§ 26.1-35-04 — Computation of minimum standard by calendar year of issue

North Dakota § 26.1-35-04

• Jurisdiction: North Dakota
• Title 26.1: Insurance
• Ch. 26.1-35: Standard Valuation Law

Text

1. The interest rates used in determining the minimum standard for the valuation of the
following are the calendar year statutory valuation interest rates as defined in this
section:
a. Life insurance policies issued in a particular calendar year, on or after the earlier
of a specified date filed by an insurer with the commissioner in a written notice of
the insurer's election to comply with this chapter or January 1, 1989.
b. Individual annuity and pure endowment contracts issued in a particular calendar
year on or after January 1, 1984.
c. Annuities and pure endowments purchased in a particular calendar year on or
after January 1, 1984, under group annuity and pure endowment contracts.
d. The net increase, if any, in a particular calendar year after January 1, 1984, in
amounts held under guaranteed interest contracts.
2. The calendar year statutory valuation interest rates, I, must be determined as follows
and the results rounded to the nearer one-quarter of one percent:
a. For life insurance:
I = .03 + W (R - .03) + W (R - .09)
1 2
2
b. 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 R is the lesser of R and .09, R is the greater of R and .09, R is the
1 2
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 subdivision b, the formula for life insurance stated in subdivision a
applies to annuities and guaranteed interest contracts with guarantee durations in
excess of ten years and the formula for single premium immediate annuities
stated in subdivision b applies to annuities and guaranteed interest contracts with
guarantee duration 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 subdivision b applies.
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 subdivision b applies.
However, if the calendar year statutory valuation interest rate for a life insurance policy
issued in any calendar year determined without reference to this sentence 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 the life insurance policies must equal the corresponding
actual rate for the immediately preceding calendar year. For purposes of applying the
preceding sentence, the calendar year statutory valuation interest rate for life
insurance policies issued in a calendar year must be determined for 1980 by using the
reference interest rate defined for 1979, and must be determined for each subsequent
calendar year regardless of when section 26.1-33-24 becomes operative.
3. The weighting factors referred to in the formulas in subsection 2 are given in the
following tables:
a. The weighting factors for life insurance are:
Guarantee Duration Weighting Factors
10 years or less .50
More than 10 years, but not more than 20 years .45
More than 20 years .35

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 guaranteed interest contracts with cash settlement options
is eighty hundredths.
c. The weighting factors for other annuities and for guaranteed interest contracts,
except as stated in subdivision b, are as specified in paragraphs 1, 2, and 3,
according to the requirements and definitions in paragraphs 4, 5, and 6:
(1) For annuities and guaranteed interest contracts valued on an issue year
basis:
Guarantee Weighting Factor
Duration for Plan Type
A B C
5 years or less .80 .60 .50
More than 5 years, but not more than 10 years .75 .60 .50
More than 10 years, but not more than 20 years .65 .50 .45
More than 20 years .45 .35 .35
(2) For annuities and guaranteed interest
contracts valued on a change in fund basis,
the factors shown in paragraph 1 increased by .15 .25 .05
(3) 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 paragraph 1 or
derived in paragraph 2 increased by .05 .05 .05
(4) 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 guaranteed duration is the
number of years from the date of issue or date of purchase to the date
annuity benefits are scheduled to commence.
(5) The plan type as used in the tables in this subsection is defined as follows:
(a) Plan type A: At any time the policyholder may withdraw funds only with
an adjustment to reflect changes in interest rates or asset values since
receipt of the funds by the insurer, without such adjustment but in
installments over five years or more, as an immediate life annuity, or
no withdrawal permitted.
(b) Plan type B: Before expiration of the interest rate guarantee, the
policyholder may withdraw funds only with an adjustment to reflect
changes in interest rates or asset values since receipt of the funds by
the insurer, without an adjustment but in installments over five years or
more, or no withdrawal permitted. At the end of the interest rate

guarantee, funds may be withdrawn without an adjustment in a single
sum or installments over less than five years.
(c) Plan type C: The policyholder may withdraw funds before expiration of
the interest rate guarantee in a single sum or installments over less
than five years either without adjustment to reflect changes in interest
rates or asset values since receipt of the funds by the insurer, or
subject only to a fixed surrender charge stipulated in the contract as a
percentage of the fund.
(6) An insurer 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, an
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. A 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.
4. The reference interest rate referred to in subsection 2 is defined as follows:
a. For 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 thirtieth of the
calendar year next preceding the year of issue, the monthly average of the
composite yield on seasoned corporate bonds, as published by Moody's
investors service, incorporated.
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 thirtieth of the calendar year of issue or
year of purchase, the monthly average of the composite yield on seasoned
corporate bonds, as published by Moody's investors service, incorporated.
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 subdivision b 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 thirtieth of the calendar year of issue or purchase,
of the monthly average of the composite yield on seasoned corporate bonds, as
published by Moody's investors service, incorporated.
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 subdivision b with guaranteed duration of ten years or less, the average
over a period of twelve months, ending on June thirtieth of the calendar year of
issue or purchase, of the monthly average of the composite yield on seasoned
corporate bonds, as published by Moody's investors service, incorporated.
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 thirtieth of the calendar year of issue or purchase, of the
monthly average of the composite yield on seasoned corporate bonds, as
published by Moody's investors service, incorporated.
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 subdivision b the average over a period of twelve months, ending on
June thirtieth of the calendar year of the change in the fund, of the monthly

average of the composite yield on seasoned corporate bonds, as published by
Moody's investors service, incorporated.
5. If the monthly average of the composite yield on seasoned corporate bonds is no
longer published by Moody's investors service, incorporated, or if the national
association of insurance commissioners determines that the monthly average of the
composite yield on seasoned corporate bonds as published by Moody's investors
service, incorporated, is no longer appropriate for the determination of the reference
interest rate, then an alternative method for determination of the reference interest rate
adopted by the national association of insurance commissioners and approved by rule
adopted by the commissioner, may be substituted.