Sec. 18. (a) Contracts of life insurance bearing dates of issue that are earlier than a transition date selected by the company under IC 27-1-12-12, the transition date in no event to be later than January 1, 1948, must be valued in accordance with the following:

(1) As soon as practicable after the filing with the department under IC 27-1-20-21 of the annual statement of a company organized under this article or under another law of this state and doing business in Indiana, the department shall ascertain the net reserve value of each contract in force on the immediately preceding December 31, on the basis of:

(A) the American Experience Table of Mortality and four percent (4%) interest; or

(B) the Actuaries' Combined Experience Table of Mortality and four percent (4%) interest;

as adopted by the company. However, if the company issues a contract based on a higher standard than the standards described in clauses (A) and (B), the contract must be valued according to the higher standard. The department may hire, at the company's expense, an actuary to make the valuation or the department may accept a valuation made by the company, as determined by the department.

(2) In making a valuation under subdivision (1), the department or a representative of the department shall compute the net reserve value according to the terms of the contract. If a contract provides term insurance, or for a valuation as term insurance for any time covered by the contract, the valuation of the contract must be in accordance with the provision in the contract. However, a contract issued after March 5, 1909:

(A) may provide for not more than one (1) year of preliminary term insurance; and

(B) if the premium charged for term insurance under:

(i) a limited payment life preliminary term contract providing for the payment of less than twenty (20) annual premiums; or

(ii) an endowment preliminary term contract;

exceeds the premium charged for life insurance under twenty (20) payment life preliminary term contracts of the same company, the reserve on the contract at the end of any year, including the first, must not be less than the reserve on a twenty (20) payment life preliminary term contract issued in the same year at the same age, together with an amount that is equivalent to the accumulation of a net level premium sufficient to provide for a pure endowment at the end of the premium payment period equal to the difference between the value at the end of the period of the twenty (20) payment life preliminary term contract and the full reserve at the time of the limited payment life or endowment contract.

(3) All contracts of life insurance, including contracts issued on a reducing premium plan or a return premium plan, must be valued according to this article. However, if the actual premium charged for an insurance contract is less than the net premium for the insurance contract, based on the American Men Ultimate Table of Mortality with three and one-half percent (3 1/2%) interest, the company must also establish an additional reserve equal to the value of an annuity, the amount of which must be equal to the difference between the premium charged and the net premium for insurance based on the American Men Ultimate Table with three and one-half percent (3 1/2%) interest and a term in years that is equal to the number of future annual payments due on the insurance at the date of valuation.

(4) Insurance against permanent mental or physical disability resulting from accident or disease or against accidental death, combined with a contract of life insurance, must be valued on a basis of fifty percent (50%) of the additional annual premium charged for the insurance.

(5) The department may at any time during the year ascertain the net reserve value of the contracts of a company, as provided in this section, to determine the solvency of the company.

(6) Reserves may be calculated, at the option of the company, according to standards that produce greater aggregate reserves for all contracts than the reserves produced by the standard specified in this section.

(7) A company that has adopted a standard of valuation producing greater aggregate reserves than the aggregate reserves calculated according to the minimum standard provided for in this section may, with the approval of the department, adopt a standard of valuation producing lower aggregate reserves, but not lower in the aggregate than the reserves produced by the standard specified in the company's contracts.

(b) Subsection (a)(1) through (a)(3) applies only to the valuation of life insurance contracts.

As added by P.L.276-2013, SEC.10.