other general expenses | ||||||
15 | and examinations conducted under the authority
of the | ||||||
16 | Director under subsection (5) of Section 531.12.
| ||||||
17 | (b) Class B assessments shall be made to the extent | ||||||
18 | necessary to carry
out the powers and duties of the | ||||||
19 | Association under Section 531.08 with regard
to an impaired | ||||||
20 | or insolvent domestic insurer or insolvent foreign or alien | ||||||
21 | insurers.
| ||||||
22 | (3) (a) The amount of any Class A assessment shall be | ||||||
23 | determined at the discretion of the board of directors
by the
| ||||||
24 | Board and such assessments shall
may be authorized and called
| ||||||
25 | made on a non-pro rata basis. Such assessments shall not exceed |
| |||||||
| |||||||
1 | $200
per company in any one calendar year. The amount of any | ||||||
2 | Class B
assessment shall be allocated for assessment
purposes | ||||||
3 | among the accounts
and subaccounts pursuant to an allocation | ||||||
4 | formula which may be based on
the premiums or reserves of the | ||||||
5 | impaired or insolvent insurer or any other
standard deemed by | ||||||
6 | the board in its sole discretion as being fair and
reasonable | ||||||
7 | under the circumstances.
| ||||||
8 | (b) Class B assessments against member insurers for | ||||||
9 | each account and
subaccount shall
be in the proportion that | ||||||
10 | the premiums received on business in this State
by each | ||||||
11 | assessed member insurer on policies or contracts covered by
| ||||||
12 | each account or subaccount for the three most recent | ||||||
13 | calendar years
for which information is available | ||||||
14 | preceding the year in which the insurer
became impaired or | ||||||
15 | insolvent, as the case may be, bears to such premiums
| ||||||
16 | received on business in this State for such calendar years | ||||||
17 | by all assessed
member insurers.
| ||||||
18 | (c) Assessments for funds to meet the requirements of | ||||||
19 | the Association
with respect to an impaired or insolvent | ||||||
20 | insurer shall not be made until
necessary to implement the | ||||||
21 | purposes of this Article. Classification
of assessments
| ||||||
22 | under subsection (2) and computations of assessments under | ||||||
23 | this subsection
shall be made with a reasonable degree of | ||||||
24 | accuracy, recognizing that exact
determinations may not | ||||||
25 | always be possible.
| ||||||
26 | (4) The Association may abate or defer, in whole or in |
| |||||||
| |||||||
1 | part, the assessment
of a member insurer if, in the opinion of | ||||||
2 | the board, payment of the assessment
would endanger the ability | ||||||
3 | of the member insurer to fulfill its contractual
obligations. | ||||||
4 | The total of all assessments upon a member insurer for the
life | ||||||
5 | and annuity
account and for each subaccount thereunder may not | ||||||
6 | in any one calendar
year exceed 2% and for the health account | ||||||
7 | may not in any one calendar
year exceed 2% of such insurer's
| ||||||
8 | average premiums received in this State on the policies and | ||||||
9 | contracts
covered by the account or subaccount during the three | ||||||
10 | calendar years
preceding the year in which the insurer became | ||||||
11 | an impaired or insolvent
insurer. If a one percent assessment | ||||||
12 | for any subaccount of the life and
annuity account in any one | ||||||
13 | year does not provide an amount sufficient to
carry out the | ||||||
14 | responsibilities of the Association, then pursuant to
| ||||||
15 | subsection 3(b), the board shall access all subaccounts of the | ||||||
16 | life and
annuity account for the necessary additional amount, | ||||||
17 | subject to the maximum
stated in this subsection.
| ||||||
18 | (5) In the event an assessment against a member insurer is | ||||||
19 | abated, or deferred,
in whole or in part, because of the | ||||||
20 | limitations set forth in subsection (4) of this
Section the | ||||||
21 | amount by which such assessment is abated or deferred, may be
| ||||||
22 | assessed against the other member insurers in a manner | ||||||
23 | consistent with the
basis for assessments set forth in this | ||||||
24 | Section. If the maximum assessment,
together with the other | ||||||
25 | assets of the Association in either account, does
not provide | ||||||
26 | in any
one year in either account an amount sufficient to carry |
| |||||||
| |||||||
1 | out the
responsibilities
of the Association, the necessary | ||||||
2 | additional funds may be assessed as soon
thereafter
as | ||||||
3 | permitted by this Article.
The board may provide in the plan of | ||||||
4 | operation a method of allocating
funds among claims, whether | ||||||
5 | relating to one or more impaired or insolvent
insurers, when | ||||||
6 | the maximum assessment will be insufficient to cover | ||||||
7 | anticipated
claims.
| ||||||
8 | (6) The board may, by an equitable method as established in | ||||||
9 | the
plan of operation, refund to member insurers, in proportion | ||||||
10 | to the contribution
of each insurer to that account, the amount | ||||||
11 | by which the assets of the account
exceed the amount the board | ||||||
12 | finds is necessary to carry out during the coming
year the | ||||||
13 | obligations of the Association with regard to that account, | ||||||
14 | including
assets accruing from net realized gains and income | ||||||
15 | from investments. A
reasonable amount may be retained in any | ||||||
16 | account to provide funds for the
continuing expenses of the | ||||||
17 | Association and for future losses if refunds are
impractical.
| ||||||
18 | (7) An assessment is deemed to occur on the date upon which | ||||||
19 | the board
votes such assessment. The board may defer calling | ||||||
20 | the payment of the
assessment or may call for payment in one or | ||||||
21 | more installments.
| ||||||
22 | (8) It is proper for any member insurer, in determining its | ||||||
23 | premium
rates and policyowner dividends as to any kind of | ||||||
24 | insurance within the scope of
this Article, to consider the | ||||||
25 | amount reasonably necessary to meet its assessment
obligations | ||||||
26 | under this Article.
|
| |||||||
| |||||||
1 | (9) The Association must issue to each insurer paying a
| ||||||
2 | Class B assessment
under this Article a certificate of | ||||||
3 | contribution,
in a form acceptable to the
Director, for the | ||||||
4 | amount of the assessment so paid. All outstanding certificates
| ||||||
5 | are of equal
dignity and priority without reference to amounts | ||||||
6 | or dates of issue. A certificate
of contribution may be shown | ||||||
7 | by the insurer in its financial statement as an asset
in such | ||||||
8 | form and for such amount, if any, and period of time as the | ||||||
9 | Director
may approve, provided the insurer shall in any event | ||||||
10 | at its option have
the right to show a certificate of | ||||||
11 | contribution as an admitted asset at
percentages of the | ||||||
12 | original face amount for calendar years as follows:
| ||||||
13 | 100% for the calendar year after the year of issuance;
| ||||||
14 | 80% for the second calendar year after the year of | ||||||
15 | issuance;
| ||||||
16 | 60% for the third calendar year after the year of issuance;
| ||||||
17 | 40% for the fourth calendar year after the year of | ||||||
18 | issuance;
| ||||||
19 | 20% for the fifth calendar year after the year of issuance.
| ||||||
20 | (Source: P.A. 86-753.)
|