31.05.03.07

.07 General Calculation Requirements for Contract Segmentation Method.

A. All calculations are made using:

(1) For policies issued before January 1, 2009, the 1980 CSO valuation table or the 2001 CSO Mortality Table;

(2) For policies issued on or after January 1, 2009, the 2001 CSO Mortality Table; and

(3) If elected, the optional minimum mortality standard for deficiency reserves stipulated in Regulation .10B—D of this chapter.

B. The length of a particular contract segment shall be set equal to the minimum of the value t, for which Gt is greater than Rt (if Gt never exceeds Rt the segment length is deemed to be the number of years from the beginning of the segment to the mandatory expiration date of the policy), where Gt and Rt are defined as follows:

(1) Gt = (GPx+k+t/GPx+k+t-l)

where

x = original issue age;

k = The number of years from the date of issue to the beginning of the segment;

t = 1, 2, . . .; t is reset to 1 at the beginning of each segment;

GPx+k+t-l = Guaranteed gross premium per thousand of face amount, ignoring policy fees only if level for the premium paying period of the policy, for year t of the segment.

Rt = qx+k+t/qx+k+t-1 However, Rt may be increased or decreased by 1 percent in any policy year, at the company's option, but Rt may not be less than one;

where:

x, k, and t are as defined above, and

qx+k+t = valuation mortality rate for deficiency reserves in policy year k+t but using the mortality of Regulation.10C(2) of this chapter if Regulation.10C(3) of this chapter is elected for deficiency reserves. If GPx+k+t is greater than 0 and GPx+k+t-l is equal to 0, Gt shall be deemed to be 1,000. If GPx+k+t and GPx+k+t-1 are both equal to 0, Gt shall be deemed to be 0.

(2) When the 2001 CSO Mortality Table is elected or required to be used, the value of "qx+k+1" is the valuation mortality rate for deficiency reserves in policy year k+t, but using the unmodified select mortality rates if modified select mortality rates are used in the computation of deficiency reserves.