Weekly Tip: NAIC Model Rule 821-UPDATED


Weekly Tips

NAIC Model Rule 821-UPDATED


This week, we are providing an updated Weekly Tip that was originally issued in July 2013.  The previous Weekly Tip provided information regarding the amendments that were made to the NAIC Model Rule 821. In this version we have added information under (a) clarifying the steps to be taken based on the variability treatment of information affected by the mortality table used for a previously approved form, as well as clarified under (b) that mix and match may be used to make changes to forms previously approved by a Compacting State.

As a reminder, the forms filed with the IIPRC are subject to the nonforfeiture and settlement option requirements within the applicable Uniform Standards. Reserves with regards to products filed with the IIPRC continue to be subject to each individual state insurance department's laws/regulations as these laws and regulations are not product content requirements. This Model Regulation when adopted by a Compacting State pertains to annuity reserves for applicable products approved by the Compact for that state.

Even though reserves for products filed with the IIPRC are outside of the uniform standards, a Compacting State’s adoption of the Model Regulation may affect certain aspects of IIPRC life and annuity products. For example, the Uniform Standards for individual universal life products addresses settlement options. Companies must include the interest and mortality basis of the settlement option in the policy form. In lieu of listing the interest and mortality basis in the form, the form may include complete tables of guaranteed settlement option amounts. This requirement can be found in Provision AA(1) of IIPRC-L-09-I on the Record. Similar requirements exist in the core annuity contract standards. The Uniform Standards do not require the use of a specific mortality table and as such, the adoption of Model Regulation 821 by a state(s) does not require a company to begin using the 2012 IAM or IAR tables as the basis for guaranteed settlement option rates.

If a company wishes to change the mortality basis of guaranteed settlement option rates for new issues, the company must submit the updated mortality basis to the   IIPRC for prior approval. Again, the revised settlement option basis can be included in the revised form or the revised form can include tables of guaranteed settlement option factors which reflect the use of the new mortality basis.

Our Annuity Reviewer, Karen Givens would like to point out to Annuity filers, that if a company wishes to change the settlement option basis, the procedures are as follows:

  1. If the previously approved Compact form includes the settlement option basis and/or table of factors and this information was bracketed as variable with an appropriate explanation of variability provided in the Statement of Variability, the company can request that the previously approved filing be re-opened and once re-opened, submit an amendment letter with the revised Statement of Variability and appropriate amended filing fee.  If this information was not indicated as being variable, then a new filing needs to be submitted.  Alternatively, the previously approved filing can be amended by submitting new forms that reflect new form numbers and any applicable supporting documentation.  An amended filing fee and any applicable state filing fees would be required as well.
  2. A company may file an endorsement which reflects a new settlement option basis and/or table of factors to be attached to previously-approved Compact or previously approved State forms.  The endorsement must be submitted in a new filing for prior approval with the forms it affects being identified as Associated Filings or on the Statement of Intent, as applicable.  If the endorsement will be used via mix and match, a certification will need to be provided certifying that no other changes to the language contained in the previously approved State form occurred other than the revisions to the mortality table assumptions.

If you have any questions about the updates to NAIC Model Rule 821 or the Weekly Tip, please contact the IIPRC office.