Section 2523.1 - Definitions(a) "Basis" carries two meanings. (1) When used in the context of an initial or redetermination method, "basis" means the specified period over which an average is computed that produces the value of the five-year Constant Maturity Treasury ("CMT") Rate. The "specified period" could be as short as a single day. The same basis shall apply to all equity-indexed benefits and the non equity-indexed benefit, if any. (A) The basis may also use a specified period that is determined by the level of change in the CMT rate, or any other date dependent methodology adopted by the National Association of Insurance Commissioners ("NAIC") and approved by the commissioner. A specifically excluded method is one that defines the nonforfeiture rate as the lowest rate in a specified time period. A method based upon changes in CMT levels must move up or down in an identical manner with changes in interest rates, subject to statutory minimums and maximums.(B) If the basis uses a specified period determined by the level of change in the CMT rate: 1. The nonforfeiture rate applicable at the time this subsection is first utilized for a contract form shall be determined by a method using a specified period or another approved date dependent methodology.2. A symmetrical range shall be defined that will determine when the rate shall be updated. The maximum allowable range shall be plus or minus fifty (50) basis points.3. At the beginning of each modal period (e.g., monthly, quarterly, etc.), a potential nonforfeiture rate shall be calculated using the method in paragraph 1., above, without incorporating any caps or floors. The "modal period" is the period the company specifies during which the current nonforfeiture rate will remain fixed.4. If the difference between the potential nonforfeiture rate and the current initial nonforfeiture rate is less than or equal to the range, the current nonforfeiture rate shall not be updated.5. If the difference between the potential nonforfeiture rate and the current nonforfeiture rate is more than the range, the current nonforfeiture rate shall be updated to be equal to the potential nonforfeiture rate adjusted for rounding and any caps or floors.6. See the examples of indexing methods dependent upon changes in CMT levels in Section 2523.6, Appendix A.(2) When used in the context of equity-indexed benefits, "basis" means the point in time used for establishing the parameters incorporated into the calculation of the value of the equity-indexed options. These parameters include the risk free rate, dividend yield, index volatility, prior index values if the option is path dependent, and any other relevant parameters.(b) "Equity-indexed benefit" means a benefit in an annuity contract in which the value of the benefit is determined using an interest crediting rate based on the performance on an equity-based index and contract parameters. Excluded from this definition are variable benefits of separate account variable annuities and indexed guaranteed separate account contracts purchased by institutional buyers.(c) "Index term" means each period of time until the next indexed interest crediting date.(d) "Initial method" means the basis upon which the initial nonforfeiture rate is established and the period for which it applies. The period may last for the entire duration of the contract.(e) "Initial nonforfeiture rate" means the nonforfeiture rate applicable at contract issue.(f) "Minimum nonforfeiture amount" means the minimum value required under Section 10168.25 of the Insurance Code. It reflects net considerations, the nonforfeiture rate, and other items as specified in Section 10168.25.(g) "Nonforfeiture rate" means the interest rate used in determining the minimum nonforfeiture amount. This will be determined at issue (initial nonforfeiture rate) and, if applicable, each subsequent redetermination period (redetermination nonforfeiture rate).(h) "Redetermination method" means the redetermination date, basis and period for all future redetermination nonforfeiture rates.(i) "Redetermination nonforfeiture rate" means the nonforfeiture rate applicable at redetermination.Cal. Code Regs. Tit. 10, § 2523.1
1. New section filed 12-19-2012; operative 12-19-2012 pursuant to Government Code section 11343.4 (Register 2012, No. 51). Note: Authority cited: Sections 10168.25(f) and 10168.92, Insurance Code. Reference: Section 10168.25, Insurance Code.
1. New section filed 12-19-2012; operative 12-19-2012 pursuant to Government Code section 11343.4 (Register 2012, No. 51).