Title 210 - NEBRASKA DEPARTMENT OF INSURANCE Chapter 40

Title 210 - NEBRASKA DEPARTMENT OF INSURANCE

Chapter 40 - UNIVERSAL LIFE INSURANCE

001. Statutory authority. This regulation is promulgated under the authority of NEB. REV. STAT. § 44-101.01 and is

operative October 1, 2008.

002. Purpose. The purpose of this regulation is to supplement existing regulations on life insurance policies in order to

accommodate the development and issuance of universal life insurance plans.

003. Definitions. As used in this regulation:

003.01 "Universal life insurance policy" means any life insurance policy where separately identified interest credits

(other than in connection with dividend accumulations, premium deposit funds, or other supplementary accounts)

and mortality and expense charges are made to the policy. A universal life insurance policy may provide for other

credits and charges, such as charges for the cost of benefits provided by rider.

003.02 "Flexible premium universal life insurance policy" means a universal life insurance policy which permits the

policyowner to vary, independently of each other, the amount or timing of one or more premium payments or the

amount of insurance.

003.03 "Fixed premium universal life insurance policy" means any universal life insurance policy other than a

flexible premium universal life insurance policy.

003.04 "Interest-indexed universal life insurance policy" means any universal life insurance policy where the

interest credits are linked to an external referent.

003.05 "Net cash surrender value" means the maximum amount payable to the policyowner upon surrender.

003.06 "Cash surrender value" means the net cash surrender value plus any amounts outstanding as policy loans.

003.07 "Policy Value" means the amount to which separately identified interest credits and mortality, expense, or

other charges are made under a universal life insurance policy.

003.08 "Director" means the Insurance Director of this State.

004. Scope. This regulation encompasses all individual universal life insurance policies except those policies defined

under Subsection 002.19 of Title 210, Chapter 15 of the Nebraska Administrative Code (Variable Life Insurance Rule).

005. Valuation.

005.01 Requirements. The minimum valuation standard for universal life insurance policies shall be the

Commissioners Reserve Valuation Method, as described below for such policies, and the tables and interest rates

specified below. The terminal reserve for the basic policy and any benefits and/or riders for which premiums are not

paid separately as of any policy anniversary shall be equal to the net level premium reserves less (C) and less (D),

where:

Reserves by the net level premium method shall be equal to ((A) - (B))r where

(A), (B) and r are as defined below:

(A) is the present value of all future guaranteed benefits at the date of valuation.

(B) is the quantity PVFB x + t

x

where PVFB is the present value of all benefits guaranteed at issue assuming future Guaranteed Maturity

Premiums are paid by the policyowner and taking into account all guarantees contained in the policy or declared by

the insurer.

x and x + t are present values of an annuity of one per year payable on policy

anniversaries beginning at ages x and x + t, respectively, and continuing until the

highest attained age at which a premium may be paid under the policy. The letter

x is defined as the issue age and the letter t is defined as the duration of the

policy.

The Guaranteed Maturity Premium for flexible premium universal life insurance policies shall be that level gross

premium, paid at issue and periodically thereafter over the period during which premiums are allowed to be paid,

which will mature the policy on the latest maturity date, if any, permitted under the policy (otherwise at the highest

age in the valuation mortality table), for an amount which is in accordance with the policy structure. The Guaranteed

Maturity Premium is calculated at issue based on all policy guarantees at issue (excluding guarantees linked to an

external referent). The Guaranteed Maturity Premium for fixed premium universal life insurance policies shall be the

premium defined in the policy which at issue provides the minimum policy guarantees.

The letter r is equal to one, unless the policy is a flexible premium policy and the policy value is less than the

Guaranteed Maturity Fund, in which case r is the ratio of the policy value to the Guaranteed Maturity Fund.

The Guaranteed Maturity Fund at any duration is that amount which, together with future Guaranteed Maturity

Premiums, will mature the policy based on all policy guarantees at issue.

((a) - (b))  x + t r

 x

, where (a) - (b) is as described in

NEB. REV. STAT. § 44-404(d) for the plan of insurance defined at issue by the

Guaranteed Maturity Premiums and all guarantees contained in the policy or

declared by the insurer.



x + t , and  x are defined in (B) above.

(D) is the sum of any additional quantities analogous to (C) which arise because of structural changes in the

policy, with each such quantity being determined on a basis consistent with that of (C) using the maturity date in

effect at the time of change.

The Guaranteed Maturity Premium, the Guaranteed Maturity Fund and (B) above shall be recalculated to

reflect any structural changes in the policy. This recalculation shall be done in a manner consistent with the

descriptions above. Future guaranteed benefits are determined by (1) projecting the greater of the Guaranteed

Maturity Fund and the policy value, taking into account future Guaranteed Maturity Premiums, if any, and using

all guarantees of interest, mortality, expense deductions, etc., contained in the policy or declared by the insurer;

and (2) taking into account any benefits guaranteed in the policy or by declaration which do not depend on the

policy value.

All present values shall be determined using (i) an interest rate (or rates) specified by the NEB. REV. STAT. §

44-404 for policies issued in the same year; (ii) the mortality rates specified by § 44-404 for policies issued in

the same year or contained in such other table as may be approved by the Director for this purpose; and (iii)

any other tables needed to value supplementary benefits provided by a rider which is being valued together

with the policy.

005.02 Alternative Minimum Reserves. If, in any policy year, the Guaranteed Maturity Premium on any universal life

insurance policy is less than the valuation net premium for such policy, calculated by the valuation method actually

used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest,

the minimum reserve required for such contract shall be the greater of (1) or (2).

(1) The reserve calculated according to the method, the mortality table, and the rate of interest actually used.

(2) The reserve calculated according to the method actually used but using the minimum valuation standards of

mortality and rate of interest and replacing the valuation net premium by the Guaranteed Maturity Premium in

each policy year for which the valuation net premium exceeds the Guaranteed Maturity Premium.

For universal life insurance reserves on a net level premium basis, the valuation net premium is

PVFB

x

and for reserves on a Commissioners Reserve Valuation Method, the valuation net

PVFB + (a) - (b).

premium is



006. Nonforfeiture.

006.01 Minimum Cash Surrender Values for Flexible Premium Universal Life Insurance Policies. Minimum cash

surrender values for flexible premium universal life insurance policies shall be determined separately for the basic

policy and any benefits and riders for which premiums are paid separately. The following requirements pertain to a

basic policy and any benefits and riders for which premiums are not paid separately.

The minimum cash surrender value (before adjustment for indebtedness and dividend credits) available on a date

as of which interest is credited to the policy shall be equal to the accumulation to that date of the premiums paid

minus the accumulations to that date of (i) the benefit charges, (ii) the averaged administrative expense charges for

the first policy year and any insurance-increase years, (iii) actual administrative expense charges for other years,

(iv) initial and additional acquisition expense charges not exceeding the initial or additional expense allowances,

respectively, (v) any service charges actually made (excluding charges for cash surrender or election of a paid-up

nonforfeiture benefit) and (vi) any deductions made for partial withdrawals; all accumulations being at the actual

rate or rates of interest at which interest credits have been made unconditionally to the policy (or have been made

conditionally, but for which the conditions have since been met), and minus any unamortized unused initial and

additional expense allowances.

Interest on the premiums and on all charges referred to in items (i) - (vi) above shall be accumulated from and to

such dates as are consistent with the manner in which interest is credited in determining the policy value.

The benefit charges shall include the charges made for mortality and any charges made for riders or supplementary

benefits for which premiums are not paid separately. If benefit charges are substantially level by duration and

develop low or no cash values, then the Director shall have the right to require higher cash values unless the

insurer provides adequate justification that the cash values are appropriate in relation to the policy’s other

characteristics.

The administrative expense charges shall include charges per premium payment, charges per dollar of premium

paid, periodic charges per thousand dollars of insurance, periodic per policy charges, and any other charges

permitted by the policy to be imposed without regard to the policyowner’s request for services. The averaged

administrative expense charges for any year shall be those which would have been imposed in that year if the

charge rate or rates for each transaction or period within the year had been equal to the arithmetic average of the

corresponding charge rates which the policy states will be imposed in policy years two through twenty in

determining the policy value.

The initial acquisition expense charges shall be the excess of the expense charges, other than service charges,

actually made in the first policy year over the averaged administrative expense charges for that year. Additional

acquisition expense charges shall be the excess of the expense charges, other than service charges, actually made

in an insurance-increase year over the averaged administrative expense charges for that year. An insurance-

increase year shall be the year beginning on the date of increase in the amount of insurance by policyowner

request (or by the terms of the policy).

Service charges shall include charges permitted by the policy to be imposed as the result of a policyowner’s request

for a service by the insurer (such as the furnishing of future benefit illustrations) or of special transactions.

The initial expense allowance shall be the allowance provided by NEB. REV. STAT. § 44-407.04(a), (ii), (iii) and (iv)

or by § 44-407.24(l)(b) and (c), as applicable, for a fixed premium, fixed benefit endowment policy with a face

amount equal to the initial face amount of the flexible premium universal life insurance policy, with level premiums

paid annually until the highest attained age at which a premium may be paid under the flexible premium universal

life insurance policy, and maturing on the latest maturity date permitted under the policy, if any, otherwise at the

highest age in the valuation mortality table. The unused initial expense allowance shall be the excess, if any, of the

initial expense allowance over the initial acquisition expense charges as defined above. If the amount of insurance

is subsequently increased upon request of the policyowner (or by the terms of the policy), an additional expense

allowance and an unused additional expense allowance shall be determined on a basis consistent with the above

and with § 44-407.24(5), using the face amount and the latest maturity date permitted at that time under the policy.

The unamortized unused initial expense allowance during the policy year

beginning on the policy anniversary at age x + t (where x is the issue age) shall

x.+ t

be the unused initial expense allowance multiplied by

x

where  x + t and x are are present values of an annuity of one per year payable on

policy anniversaries beginning at ages x + t and x, respectively, and continuing

until the highest attained age at which a premium may be paid under the policy,

both on the mortality and interest bases guaranteed in the policy. An unamortized

unused additional expense allowance shall be the unused additional expense

allowance multiplied by a similar ratio of annuities, with x replaced by an

annuity beginning on the date as of which the additional expense allowance was

determined.

006.02 Minimum Cash Surrender Values For Fixed Premium Universal Life Insurance Policies. For fixed premium

universal life insurance policies, the minimum cash surrender values shall be determined separately for the basic

policy and any benefits and riders for which premiums are paid separately. The following requirements pertain to a

basic policy and any benefits and riders for which premiums are not paid separately.

The minimum cash surrender value (before adjustment for indebtedness and dividend credits) available on a date

as of which interest is credited to the policy shall be equal to ((A)-(B)-(C)-(D)), where:

(A) is the present value of all future guaranteed benefits.

(B) is the present value of future adjusted premiums. The adjusted premiums are

calculated as described in NEB. REV. STAT. §§ 44-407.04 and 44-407.08, or in

NEB. REV. STAT. § 44-407.24(1), as applicable. If 44-407.24(1) is applicable,

PVFB

the nonforfeiture net level premium is equal to the quantity



where PVFB is the present value of all benefits guaranteed at issue assuming

future premiums are paid by the insurer.

x is the present value of an annuity of one per year payable on policy

anniversaries beginning at age x and continuing until the highest attained age

at which a premium may be paid under the policy.

premium which arise because of guarantees declared by the insurer after the

issue date of the policy. x shall be replaced by an annuity beginning on the

date as of which the declaration became effective and payable until the end of

the period covered by the declaration.

(D)is the sum of any quantities analogous to (B) which arise because of structural

changes in the policy.

Future guaranteed benefits are determined by (1) projecting the policy value, taking into account future premiums, if

any, and using all guarantees of interest, mortality, expense deductions, etc., contained in the policy or declared by

the insurer; and (2) taking into account any benefits guaranteed in the policy or by declaration which do not depend

on the policy value.

All present values shall be determined using (i) an interest rate (or rates) specified by the Standard Nonforfeiture

Law for Life Insurance for policies issued in the same year and (ii) the mortality rates specified by the Standard

Nonforfeiture Law for Life Insurance for policies issued in the same year or contained in such other table as may be

approved by the Director for this purpose.

006.03 Minimum Paid-Up Nonforfeiture Benefits. If a universal life insurance policy provides for the optional election

of a paid-up nonforfeiture benefit, it shall be such that its present value shall be at least equal to the cash surrender

value provided for by the policy on the effective date of the election. The present value shall be based on mortality

and interest standards at least as favorable to the policyowner as (1) in the case of a flexible premium universal life

insurance policy, the mortality and interest basis guaranteed in the policy for determining the policy value, or (2) in

the case of a fixed premium policy the mortality and interest standards permitted for paid-up nonforfeiture benefits

by the Standard Nonforfeiture Law for Life Insurance. In lieu of the paid-up nonforfeiture benefit, the insurer may

substitute, upon proper request not later than sixty days after the due date of the premium in default, an actuarially

equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer period of death

benefits, or, if applicable, a greater amount or earlier payment of endowment benefits.

007. Mandatory Policy Provisions. The policy shall provide the following:

007.01 Periodic Disclosure to Policyowner. The policy shall provide that the policyowner will be sent, without

charge, at least annually, a report which will serve to keep such policyowner advised as to the status of the policy.

The end of the current report period must be not more than three months previous to the date of the mailing of the

report. Specific requirements of this report are detailed in Section 009.

007.02 Current Illustrations. The annual report shall provide notice that the policyholder may request an illustration

of current and future benefits and values.

007.03 Policy Guarantees. The policy shall provide guarantees of minimum interest credits and maximum mortality

and expense charges. All values and data shown in the policy shall be based on guarantees. No figures based on

nonguarantees shall be included in the policy.

007.04 Calculation of Cash Surrender Values. The policy shall contain at least a general description of the

calculation of cash surrender values including the following information:

007.04A The guaranteed maximum expense charges and loads.

007.04B Any limitation on the crediting of additional interest. Interest credits shall not remain conditional for a

period longer than twenty-four (24) months.

007.04C The guaranteed minimum rate or rates of interest.

007.04D The guaranteed maximum mortality charges.

007.04E Any other guaranteed charges.

007.04F Any surrender or partial withdrawal charges.

007.05 Changes in Basic Coverage. If the policyowner has the right to change the basic coverage, any limitation on

the amount or timing of such change shall be stated in the policy. If the policyowner has the right to increase the

basic coverage, the policy shall state whether a new period of contestability and/or suicide is applicable to the

additional coverage.

007.06 Grace Period and Lapse. The policy shall provide for written notice to be sent to the policyowner’s last

known address at least thirty (30) days prior to termination of coverage.

A flexible premium policy shall provide for a grace period of at least thirty (30) days after lapse. Unless otherwise

defined in the policy, lapse shall occur on that date on which the net cash surrender value first equals zero.

007.07 Misstatement of Age or Sex. If there is a misstatement of age or sex in the policy, the amount of the death

benefit shall be that which would be purchased by the most recent mortality charge at the correct age or sex. The

Director may approve other methods which are deemed satisfactory.

007.08 Maturity Date. If a policy provides for a "maturity date", "end date", or similar date, then the policy shall also

contain a statement, in close proximity to that date, that it is possible that coverage may not continue to the maturity

date even if scheduled premiums are paid in a timely manner, if such is the case.

008. Disclosure Requirements. Disclosure of information about the policy being applied for shall follow the standards

set forth in 210 NEB. ADMIN. R. & REG. 72.

009. Periodic Disclosure to Policyowner.

009.01 Requirements. The policy shall provide that the policyowner will be sent, without charge, at least annually, a

report which will serve to keep such policyowner advised of the status of the policy. The end of the current report

period shall be not more than three (3) months previous to the date of the mailing of the report.

Such report shall include the following:

009.01A The beginning and end of the current report period.

009.01B The policy value at the end of the previous report period and at the end of the current report period.

009.01C The total amounts which have been credited or debited to the policy value during the current report

period, identifying each by type (e.g., interest, mortality, expense and riders).

009.01D The current death benefit at the end of the current report period on each life covered by the policy.

009.01E The net cash surrender value of the policy as of the end of the current report period.

009.01F The amount of outstanding loans, if any, as of the end of the current report period.

009.01G For fixed premium policies:

If, assuming guaranteed interest, mortality and expense loads and continued scheduled premium payments,

the policy’s net cash surrender value is such that it would not maintain insurance in force until the end of the

next reporting period, a notice to this effect shall be included in the report.

009.01H For flexible premium policies:

If, assuming guaranteed interest, mortality and expense loads, the policy’s net cash surrender value will not

maintain insurance in force until the end of the next reporting period unless further premium payments are

made, a notice to this effect shall be included in the report.

010. Interest-Indexed Universal Life Insurance Policies.

010.01 Initial Filing Requirements. The following information shall be submitted in connection with any filing of

interest-indexed universal life insurance policies ("interest-indexed policies"). All such information received shall be

treated confidentially to the extent permitted by law.

010.01AA description of how the interest credits are determined, including:

(i) a description of the index;

(ii) the relationship between the value of the index and the actual interest rate to be credited;

(iii) the frequency and timing of determining the interest rate; and

(iv) the allocation of interest credits, if more than one rate of interest applies to different portions of the

policy value.

010.01B The insurer’s investment policy, which includes a description of the following:

(i) how the insurer addressed the reinvestment risks.

(ii) how the insurer plans to address the risk of capital loss on cash outflows.

(iii) how the insurer plans to address the risk that appropriate investments may not be available or not

available in sufficient quantities.

(iv) how the insurer plans to address the risk that the indexed interest rate may fall below the minimum

contractual interest rate guaranteed in the policy.

(v) the amount and type of assets currently held for interest indexed policies.

(vi) the amount and type of assets expected to be acquired in the future.

010.01C If policies are linked to an index for a specified period less than to the maturity date of the policy, a

description of the method used (or currently contemplated) to determine interest credits upon the expiration of

such period.

010.01D A description of any interest guarantee in addition to or in lieu of the index.

010.01E A description of any maximum premium limitations and the conditions under which they apply.

010.02 Additional Filing Requirements.

010.02AAnnually, every insurer shall submit a Statement of Actuarial Opinion by the insurer’s actuary similar to

the example contained in Subsection 010.03.

010.02B Annually, every insurer shall submit a description of the amount and type of assets currently held by

the insurer with respect to its interest-indexed policies.

010.02C Prior to implementation, every domestic insurer shall submit a description of any material change in

the insurer’s investment strategy or method of determining the interest credits. A change is considered to be

material if it would affect the form or definition of the index (i.e., any change in the information supplied in

Subsection 010.01 above) or if it would significantly change the amount or type of assets held for interest-

indexed policies.

010.03 Statement of Actuarial Opinion for Interest-Indexed Universal Life Insurance Policies.