Weekly Tip: NAIC Model Rule 821


Weekly Tips

 NAIC Model Rule 821


Are you wondering whether or how to update your Compact-approved products to reflect the recently adopted amendments to NAIC Model Rule 821?   Some Compacting States have adopted or will be adopting the amendments.   Model 821 governs new Individual Annuity Mortality Tables for Use in Determining Reserve Liabilities for Annuities.  This Weekly Tip will help you understand the process.

NAIC Model 821 addresses the acceptable mortality table(s) used as the basis for annuity reserves.  The amended NAIC Model Rule (Regulation) for Recognizing a New Annuity Mortality Table for use in Determining Reserve Liabilities for Annuities was adopted at the 2012 Fall National NAIC Meeting at the Executive/Plenary Session.

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.  

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. 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 their guaranteed settlement option rates for new issues, the company must submit revised policy forms 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.

If a company wishes to change their settlement option basis, they must follow the procedures outlined below:
a.  If the previously approved form includes the settlement option basis and/or table of factors on the specifications page, the company can request that the previously approved filing be re-opened and once re-opened, submit an amendment letter with the revised specifications pages.
b.  If the basis and/or table of settlement option factors are included in the policy, the company must submit revised policy forms with new form numbers in a new filing for prior approval.
c.  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 forms.  The endorsement must be submitted in a new filing for prior approval.

If you have any questions about this information, please contact the IIPRC Office.