Md. Code Regs. 31.09.15.06

Current through Register Vol. 51, No. 24, December 2, 2024

Section 31.09.15.06 - Nonforfeiture Values for Flexible Premium Universal Life Insurance Policies

A. Minimum cash surrender values for flexible premium universal life insurance policies shall be determined separately for the basic policy and for any benefits and riders for which premiums are paid separately.

B. The requirements in this regulation pertain to a basic policy and any benefits and riders for which premiums are not paid separately.

C. The minimum cash surrender value, before adjustment for indebtedness and dividend credits, available on a date as of which interest is credited to the policy shall be equal to:

(1) The accumulation to that date of the premiums paid; minus

(2) The accumulations to that date of:

(a) The benefit charges;

(b) The averaged administrative expense charges for the first policy year and any insurance-increase years;

(c) Actual administrative expense charges for other years;

(d) Initial and additional acquisition expense charges not exceeding the initial or additional expense allowances, respectively;

(e) Any service charges actually made, excluding charges for cash surrender or election of a paid-up nonforfeiture benefit; and

(f) Any deductions made for partial withdrawals; minus

(3) Any unamortized unused initial and additional expense allowances.

D. All accumulations in §C(1) and (2) of this regulation shall be at the actual rate or rates of interest at which interest credits have been made unconditionally to the policy, or have been made conditionally, but for which the conditions have since been met.

E. Interest on the premiums and on all charges referred to in §C(1)-(2) of this regulation shall be accumulated from and to such dates as are consistent with the manner in which interest is credited in determining the policy value.

F. Benefit Changes.

(1) The benefit charges listed in §C(2)(a) of this regulation shall include the charges made for mortality and any charges made for riders or supplementary benefits for which premiums are not paid separately.

(2) If benefit charges are substantially level by duration and develop low or no cash values, then the Commissioner shall have the right to require higher cash values unless the insurer provides adequate justification that the cash values are appropriate in relation to the policy's other characteristics.

G. Calculation of Administrative Expense Charges.

(1) The administrative expense charges referenced in §C(2)(b) and (c) of this regulation shall include the following if provided for by the policy:

(a) Charges per premium payment;

(b) Charges per dollar of premium paid;

(c) Periodic charges per thousand dollars of insurance;

(d) Periodic per policy charges; and

(e) Any other charges permitted by the policy to be imposed without regard to the policyowner's request for services.

(2) The averaged administrative expense charges referenced in §C(2)(b) of this regulation for any year shall be those which would have been imposed in that year if the charge rate or rates for each transaction or period within the year had been equal to the arithmetic average of the corresponding charge rates that the policy states will be imposed in policy years 2 through 20 in determining the policy value.

H. Calculation of Initial Acquisition Expense Charges.

(1) The initial acquisition expense charges referenced in §C(2)(d) of this regulation shall be the excess of the expense charges, other than service charges, actually made in the first policy year over the averaged administrative expense charges for that year.

(2) Additional acquisition expense charges referenced in §C(2)(d) of this regulation shall be the excess of the expense charges, other than service charges, actually made in an insurance-increase year over the averaged administrative expense charges for that year.

(3) An insurance-increase year shall be the year beginning on the date of increase in the amount of insurance by policyowner request or by the terms of the policy.

(4) The service charges referenced in §H(1) and (2) of this regulation shall include charges permitted by the policy to be imposed as the result of a policyowner's request for a service by the insurer, such as the furnishing of future benefit illustrations, or of special transactions.

I. Calculation of Initial Expense Allowance.

(1) The initial expense allowance referenced in §C(3) of this regulation shall be the allowance provided by Insurance Article, § 16-309(b), Annotated Code of Maryland, for a fixed premium, fixed benefit endowment policy with a face amount equal to the initial face amount of the flexible premium universal life insurance policy, with level premiums paid annually until the highest attained age at which a premium may be paid under the flexible premium universal life insurance policy, and maturing on the latest maturity date permitted under the policy, if any, otherwise at the highest age in the valuation mortality table.

(2) The unused initial expense allowance shall be the excess, if any, of the initial expense allowance over the initial acquisition expense charges as described in §H of this regulation.

(3) If the amount of insurance is subsequently increased upon request of the policyowner, or by the terms of the policy, an additional expense allowance and an unused additional expense allowance shall be determined on a basis consistent with §I(1) and (2) of this regulation and with Insurance Article, § 16-309(e), Annotated Code of Maryland, using the face amount and the latest maturity date permitted at that time under the policy.

(4) Unamortized Unused Expense Allowance.

(a) The unamortized unused initial expense allowance during the policy year beginning on the policy anniversary at age x+t, where x is the same issue age, shall be the unused initial expense allowance multiplied byax+t/axwhere ax+t and ax are present values of an annuity of one per year payable on policy anniversaries beginning at ages x+t and x, respectively, and continuing until the highest attained age at which a premium may be paid under the policy, both on the mortality and interest bases guaranteed in the policy.

(b) An unamortized unused additional expense allowance shall be the unused additional expense allowance multiplied by a similar ratio of annuities, with ax replaced by an annuity beginning on the date as of which the additional expense allowance was determined.

Md. Code Regs. 31.09.15.06