Sec. 31.05.03.07. 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 G_t is greater than R_t (if G_t never exceeds R_t 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 G_t and R_t are defined as follows:

(1) G_t = (GP_x+k+t/GP_x+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;

GP_x+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.

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

where:

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

q_x+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 GP_x+k+t is greater than 0 and GP_x+k+t-l is equal to 0, G_t shall be deemed to be 1,000. If GP_x+k+t and GP_x+k+t-1 are both equal to 0, G_t shall be deemed to be 0.

(2) When the 2001 CSO Mortality Table is elected or required to be used, the value of "q_x+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.