Exposure of Amendment Proposal
NPR Requirements
Exposed for comment through January 15, 2016
Send comments to Reggie Mazyck
(RMazyck@NAIC.ORG)
Life Actuarial (A) Task Force/ Health Actuarial (B) Task Force
Amendment Proposal Form*
1.
Identify yourself, your affiliation and a very brief description (title) of the issue.
John Bruins, ACLI – Modifications to Net Premium Reserve requirements
2.
Identify the document, including the date if the document is “released for comment,” and the location in
the document where the amendment is proposed:
VM-20, June 18, 2015 adopted version, VM-01 and VM-20
3.
Show what changes are needed by providing a red-line version of the original verbiage with deletions and
identify the verbiage to be deleted, inserted or changed by providing a red-line (turn on “track changes”
in Word®) version of the verbiage. (You may do this through an attachment.)
See following 2 pages
4.
State the reason for the proposed amendment? (You may do this through an attachment.)
This provides for certain edits to clarify the requirements for certain items that have been identified and
concerning or unclear.
* This form is not intended for minor corrections, such as formatting, grammar, cross–references or spelling. Those types of changes do not
require action by the entire group and may be submitted via letter or email to the NAIC staff support person for the NAIC group where the
document originated.
NAIC Staff Comments:
Dates: Received
Reviewed by Staff
Notes:
W:\National Meetings\2010\...\TF\LHA\
Distributed
Considered
VM-01 – Definitions:
23.
A “secondary guarantee” is a guarantee that a policy will remain in force for more than five
1
years (the secondary guarantee period) even if its fund value is exhausted, subject to one or more
conditions.
27.
The term “universal life insurance policy” means a life insurance policy where separately
identified interest credits (other than in connection with dividend accumulations, premium deposit
funds, or other supplementary accounts) and mortality and expense charges are made to the policy. A
universal life insurance policy may provide for other credits and charges, such as charges for cost of
benefits provided by rider.
VM-20 – Requirements for Reserves for Life Insurance Policies
Section 3.
B. For purposes of this Section 3 and Section 6, the following definitions apply:
6.
For any universal life policy with a secondary guarantee period, during the secondary guarantee period
the net premium reserve shall be the greater of the reserve amount determined according to subsection
3.B.5, assuming the policy has no secondary guarantees, and the reserve amount for the policy
determined according to the methodology and requirements subsections 3.B.6.b through 3.B.6.e below.
C. Net Premium Reserve Assumptions
3.
Lapse Rates
a.
For policies that are not a universal life policies or riders containing a secondary guarantee or a
Term policy, the lapse rates used in determining the present values described in subsection 3.B
shall be 0% per year during the premium paying period and 0% per year thereafter.
b.
For Term Insurance policies, the annual lapse rates used to determine the present values described
in subsection 3.B shall vary by level premium period as stated below:
i.
10% per year during any level premium period of less than five years, except as noted in iii.
ii. 6% per year during any level premium period of five or more years, except as noted
in iii.
iii. For any policy with values subject to the requirements of C-45 {Note: C-45 is the
Actuarial guideline that defines NF parameters for ROP Term.} in VM-C, the annual
lapse rate is 6% for the first half of the initial level premium period, and 0% for the
remainder of the initial level premium period
1
Or five years or less if the specified premium for the secondary guarantee period is less than the net level reserve
premium for the secondary guarantee period based on the CSO valuation tables defined in this Section and the
valuation interest rates defined in this Section, or if the initial surrender charge is less than 100% of the first year
annualized specified premium for the secondary guaranteed period.
iv. 10% per year during any premium paying period after an initial level premium period of less
than five years.
v.
For policies or riders having a level premium of five years or longer, the lapse rate for the first
year following that level premium period shall be determined based on the length of the
current and renewal level premium periods and the percent increase in the gross premium per
$1,000 as shown in the table below instead of what would otherwise apply from i or ii above.
Length of
Current
Premium
Period
Length of
Renewal
Premium
Period
Percent increase
in gross
premium per
$1,000
Shock Lapse at
time of
premium
increase
1<PP≤5
1<PP≤5
ART
1<PP<=5
ART
ART
1<PP≤5
5<PP≤10
ART
ART
1<PP≤5
5<PP≤10
10<PP
ANY
ANY
< 400%
Over 400%
ANY
ANY
< 400%
Over 400%
ANY
ANY
ANY
50%
25%
70%
80%
50%
25%
70%
80%
70%
50%
50%
5<PP≤10
5<PP≤10
5<PP≤10
5<PP≤10
10<PP
10<PP
10<PP
10<PP
10<PP
c.
For universal life policies, with a secondary guarantee, the lapse rate, Lx+t, used to
determine the present values described in Subsection B at time t for an insured age x at
issue shall be determined as follow: