Study Notes and Published References - Note PRODUCT MATTERS - REGULATORS RESPOND TO INDUSTRY INNOVATION THROUGH GUIDELINE AXXX

Section 1 - Increase tied to an external trigger

b/c insurer does not have unrestricted right to increase prems
AXXX requires cos reserve these plans as if prems guar for full level prem period

Section 2 - Refund of Prem - Partially Guaranteed

right to increase prem not unrestricted since need to provide additional benefits
must reserve over entire level prem or secondary guarantee preriod

Section 3 - Affiliated Co Guarantee

prem increased protected by second co via reinsurance, second policy, or agreement
AXXX requires that the reserves of these combined coverages/benefits = what direct writer would hold w/o this agreement
reserve credits only allowed if agreement meets reinsurance requirements

Section 4 - Refund of Prem - Fully Guaranteed

high guar GP w/ CV, div or prem refund after period of time
creates low net prem
AXXX requires net prem used in calc
coinsurance allowances for legit reinsurance does not fall into this category

Section 5 - Re-entry Plans

AXXX requires initial re-entry period and prems treated as continuation of initial guarantees

Section 6 - Level Net Reins Prems

additional "expense allowance" has no relationship to actual expenses
initial segment = full level prem period and valn prems s/b level over that period

UL and AXXX

Accum of Prem and Shadow Acct Secondary Guaranteed both fall under AXXX
Accum of Prem already addressed under XXX
No Lapse Guar is Shadow Acct > 0 (even if regular acct < 0)
Shadow Acct grows just like regular acct, but w/ more favorable changes/credits than guar in underlying policy
Catch-Up provisions allow PO to dump money in to reinstate secondary guar

Section 7 - Premium "Catch-Up" Provisions

AXXX provides relief
can reduce basic and def reserve by any "catch-up" amounts (reserve can't drop below 0)

Section 8 - Secondary Guar Requirements

prepaid shadow acct deposits need to be added to reserve
- capped by coveage NSP
argument against: actual prem payment history is modification to XXX and UL Model Reg
- Model Reg call for prems at issue and prepayments not known at issue.

Sections 1-7 retroactive to XXX effective date
Section 8 effective 1/1/2003

Copyright © 2004 Steve Welander.
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