C.3 Standard NF Law

Question 1

NF requirements for Life insurers

Answer 1

• companies must provide a RPU or equivalent benefit
• ordinary policies more than 3 years old must have positive CSV if fully paid up

if a PH stops paying premium, then within 60 days:

• the policy must provide a default NF option automatically
• PH can elect another NF option
• NF mortality, IR, method must be disclosed to PH
• CSVs must be disclosed if prescheduled, for first 20 years
• must state NF values are > SNL min

Question 2

Calculation of Min CSV

Answer 2

min CSV = PV gt Benefits - PV adj premium - Policy Loans

exclude supplemental benefits and riders
include spouse rider

Question 3

Calculation of:

• Adjusted Premiums
• NF NLP
• NF factors

Answer 3

• adj premiums=constant % of GPs
• PV adj premium = PV gt benefits + 1% Face + 1.25 min(4% face, NFNLP)
  NFNLP = PV gt benefits / annuity certain x
  -if face amount is not level, use the average face amount for the first 10 policy years

assumptions:

• Mortality: post VM - use CSO in VM, else use the prevailing CSO
• IR: Post VM - The VM provides SNl rate; else use 1.25*SVL IR, floored at 4%