Utah Code 31A-17-511. Reserve calculation — Valuation net premium exceeding the gross premium charged

31A-17-511. Reserve calculation — Valuation net premium exceeding the gross premium charged.

(1)

If in any contract year the gross premium charged by any company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this section are those standards stated in Sections 31A-17-504 and 31A-17-506.

Terms Used In Utah Code 31A-17-511

Company: means an entity that:

(i)	has written, issued, or reinsured a life insurance contract, accident and health insurance contract, or deposit-type contract in this state and has at least one such policy in force or on claim; or

(ii)

has written, issued, or reinsured a life insurance contract, accident and health insurance contract, or deposit-type contract in any state and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this state. See Utah Code 31A-17-501

Contract: A legal written agreement that becomes binding when signed.

Insurance: includes :

(i)	a risk distributing arrangement providing for compensation or replacement for damages or loss through the provision of a service or a benefit in kind;

(ii)	a contract of guaranty or suretyship entered into by the guarantor or surety as a business and not as merely incidental to a business transaction; and

(iii)

a plan in which the risk does not rest upon the person who makes an arrangement, but with a class of persons who have agreed to share the risk. See Utah Code 31A-1-301

Policy: includes a service contract issued by:

(i)	a motor club under Chapter 11, Motor Clubs;

(ii)	a service contract provided under Chapter 6a, Service Contracts; and

(iii)

a corporation licensed under:

(A)	Chapter 7, Nonprofit Health Service Insurance Corporations; or

(B)

Chapter 8, Health Maintenance Organizations and Limited Health Plans. See Utah Code 31A-1-301

Premium: includes , however designated:

(i)	an assessment;

(ii)	a membership fee;

(iii)

a required contribution; or

(iv)

monetary consideration. See Utah Code 31A-1-301

Rate: means :

(i)	the cost of a given unit of insurance; or

(ii)

for property or casualty insurance, that cost of insurance per exposure unit either expressed as:

(A)	a single number; or

(B)

a pure premium rate, adjusted before the application of individual risk variations based on loss or expense considerations to account for the treatment of:

(I)

expenses;

(II)	profit; and

(III)

individual insurer variation in loss experience. See Utah Code 31A-1-301

(2)

Provided that for any life insurance policy issued on or after January 1, 1997, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination of an endowment benefit and cash surrender value in an amount greater than such excess premium, this section shall be applied as if the method actually used in calculating the reserve for such policy were the method described in Section 31A-17-507, ignoring Subsection 31A-17-507(2). The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with Section 31A-17-507, including Subsection 31A-17-507(2), and the minimum reserve calculated in accordance with this section.

Amended by Chapter 163, 2016 General Session

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