§ 84a.7. Waiver of premium reserves.
Waiver of premium reserves involves several special considerations. The disability valuation tables promulgated by the National Association of Insurance Commissioners, or a successor thereto, are based on exposures that include contracts on premium waiver as in-force contracts. Therefore, contract reserves based on these tables are not reserves on ‘‘active lives’’ but rather reserves on contracts ‘‘in force.’’ This is true for the 1964 CDT, 1985 CIDA and 1985 CIDB tables.
(1) Tabular reserves using one of these tables shall value reserves on the following basis:
(i) Claim reserves shall include reserves for premiums expected to be waived, valuing as a minimum the valuation net premium being waived.
(ii) Premium reserves shall include contracts on premium waiver as in-force contracts, valuing as a minimum the unearned modal valuation net premium being waived.
(iii) Contract reserves shall include recognition of the waiver of premium benefit in addition to other contract benefits provided for, valuing as a minimum the valuation net premium to be waived.
(2) If an insurer is, instead, valuing reserves on what is truly an active life table, or if the specific valuation table is not being used but the insurer’s gross premiums are calculated on a basis that includes in the projected exposure only those contracts for which premiums are being paid, it may not be necessary to provide specifically for waiver of premium reserves. An insurer using a true ‘‘active life’’ basis shall carefully consider whether or not additional liability should be recognized on account of premiums waived during periods of disability or during claim continuation.
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