1.    The interest rates used in determining the minimum standard for the valuation of the following are the calendar year statutory valuation interest rates as defined in this section:

Terms Used In North Dakota Code 26.1-35-04

  • Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
  • Contract: A legal written agreement that becomes binding when signed.
  • following: when used by way of reference to a chapter or other part of a statute means the next preceding or next following chapter or other part. See North Dakota Code 1-01-49
  • Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
  • Rule: includes regulation. See North Dakota Code 1-01-49
  • Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
  • written: include "typewriting" and "typewritten" and "printing" and "printed" except in the case of signatures and when the words are used by way of contrast to typewriting and printing. See North Dakota Code 1-01-37
  • year: means twelve consecutive months. See North Dakota Code 1-01-33

a.    Life insurance policies issued in a particular calendar year, on or after the earlier of a specified date filed by an insurer with the commissioner in a written notice of the insurer’s election to comply with this chapter or January 1, 1989.

b.    Individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1984.

c.    Annuities and pure endowments purchased in a particular calendar year on or after January 1, 1984, under group annuity and pure endowment contracts.

d.    The net increase, if any, in a particular calendar year after January 1, 1984, in amounts held under guaranteed interest contracts.

2.    The calendar year statutory valuation interest rates, I, must be determined as follows and the results rounded to the nearer one-quarter of one percent:

a.    For life insurance:

I = .03 + W (R1 – .03) + W (R2 – .09) 2 b.    For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options:

I = .03 + W (R – .03) where R1 is the lesser of R and .09, R2 is the greater of R and .09, R is the reference interest rate defined in this section, and W is the weighting factor defined in this section.

c.    For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in subdivision b, the formula for life insurance stated in subdivision a applies to annuities and guaranteed interest contracts with guarantee durations in excess of ten years and the formula for single premium immediate annuities stated in subdivision b applies to annuities and guaranteed interest contracts with guarantee duration of ten years or less.

d.    For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in subdivision b applies.

e.    For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in subdivision b applies.

However, if the calendar year statutory valuation interest rate for a life insurance policy issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for the life insurance policies must equal the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year must be determined for 1980 by using the reference interest rate defined for 1979, and must be determined for each subsequent calendar year regardless of when section 26.1-33-24 becomes operative.

3.    The weighting factors referred to in the formulas in subsection 2 are given in the following tables:

a.    The weighting factors for life insurance are:

Guarantee Duration                                                             Weighting Factors 10 years or less                                                                                             .50 More than 10 years, but not more than 20 years                                         .45 More than 20 years                                                                                     .35     For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy.

b.    The weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options is eighty hundredths.

c.    The weighting factors for other annuities and for guaranteed interest contracts, except as stated in subdivision b, are as specified in paragraphs 1, 2, and 3, according to the requirements and definitions in paragraphs 4, 5, and 6:

(1) For annuities and guaranteed interest contracts valued on an issue year basis:

Guarantee                                                                     Weighting Factor Duration                                                                             for Plan Type A         B         C 5 years or less                                                         .80        .60     .50 More than 5 years, but not more than 10 years     .75        .60     .50 More than 10 years, but not more than 20 years     .65        .50     .45 More than 20 years                                                 .45        .35     .35 (2)     For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in paragraph 1 increased by        .15        .25     .05 (3)     For annuities and guaranteed interest contracts valued on an issue year basis, other than those with no cash settlement options, which do not guarantee interest on considerations received more than one year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on considerations received more than twelve months beyond the valuation date, the factors shown in paragraph 1 or derived in paragraph 2 increased by                        .05        .05     .05 (4) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guaranteed duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

(5) The plan type as used in the tables in this subsection is defined as follows: (a)    Plan type A: At any time the policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, without such adjustment but in installments over five years or more, as an immediate life annuity, or no withdrawal permitted.

(b)    Plan type B: Before expiration of the interest rate guarantee, the policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, without an adjustment but in installments over five years or more, or no withdrawal permitted. At the end of the interest rate     guarantee, funds may be withdrawn without an adjustment in a single sum or installments over less than five years.

(c)    Plan type C: The policyholder may withdraw funds before expiration of the interest rate guarantee in a single sum or installments over less than five years either without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

(6) An insurer may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in this section, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract. A change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.

4.    The reference interest rate referred to in subsection 2 is defined as follows:

a.    For life insurance, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year next preceding the year of issue, the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.

b.    For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or year of purchase, the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.

c.    For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision b with guarantee duration in excess of ten years, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.

d.    For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision b with guaranteed duration of ten years or less, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.

e.    For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.

f.    For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in subdivision b the average over a period of twelve months, ending on June thirtieth of the calendar year of the change in the fund, of the monthly    average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.

5.    If the monthly average of the composite yield on seasoned corporate bonds is no longer published by Moody’s investors service, incorporated, or if the national association of insurance commissioners determines that the monthly average of the composite yield on seasoned corporate bonds as published by Moody’s investors service, incorporated, is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate adopted by the national association of insurance commissioners and approved by rule adopted by the commissioner, may be substituted.

  Previous section
Next section  
 Chapter 26.1-35 Contents