(1) The calendar year statutory valuation interest rates, as defined in this section,
must be the interest rates used in determining the minimum standard for the
valuation of:
(a) Life insurance policies issued in a particular calendar year, on or after the
operative date of section 10-7-305.1;
(b) Individual annuity and pure endowment contracts issued in a particular
calendar year on or after January 1, 1982;
(c) Annuities and pure endowments purchased in a particular calendar year
on or after January 1, 1982, under group annuity and pure endowment contracts; and
(d) The net increase, if any, in a particular calendar year after January 1, 1982,
in amounts held under guaranteed interest contracts.
(2) The calendar year statutory valuation interest rates (I) shall be
determined as follows, and the results rounded to the nearer one-quarter of one
percent:
(a) For life insurance:
I = .03 + W (R1 - .03) + W/2 (R2 - .09).
(b) (I) For single-premium immediate annuities and for annuity benefits
involving life contingencies arising from other annuities with cash settlement
options and from guaranteed interest contracts with cash settlement options:
I = .03 + W (R - .03).
(II) In the formulas used in paragraph (a) of this subsection (2) and this
paragraph (b), R1 is the lesser of R and .09, R2 is the greater of R and .09, R is
the reference interest rate defined in this section, and W is the weighting factor
defined in this section.
(c) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on an issue year basis, except as
stated in paragraph (b) of this subsection (2), the formula for life insurance stated in
paragraph (a) of this subsection (2) shall apply to annuities and guaranteed interest
contracts with guarantee durations in excess of ten years and the formula for
single-premium immediate annuities stated in said paragraph (b) shall apply to
annuities and guaranteed interest contracts with guarantee durations of ten years
or less.
(d) For other annuities with no cash settlement options and for guaranteed
interest contracts with no cash settlement options, the formula for single-premium
immediate annuities stated in paragraph (b) of this subsection (2) shall apply.
(e) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a change in fund basis, the
formula for single-premium immediate annuities stated in paragraph (b) of this
subsection (2) shall apply.
(3) (a) If the calendar year statutory valuation interest rate for any life
insurance policies issued in any calendar year determined without reference to this
paragraph (a) differs from the corresponding actual rate for similar policies issued
in the immediately preceding calendar year by less than one-half of one percent,
the calendar year statutory valuation interest rate for such life insurance policies
shall be equal to the corresponding actual rate for the immediately preceding
calendar year.
(b) For purposes of applying the provision of paragraph (a) of this subsection
(3), the calendar year statutory valuation interest rate for life insurance policies
issued in a calendar year shall be determined for 1980 (using the reference interest
rate defined for 1979) and shall be determined for each subsequent calendar year
regardless of when section 10-7-305.1 becomes operative.
(4) The weighting factors referred to in the formulas stated in subsection (2)
of this section are given in the following tables:
(a) (I) The weighting factors for life insurance:
GUARANTEE DURATIONWEIGHTING
(YEARS)FACTORS
10 or less.50
More than 10 but not more than 20.45
More than 20.35
(II) For life insurance, the guarantee duration is the maximum number of
years the life insurance can remain in force on a basis guaranteed in the policy or
under options to convert to plans of life insurance with premium rates or
nonforfeiture values or both which are guaranteed in the original policy.
(b) The weighting factor for single-premium immediate annuities and for
annuity benefits involving life contingencies arising from other annuities with cash
settlement options and from guaranteed interest contracts with cash settlement
options: .80
(c) The weighting factors for other annuities and for guaranteed interest
contracts, except as stated in paragraph (b) of this subsection (4), shall be as
specified in the following tables (subparagraphs (I), (II), and (III)) and according to
the following rules and definitions (subparagraphs (IV), (V), and (VI)):
(I) For annuities and guaranteed interest contracts valued on an issue year
basis:
WEIGHTING
GUARANTEE DURATIONFACTORS
(YEARS)FOR PLAN TYPE
A B C
5 or less.80 .60 .50
More than 5 but not more than 10.75 .60 .50
More than 10 but not more than 20.65 .50 .45
More than 20.45 .35 .35
(II) For annuities and guaranteed interest contracts valued on a change in
fund basis, the factors shown in subparagraph (I) of this paragraph (c) increased by:
PLAN TYPE
A B C
.15 .25 .05
(III) For annuities and guaranteed interest contracts valued on an issue year
basis (other than those with no cash settlement options) which do not guarantee
interest on considerations received more than one year after issue or purchase and
for annuities and guaranteed interest contracts valued on a change in fund basis
which do not guarantee interest rates on considerations received more than twelve
months beyond the valuation date, the factors shown in subparagraph (I) or derived
in subparagraph (II) of this paragraph (c) increased by:
PLAN TYPE
A B C
.05 .05 .05
(IV) For other annuities with cash settlement options and guaranteed
interest contracts with cash settlement options, the guarantee duration is the
number of years for which the contract guarantees interest rates in excess of the
calendar year statutory valuation interest rate for life insurance policies with
guarantee duration in excess of twenty years. For other annuities with no cash
settlement options and for guaranteed interest contracts with no cash settlement
options, the guarantee duration is the number of years from the date of issue or
date of purchase to the date annuity benefits are scheduled to commence.
(V) Plan type, as used in the tables in subparagraphs (I), (II), and (III) of this
paragraph (c), is defined as follows:
(A) Plan type A: At any time policyholder may withdraw funds only: (i) with an
adjustment to reflect changes in interest rates or asset values since receipt of the
funds by the insurance company; or (ii) without such adjustment but in installments
over five years or more; or (iii) as an immediate life annuity; or (iv) no withdrawal
permitted.
(B) Plan type B: Before expiration of the interest rate guarantee,
policyholder may withdraw funds only: (i) with adjustment to reflect changes in
interest rates or asset values since receipt of the funds by the insurance company;
or (ii) without such adjustment but in installments over five years or more; or (iii) no
withdrawal permitted. At the end of interest rate guarantee, funds may be
withdrawn without such adjustment in a single sum or installments over less than
five years.
(C) Plan type C: Policyholder may withdraw funds before expiration of
interest rate guarantee in a single sum or installments over less than five years
either: (i) without adjustment to reflect changes in interest rates or asset values
since receipt of the funds by the insurance company; or (ii) subject only to a fixed
surrender charge stipulated in the contract as a percentage of the fund.
(VI) A company may elect to value guaranteed interest contracts with cash
settlement options and annuities with cash settlement options on either an issue
year basis or on a change in fund basis. Guaranteed interest contracts with no cash
settlement options and other annuities with no cash settlement options must be
valued on an issue year basis. As used in this section, issue year basis of valuation
refers to a valuation basis under which the interest rate used to determine the
minimum valuation standard for the entire duration of the annuity or guaranteed
interest contract is the calendar year valuation interest rate for the year of issue or
year of purchase of the annuity or guaranteed interest contract, and change in
fund basis of valuation refers to a valuation basis under which the interest rate
used to determine the minimum valuation standard applicable to each change in the
fund held under the annuity or guaranteed interest contract is the calendar year
valuation interest rate for the year of the change in the fund.
(5) The reference interest rate referred to in subsection (2) of this section
shall be defined as follows:
(a) For all life insurance, the lesser of the average over a period of thirty-six
months and the average over a period of twelve months, ending on June 30 of the
calendar year next preceding the year of issue, of Moody's corporate bond yield
average - monthly average corporates, as published by Moody's Investors Service,
Inc.;
(b) For single-premium immediate annuities and for annuity benefits
involving life contingencies arising from other annuities with cash settlement
options and guaranteed interest contracts with cash settlement options, the
average over a period of twelve months, ending on June 30 of the calendar year of
issue or year of purchase, of Moody's corporate bond yield average - monthly
average corporates, as published by Moody's Investors Service, Inc.;
(c) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a year of issue basis, except as
stated in paragraph (b) of this subsection (5), with guarantee duration in excess of
ten years, the lesser of the average over a period of thirty-six months and the
average over a period of twelve months, ending on June 30 of the calendar year of
issue or purchase, of Moody's corporate bond yield average - monthly average
corporates, as published by Moody's Investors Service, Inc.;
(d) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a year of issue basis, except as
stated in paragraph (b) of this subsection (5), with guarantee duration of ten years
or less, the average over a period of twelve months, ending on June 30 of the
calendar year of issue or purchase, of Moody's corporate bond yield average -
monthly average corporates, as published by Moody's Investors Service, Inc.;
(e) For other annuities with no cash settlement options and for guaranteed
interest contracts with no cash settlement options, the average over a period of
twelve months, ending on June 30 of the calendar year of issue or purchase, of
Moody's corporate bond yield average - monthly average corporates, as published
by Moody's Investors Service, Inc.;
(f) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a change in fund basis, except as
stated in paragraph (b) of this subsection (5), the average over a period of twelve
months, ending on June 30 of the calendar year of the change in the fund, of
Moody's corporate bond yield average - monthly average corporates, as published
by Moody's Investors Service, Inc.
(6) In the event that Moody's corporate bond yield average - monthly
average corporates is no longer published by Moody's Investors Service, Inc., or in
the event that the NAIC determines that Moody's corporate bond yield average -
monthly average corporates, as published by Moody's Investors Service, Inc., is no
longer appropriate for the determination of the reference interest rate, then an
alternative method for determination of the reference interest rate, which is
adopted by the NAIC and approved by rule promulgated by the commissioner, may
be substituted.