Authority: IC 27-1-12-10.5

Affected: IC 27-1-12-10; IC 27-1-12.8-21

Sec. 3. (a) At the election of the company for any one (1) or more specified plans of life insurance, the minimum mortality standard for basic reserves may be calculated using the 1980 CSO valuation tables with select mortality factors (or any other valuation mortality table adopted by the NAIC after the effective date of this rule and promulgated by rule by the commissioner of the department of insurance (commissioner) for this purpose). If select mortality factors are elected, they may be:

1. (1) the ten-year select mortality factors incorporated into the 1980 amendments to the NAIC Standard Valuation Law;
2. (2) the select mortality factors set forth in section 6 of this rule; or
3. (3) any other table of select mortality factors adopted by the NAIC after the effective date of this rule and promulgated by rule by the commissioner for the purpose of calculating basic reserves.

(b) Deficiency reserves, if any, are calculated for each policy as the excess, if greater than zero (0), of the quantity A over the basic reserve. The quantity A is obtained by recalculating the basic reserve for the policy using guaranteed gross premiums instead of net premiums when the guaranteed gross premiums are less than the corresponding net premiums. At the election of the company for any one (1) or more specified plans of insurance, the quantity A and the corresponding net premiums used in the determination of quantity A may be based upon the 1980 CSO valuation tables with select mortality factors (or any other valuation mortality table adopted by the NAIC after the effective date of this rule and promulgated by rule by the commissioner). If select mortality factors are elected, they may be the following:

1. (1) The ten-year select mortality factors incorporated into the 1980 amendments to the NAIC Standard Valuation Law.
2. (2) The select mortality factors set forth in section 6 of this rule.

3. (3) For durations in the first segment, X percent of the select mortality factors set forth in section 6 of this rule, subject to the following:

   1. (A) X may vary by:

      1. (i) policy year;
      2. (ii) policy form;
      3. (iii) underwriting classification;
      4. (iv) issue age; or
      5. (v) any other policy factor expected to affect mortality experience.
   2. (B) X shall not be less than twenty percent (20%).
   3. (C) X shall not decrease in any successive policy years.
   4. (D) X is such that, when using the valuation interest rate used for basic reserves, the actuarial present value of future death benefits, calculated using the mortality rates resulting from the application of X is greater than or equal to the actuarial present value of future death benefits calculated using anticipated mortality experience without recognition of mortality improvement beyond the valuation date.
   5. (E) X is such that the mortality rates resulting from the application of X are at least as great as the anticipated mortality experience, without recognition of mortality improvement beyond the valuation date, in each of the first five (5) years after the valuation date.
   6. (F) The appointed actuary shall increase X at any valuation date where it is necessary to continue to meet all the requirements of this subdivision.
   7. (G) The appointed actuary may decrease X at any valuation date as long as X does not decrease in any successive policy years and as long as it continues to meet all the requirements of this subdivision.
   8. (H) The appointed actuary shall specifically take into account the adverse effect on expected mortality and lapsation of any anticipated or actual increase in gross premiums.

   9. (I) If X is less than one hundred percent (100%) at any duration for any policy, the following requirements shall be met:

      1. (i) The appointed actuary shall annually prepare an actuarial opinion and memorandum for the company in conformance with the requirements of 760 IAC 1-57-8.
      2. (ii) The appointed actuary shall annually opine for all policies subject to this rule as to whether the mortality rates resulting from the application of X meet the requirements of this subdivision. This opinion shall be supported by an actuarial report, subject to appropriate Actuarial Standards of Practice promulgated by the Actuarial Standards Board of the American Academy of Actuaries. The X factors shall reflect anticipated future mortality, without recognition of mortality improvement beyond the valuation date, taking into account relevant emerging experience.
4. (4) Any other table of select mortality factors adopted by the NAIC after the effective date of this rule and promulgated by rule by the commissioner for the purpose of calculating deficiency reserves.

(c) This subsection applies to both basic reserves and deficiency reserves. Any set of select mortality factors may be used only for the first segment. However, if the first segment is less than ten (10) years, the appropriate ten-year select mortality factors incorporated into the 1980 amendments to the NAIC Standard Valuation Law may be used thereafter through the tenth policy year from the date of issue.

(d) In determining basic reserves or deficiency reserves, guaranteed gross premiums without policy fees may be used where the calculation involves the guaranteed gross premium but only if the policy fee is a level dollar amount after the first policy year. In determining deficiency reserves, policy fees may be included in guaranteed gross premiums, even if not included in the actual calculation of basic reserves.

(e) Reserves for policies that have changes to guaranteed gross premiums, guaranteed benefits, guaranteed charges, or guaranteed credits that are unilaterally made by the insurer after issue and that are effective for more than one (1) year after the date of the change shall be the greatest of the following:

1. (1) Reserves calculated ignoring the guarantee.
2. (2) Reserves assuming the guarantee was made at issue.
3. (3) Reserves assuming that the policy was issued on the date of the guarantee.

(f) The commissioner may require that the company document the extent of the adequacy of reserves for specified blocks, including, but not limited to, policies issued prior to the effective date of this rule. This documentation may include a demonstration of the extent to which aggregation with other nonspecified blocks of business is relied upon in the formation of the appointed actuary opinion pursuant to and consistent with the requirements of 760 IAC 1-57-8.

(Department of Insurance; 760 IAC 1-64-3; filed Dec 1, 1999, 3:20 p.m.: 23 IR 798; readopted filed Nov 7, 2005, 10:50 a.m.: 29 IR 896; readopted filed Nov 29, 2011, 9:14 a.m.: 20111228-IR-760110553RFA; readopted filed Nov 6, 2017, 1:06 p.m.: 20171206-IR-760170354RFA; readopted filed Nov 13, 2023, 10:12 a.m.: 20231213-IR-760230631RFA)