31.09.16.11

.11 Actuarial Standards.

A. Financing Options.

(1) The insurer may require a premium charge or cost of insurance charge for the accelerated benefit as follows:

(a) The insurer shall base the charge on sound actuarial principles; and

(b) For group insurance, the insurer may reflect the additional cost in experience rating.

(2) The insurer may pay a present value of the face amount as follows:

(a) The present value calculation shall be based on any applicable actuarial discount appropriate to the policy design;

(b) The interest rate or interest rate methodology used in the calculation shall be based on sound actuarial principles;

(c) The insurer shall disclose the interest rate or interest rate methodology in the contract or actuarial memorandum; and

(d) The maximum interest rate used shall be no more than the greater of:

(i) The current yield on 90-day Treasury bills; or

(ii) The current maximum adjustable policy loan interest rate as set forth in accordance with Insurance Article, §16-208, Annotated Code of Maryland.

(3) The insurer may accrue an interest charge on the amount of the accelerated benefits as follows:

(a) The interest rate or interest rate methodology used in the calculation shall be based on sound actuarial principles;

(b) The insurer shall disclose the interest rate or interest rate methodology in the contract or actuarial memorandum;

(c) The maximum interest rate used shall be no more than the greater of:

(i) The current yield on 90-day Treasury bills; or

(ii) The current maximum adjustable policy loan interest rate as set forth in accordance with Insurance Article, §16-208, Annotated Code of Maryland; and

(d) The interest rate accrued on the portion of the lien that is equal in amount to the cash value of the contract at the time of the benefit acceleration shall be no more than the policy loan interest rate stated in the contract.

B. Effect on Cash Value.

(1) Except as provided in §B(2) of this regulation, when an accelerated benefit is payable, there may be no more than a pro rata reduction in the cash value based on the percentage of death benefits accelerated to produce the accelerated benefit payment; or

(2) The payment of accelerated benefits, any administrative expense charges, any future premiums and any accrued interest may be considered a lien against the death benefit of the policy or rider and the access to the cash value may be:

(a) Restricted to any excess of the cash value over the sum of any other outstanding loans and the lien; and

(b) Future access to additional policy loans may be limited to any excess of the cash value over the sum of the lien and any other outstanding policy loans.

C. Effect of Any Outstanding Policy Loans on Accelerated Death Benefit Payment. When payment of an accelerated benefit results in a pro rata reduction in the cash value, the payment may not be applied toward repaying an amount greater than a pro rata portion of any outstanding policy loans.