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304.6-145 Minimum standards -- Operative dates.
(1)
(2)
The interest rates used in determining the minimum standard for the valuation of:
(a) All life insurance policies issued in a particular calendar year, on or after the
effective date of KRS 304.15-342;
(b) All individual annuity and pure endowment contracts issued in a particular
calendar year on or after January 1, 1983;
(c) All annuities and pure endowments purchased in a particular calendar year on
or after January 1, 1983 under group annuity and pure endowment contracts;
and
(d) The net increase, if any, in a particular calendar year after January 1, 1983, in
amounts held under guaranteed interest contracts shall be the calendar year
statutory valuation interest rates as defined in this section.
The calendar year statutory valuation interest rates, I, shall be determined as follows
and the results rounded to the nearer one-quarter of one percent (1/4 of 1%):
(a) For life insurance,
I = .03 + W (R1 - .03) + W/2 (R2 - .09);
(b) For single premium immediate annuities and for annuity benefits involving
life contingencies arising from other annuities with cash settlement options
and from guaranteed interest contracts with cash settlement options,
I = .03 + W (R - .03)
where R1 is the lesser of R and .09,
R2 is the greater of R and .09,
R is the reference interest rate defined in this section,
and W is the weighting factor defined in this section;
(c) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on an issue year basis, except as
stated in paragraph (b) above, the formula for life insurance stated in
paragraph (a) above shall apply to annuities and guaranteed interest contracts,
with guarantee durations in excess of ten (10) years and the formula for single
premium immediate annuities stated in paragraph (b) above shall apply to
annuities and guaranteed interest contracts with guarantee duration of ten (10)
years or less;
(d) For other annuities with no cash settlement options and for guaranteed interest
contracts with no cash settlement options, the formula for single premium
immediate annuities stated in paragraph (b) above shall apply; and
(e) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a change in fund basis, the
formula for single premium immediate annuities stated in paragraph (b) above
shall apply.
However, if the calendar year statutory valuation interest rate for any life
insurance policies issued in any calendar year determined without reference to
this sentence differs from the corresponding actual rate for similar policies
issued in the immediately preceding calendar year by less than one-half of one
(3)
percent (1/2 of 1%), the calendar year statutory valuation interest rate for such
life insurance policies shall be equal to the corresponding actual rate for the
immediately preceding calendar year. For purposes of applying the
immediately preceding sentence, the calendar year statutory valuation interest
rate for life insurance policies issued in a calendar year shall be determined for
1980 (using the reference interest rate defined for 1979) and shall be
determined for each subsequent calendar year regardless of when KRS
304.15-342 becomes effective.
The weighting factors referred to in the formulas stated above are given in the
following tables:
(a) Weighting Factors for Life Insurance:
Guarantee Duration
Weighting Factors
(Years)
10 or less
.50
More than 10, but not
more than 20
.45
More than 20
.35
For life insurance, the guarantee duration is the maximum number of years the
life insurance can remain in force on a basis guaranteed in the policy or under
options to convert to plans of life insurance with premium rates or
nonforfeiture values or both which are guaranteed in the original policy;
(b) Weighting factor for single premium immediate annuities and for annuity
benefits involving life contingencies arising from other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options:
.80
(c) Weighting factors for other annuities and for guaranteed interest contracts,
except as stated in (b) above, shall be as specified in tables 1., 2., and 3.
below, according to the rules and definitions in 4., 5., and 6. below:
1.
For annuities and guaranteed interest contracts valued on an issue year
basis:
Guarantee Duration
Weighting Factor for Plan Type
(Years)
A
B
C
5 or less:
.80
.60
.50
More than 5, but not
more than 10
.75
.60
.50
More than 10, but not
more than 20:
.65
.50
.45
More than 20:
.45
.35
.35
2.
For annuities and guaranteed interest contracts valued on a change in
fund basis, the factors shown in 1. above increased by:
Plan Type
A
B
C
.15
.25
.05
3.
For annuities and guaranteed interest contracts valued on an issue year
basis (other than those with no cash settlement options) which do not
guarantee interest on considerations received more than one (1) year
after issue or purchase and for annuities and guaranteed interest
contracts valued on a change in fund basis which do not guarantee
interest rates on considerations received more than twelve (12) months
beyond the valuation date, the factors shown in 1. or derived in 2.
increased by:
Plan Type
A
B
C
.05
.05
.05
4.
For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, the guarantee duration is the
number of years for which the contract guarantees interest rates in
excess of the calendar year statutory valuation interest rate for life
insurance policies with guarantee duration in excess of twenty (20)
years. For other annuities with no cash settlement options and for
guaranteed interest contracts with no cash settlement options, the
guarantee duration is the number of years from the date of issue or date
of purchase to the date annuity benefits are scheduled to commence.
5.
Plan type as used in the above tables is defined as follows:
Plan Type A: At any time policyholder may withdraw funds only with an
adjustment to reflect changes in interest rates or asset values since
receipt of the funds by the insurer, or without such adjustment but
in installments over five (5) years or more, or as an immediate life
annuity, or no withdrawal permitted;
Plan Type B: Before expiration of the interest rate guarantee, policyholder
may withdraw funds only with an adjustment to reflect changes in
interest rates or asset values since receipt of the funds by the
insurer, or without such adjustment but in installments over five
(5) years or more, or no withdrawal permitted. At the end of
interest rate guarantee, funds may be withdrawn without such
adjustment in a single sum or installments over less than five (5)
years; and
Plan Type C: Policyholder may withdraw funds before expiration of interest
rate guarantee in a single sum or installments over less than five
(5) years either without adjustment to reflect changes in interest
rates or asset values since receipt of the funds by the insurer, or
subject only to a fixed surrender charge stipulated in the contract
as a percentage of the fund.
6.
An insurer may elect to value guaranteed interest contracts with cash
settlement options and annuities with cash settlement options on either
an issue year basis or on a change in fund basis. Guaranteed interest
contracts with no cash settlement options and other annuities with no
(4)
cash settlement options must be valued on an issue year basis. As used
in this section, an issue year basis of valuation refers to a valuation basis
under which the interest rate used to determine the minimum valuation
standard applicable to each change in the fund held under the annuity or
guaranteed interest contract is the calendar year valuation interest rate
for the year of the change in the fund.
The reference interest rate referred to in subsection (2) of this section shall be
defined as follows:
(a) For all life insurance, the lesser of the average over a period of thirty-six (36)
months and the average over a period of twelve (12) months, ending on June
30 of the calendar year next preceding the year of issue, of Moody's Corporate
Bond Yield Average - Monthly Average Corporates, as published by Moody's
Investors Service, Inc.;
(b) For single premium immediate annuities and for annuity benefits involving
life contingencies arising from other annuities with cash settlement options
and guaranteed interest contracts with cash settlement options, the average
over a period of twelve (12) months, ending on June 30 of the calendar year of
issue or year of purchase, of Moody's Corporate Bond Yield Average Monthly Average Corporates, as published by Moody's Investors Service, Inc.;
(c) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a year of issue basis, except
as stated in paragraph (b) above, with guarantee duration in excess of ten (10)
years, the lesser of the average over a period of thirty-six (36) months and the
average over a period of twelve (12) months, ending on June 30 of the
calendar year of issue or purchase, of Moody's Corporate Bond Yield Average
- Monthly Average Corporates, as published by Moody's Investors Service,
Inc.;
(d) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a year of issue basis, except
as stated in paragraph (b) above, with guarantee duration of ten (10) years or
less, the average over a period of twelve (12) months, ending on June 30 of
the calendar year of issue or purchase, of Moody's Corporate Bond Yield
Average - Monthly Average Corporates, as published by Moody's Investors
Service, Inc.;
(e) For other annuities with no cash settlement options and for guaranteed interest
contracts with no cash settlement options, the average over a period of twelve
(12) months, ending on June 30 of the calendar year of issue or purchase, of
Moody's Corporate Bond Yield Average - Monthly Average Corporates, as
published by Moody's Investors Service, Inc.; and
(f) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on a change in fund basis,
except as stated in paragraph (b) above, the average over a period of twelve
(12) months, ending on June 30 of the calendar year of the change in the fund,
of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as
(5)
published by Moody's Investors Service, Inc.
In the event that Moody's Corporate Bond Yield Average - Monthly Average
Corporates is no longer published by Moody's Investors Service, Inc., or in the
event that the National Association of Insurance Commissioners determines that
Moody's Corporate Bond Yield Average - Monthly Average Corporates as
published by Moody's Investors Service, Inc. is no longer appropriate for the
determination of the reference interest rate, then an alternative method for
determination of the reference interest rate, which is adopted by the National
Association of Insurance Commissioners and approved by regulation promulgated
by the commissioner, may be substituted.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1004, effective July 15, 2010. -- Created
1982 Ky. Acts ch. 263, sec. 10, effective July 15, 1982.
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