Section R. 500.853 - Reserve liabilitiesRule 13. All of the following provisions are applicable to reserve liabilities for variable life insurance:
(a) Reserve liabilities for variable life insurance policies shall be established pursuant to section 834 of Act No. 218 of the Public Acts of 1956, as amended, being S500.834 of the Michigan Compiled Laws, in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.(b) For scheduled premium policies, reserve liabilities for the guaranteed minimum death benefit shall be the reserve needed to provide for the contingency of death occurring when the guaranteed minimum death benefit exceeds the death benefit that would be paid in the absence of the guarantee, shall be maintained in the general account of the insurer, and shall be not less than the greater of either of the following minimum reserves:(i) The aggregate total of the term costs, if any, covering a period of 1 full year from the valuation date, of the guarantee on each variable life insurance contract, assuming an immediate 1/3 depreciation in the current value of the assets of the separate account followed by a net investment return equal to the assumed investment rate.(ii) The aggregate total of the attained age level reserves on each variable life insurance contract. The attained age level reserve on each variable life insurance contract shall not be less than zero and shall equal the residue, as described in subparagraph (A) of this paragraph, of the prior year's attained age level reserve on the contract, with any such residue increased or decreased by a payment computed on an attained age basis as described in subparagraph (B) of this paragraph. Subparagraphs (A) and (B) read as follows:(A) The residue of the prior year's attained age level reserve on each variable life insurance contract shall not be less than zero and shall be determined by adding interest at the valuation interest rate to such prior year's reserve, deducting the tabular claims based on the excess, if any, of the guaranteed minimum death benefit over the death benefit that would be payable in the absence of such guarantee, and dividing the net result by the tabular probability of survival. The excess referred to in the preceding sentence shall be based on the actual level of death benefits that would have been in effect during the preceding year in the absence of the guarantee, taking appropriate account of the reserve assumptions regarding the distributions of death claim payments over the year.(B) The payment referred to in paragraph (ii) of this subdivision shall be computed so that the present value of a level payment of that amount each year over the future premium paying period of the contract is equal to A minus B minus C, where "A" is the present value of the future guaranteed minimum death benefits, "B" is the present value of the future death benefits that would be payable in the absence of such guarantee, and "C" is any residue, as described in subparagraph (A) of this paragraph, of the prior year's attained age level reserve on such variable life insurance contract. The amounts of future death benefits referred to in B shall be computed assuming a net investment return of the separate account, which may differ from the assumed investment rate or the valuation interest rate, or both, but shall not exceed the maximum interest rate permitted for the valuation of life insurance contracts; however, if the contract is paid up, the payment shall equal A minus B minus C.(c) The valuation interest rate and mortality table used in computing the 2 minimum reserves described in subdivision (b)(i) and (ii) shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ approximations and estimates acceptable to the commissioner, including, but not limited to, groupings and averages.(d) For flexible premium policies, reserve liabilities for any guaranteed minimum death benefit shall be maintained in the general account of the insurer and shall not be less than the aggregate total of the term costs, if any, covering the period in the guarantee not otherwise provided for by the reserves held in the separate account assuming an immediate 1/3 depreciation in the current value of the assets of the separate account followed by a net investment return equal to the valuation interest rate. The valuation interest rate and mortality table used in computing this additional reserve, if any, shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates, including, but not limited to, groupings and averages.(e) Reserve liabilities for all fixed incidental insurance benefits and any guarantees associated with variable incidental insurance benefits shall be maintained in the general account and reserve liabilities for all variable aspects of the variable incidental insurance benefits shall be maintained in a separate account in amounts determined in accordance with the actuarial procedures appropriate to such benefit.Mich. Admin. Code R. 500.853