(a) Requirements.--A company seeking an exemption for any of its ordinary life policies issued on or after the operative date of the valuation manual may file a statement of exemption for the current calendar year with its domestic commissioner prior to July 1 of that year if the following conditions are met:

(1) The company has less than $300,000,000 of ordinary life premiums and, if the company is a member of an NAIC group of life insurers, the group has combined ordinary life premiums of less than $600,000,000.

(2) The company reported total adjusted capital of at least 450% of the authorized control level risk-based capital in the most recent risk-based capital report. This paragraph shall not apply to fraternal benefit societies with less than $50,000,000 of ordinary life premiums.

(3) The appointed actuary has provided an unqualified opinion on the reserves reported in the most recent annual statement.

(4) Any universal life secondary guarantee policies issued or assumed by the company with an issue date on or after January 1, 2020, meet the definition of a nonmaterial secondary guarantee universal life product.

(b) Certification.--The statement of exemption under subsection (a) must certify that:

(1) The conditions under subsection (a) are met based on premiums and other values from the prior calendar year's financial statements.

(2) Any universal life secondary guarantee business issued since January 1, 2020, meets the definition of a nonmaterial secondary guarantee universal life product.

(c) Inclusion with NAIC filing.--The statement of exemption under subsection (a) shall also be included with the NAIC filing for the second quarter of that year.

(d) Rejection.--If the commissioner finds that the conditions in subsection (a) are not met, the commissioner shall reject the statement of exemption prior to September 1. If the commissioner rejects the exemption or the company does not file a statement of exemption, the company shall follow the requirements of the valuation manual minimum standard entitled VM-20 for the ordinary life policies issued on or after the operative date of the valuation manual.

(e) Approval.--If the statement of exemption under subsection (a) is granted, the minimum reserve requirements for the exempt company's ordinary life policies issued on or after the operative date of the valuation manual shall be as set forth in the valuation manual except for VM-20, but using mortality tables authorized by VM-20.

(f) Definitions.--As used in this section, the following words and phrases shall have the meanings given to them in this subsection unless the context clearly indicates otherwise:

"Nonmaterial secondary guarantee universal life product." A universal life product where the secondary guarantee meets the following parameters at the time of issue:

(1) The policy has only one secondary guarantee, which is in the form of a required premium consisting of either a specified annual or cumulative premium.

(2) The duration of the secondary guarantee for each policy is no longer than 20 years from issue through issue age 60, grading down by two-thirds year for each higher issue age to age 82, and thereafter five years.

(3) The present value of the required premium under the secondary guarantee must be at least as great as the present value of net premiums resulting from the appropriate valuation basic table over the course of the maximum secondary guarantee duration allowable under the contract in aggregate and subject to the duration limit under paragraph (2). The following shall apply:

(i) The present value shall use minimum allowable valuation basic table rates, where preferred tables are subject to existing qualification requirements, and the maximum valuation interest rate as defined in VM-20 section 3(C)(2).

(ii) The minimum premiums shall be the annual required premiums over the course of the maximum secondary guarantee duration.

"Ordinary life premiums." Direct premiums plus reinsurance assumed premiums from an unaffiliated company from the ordinary life line of business reported in Exhibit 1-Part 1, entitled Premiums and Annuity Considerations for Life and Accident and Health Contracts, of the prior calendar year's life, accident and health annual statement or the fraternal annual statement.

(Oct. 24, 2018, P.L.1182, No.163, eff. imd.)

2018 Amendment. Act 163 amended subsecs. (a)(4) and (b)(2).