(215 ILCS 5/223) (from Ch. 73, par. 835)
Sec. 223.
Director to value policies ‑ Legal standard of valuation.
(1) The Director shall annually value, or cause to be valued, the
reserve liabilities (hereinafter called reserves) for all outstanding
life insurance policies and annuity and pure endowment contracts of
every life insurance company doing business in this State, except that
in the case of an alien company, such valuation shall be limited to its
United States business, and may certify the amount of any such reserves,
specifying the mortality table or tables, rate or rates of interest, and
methods (net level premium method or other) used in the calculation of
such reserves. In calculating such reserves, he may use group methods
and approximate averages for fractions of a year or otherwise. In lieu
of the valuation of the reserves herein required of any foreign or alien
company, he may accept any valuation made, or caused to be made, by the
insurance supervisory official of any state or other jurisdiction when
such valuation complies with the minimum standard herein provided and if
the official of such state or jurisdiction accepts as sufficient and
valid for all legal purposes the certificate of valuation of the
Director when such certificate states the valuation to have been made in
a specified manner according to which the aggregate reserves would be at
least as large as if they had been computed in the manner prescribed by
the law of that state or jurisdiction.
Any such company which at any time has adopted any standard of
valuation producing greater aggregate reserves than those calculated
according to the minimum standard herein provided may, with the approval
of the Director, adopt any lower standard of valuation, but not lower
than the minimum herein provided, however, that, for the purposes of this
subsection, the holding of additional reserves previously determined by a
qualified actuary to be necessary to render the opinion required by
subsection (1a) shall not be deemed to be the adoption of a higher standard
of valuation. In the valuation of policies the
Director shall give no consideration to, nor make any deduction because
of, the existence or the possession by the company of
(a) policy liens created by any agreement given or |
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assented to by any assured subsequent to July 1, 1937, for which liens such assured has not received cash or other consideration equal in value to the amount of such liens, or
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(b) policy liens created by any agreement entered
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into in violation of section 232 unless the agreement imposing or creating such liens has been approved by a Court in a proceeding under Article XIII, or in the case of a foreign or alien company has been approved by a court in a rehabilitation or liquidation proceeding or by the insurance official of its domiciliary state or country, in accordance with the laws thereof.
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(1a) This subsection shall become operative at the end of the first
full calendar year following the effective date of this amendatory Act of 1991.
(A) General.
(1) Every life insurance company doing business
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in this State shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the Director by regulation are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this State. The Director by regulation shall define the specifics of this opinion and add any other items deemed to be necessary to its scope.
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(2) The opinion shall be submitted with the
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annual statement reflecting the valuation of reserve liabilities for each year ending on or after December 31, 1992.
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(3) The opinion shall apply to all business in
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force including individual and group health insurance plans, in form and substance acceptable to the Director as specified by regulation.
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(4) The opinion shall be based on standards
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adopted from time to time by the Actuarial Standards Board and on additional standards as the Director may by regulation prescribe.
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(5) In the case of an opinion required to be
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submitted by a foreign or alien company, the Director may accept the opinion filed by that company with the insurance supervisory official of another state if the Director determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State.
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(6) For the purpose of this Section, "qualified
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actuary" means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in its regulations.
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(7) Except in cases of fraud or willful
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misconduct, the qualified actuary shall not be liable for damages to any person (other than the insurance company and the Director) for any act, error, omission, decision or conduct with respect to the actuary's opinion.
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(8) Disciplinary action by the Director against
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the company or the qualified actuary shall be defined in regulations by the Director.
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(9) A memorandum, in form and substance
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acceptable to the Director as specified by regulation, shall be prepared to support each actuarial opinion.
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(10) If the insurance company fails to provide a
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supporting memorandum at the request of the Director within a period specified by regulation or the Director determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the regulations or is otherwise unacceptable to the Director, the Director may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum as is required by the Director.
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(11) Any memorandum in support of the opinion,
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and any other material provided by the company to the Director in connection therewith, shall be kept confidential by the Director and shall not be made public and shall not be subject to subpoena, other than for the purpose of defending an action seeking damages from any person by reason of any action required by this Section or by regulations promulgated hereunder; provided, however, that the memorandum or other material may otherwise be released by the Director (a) with the written consent of the company or (b) to the American Academy of Actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the Director for preserving the confidentiality of the memorandum or other material. Once any portion of the confidential memorandum is cited by the company in its marketing or is cited before any governmental agency other than a state insurance department or is released by the company to the news media, all portions of the confidential memorandum shall be no longer confidential.
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(B) Actuarial analysis of reserves and assets
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supporting those reserves.
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(1) Every life insurance company, except as
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exempted by or under regulation, shall also annually include in the opinion required by paragraph (A)(1) of this subsection (1a), an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the Director by regulation, when considered in light of the assets held by the company with respect to the reserves and related actuarial items including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts including, but not limited to, the benefits under and expenses associated with the policies and contracts.
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(2) The Director may provide by regulation for a
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transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this Section.
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(2) This subsection shall apply to only those policies and contracts
issued prior to the operative date of section 229.2 (the Standard
Non‑forfeiture Law).
(a) Except as otherwise in this Article provided,
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the legal minimum standard for valuation of contracts issued before January 1, 1908, shall be the Actuaries or Combined Experience Table of Mortality with interest at 4% per annum and for valuation of contracts issued on or after that date shall be the American Experience Table of Mortality with either Craig's or Buttolph's Extension for ages under 10 and with interest at 3 1/2% per annum. The legal minimum standard for the valuation of group insurance policies under which premium rates are not guaranteed for a period in excess of 5 years shall be the American Men Ultimate Table of Mortality with interest at 3 1/2% per annum. Any life company may, at its option, value its insurance contracts issued on or after January 1, 1938, in accordance with their terms on the basis of the American Men Ultimate Table of Mortality with interest not higher than 3 1/2% per annum.
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(b) Policies issued prior to January 1, 1908, may
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continue to be valued according to a method producing reserves not less than those produced by the full preliminary term method. Policies issued on and after January 1, 1908, may be valued according to a method producing reserves not less than those produced by the modified preliminary term method hereinafter described in paragraph (c). Policies issued on and after January 1, 1938, may be valued either according to a method producing reserves not less than those produced by such modified preliminary term method or by the select and ultimate method on the basis that the rate of mortality during the first 5 years after the issuance of such contracts respectively shall be calculated according to the following percentages of rates shown by the American Experience Table of Mortality:
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(i) first insurance year 50% thereof;
(ii) second insurance year 65% thereof;
(iii) third insurance year 75% thereof;
(iv) fourth insurance year 85% thereof;
(v) fifth insurance year 95% thereof;
(c) If the premium charged for the first policy year
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under a limited payment life preliminary term policy providing for the payment of all premiums thereon in less than 20 years from the date of the policy or under an endowment preliminary term policy, exceeds that charged for the first policy year under 20 payment life preliminary term policies of the same company, the reserve thereon at the end of any year, including the first, shall not be less than the reserve on a 20 payment life preliminary term policy issued in the same year at the same age, together with an amount which shall be equivalent to the accumulation of a net level premium sufficient to provide for a pure endowment at the end of the premium payment period, equal to the difference between the value at the end of such period of such a 20 payment life preliminary term policy and the full net level premium reserve at such time of such a limited payment life or endowment policy. The premium payment period is the period during which premiums are concurrently payable under such 20 payment life preliminary term policy and such limited payment life or endowment policy.
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(d) The legal minimum standard for the valuations of
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annuities issued on and after January 1, 1938, shall be the American Annuitant's Table with interest not higher than 3 3/4% per annum, and all annuities issued before that date shall be valued on a basis not lower than that used for the annual statement of the year 1937; but annuities deferred 10 or more years and written in connection with life insurance shall be valued on the same basis as that used in computing the consideration or premiums therefor, or upon any higher standard at the option of the company.
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(e) The Director may vary the standards of interest
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and mortality as to contracts issued in countries other than the United States and may vary standards of mortality in particular cases of invalid lives and other extra hazards.
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(f) The legal minimum standard for valuation of
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waiver of premium disability benefits or waiver of premium and income disability benefits issued on and after January 1, 1938, shall be the Class (3) Disability Table (1926) modified to conform to the contractual waiting period, with interest at not more than 3 1/2% per annum; but in no event shall the values be less than those produced by the basis used in computing premiums for such benefits. The legal minimum standard for the valuation of such benefits issued prior to January 1, 1938, shall be such as to place an adequate value, as determined by sound insurance practices, on the liabilities thereunder and shall be such that the value of the benefits under each and every policy shall in no case be less than the value placed upon the future premiums.
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(g) The legal minimum standard for the valuation of
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industrial policies issued on or after January 1, 1938, shall be the American Experience Table of Mortality or the Standard Industrial Mortality Table or the Substandard Industrial Mortality Table with interest at 3 1/2% per annum by the net level premium method, or in accordance with their terms by the modified preliminary term method hereinabove described.
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(h) Reserves for all such policies and contracts may
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be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by this subsection.
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(3) This subsection shall apply to only those policies and contracts
issued on or after January 1, 1948 or such earlier operative date of
Section 229.2 (the Standard Non‑forfeiture Law) as shall have been
elected by the insurance company issuing such policies or contracts.
(a) Except as otherwise provided in subsections (4),
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(6), and (7), the minimum standard for the valuation of all such policies and contracts shall be the Commissioners Reserve valuation method defined in paragraphs (b) and (f) of this subsection and in subsection 5, 3 1/2% interest for such policies issued prior to September 8, 1977, 5 1/2% interest for single premium life insurance policies and 4 1/2% interest for all other such policies issued on or after September 8, 1977, and the following tables:
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(i) The Commissioners 1941 Standard Ordinary
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Mortality Table for all Ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies, for such policies issued prior to the operative date of subsection (4a) of Section 229.2 (Standard Non‑forfeiture Law); and the Commissioners 1958 Standard Ordinary Mortality Table for such policies issued on or after such operative date but prior to the operative date of subsection (4c) of Section 229.2 provided that for any category of such policies issued on female risks all modified net premiums and present values referred to in this Act may, prior to September 8, 1977, be calculated according to an age not more than 3 years younger than the actual age of the insured and, after September 8, 1977, calculated according to an age not more than 6 years younger than the actual age of the insured; and for such policies issued on or after the operative date of subsection (4c) of Section 229.2, (i) the Commissioners 1980 Standard Ordinary Mortality Table, or (ii) at the election of the company for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten‑Year Select Mortality Factors, or (iii) any ordinary mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies.
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(ii) For all Industrial Life Insurance policies
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issued on the standard basis, excluding any disability and accidental death benefits in such policies‑‑the 1941 Standard Industrial Mortality Table for such policies issued prior to the operative date of subsection 4 (b) of Section 229.2 (Standard Non‑forfeiture Law); and for such policies issued on or after such operative date the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies.
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(iii) For Individual Annuity and Pure Endowment
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contracts, excluding any disability and accidental death benefits in such policies‑‑the 1937 Standard Annuity Mortality Table‑‑or, at the option of the company, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the Director.
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(iv) For Group Annuity and Pure Endowment
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contracts, excluding any disability and accidental death benefits in such policies‑‑the Group Annuity Mortality Table for 1951, any modification of such table approved by the Director, or, at the option of the company, any of the tables or modifications of tables specified for Individual Annuity and Pure Endowment contracts.
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(v) For Total and Permanent Disability Benefits
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in or supplementary to Ordinary policies or contracts for policies or contracts issued on or after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit, or any tables of disablement rates and termination rates adopted after 1980 by the National Association of Insurance Commissioners and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such tables or, at the option of the company, the Class (3) Disability Table (1926); and for policies issued prior to January 1, 1961, the Class (3) Disability Table (1926). Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies.
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(vi) For Accidental Death benefits in or
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supplementary to policies‑‑for policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the National Association of Insurance Commissioners and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies; for policies issued on or after January 1, 1961, and prior to January 1, 1966, any of such tables or, at the option of the company, the Inter‑Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter‑Company Double Indemnity Mortality Table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies.
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(vii) For Group Life Insurance, life insurance
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issued on the substandard basis and other special benefits‑‑such tables as may be approved by the Director.
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(b) Except as otherwise provided in paragraph (f) of
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subsection (3), subsection (5), and subsection (7) reserves according to the Commissioners reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of (A) over (B), as follows:
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(A) A net level annual premium equal to the
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present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided, however, that such net level annual premium shall not exceed the net level annual premium on the 19 year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of such policy.
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(B) A net one year term premium for such
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benefits provided for in the first policy year.
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For any life insurance policy issued on or after
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January 1, 1987, for which the contract premium in the first policy year exceeds that of the second year with no comparable additional benefit being provided in that first year, which policy provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the Commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date, defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium, shall, except as otherwise provided in paragraph (f) of subsection (3), be the greater of the reserve as of such policy anniversary calculated as described in the preceding part of this paragraph (b) and the reserve as of such policy anniversary calculated as described in the preceding part of this paragraph (b) with (i) the value defined in subpart A of the preceding part of this paragraph (b) being reduced by 15% of the amount of such excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on such date as an endowment, and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in paragraph (a) of subsection (3) and in subsection 6 shall be used.
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Reserves according to the Commissioners reserve
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valuation method for (i) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums, (ii) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, (iii) disability and accidental death benefits in all policies and contracts, and (iv) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of this paragraph (b), except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums.
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(c) In no event shall a company's aggregate reserves
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for all life insurance policies, excluding disability and accidental death benefits be less than the aggregate reserves calculated in accordance with the methods set forth in paragraphs (b), (f), and (g) of subsection (3) and in subsection (5) and the mortality table or tables and rate or rates of interest used in calculating non‑forfeiture benefits for such policies.
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(d) In no event shall the aggregate reserves for all
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policies, contracts, and benefits be less than the aggregate reserves determined by the qualified actuary to be necessary to render the opinion required by subsection (1a).
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(e) Reserves for any category of policies, contracts
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or benefits as established by the Director, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein.
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(f) If in any contract year the gross premium
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charged by any life insurance company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this paragraph (f) are those standards stated in subsection (6) and paragraph (a) of subsection (3).
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For any life insurance policy issued on or after
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January 1, 1987, for which the gross premium in the first policy year exceeds that of the second year with no comparable additional benefit provided in that first year, which policy provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the foregoing provisions of this paragraph (f) shall be applied as if the method actually used in calculating the reserve for such policy were the method described in paragraph (b) of subsection (3), ignoring the second paragraph of said paragraph (b). The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with paragraph (b) of subsection (3), including the second paragraph of said paragraph (b), and the minimum reserve calculated in accordance with this paragraph (f).
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(g) In the case of any plan of life insurance which
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provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves cannot be determined by the methods described in paragraphs (b) and (f) of subsection (3) and subsection (5), the reserves which are held under any such plan shall:
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(i) be appropriate in relation to the benefits
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and the pattern of premiums for that plan, and
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(ii) be computed by a method which is consistent
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with the principles of this Standard Valuation Law, as determined by regulations promulgated by the Director.
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(4) Except as provided in subsection (6), the minimum standard for
the valuation of all individual annuity and pure endowment contracts issued
on or after the operative date of this subsection, as defined herein, and
for all annuities and pure endowments purchased on or after such operative
date under group annuity and pure endowment contracts shall be the
Commissioners Reserve valuation methods defined in paragraph (b) of
subsection (3) and subsection (5) and the following tables and interest rates:
(a) For individual single premium immediate annuity
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contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, any individual annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such contracts, or any modification of those tables approved by the Director, and 7 1/2% interest.
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(b) For individual and pure endowment contracts
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other than single premium annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, any individual annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such contracts, or any modification of those tables approved by the Director, and 5 1/2% interest for single premium deferred annuity and pure endowment contracts and 4 1/2% interest for all other such individual annuity and pure endowment contracts.
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(c) For all annuities and pure endowments purchased
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under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table, any group annuity mortality table adopted after 1980 by the National Association of Insurance Commissioners and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of those tables approved by the Director, and 7 1/2% interest.
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After September 8, 1977, any company may file with the Director a written
notice of its election to comply with the provisions of this subsection
after a specified date before January 1, 1979, which shall be the operative
date of this subsection for such company; provided, a company may elect a
different operative date for individual annuity and pure endowment
contracts from that elected for group annuity and pure endowment contracts.
If a company makes no election, the operative date of this subsection for
such company shall be January 1, 1979.
(5) This subsection shall apply to all annuity and pure endowment contracts
other than group annuity and pure endowment contracts purchased under a
retirement plan or plan of deferred compensation, established or maintained
by an employer (including a partnership or sole proprietorship) or by an
employee organization, or by both, other than a plan providing individual
retirement accounts or individual retirement annuities under Section 408
of the Internal Revenue Code, as now or hereafter amended.
Reserves according to the Commissioners annuity reserve method for
benefits under annuity or pure endowment contracts, excluding any
disability and accidental death benefits in such contracts, shall be the
greatest of the respective excesses of the present values, at the date of
valuation, of the future guaranteed benefits, including guaranteed
nonforfeiture benefits, provided for by such contracts at the end of each
respective contract year, over the present value, at the date of valuation,
of any future valuation considerations derived from future gross
considerations, required by the terms of such contract, that become payable
prior to the end of such respective contract year. The future guaranteed
benefits shall be determined by using the mortality table, if any, and the
interest rate, or rates, specified in such contracts for determining
guaranteed benefits. The valuation considerations are the portions of the
respective gross considerations applied under the terms of such contracts
to determine nonforfeiture values.
(6) (a) Applicability of this subsection. (i) The
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interest rates used in determining the minimum standard for the valuation of
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(A) all life insurance policies issued in a
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particular calendar year, on or after the operative date of subsection (4c) of Section 229.2 (Standard Nonforfeiture Law),
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(B) all individual annuity and pure endowment
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contracts issued in a particular calendar year ending on or after December 31, 1983,
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(C) all annuities and pure endowments purchased
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in a particular calendar year ending on or after December 31, 1983, under group annuity and pure endowment contracts, and
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(D) the net increase in a particular calendar
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year ending after December 31, 1983, in amounts held under guaranteed interest contracts
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shall be the calendar year statutory valuation interest
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rates, as defined in this subsection.
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(b) Calendar Year Statutory Valuation Interest Rates.
(i) The calendar year statutory valuation
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interest rates shall be determined according to the following formulae, rounding "I" to the nearest .25%.
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(A) For life insurance,
I = .03 + W (R1 ‑ .03) + W/2 (R2 ‑ .09).
(B) For single premium immediate annuities
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and annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options,
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I = .03 + W (R ‑ .03) or with prior approval
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of the Director I = .03 + W (Rq ‑ .03).
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For the purposes of this subparagraph (i), "I"
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equals the calendar year statutory valuation interest rate, "R" is the reference interest rate defined in this subsection, "R1" is the lesser of R and .09, "R2" is the greater of R and .09, "Rq" is the quarterly reference interest rate defined in this subsection, and "W" is the weighting factor defined in this subsection.
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(C) For other annuities with cash settlement
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options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in (B), the formula for life insurance stated in (A) applies to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years, and the formula for single premium immediate annuities stated in (B) above applies to annuities and guaranteed interest contracts with guarantee durations of 10 years or less.
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(D) For other annuities with no cash
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settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in (B) applies.
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(E) For other annuities with cash settlement
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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 (B) applies.
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(ii) If the calendar year statutory valuation
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interest rate for any life insurance policy issued in any calendar year determined without reference to this subparagraph differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than .5%, the calendar year statutory valuation interest rate for such life insurance policy shall be the corresponding actual rate for the immediately preceding calendar year. For purposes of applying this subparagraph, 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 subsection (4c) of Section 229.2 (Standard Nonforfeiture Law) becomes operative.
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(c) Weighting Factors.
(i) The weighting factors referred to in the
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formulae stated in paragraph (b) are given in the following tables.
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(A) Weighting Factors for Life Insurance.
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Guarantee |
Weighting |
Duration |
Factors |
(Years) |
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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) The 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 is .80.
|
|
(C) The weighting factors for other
|
|
annuities and for guaranteed interest contracts, except as stated in (B) of this subparagraph (i), shall be as specified in tables (1), (2), and (3) of this subpart (C), according to the rules and definitions in (4), (5) and (6) of this subpart (C).
|
|
(1) For annuities and guaranteed interest
|
|
contracts valued on an issue year basis.
|
|
|
Guarantee |
Weighting Factor |
Duration |
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) for Plan Types A, B and C are increased by .15, .25 and .05, respectively.
|
|
(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 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 12 months beyond the valuation date, the factors shown in (1), or derived in (2), for Plan Types A, B and C are increased by .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 durations in excess of 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) The plan types used in the above tables
|
|
|
Plan Type A is a plan under which the
|
|
policyholder may not withdraw funds, or may withdraw funds at any time but only (a) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, (b) without such an adjustment but in installments over 5 years or more, or (c) as an immediate life annuity.
|
|
Plan Type B is a plan under which the
|
|
policyholder may not withdraw funds before expiration of the interest rate guarantee, or may withdraw funds before such expiration but only (a) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (b) without such adjustment but in installments over 5 years or more. At the end of the interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than 5 years.
|
|
Plan Type C is a plan under which the
|
|
policyholder may withdraw funds before expiration of the interest rate guarantee in a single sum or installments over less than 5 years either (a) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (b) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.
|
|
(6) A company 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 cash settlement options shall be valued on an issue year basis. As used in this Section, "issue year basis of valuation" refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract. "Change in fund basis of valuation", as used in this Section, 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.
|
|
(d) Reference Interest Rate. (i) The reference
|
|
interest rate referred to in paragraph (b) of this subsection is defined as follows.
|
|
(A) For all life insurance, the reference
|
|
interest rate is the lesser of the average over a period of 36 months, and the average over a period of 12 months, with both periods ending on June 30, or with prior approval of the Director ending on December 31, 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 reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, 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 annuities with cash settlement options
|
|
and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except those described in (B), with guarantee durations in excess of 10 years, the reference interest rate is the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, 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 those described in (B), with guarantee durations of 10 years or less, the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, 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 annuities with no cash settlement
|
|
options and for guaranteed interest contracts with no cash settlement options, the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, 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.
|
|
(F) For annuities with cash settlement options
|
|
and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except those described in (B), the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average‑Monthly Average Corporates, as published by Moody's Investors Service, Inc.
|
|
(G) For annuities valued by a formula based on
|
|
Rq, the quarterly reference interest rate is, with the prior approval of the Director, the average within each of the 4 consecutive calendar year quarters ending on March 31, June 30, September 30 and December 31 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.
|
|
(e) Alternative Method for Determining Reference
|
|
Interest Rates. In the event that the Moody's Corporate Bond Yield Average‑Monthly Average Corporates is no longer published by Moody's Investors Services, 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 regulations promulgated by the Director, may be substituted.
|
|
(7) Minimum Standards for Health (Disability, Accident and Sickness)
Plans. The Director shall promulgate a regulation containing the minimum
standards applicable to the valuation of health (disability, sickness and
accident) plans.
(Source: P.A. 91‑357, eff. 7‑29‑99.)
|
(215 ILCS 5/229.2) (from Ch. 73, par. 841.2)
Sec. 229.2.
Standard Non‑forfeiture Law for Life Insurance.
(1) No policy
of life insurance, except as stated in subsection (8),
shall be delivered or issued for delivery in this
State unless it contains in
substance the following provisions or corresponding provisions which in
the opinion of the Director are at least as favorable to the defaulting
or surrendering policyholder and are essentially in compliance with subsection
(7) of this law:
(i) That, in the event of default in any premium payment, the
company will grant, upon proper request not later than 60 days after the
due date of the premium in default, a paid‑up nonforfeiture
benefit on
a plan stipulated in the policy, effective as of such due date, of such
amount as may be hereinafter specified. In lieu of such
stipulated paid‑up nonforfeiture benefit, the company may substitute, upon
proper request not later than 60 days after the due date of the premium
in default, an actuarially equivalent alternative paid‑up nonforfeiture
benefit which provides a greater amount or longer period of death benefits
or, if applicable, a greater amount or earlier payment of endowment benefits.
(ii) That, upon surrender of the policy within 60 days after the due
date of any premium payment in default after premiums have been paid for
at least 3 full years in the case of Ordinary insurance or 5 full years
in the case of Industrial insurance, the company will pay, in lieu of
any paid‑up nonforfeiture benefit, a cash surrender value of such
amount as may be hereinafter specified.
(iii) That a specified paid‑up nonforfeiture benefit
shall become
effective as specified in the policy unless the person entitled to make
such election elects another available option not later than 60 days
after the due date of the premium in default.
(iv) That, if the policy shall have become paid‑up by completion of
all premium payments or if it is continued under any paid‑up
nonforfeiture benefit which became effective on or
after the third
policy anniversary in the case of Ordinary insurance or the fifth policy
anniversary in the case of Industrial insurance, the company will pay,
upon surrender of the policy within 30 days after any policy
anniversary, a cash surrender value of such amount as may be hereinafter
specified.
(v) In the case of policies which cause on a basis guaranteed in the
policy unscheduled changes in benefits or premiums, or which provide an
option for changes in benefits or premiums other than a change to a new
policy, a statement of the mortality table, interest rate, and method used
in calculating cash surrender values and the paid‑up nonforfeiture benefits
available under the policy. In the case of all other policies,
a statement of the mortality table and interest rate used in
calculating the cash surrender values and the paid‑up nonforfeiture
benefits available under the policy, together with a table showing the
cash surrender value, if any, and paid‑up nonforfeiture
benefit, if
any, available under the policy on each policy anniversary either during
the first 20 policy years or during the term of the policy, whichever is
shorter, such values and benefits to be calculated upon the assumption
that there are no dividends or paid‑up additions credited to the policy
and that there is no indebtedness to the company on the policy.
(vi) A statement that the cash surrender values and the paid‑up
nonforfeiture benefits available under the policy
are not less than the
minimum values and benefits required by or pursuant to the insurance law
of the state in which the policy is delivered; an explanation of the
manner in which the cash surrender values and the paid‑up nonforfeiture
benefits are altered by the existence of any paid‑up additions credited
to the policy or any indebtedness to the company on the policy; if a
detailed statement of the method of computation of the values and
benefits shown in the policy is not stated therein, a statement that
such method of computation has been filed with the insurance supervisory
official of the state in which the policy is delivered; and a statement
of the method to be used in calculating the cash surrender value and
paid‑up nonforfeiture benefit available under the
policy on any policy
anniversary beyond the last anniversary for which such values and
benefits are consecutively shown in the policy.
Any of the foregoing provisions or portions thereof not applicable by
reason of the plan of insurance may, to the extent inapplicable, be
omitted from the policy.
The company shall reserve the right to defer the payment of any cash
surrender value for a period of 6 months after demand therefor with
surrender of the policy.
(2) (i) Any cash surrender value available under the policy in the event
of default in a premium payment due on any policy anniversary, whether
or not required by subsection (1), shall be an amount not less than the
excess, if any, of the present value, on such anniversary, of the future
guaranteed benefits which would have been provided for by the policy,
including any existing paid‑up additions, if there had been no default,
over the sum of (i) the then present value of the adjusted premiums as
defined in subsections 4, 4(a), 4(b) and 4(c), corresponding
to premiums which
would have fallen due on and after such anniversary, and (ii) the amount
of any indebtedness to the company on the policy.
(ii) For any policy issued on or after the operative date of subsection
4(c), which provides supplemental life insurance or annuity benefits at
the option of the insured for an identifiable additional premium by rider
or supplemental policy provision,
the cash surrender value shall be an amount not less than the sum of the
cash surrender value as determined in paragraph (i) for an otherwise similar
policy issued at the same age without such rider or supplemental policy
provision and the cash surrender value as determined in such paragraph for
a policy which provides only the benefits otherwise provided by such rider
or supplemental policy provision.
(iii) For any family policy issued on or after the operative date of subsection
4(c), which defines a primary insured and provides term insurance on the
life of the spouse of the primary insured expiring before the spouse attains
age 71, the cash surrender value shall be an amount not less than the sum
of the cash surrender value as determined in paragraph (i) for an otherwise
similar policy issued at the same age without such term insurance on the
life of the spouse and the cash surrender value as determined in such paragraph
for a policy which provides only the benefits otherwise provided by such
term insurance on the life of the spouse.
(iv) Any cash surrender
value available within 30 days after any policy anniversary under any
policy paid up by completion of all premium payments or any policy
continued under any paid‑up nonforfeiture benefit, whether or not
required by subsection (1), shall be an amount not less than the present
value, on such anniversary, of the future guaranteed benefits provided
for by the policy, including any existing paid‑up additions, decreased
by any indebtedness to the company on the policy.
(3) Any paid‑up nonforfeiture benefit available
under the policy in
the event of default in a premium payment due on any policy anniversary
shall be such that its present value as of such anniversary shall be at
least equal to the cash surrender value then provided for by the policy,
or if none is provided for, that cash surrender value which would have
been required by this section in the absence of the condition that
premiums shall have been paid for at least a specified period.
(4) This subsection (4) shall not apply to policies issued on or after
the operative date of subsection (4c). Except as provided in the third
paragraph of this subsection,
the adjusted premiums for any policy shall be calculated on an annual
basis and shall be such uniform percentage of the respective premium
specified in the policy for each policy year, excluding any extra
premiums charged because of impairments or special hazards, that the
present value, at the date of issue of the policy, of all such adjusted
premiums shall be equal to the sum of (i) the then present value of the
future guaranteed benefits provided for by the policy; (ii) 2% of the
amount of insurance, if the insurance be uniform in amount, or of the
equivalent uniform amount, as hereinafter defined, if the amount of
insurance varies with duration of the policy; (iii) 40% of the adjusted
premium for the first policy year; (iv) 25% of either the adjusted
premium for the first policy year or the adjusted premium for a whole
life policy of the same uniform or equivalent uniform amount with
uniform premiums for the whole of life issued at the same age for the
same amount of insurance, whichever is less. Provided, however, that in
applying the percentages specified in (iii) and (iv) above, no adjusted
premium shall be deemed to exceed 4% of the amount of insurance or
uniform amount equivalent thereto. The date of issue of a policy for the
purpose of this subsection shall be the date as of which the rated age
of the insured is determined.
In the case of a policy providing an amount of insurance varying with
duration of the policy, the equivalent uniform amount thereof for the
purpose of this subsection shall be deemed to be the level amount of
insurance, provided by an otherwise similar policy, containing the same
endowment benefit or benefits, if any, issued at the same age and for
the same term, the amount of which does not vary with duration and the
benefits under which have the same present value at the inception of the
insurance as
the benefits under the policy; provided, however, that in the case of a
policy providing a varying amount of insurance issued on the life of a
child under age 10, the equivalent uniform amount may be computed as
though the amount of insurance provided by the policy prior to the
attainment of age 10 were the amount provided by such policy at age 10.
The adjusted premiums for any policy providing term insurance
benefits by rider or supplemental policy provision shall be equal to (a)
the adjusted premiums for an otherwise similar policy issued at the same
age without such term insurance benefits, increased, during the period
for which premiums for such term insurance benefits are payable, by (b)
the adjusted premiums for such term insurance, the foregoing items (a)
and (b) being calculated separately and as specified in the first 2
paragraphs of this subsection except that, for the purposes of (ii),
(iii) and (iv) of the first such paragraph, the amount of insurance or
equivalent uniform amount of insurance used in the calculation of the
adjusted premiums referred to in (b) shall be equal to the excess of the
corresponding amount determined for the entire policy over the amount
used in the calculation of the adjusted premiums in (a).
Except as otherwise provided in subsections (4a) and (4b), all
adjusted premiums and present values referred to in this section shall
for all policies of Ordinary insurance be calculated on the basis of the
Commissioners 1941 Standard Ordinary Mortality Table, provided that for
any category of Ordinary insurance issued on female risks adjusted
premiums and present values may be calculated according to an age not
more than 3 years younger than the actual age of the insured, and such
calculations for all policies of Industrial insurance shall be made on
the basis of the 1941 Standard Industrial Mortality Table. All
calculations shall be made on the basis of the rate of interest, not
exceeding 3 1/2% per annum, specified in the policy for calculating cash
surrender values and paid‑up nonforfeiture benefits.
Provided, however,
that in calculating the present value of any paid‑up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than 130% of the
rates of mortality according to such applicable table. Provided,
further, that for insurance issued on a substandard basis, the
calculation of any such adjusted premiums and present values may be
based on such other table of mortality as may be specified by the
company and approved by the Director.
(4a) This subsection (4a) shall not apply to Ordinary policies issued
on or after the operative date of subsection (4c). In the case of Ordinary
policies issued on or after the
operative date of this subsection (4a) as defined herein, all adjusted
premiums and present values referred to in this Section shall be
calculated on the basis of the Commissioners 1958 Standard Ordinary
Mortality Table and the rate of interest specified in the policy for calculating
cash surrender values and
paid‑up nonforfeiture benefits, provided that such
rate of interest shall not exceed 3 1/2% per annum except that a rate of
interest not exceeding 5 1/2% per annum may be used for policies issued
on or after September 8, 1977, except that for any single premium
whole life or endowment insurance policy a rate of interest not exceeding
6 1/2% per annum may be used and provided that for any category of
Ordinary insurance issued on female risks, adjusted premiums and present
values may be calculated according to an age not more than 6 years
younger than the actual age of the insured. Provided, however, that in
calculating the present value of any paid‑up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than those shown
in the Commissioners 1958 Extended Term Insurance Table. Provided,
however, that for insurance issued on a substandard basis, the
calculation for any such adjusted premiums and present values may be
based on such other table of mortality as may be specified by the
company and approved by the Director. After the effective date of this
subsection (4a), any company may file with the Director written notice
of its election to comply with the provisions of this subsection after a
specified date before January 1, 1966. After the filing of such notice,
then upon such specified date (which shall be the operative date of this
subsection for such company), this subsection shall become operative
with respect to the Ordinary policies thereafter issued by such company.
If a company makes no such election, the operative date of this
subsection for such company shall be January 1, 1966.
(4b) This subsection (4b) shall not apply to Industrial policies issued
on or after the operative date of subsection (4c). In the case of Industrial
policies issued on or after the
operative date of this subsection (4b) as defined herein, all adjusted
premiums and present values referred to in this Section shall be
calculated on the basis of the Commissioners 1961 Standard Industrial
Mortality Table and the rate of interest specified in the policy for calculating
cash surrender values and
paid‑up nonforfeiture benefits, provided that such
rate of interest shall not exceed 3 1/2% per annum except that a rate of
interest not exceeding
5 1/2% per annum may be used for policies issued on or after September
8, 1977, except
that for any single premium whole life or endowment insurance policy a rate
of interest not exceeding 6 1/2% per annum may be used. Provided, however,
that in calculating
the present value of any paid‑up term insurance with accompanying pure
endowment, if any, offered as a nonforfeiture benefit,
the rates of
mortality assumed may be not more than those shown in the Commissioners
1961 Industrial Extended Term Insurance Table. Provided, further, that
for insurance issued on a substandard basis, the calculations of any
such adjusted premiums and present values may be based on such other
table of mortality as may be specified by the company and approved by
the Director. After the effective date of this subsection (4b), any
company may file with the Director a written notice of its election to
comply with the provisions of this subsection after a specified date
before January 1, 1968. After the filing of such notice, then upon such
specified date (which shall be the operative date of this subsection for
such company), this subsection shall become operative with respect to
the Industrial policies thereafter issued by such company. If a company
makes no such election, the operative date of this subsection for such
company shall be January 1, 1968.
(4c)(a) This subsection shall apply to all policies issued on or after
its operative date. Except as provided in paragraph (g), the adjusted premiums
for any policy shall be calculated on an annual basis and shall be such
uniform percentage of the respective premiums specified in the policy for
each policy year, excluding amounts payable as extra premiums to cover impairments
or special hazards and any uniform annual contract charge or policy fee
specified in the policy in a statement of the method to be used in calculating
the cash surrender value and paid‑up nonforfeiture benefits of the policy,
that the present value, at the date of issue of the policy, of all adjusted
premiums shall be equal to the sum of (i) the then present value of the
future guaranteed benefits provided for by the policy; (ii) 1% of either
the amount of insurance, if the insurance is uniform in amount, or the average
amount of insurance at the beginning of each of the first 10 policy years;
and (iii) 125% of the nonforfeiture net level premium as hereinafter defined.
In applying the percentage specified in (iii), however,
no nonforfeiture net level premium shall exceed 4% of either the amount
of insurance, if the insurance is uniform in amount, or the average amount
of insurance at the beginning of each of the first 10 policy years. The
date of issue of a policy for the purpose of this subsection is the date
as of which the rated age of the insured is determined.
(b) The nonforfeiture net level premium equals the present value, at the
date of issue of the policy, of the guaranteed benefits provided for by
the policy divided by the present value, at the date of issue of the policy,
of an annuity of one per annum payable on the date of issue of the policy
and on each anniversary of such policy on which a premium falls due.
(c) In the case of a policy which causes, on a basis guaranteed in such
policy, unscheduled changes in benefits or premiums, or which provides an
option for changes in benefits or premiums other than a change to a new
policy, adjusted premiums and present values shall initially be calculated
on the assumption that future benefits and premiums do not change from those
stipulated at the date of issue of such policy. At the time of any such
change in the benefits or premiums, the future adjusted premiums, nonforfeiture
net level premiums and present values shall be recalculated on the assumption
that future benefits and premiums do not change from those stipulated by
such policy immediately after the change.
(d) Except as otherwise provided in paragraph (g), the recalculated future
adjusted premiums for any policy shall be such uniform percentage of the
respective future premiums specified in the policy for each policy year,
excluding amounts payable as extra premiums to cover impairments and special
hazards and any uniform annual contract charge or policy fee specified in
the policy in a statement of the method to be used in calculating the cash
surrender values and paid‑up nonforfeiture benefits, that the present value,
at the time of change to the newly defined benefits or premiums, of all
such future adjusted premiums shall be equal to the excess of (A) the sum
of (i) the then present value of the then future guaranteed benefits provided
for by the policy and (ii) the additional expense allowance, if any, over
(B) the then cash surrender value, if any, or present value of any paid‑up
nonforfeiture benefit under the policy.
(e) The additional expense allowance at the time of the change to the
newly defined benefits or premiums shall be the sum of
(i) 1% of the excess, if positive, of the average amount of insurance at
the beginning of each of the first 10 policy years subsequent to the change
over the average amount of insurance prior to the change at the beginning
of each of the first 10 policy years subsequent to the time of the most
recent previous change, or, if there has been no previous change, the date
of issue of the policy; and (ii) 125% of the increase, if positive, in
the nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium equals the result
obtained by dividing X by Y, where
(i) X equals the sum of
(A) the nonforfeiture net level premium applicable prior to the change
times the present value of an annuity of one per annum payable on each anniversary
of the policy on or subsequent to the date of the change on which a premium
would have fallen due had the change not occurred, and
(B) the present value of the increase in future guaranteed benefits provided
for by the policy; and
(ii) Y equals the present value of an annuity of one per annum payable
on each anniversary of the policy on or subsequent to the date of change
on which a premium falls due.
(g) Notwithstanding any other provisions of this subsection to the contrary,
in the case of a policy issued on a substandard basis which provides reduced
graded amounts of insurance so that, in each policy year, such policy has
the same tabular mortality cost as an otherwise similar policy issued on
the standard basis which provides higher uniform amounts of insurance, adjusted
premiums and present values for such substandard policy may be calculated
as if it were issued to provide such higher uniform amounts of insurance
on the standard basis.
(h) All adjusted premiums and present values referred to in this Section
shall for all policies of ordinary insurance be calculated on the basis
of the Commissioners 1980 Standard Ordinary Mortality Table or, at the election
of the company for any one or more specified plans of life
insurance, the Commissioners 1980 Standard Ordinary Mortality Table with
Ten‑Year Select Mortality Factors. All adjusted premiums and present values
referred to in this Section shall for all policies of Industrial insurance
be calculated on the basis of the Commissioners 1961 Standard Industrial
Mortality Table. All adjusted premiums and present values referred to in
this Section for all policies issued in a particular calendar year shall
be calculated on the basis of a rate of interest not exceeding
the nonforfeiture interest rate as defined in this subsection for policies
issued in that calendar year. The provisions of this paragraph are subject
to the provisions set forth in subparagraphs (i) through (vii).
(i) At the option of the company, calculations for all policies issued
in a particular calendar year may be made on the basis of a rate of interest
not exceeding the nonforfeiture interest rate, as defined in this subsection,
for policies issued in the immediately preceding calendar year.
(ii) Under any paid‑up nonforfeiture benefit, including any paid‑up dividend
additions, any cash surrender value available, whether or not required by
subsection (1), shall be calculated on the basis of the mortality table
and rate of interest used in determining the amount of such paid‑up nonforfeiture
benefit and paid‑up dividend additions, if any.
(iii) A company may calculate the amount of any guaranteed paid‑up nonforfeiture
benefit, including any paid‑up additions under the policy, on the basis
of an interest rate no lower than that specified in the policy for calculating
cash surrender values.
(iv) In calculating the present value of any paid‑up term insurance with
an accompanying pure endowment, if any, offered as a nonforfeiture benefit,
the rates of mortality assumed may be not more than those shown in the Commissioners
1980 Extended Term Insurance Table for policies of ordinary insurance and
not more than the Commissioner 1961 Industrial Extended Term Insurance Table
for policies of industrial insurance.
(v) For insurance issued on a substandard basis, the calculation of any
such adjusted premiums and present values may be based on appropriated modifications
of the aforementioned tables.
(vi) Any ordinary mortality tables adopted after 1980 by the National Association
of Insurance Commissioners and approved by regulations promulgated
by the Director for use in determining the minimum nonforfeiture standard
may be substituted for the Commissioners 1980 Standard Ordinary Mortality
Table with or without Ten‑Year Select Mortality Factors or for the Commissioners
1980 Extended Term Insurance Table.
(vii) Any industrial mortality tables adopted after 1980 by the National
Association of Insurance Commissioners and approved by regulations promulgated
by the Director for use in determining the minimum nonforfeiture standard
may be substituted for the Commissioners 1961 Standard Industrial Mortality
Table or the Commissioners 1961 Industrial Extended Term Insurance Table.
(i) The nonforfeiture interest rate per annum for any policy issued in
a particular calendar year shall be equal to 125% of the calendar year statutory
valuation interest rate for such policy, as defined in the Standard Valuation
Law, rounded to the nearest .25%.
(j) Notwithstanding any other provision in this Code to the contrary,
any refiling of nonforfeiture values or their methods of computation for
any previously approved policy form which involves only a change in the
interest rate or mortality table used to compute nonforfeiture values shall
not require refiling of any other provisions of that policy form.
(k) After the effective date of this subsection, any company may, with
respect to any category of insurance, file with the Director a written notice
of its election to comply with the provisions of this subsection after a
specified date before January 1, 1989. That date
shall be the operative date of this subsection for that category of insurance
for such company. If
a company makes no such election, the operative date of this subsection
for that category of insurance issued by such company shall be January 1, 1989.
(5) In the case of any plan of life insurance which provides for future
premium determination, the amounts of which are to be determined by the
insurance company based on then estimates of future experience, or in the
case of any plan of life insurance which is of such a nature that minimum
values cannot be determined by the methods described in subsections (1),
(2), (3), (4), (4a), (4b) or (4c), then
(a) the Director shall satisfy himself that the benefits provided under
such plan are substantially as favorable to policyholders and insured parties
as the minimum benefits otherwise required by subsections (1), (2), (3),
(4), (4a), (4b) or (4c);
(b) the Director shall satisfy himself that the benefits and the pattern
of premiums of that plan are not such as to mislead prospective policyholders
or insured parties; and
(c) the cash surrender values and paid‑up nonforfeiture benefits provided
by such plan shall not be less than the minimum values and benefits computed
by a method consistent with the principles of this Standard Nonforfeiture
law for Life Insurance, as determined by regulations promulgated by the Director.
(6) Any cash surrender value and any paid‑up nonforfeiture benefit,
available under the policy in the event of default in a premium payment
due at any time other than on the policy anniversary, shall be
calculated with allowance for the lapse of time and the payment of
fractional premiums beyond the last preceding policy anniversary. All
values referred to in subsections (2), (3), (4), (4a), (4b)
and (4c) may be
calculated upon the assumption that any death benefit is payable at the
end of the policy year of death. The net value of any paid‑up additions,
other than paid‑up term additions, shall be not less than the amounts
used to provide such additions. Notwithstanding the provisions of
subsection (2), additional benefits payable (i) in the event of death or
dismemberment by accident or accidental means, (ii) in the event of
total and permanent disability, (iii) as reversionary annuity or
deferred reversionary annuity benefits, (iv) as term insurance benefits
provided by a rider or supplemental policy provision to which, if issued
as a separate policy, this section would not apply, (v) as term
insurance on the life of a child or on the lives of children provided in
a policy on the life of a parent of the child, if such term insurance
expires before the child's age is 26, is uniform in amount after the
child's age is one, and has not become paid‑up by reason of the death of
a parent of the child, and (vi) as other policy benefits additional to
life insurance and endowment benefits, and premiums for all such
additional benefits, shall be disregarded in ascertaining cash surrender
values and nonforfeiture benefits required by this section, and no such
additional benefits shall be required to be included in any paid‑up
nonforfeiture benefits.
(7) This subsection shall apply to all policies issued on or after January
1, 1987. Any cash surrender value available under the policy in the event
of default in a premium payment due on any policy anniversary shall be in
an amount which does not differ by more than .2% of either the amount of
insurance if the insurance is uniform in amount, or the average amount of
insurance at the beginning of each of the first 10 policy years, from the
sum of (a) the greater of zero and the basic cash value hereinafter specified
and (b) the present value of any existing paid‑up additions less the amount
of any indebtedness to the company under the policy.
The basic cash value equals the present value, on such anniversary, of
the future guaranteed benefits which would have been provided for by the
policy, excluding any existing paid‑up additions and before deduction of
any indebtedness to the company, if there had been no default, less the
then present value of the nonforfeiture factors, as hereinafter defined,
corresponding to premiums which would have fallen due on and after such
anniversary. The effects on the basic cash value of supplemental life insurance
or annuity benefits or of family coverage, as described in subsection (2)
or (4), whichever is applicable, shall, however, be the same as are the
effects specified in subsection (2) or (4), whichever is applicable, on
the cash surrender values defined in that subsection.
The nonforfeiture factor for each policy year equals a percentage of the
adjusted premium for the policy year, as defined in subsection (4) or (4c),
whichever is applicable. Except as is required by the next succeeding sentence
of this paragraph, such percentage
(a) shall be the same percentage for each policy year between the second
policy anniversary and the later of (i) the fifth policy anniversary and
(ii) the first policy anniversary at which there is available under the
policy a cash surrender value in an amount, before including any paid‑up
additions and before deducting any indebtedness, of at least .2% of either
the amount of insurance, if the insurance is uniform in amount, or the average
amount of insurance at the beginning of each of the first 10 policy years; and
(b) shall be such that no percentage after the later of the 2 policy anniversaries
specified in the preceding item (a) may apply to fewer than 5 consecutive policy years.
No basic cash value may be less than the value which would be obtained
if the adjusted premiums for the policy, as defined in subsection (4) or
(4c), whichever is applicable, were substituted for the nonforfeiture factors
in the calculation of the basic cash value.
All adjusted premiums and present values referred to in this subsection
shall for a particular policy be calculated on the same mortality and interest
bases as those used in accordance with the other
subsections of this law. The cash surrender values referred to in this
subsection shall include any endowment benefits provided for by the policy.
Any cash surrender value available other than in the event of default in
a premium payment due on a policy anniversary, and the amount of any paid‑up
nonforfeiture benefit available under the policy in the event of default
in a premium payment shall be determined in manners consistent with the
manners specified for determining the analogous minimum amounts in subsections
1, 2, 3, 4c, and 6. The amounts of any cash surrender values and of any
paid‑up nonforfeiture benefits granted in connection with additional benefits
such as those listed as items (i) through (vi) in subsection (6) shall conform
with the principles of this subsection (7).
(8) This Section shall not apply to any of the following:
(a) reinsurance,
(b) group insurance,
(c) a pure endowment,
(d) an annuity or reversionary annuity contract,
(e) a term policy of uniform amount, which provides no guaranteed nonforfeiture
or endowment benefits, or renewal thereof, of 20 years or
less expiring before age 71, for which uniform premiums are payable
during the entire term of the policy,
(f) a term policy of
decreasing amount, which provides no guaranteed nonforfeiture or endowment
benefits, on which each adjusted premium, calculated as
specified in subsections (4), (4a), (4b) and (4c), is less
than the adjusted
premium so calculated, on a term policy of uniform
amount, or renewal thereof, which provides no guaranteed nonforfeiture or
endowment benefits, issued at the same
age and for the same initial amount of insurance and for a term of 20
years or less expiring before age 71, for which uniform premiums are payable
during the entire term of the policy,
(g) a policy, which provides no guaranteed nonforfeiture or endowment
benefits, for which no cash surrender value, if any, or present value of
any paid‑up nonforfeiture benefit, at the beginning of any policy year,
calculated as specified in subsections (2), (3), (4), (4a), (4b) and (4c),
exceeds 2.5% of the amount of insurance at the beginning of the same policy year,
(h) any policy
which shall be delivered outside this State through an agent or other
representative of the company issuing the policy.
For purposes of determining the applicability of this Section, the age
of expiry for a joint term life insurance policy shall be the age of expiry
of the oldest life.
(Source: P.A. 83‑1465.)
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(215 ILCS 5/229.4a)
(Section scheduled to be repealed on July 1, 2007)
Sec. 229.4a. Standard Non‑forfeiture Law for Individual Deferred
Annuities.
(1)
Title.
This Section shall be known as the Standard Nonforfeiture Law for Individual Deferred Annuities.
(2) Applicability.
This Section shall not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced, or reversionary annuity, nor to any contract which shall be delivered outside this State through an agent or other representative of the company issuing the contract.
(3) Nonforfeiture Requirements.
(A) In the case of contracts issued on or after the |
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operative date of this Section as defined in subsection (13), no contract of annuity, except as stated in subsection (2), shall be delivered or issued for delivery in this State unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the Director of Insurance are at least as favorable to the contract holder, upon cessation of payment of considerations under the contract:
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(i) That upon cessation of payment of
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considerations under a contract, or upon the written request of the contract owner, the company shall grant a paid‑up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (5), (6), (7), (8) and (10);
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(ii) If a contract provides for a lump sum
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settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company shall pay in lieu of a paid‑up annuity benefit a cash surrender benefit of such amount as is specified in subsections (5), (6), (8) and (10). The company may reserve the right to defer the payment of the cash surrender benefit for a period not to exceed 6 months after demand therefor with surrender of the contract after making written request and receiving written approval of the Director. The request shall address the necessity and equitability to all policyholders of the deferral;
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(iii) A statement of the mortality table, if any,
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and interest rates used calculating any minimum paid‑up annuity, cash surrender, or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of the benefits; and
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(iv) A statement that any paid‑up annuity, cash
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surrender or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which the benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract or any prior withdrawals from or partial surrenders of the contract.
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(B) Notwithstanding the requirements of this Section,
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a deferred annuity contract may provide that if no considerations have been received under a contract for a period of 2 full years and the portion of the paid‑up annuity benefit at maturity on the plan stipulated in the contract arising from prior considerations paid would be less than $20 monthly, the company may at its option terminate the contract by payment in cash of the then present value of the portion of the paid‑up annuity benefit, calculated on the basis on the mortality table, if any, and interest rate specified in the contract for determining the paid‑up annuity benefit, and by this payment shall be relieved of any further obligation under the contract.
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(4) Minimum values. The minimum values as specified in subsections (5), (6), (7), (8) and (10) of any paid‑up annuity, cash surrender or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subsection.
(A)(i) The minimum nonforfeiture amount at any time
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at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at rates of interest as indicated in subdivision (4)(B) of the net considerations (as hereinafter defined) paid prior to such time, decreased by the sum of paragraphs (a) through (d) below:
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(a) Any prior withdrawals from or partial
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surrenders of the contract accumulated at rates of interest as indicated in subdivision (4)(B);
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(b) An annual contract charge of $50,
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accumulated at rates of interest as indicated in subdivision (4)(B);
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(c) Any premium tax paid by the company for
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the contract, accumulated at rates of interest as indicated in subdivision (4)(B); and
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(d) The amount of any indebtedness to the
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company on the contract, including interest due and accrued.
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(ii) The net considerations for a given contract year
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used to define the minimum nonforfeiture amount shall be an amount equal to 87.5% of the gross considerations, credited to the contract during that contract year.
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(B) The interest rate used in determining minimum
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nonforfeiture amounts shall be an annual rate of interest determined as the lesser of 3% per annum and the following, which shall be specified in the contract if the interest rate will be reset:
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(i) The five‑year Constant Maturity Treasury Rate
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reported by the Federal Reserve as of a date, or average over a period, rounded to the nearest 1/20th of one percent, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under subdivision (4)(B)(iv);
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(ii) Reduced by 125 basis points;
(iii) Where the resulting interest rate is not
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(iv) The interest rate shall apply for an initial
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period and may be redetermined for additional periods. The redetermination date, basis and period, if any, shall be stated in the contract. The basis is the date or average over a specified period that produces the value of the 5‑year Constant Maturity Treasury Rate to be used at each redetermination date.
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(C) During the period or term that a contract
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provides substantive participation in an equity indexed benefit, it may increase the reduction described in subdivision (4)(B)(ii) above by up to an additional 100 basis points to reflect the value of the equity index benefit. The present value at the contract issue date, and at each redetermination date thereafter, of the additional reduction shall not exceed market value of the benefit. The Director may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. Lacking such a demonstration that is acceptable to the Director, the Director may disallow or limit the additional reduction.
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(D) The Director may adopt rules to implement the
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provisions of subdivision (4)(C) and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts that the Director determines adjustments are justified.
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(5) Computation of Present Value. Any paid‑up annuity
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benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Present value shall be computed using the mortality table, if any, and the interest rates specified in the contract for determining the minimum paid‑up annuity benefits guaranteed in the contract.
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(6) Calculation of Cash Surrender Value. For contracts
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that provide cash surrender benefits, the cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid‑up annuity benefit that would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract, such present value being calculated on the basis of an interest rate not more than 1% higher than the interest rate specified in the contract for accumulating the net considerations to determine maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.
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(7) Calculation of Paid‑up Annuity Benefits. For
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contracts that do not provide cash surrender benefits, the present value of any paid‑up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid‑up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid‑up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine maturity value, and increased by any additional amounts credited by the company to the contract. For contracts that do not provide any death benefits prior to the commencement of any annuity payments, present values shall be calculated on the basis of such interest rate and the mortality table specified in the contract for determining the maturity value of the paid‑up annuity benefit. However, in no event shall the present value of a paid‑up annuity benefit be less than the minimum nonforfeiture amount at that time.
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(8) Maturity Date. For the purpose of determining the
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benefits calculated under subsections (6) and (7), in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.
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(9) Disclosure of Limited Death Benefits. A contract
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that does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided.
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(10) Inclusion of Lapse of Time Considerations. Any
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paid‑up annuity, cash surrender or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.
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(11) Proration of Values; Additional Benefits. For a
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contract which provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (5), (6), (7), (8) and (10), additional benefits payable in the event of total and permanent disability, as reversionary annuity or deferred reversionary annuity benefits, or as other policy benefits additional to life insurance, endowment and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid‑up annuity, cash surrender and death benefits that may be required under this Section. The inclusion of such benefits shall not be required in any paid‑up benefits, unless the additional benefits separately would require minimum nonforfeiture amounts, paid‑up annuity, cash surrender and death benefits.
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(12) Rules. The Director may adopt rules to implement the
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provisions of this Section.
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(13) Effective Date. After the effective date of this
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amendatory Act of the 93rd General Assembly, a company may elect to apply its provisions to annuity contracts on a contract form‑by‑contract form basis before July 1, 2006. In all other instances, this Section shall become operative with respect to annuity contracts issued by the company on or after July 1, 2006.
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(14) This Section is repealed on July 1, 2007.
(Source: P.A. 93‑873, eff. 8‑6‑04.)
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