Current through Register Vol. 54, No. 48, November 30, 2024
Section 82.32 - Reserve liabilities for the guaranteed minimum death benefit(a) Reserve liabilities for the guaranteed minimum death benefit shall be the reserve needed to provide for the contingency of death occurring when the guaranteed minimum death benefit exceeds the death benefit that would be paid in the absence of guarantee, shall be maintained in the general account of the insurer, and may not be less than the greater of the following minimum reserves: (1) The aggregate total of the term costs, if any, covering a period of 1 full year from the valuation date, or, if less, covering the period provided for in the guarantee not otherwise provided for by the reserves held in the separate account, on each variable life insurance contract, assuming an immediate 1/3 depreciation in the current value of the assets of the separate account followed by a net investment return equal to the assumed investment rate.(2) The aggregate total of the "attained age level" reserves on each variable life insurance contract. The "attained age level" reserve on each variable life insurance contract may not be less than zero and shall equal the "residue," as described in subparagraph (i), of the prior year's "attained age level" reserve on the contract, with any "residue" increased or decreased by a "payment computed on an attained age basis," as described in subparagraph (ii). (i) The "residue" of the prior year's "attained age level" reserve on each variable life insurance contract may not be less than zero and shall be determined by adding interest at the valuation interest rate to the prior year's reserve, deducting the tabular claims based on the "excess," if any, of the guaranteed minimum death benefit over the death benefit that would be payable in the absence of the guarantee, and by dividing the net result by the tabular probability of survival. The "excess" referred to in the preceding sentence shall be based on the actual level of death benefits that would have been in effect during the preceding year in the absence of the guarantee, taking appropriate account of the reserve assumptions regarding the distribution of death claim payments over the year.(ii) The "payment computed on an attained age basis" shall be computed so that the present value of a level payment of that amount each year over the future period for which charges for this risk will be collected under the contract is equal to A minus B minus C, where A is the present value of the future guaranteed minimum death benefits, B is the present value of the future death benefits that would be payable in the absence of the guarantee, and C is any "residue," as described in subparagraph (i), of the prior year's "attained age level" reserve on the variable life insurance contract. If no further charges for this risk shall be collected under the contract, the payment shall equal A minus B minus C.(iii) The present value of future death benefits that would be payable in the absence of a minimum guarantee, as referred to in subparagraph (ii) of this paragraph, shall be computed assuming a net investment return of the separate account which may differ from the assumed investment rate or the valuation interest rate, or both, but may not exceed the maximum interest rate permitted for the valuation of life insurance contracts.(b) The valuation interest rate and mortality table used in computing the two minimum reserves described in subsection (a)(1) and (2) shall conform to permissible standards for the valuation of life insurance contracts. In determining the minimum reserve, the company may employ suitable approximations and estimates, including, but not limited to, groupings and averages.The provisions of this § 82.32 adopted August 4, 1978, effective 9/5/1978, 8 Pa.B. 2171; amended April 28, 1989, effective 4/29/1989, 19 Pa.B. 1835; corrected June 30, 1989, effective retroactive to April 29, 1989, 19 Pa.B. 2754; amended May 22, 1992, effective 5/23/1992, 22 Pa.B. 2729.