KRS 304.15-342: Adjusted premiums operative at option of insurer or on January 1,

1989.

(1) This section shall apply to all policies issued on or after the effective date of this

section as defined in subsection (11) of this section. Except as provided in

subsection (7) of this section, the adjusted premiums for any policy shall be

calculated on an annual basis and shall be such uniform percentage of the respective

premiums specified in the policy for each policy year, excluding amounts payable as

extra premiums to cover impairments or special hazards and also excluding any

uniform annual contract charge or policy fee specified in the policy in a statement of

the method to be used in calculating the cash surrender values and paid -up

nonforfeiture benefits, that the present value, at the date of issue of the policy, of all

adjusted premiums shall be equal to the sum of:

(a) The then present value of the future guaranteed benefits provided for by the

policy;

(b) One percent (1%) of either the amount of insurance, if the insurance is

uniform in amount, or the average amount of insurance at the beginning of

each of the first ten (10) policy years; and

(c) One hundred twenty -five percent (125%) of the nonforfeiture net level

premium as hereinafter defined.

Provided, how ever, that in applying the percentage specified in (c) above, no

nonforfeiture net level premium shall be deemed to exceed four percent (4%) of

either the amount of insurance, if the insurance is uniform in amount, or the average

amount of insurance at the beginning of each of the first ten (10) policy years. This

date of issue of a policy for the purpose of this section shall be the date as of which

the rated age of the insured is determined.

(2) The nonforfeiture net level premium shall be equal to the pr esent value, at the date

of issue of the policy, of the guaranteed benefits provided for by the policy divided

by the present value, at the date of issue of the policy, of an annuity of one (1) per

annum payable on the date of issue of the policy and on ea ch anniversary of such

policy on which a premium falls due.

(3) In the case of policies which cause, on a basis guaranteed in the policy, unscheduled

changes in benefits or premiums, or which provide an option for changes in benefits

or premiums other than a change to a new policy, the adjusted premiums and

present values shall initially be calculated on the assumption that future benefits and

premiums do not change from those stipulated at the date of issue of the policy. At

the time of any such change in the benefits or premiums the future adjusted

premiums, nonforfeiture net level premiums and present values shall be recalculated

on the assumption that future benefits and premiums do not change from those

stipulated by the policy immediately after the change.

(4) Except as otherwise provided in subsection (7) of this section, the recalculated

future adjusted premiums for any such policy shall be such uniform percentage of

the respective future premiums specified in the policy for each policy year,

excluding amounts payable as extra premiums to cover impairments and special

hazards, and also excluding any uniform annual contract charge or policy fee

specified in the policy in a statement of the method to be used in calculating the

cash surrender values and p aid-up nonforfeiture benefits, that the present value, at

the time of change to the newly defined benefits or premiums, of all such future

adjusted premiums shall be equal to the excess of (a) the sum of the then present

value of the then future guaranteed benefits provided for by the policy and the

additional expense allowance, if any, over (b) the then cash surrender value, if any,

or present value of any paid-up nonforfeiture benefit under the policy.

(5) The additional expense allowance, at the time of the change to the newly defined

benefits or premiums, shall be the sum of:

(a) One percent (1%) of the excess, if positive, of the average amount of

insurance at the beginning of each of the first ten (10) policy years subsequent

to the change over the ave rage amount of insurance prior to the change at the

beginning of each of the first ten (10) policy years subsequent to the time of

the most recent previous change, or, if there has been no previous change, the

date of issue of the policy; and

(b) One hundr ed twenty-five percent (125%) of the increase, if positive, in the

nonforfeiture net level premium.

(6) The recalculated nonforfeiture net level premium shall be equal to the result

obtained by dividing (a) by (b) where:

(a) Equals the sum of:

1. The nonforfeiture net level premium applicable prior to the change times

the present value of an annuity of one (1) per annum payable on each

anniversary of the policy on or subsequent to the date of the change on

which a premium would have fallen due had the chang e not occurred,

and

2. The present value of the increase in future guaranteed benefits provided

for by the policy, and

(b) Equals the present value of an annuity of one (1) per annum payable on each

anniversary of the policy on or subsequent to the date of change on which a

premium falls due.

(7) Notwithstanding any other provisions of this section to the contrary, in the case of a

policy issued on a substandard basis which provides reduced graded amounts of

insurance so that, in each policy year, such policy has the same tabular mortality

cost as an otherwise similar policy issued on the standard basis which provides

higher un iform amounts of insurance, adjusted premiums and present values for

such substandard policy may be calculated as if it were issued to provide such

higher uniform amounts of insurance on the standard basis.

(8) All adjusted premiums and present values refe rred to in this section shall for all

policies of ordinary insurance be calculated on the basis of the commissioners 1980

standard ordinary mortality table or at the election of the insurer for any one (1) or

more specified plans of life insurance, the com missioners 1980 standard ordinary

mortality table with ten -year select mortality factors; shall for all policies of

industrial insurance be calculated on the basis of the commissioners 1961 standard

industrial mortality table; and shall for all policies is sued in a particular calendar

year be calculated on the basis of a rate of interest not exceeding the nonforfeiture

interest rate as defined in this section for policies issued in that calendar year.

Provided, however, that:

(a) At the option of the insure r, calculations for all policies issued in a particular

calendar year may be made on the basis of a rate of interest not exceeding the

nonforfeiture interest rate, as defined in this section, for policies issued in the

immediately preceding calendar year;

(b) Under any paid -up nonforfeiture benefit, including any paid -up dividend

additions, any cash surrender value available, whether or not required by KRS

304.15-310, shall be calculated on the basis of the mortality table and rate of

interest used in deter mining the amount of such paid -up nonforfeiture benefit

and paid-up dividend additions, if any;

(c) Any insurer may calculate the amount of any guaranteed paid-up nonforfeiture

benefit including any paid -up additions under the policy on the basis of an

interest rate no lower than that specified in the policy for calculating cash

surrender values;

(d) In calculating the present value of any paid -up term insurance with

accompanying pure endowment, if any, offered as a nonforfeiture benefit, the

rates of morta lity assumed may be not more than those shown in the

commissioners 1980 extended term insurance table for policies of ordinary

insurance and not more than the commissioners 1961 industrial extended term

insurance table for policies of industrial insurance;

(e) For insurance issued on a substandard basis, the calculation of any such

adjusted premiums and present values may be based on appropriate

modifications of the aforementioned tables;

(f) For policies issued prior to the operative date of the valuation manual, any

Commissioner's Standard ordinary mortality tables, adopted after 1980 by the

National Association of Insurance Commissioners, that are approved by

regulation promulgated by the commissioner for use in determining the

minimum nonforfeiture stand ard may be substituted for the commissioners

1980 standard ordinary mortality table with or without ten -year select

mortality factors or for the commissioners 1980 extended term insurance

table;

(g) For policies issued on or after the operative date of the valuation manual, the

valuation manual shall provide the Commissioners' Standard mortality table

for use in determining the minimum nonforfeiture standard that may be

substituted for the Commissioners' 1980 Standard Ordinary Mortality Table,

with or without Ten-Year Select Mortality Factors, or for the Commissioners'

1980 Extended Term Insurance Table. If the commissioner promulgates an

administrative regulation adopting any Commissioners' Standard ordinary

mortality table, adopted by the NAIC, for use in determining the minimum

nonforfeiture standard for policies issued on or after the operative date of the

valuation manual, then that minimum nonforfeiture standard supersedes the

minimum nonforfeiture standard provided by the valuation manual;

(h) For poli cies issued prior to the operative date of the valuation manual, any

Commissioners' Standard industrial mortality tables, adopted after 1980 by the

National Association of Insurance Commissioners, that are approved by

regulation promulgated by the commissi oner for use in determining the

minimum nonforfeiture standard may be substituted for the commissioners

1961 standard industrial mortality table or the commissioners 1961 industrial

extended term insurance table; and

(i) For policies issued on or after the operative date of the valuation manual, the

valuation manual shall provide the Commissioners' Standard mortality table

for use in determining the minimum nonforfeiture standard that may be

substituted for the Commissioners' 1961 Standard Industrial Mortal ity Table

or the Commissioners' 1961 Industrial Extended Term Insurance Table. If the

commissioner promulgates an administrative regulation adopting the

Commissioners' Standard industrial mortality table as adopted by the NAIC,

for use in determining the m inimum nonforfeiture standard for policies issued

on or after the operative date of the valuation manual, then that minimum

nonforfeiture standard supersedes the minimum nonforfeiture standard

provided by the valuation manual.

(9) (a) For policies issued p rior to the operative date of the valuation manual, the

nonforfeiture interest rate per annum for any policy issued in a particular

calendar year shall be equal to one hundred twenty -five percent (125%) of the

calendar year statutory valuation interest rat e for such policy as defined in

KRS 304.6 -130 to 304.6 -180, inclusive to the nearer one quarter of one

percent (0.25%), except that the nonforfeiture interest rate shall not be less

than four percent (4%).

(b) For policies issued on or after the operative date of the valuation manual, the

nonforfeiture interest rate per annum for any policy issued in a particular

calendar year shall be provided by the valuation manual.

(10) Notwithstanding any other provision in this code to the contrary, any refiling of

nonforfeiture values or their methods of computation for any previously approved

policy form which involves only a change in the interest rate or mortality table used

to compute nonforfeiture values shall not require refiling of any other provisions of

that policy form.

(11) Any insurer may file with the commissioner a written notice of its election to

comply with the provisions of this section after a specified date before January 1,

1989, which shall be the effective date of this section for such insurer. I f an insurer

makes no such election, the effective date of this section for such insurer shall be

January 1, 1989.