1. (1) Except on a guaranteed benefit date, a contract may provide for the determination of cash surrender benefits in accordance with a market-value adjustment formula, by applying the formula to the actual accumulation amount before deducting any withdrawal charge.
2. (2) The same market-value adjustment formula is to be applied during periods when its application would result in an increase in cash surrender benefits as is applied during periods when its application would result in a decrease in cash surrender benefits, unless the company can demonstrate, to the satisfaction of the superintendent, that equity to terminating and continuing contractholders and to the company is better served by use of a different formula in such circumstances.
3. (3) If a contract limits the amount by which cash surrender benefits may be increased by application of a market-value adjustment formula to a specific percentage of the actual accumulation amount before deduction of any withdrawal charge, the same percentage limit must apply during periods when the application of the market-value adjustment formula results in a decrease in cash surrender benefits, unless the company can demonstrate, to the satisfaction of the superintendent, that equity to terminating and continuing contractholders and to the company is better served by using a different percentage limit in such circumstances. (See example 2 in section 44.10[a][1] of this Part.)

4. (b) Single premium contracts.

   1. (1) Under a single premium contract, a market-value adjustment formula may be based on:

      1. (i) the difference between the guaranteed rate being credited on the actual accumulation amount under the contract and the new guarantee rate; and
      2. (ii) the period from the date the contract is surrendered for its cash value to the expiry date applicable to such guaranteed rate. On and after such expiry date, any cash surrender benefits shall be made available without adjustment by the market-value adjustment formula until such time as a new guaranteed rate is established. (See examples 1 and 2 in section 44.10[a][1] of this Part.)

   2. (2) Alternatively, a market-value adjustment formula for a single premium contract may be based on:

      1. (i) the difference between the interest rate, at the time the premium is remitted, on an appropriate index of publicly traded obligations for the specified time interval and the interest rate, at the time the contract is surrendered for its cash value, on the same index, or if no longer available, on an appropriate substitute index of publicly traded obligations, for the period remaining under the contract until the guaranteed benefit date ( i.e., the end of the specified time interval); and
      2. (ii) such remaining period. (See example 3 in section 44.10[a][2] of this Part.)

   3. (3) Under a market-value adjustment formula described in paragraph (1) or (2) of this subdivision:

      1. (i) the interest rates used must be determined in a consistent manner and for paragraph (1) must be based only on guaranteed interest rates;
      2. (ii) the new guarantee rate under paragraph (1) for the period from the date the contract is surrendered to the end of the specified time interval may be determined using reasonable approximations by interpolation or extrapolation of new contract rates for other periods for which the company offers guarantees if no such rate exists. If the company no longer issues guaranteed rates, then the adjustment may be determined in accordance with paragraph (2) of this subdivision;
      3. (iii) there shall be a minimum period of 30 days either immediately preceding or immediately following a guaranteed benefit date or some combination thereof of 30 days during which the contractholder may apply for a cash surrender value without adjustment (an unadjusted cash surrender value need be available only a single date, namely on the guaranteed benefit date in which case the 30-day application period must precede such date);
      4. (iv) the company may reimpose a market-value adjustment after a guaranteed benefit date based on a new guaranteed benefit period, but if the contract allows for a different procedure or a different specified time interval, or a different index, or a different guaranteed rate, the new data shall be fully disclosed to the contractholder and the contractholder shall have a period of at least 30 days commencing after the date of such disclosures during which he or she may apply for a cash surrender value without a market-value adjustment. The data shall also disclose either the new rate, or if such rate has not yet been determined, disclosure of this fact along with a notice as to rates currently in effect. Where the effective date of the new rate coincides with the date cash surrender is available without adjustment, this period of 30 days may be the same as that under subparagraph (iii) of this paragraph;
      5. (v) the company may, at its option, treat the election of a contractholder to transfer the actual accumulation amount to another investment medium in the same manner as a surrender of the contract for its cash surrender benefits; and
      6. (vi) in computing the amount of any market-value adjustment under paragraph (1), the company may, at its option, increase the new contract rate by up to one quarter of one percent (0.25 percent).
   4. (4) The market-value adjustment formula must be stated in the contract and must not pass any material risk of asset default or deterioration in asset quality from the company to the contractholder.
   5. (5) On application of the company, the superintendent may authorize the use of any other market-value adjustment formula that, in the opinion of the superintendent, provides reasonable equity to terminating and continuing contractholders and to the company.

5. (c) Flexible premium contracts.

   1. (1) Each premium or series of premiums may be subject to a separate guaranteed interest rate, with each rate running for a specified time interval not to exceed 10 years for each premium or first premium of a series of premiums such that each premium or series of premiums has a separate guaranteed benefit date.
   2. (2) Each premium or series of premiums may be subject to a separate guaranteed interest rate, but with different specified time intervals (no one to exceed 10 years) such that there is a common guaranteed benefit date for all premiums.
   3. (3) A guaranteed rate may be declared for all premiums to be received within a two-year period of time. A new guarantee rate must be declared for premiums to be received during each succeeding period not to exceed two years.
   4. (4) A market-value adjustment formula may be applied separately to the portion of the actual accumulation amount resulting from each premium, or series of premiums, remitted based on the guaranteed rate applicable to such premium (or series of premiums), or an appropriate index of publicly traded obligations, and the period remaining until the guaranteed benefit date or dates. (See examples [4][i], [5][i], 5[ii], 6 and 7 in section 44.10[b] of this Part.)
   5. (5) At its option, the company may base a market-value adjustment on the weighted average period remaining until the guaranteed benefit date for all premiums previously remitted as an approximation for adjustments based on each such period individually. (See example 5[iii] in section 44.10[b][1] of this Part.) The use of the methods described in this paragraph shall not affect the amount of any contract charges or withdrawal charges imposed under the contract.

   6. (6) At its option, where there is a common guaranteed benefit date for all premiums remitted, the company may base a market-value adjustment on a blended interest rate based on the weighted average of the interest rates associated with premiums previously credited as an approximation for adjustments based on each such interest rate. (See example 4[ii] in section 44.10[b][1] of this Part.)

      (d)

   7. (1) A contract can permit a partial cash surrender option on (i) a first-in, first-out basis; (ii) a last-in, first-out basis; or (iii) a pro rata basis from the actual accumulation amount attributable to each premium. The amount withdrawn from the actual accumulation amount attributable to each premium to provide such cash surrender value may be adjusted by the same market-value adjustment formula that would apply to a full cash surrender election made on the same date. The actual accumulation amount attributable to each premium would be reduced as of that date by the amount withdrawn from it to provide the cash surrender value and not the cash surrender value paid to the contractholder.
   8. (2) If a loan option is to be made available under the contract, the amount of the loan may be treated as a partial cash surrender (but without imposition of a withdrawal charge) which is subtracted from the actual accumulation amount prior to such loan and transferred to a separate loan account. Any loan repayments would then result in transfers from the loan account to the actual accumulation amount under the contract and could be treated as a current premium remittance for purposes of determining future market-value adjustments.

(a)