§ 27-4.5-5 - Reserve valuation method – Life insurance and endowment benefits.
SECTION 27-4.5-5
§ 27-4.5-5 Reserve valuation method –Life insurance and endowment benefits. – (a) Except as provided in §§ 27-4.5-5.1, 27-4.5-8 and 27-4.5-10,reserves according to the commissioners' reserve valuation method for the lifeinsurance and endowment benefits of policies providing for a uniform amount ofinsurance and requiring the payment of uniform premiums shall be the excess, ifany, of the present value, at the date of valuation, of the future guaranteedbenefits provided for by the policies, over the then present value of anyfuture modified net premiums. The modified net premiums for any policy shall bea uniform percentage of the contract premiums for the benefits so that thepresent value, at the date of issue of the policy, of all modified net premiumsshall be equal to the sum of the then present value of the benefits providedfor by the policy and the excess of (1) over (2), as follows:
(1) A net level annual premium equal to the present value, atthe 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 perannum payable on the first and each subsequent anniversary of the policy onwhich a premium falls due; provided, that the net level annual premium shallnot exceed the net level annual premium on the nineteen (19) year premium wholelife plan for insurance of the same amount at an age one year higher than theage at issue of the policy; and
(2) A net one year term premium for the benefits provided forin the first policy year.
(b) For any life insurance policy issued on or after January1, 1994 for which the contract premium in the first policy year exceeds that ofthe second year and for which no comparable additional benefit is provided inthe first year for the excess, and which provides an endowment benefit or acash surrender value or a combination of them in an amount greater than theexcess premium, the reserve according to the commissioner's reserve valuationmethod as of any policy anniversary occurring on or before the assumed endingdate, defined as the first policy anniversary on which the sum of any endowmentbenefit and any cash surrender value then available is greater than the excesspremium, shall, except as provided in § 27-4.5-8, be the greater of thereserve as of the policy anniversary calculated as described in subsection (a)and the reserve as of the policy anniversary calculated as described insubsection (a), but with: (1) the value defined in subdivision (a)(1) beingreduced by fifteen percent (15%) of the amount of the excess first yearpremium, (2) all present values of benefits and premiums being determinedwithout reference to premiums or benefits provided for by the policy after theassumed ending date, (3) the policy being assumed to mature on the date as anendowment, and (4) the cash surrender value provided on the date beingconsidered as an endowment benefit. In making the comparison contained in thissubsection the mortality and interest basis stated in §§ 27-4.5-4 and27-4.5-4.1 shall be used.
(c) Reserves according to the commissioner's reservevaluation method for: (1) life insurance policies providing for a varyingamount of insurance or requiring the payment of varying premiums; (2) groupannuity and pure endowment contracts purchased under a retirement plan or planof deferred compensation, established or maintained by an employer including apartnership or sole proprietorship or by an employee organization, or by both,other than a plan providing individual retirement accounts or individualretirement annuities under 26 U.S.C. § 408; (3) disability and accidentaldeath benefits in all policies and contracts; and (4) all other benefits,except life insurance and endowment benefits in life insurance policies andbenefits provided by all other annuity and pure endowment contracts; shall becalculated by a method consistent with the principles of subsections (a) and(b) of this section.