GLP - Guideline Level Premium

  • 1996-x, NAIC Proceeding
    • 7.10 - If the guideline level premium will not provide coverage to the end of the term of the contract, does the illustration have to display the annual term charges allowed by § 7702 or can the illustration explain that the coverage will terminate?
    • 8. See Question 7.9. Either may be illustrated as long as the insurer discloses the effect of what is illustrated.
  • I’ll talk about the complications.
    • The typical policy that runs into this issue is a policy with a 3% interest guarantee where the guideline level premium requires a 4% interest guarantee.
    • Therefore, under the policy guarantees, and by paying the guideline level premium year by year, the policy will expire at age 68 without value. --- It’ll be term to 68.
    • Your guideline level premium is less than the premium that would be theoretically required to mature the policy at age 100 or 95.
    • Therein lies the problem.
    • If you were to use that interpretation, it makes the reserving calculation extremely complex.
  • Let me give an example. I’m going to contradict what I just said in this example.
    • The policy doesn’t really expire at age 68 because there’s a provision in 7702 that enables you to pay YRT premiums if the policy would otherwise lapse.

  --  Edward L. Robbins

1999 - SOA - 1999 Valuation Actuary Symposium - Session 44, Society of Actuaries - 28p

  • Daniel J. McCarthy:
    • A regulator had told them that in that case they should not treat their Universal Life as though it was a Whole Life policy matured by paying the GMP (Guaranteed Maturity Premium).
    • Rather, you should assume that people will pay the guideline level premium, and that will give you a policy that provides guaranteed coverage for something less than the whole of life. What were the implications of that?  
  • Craig R. Raymond:
    • I guess I don’t disagree with anything you said.
    • The model regulation (Universal Life Model Regulation) has a structure that says you must go back to this level premium format.
    • You’re caught into this box where you’ve got a product that, when you go back to that format, it’s an iteration of the product that can’t exist.

1999 - SOA - 1999 Valuation Actuary Symposium, (va99-44of), Edward L. Robbins, Society of Actuaries - 28p

  • Robert MARKS: Do any companies have concerns regarding not being able to charge a premium that would be high enough to mature the policy on a current interest rate basis with the new guideline premiums being lower?
    • In other words, since the interest rates are being credited or say, in the 5 to 5.5 percent range, and there's a six percent interest rate in the calculation of guideline single premiums, would there be a concern that you couldn't even fund the policy on a guaranteed basis?
  • Scott Berlin, New York Life. I've heard of that issue.
    • Your guideline level is calculated at four percent.
    • This is just my feeling, but I don't think that we want to approach the Service to reduce the interest rates from four percent to say, 2.5 to 3 percent because then it opens 7702 up for scrutiny and a whole host of other issues.
    • Sometimes the evil you know is better than the evil you don't.

2002 - SOA - Implications of the New CSO Mortality Table, Society of Actuaries - 28p

17 CFR Part 270
[Release No. IC-13632; S7-10041
Request for Comments on Issues
Arising Under the Investment
Company Act of 1940 Relating to
Flexible Premium Variable Life
Insurance
AGENCY: Securities and Exchange
Commission.
ACTION: Request for written comments.

https://cdn.loc.gov/service/ll/fedreg/fr048/fr048231/fr048231.pdf