(a)The interest rates used in determining
the minimum standard for the valuation of the following are the
calendar year statutory valuation interest rates described in this section:
(1)Life insurance contracts issued in a particular calendar year,
on or after the operative date of IC 27-1-12-7(dd).
(2)Individual annuity and pure endowment contracts issued in a
particular calendar year after December 31, 1981.
(3)Annuities and pure endowments purchased in a particular
calendar year after December 31, 1981, under group annuity and
pure endowment contracts.
(4)A net increase in a particular calendar year after January 1,
1982, in amounts held under guaranteed interest contracts.
(b)Except as provided in subsection (c), the calendar year statutory
valuation interest rate, I, is determine
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(a) The interest rates used in determining
the minimum standard for the valuation of the following are the
calendar year statutory valuation interest rates described in this section:
(1) Life insurance contracts issued in a particular calendar year,
on or after the operative date of IC 27-1-12-7(dd).
(2) Individual annuity and pure endowment contracts issued in a
particular calendar year after December 31, 1981.
(3) Annuities and pure endowments purchased in a particular
calendar year after December 31, 1981, under group annuity and
pure endowment contracts.
(4) A net increase in a particular calendar year after January 1,
1982, in amounts held under guaranteed interest contracts.
(b) Except as provided in subsection (c), the calendar year statutory
valuation interest rate, I, is determined as follows, and the results must
be rounded to the nearest one-quarter of one percent (1/4 of 1%):
(1) For life insurance,
I = .03 + W(R1 - .03) + W/2(R2 - .09)
(2) 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)
where R1 is the lesser of R and .09,
R2 is the greater of R and .09,
R is the reference interest rate specified in this section, and
W is the weighting factor specified in this section.
(3) For:
(A) other annuities; and
(B) guaranteed interest contracts;
with cash settlement options, valued on an issue year basis, except
as provided in subdivision (2), the formula for life insurance
specified in subdivision (1) applies to annuities and guaranteed
interest contracts with guarantee durations in excess of ten (10)
years and the formula for single premium immediate annuities
described in subdivision (2) applies to annuities and guaranteed
interest contracts with guarantee duration of ten (10) years or less.
(4) For:
(A) other annuities; and
(B) guaranteed interest contracts;
with no cash settlement options, the formula for single premium
immediate annuities specified in subdivision (2).
(5) For:
(A) other annuities; and
(B) guaranteed interest contracts;
with cash settlement options, valued on a change in fund basis,
the formula for single premium immediate annuities specified in
subdivision (2).
(c) If the calendar year statutory valuation interest rate for a life
insurance contract issued in a calendar year determined without
reference to this subsection differs from the corresponding actual rate
for similar contracts issued in the immediately preceding calendar year
by less than one-half of one percent (1/2 of 1%), the calendar year
statutory valuation interest rate for the life insurance contract is equal
to the corresponding actual rate for the immediately preceding calendar
year. For purposes of this subsection, the calendar year statutory
valuation interest rate for life insurance contracts issued in a calendar
year is determined for 1980 (using the reference interest rate defined
in 1979) and must be determined for each subsequent calendar year
regardless of when IC 27-1-12-7(dd) becomes operative.
(d) The weighting factors referred to in the formulas specified in
subsection (b) are as follows:
(1) Weighting factors for life insurance:
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 contract or under options to convert to life
insurance contracts with premium rates, nonforfeiture values, or
both that are guaranteed in the original contract.
(2) Weighting factor for single premium immediate annuities and
for annuity benefits involving life contingencies arising from:
(A) other annuities; and
(B) guaranteed interest contracts with cash settlement options:
(3) Weighting factors for other annuities and for guaranteed
interest contracts are as specified in clauses (A) through (C),
according to the requirements of clauses (D) and (E), as follows:
(A) For annuities and guaranteed interest contracts valued on
an issue year basis:
(B) For annuities and guaranteed interest contracts valued on a
change in fund basis, the weighting factors specified in clause
(A), increased by:
(C) For annuities and guaranteed interest contracts valued on:
(i) an issue year basis (other than annuities and guaranteed
interest contracts with no cash settlement options) that do not
guarantee interest on considerations received more than one
(1) year after the issue or purchase date; or
(ii) a change in fund basis that do not guarantee interest rates
on considerations received more than twelve (12) months
after the valuation date;
the weighting factors specified in clause (A) or derived in
clause (B), increased by:
(D) For other annuities and guaranteed interest contracts:
(i) 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 contracts with guarantee
duration in excess of twenty (20) years; and
(ii) with no cash settlement options, the guaranteed duration
is the number of years from the date of issue or purchase to
the date annuity benefits are scheduled to begin.
(E) A company may elect to value:
(i) annuities; and
(ii) guaranteed interest contracts;
with cash settlement options on either an issue year basis or on
a change in fund basis. Other annuities and guaranteed interest
contracts with no cash settlement options must be valued on an
issue year basis.
(e) The reference interest rate referred to in subsection (b) is as
follows:
(1) For life insurance, the lesser of:
(A) the average, over a period of thirty-six (36) months; or
(B) the average, over a period of twelve (12) months;
ending on June 30 of the calendar year preceding the year of
issue, of the monthly average of the composite yield on seasoned
corporate bonds published by Moody's Investors Service, Inc.
(2) For single premium immediate annuities and for annuity
benefits involving life contingencies arising from:
(A) other annuities; and
(B) guaranteed interest contracts;
with cash settlement options, the average, over a period of twelve
(12) months ending on June 30 of the calendar year of issue or
purchase, of the monthly average of the composite yield on
seasoned corporate bonds published by Moody's Investors
Service, Inc.
(3) For:
(A) other annuities; and
(B) guaranteed interest contracts;
with cash settlement options valued on a year of issue basis,
except as provided in subdivision (2), with guarantee duration in
excess of ten (10) years, the lesser of the average over a period of
thirty-six (36) months or the average over a period of twelve (12)
months ending on June 30 of the calendar year of issue or
purchase, of the monthly average of the composite yield on
seasoned corporate bonds published by Moody's Investors
Service, Inc.
(4) For:
(A) other annuities; and
(B) guaranteed interest contracts;
with cash settlement options valued on a year of issue basis,
except as provided in subdivision (2), with guarantee duration of
ten (10) years or less, the average, over a period of twelve (12)
months ending on June 30 of the calendar year of issue or
purchase, of the monthly average of the composite yield on
seasoned corporate bonds published by Moody's Investors
Service, Inc.
(5) For:
(A) other annuities; and
(B) guaranteed interest contracts;
with no cash settlement options, the average, over a period of
twelve (12) months ending on June 30 of the calendar year of
issue or purchase, of the monthly average of the composite yield
on seasoned corporate bonds published by Moody's Investors
Service, Inc.
(6) For:
(A) other annuities; and
(B) guaranteed interest contracts;
with cash settlement options valued on a change in fund basis,
except as provided in subdivision (2), the average, over a period
of twelve (12) months ending on June 30 of the calendar year of
the change in the fund, of the monthly average of the composite
yield on seasoned corporate bonds published by Moody's
Investors Service, Inc.
(f) If:
(1) the monthly average of the composite yield on seasoned
corporate bonds is no longer published by Moody's Investors
Service, Inc.; or
(2) the NAIC determines that the monthly average of the
composite yield on seasoned corporate bonds published by
Moody's Investors Service, Inc., is no longer appropriate for the
determination of the reference interest rate;
an alternative method for determination of the reference interest rate
that is adopted by the NAIC and approved under rules adopted by the
commissioner under IC 4-22-2 may be substituted.