KRS 304.6-145: Minimum standards -- Operative dates.

(1) The interest rates used in determining the minimum standard for the valuation of:

(a) All life insurance policies issued in a particular calendar year, on or after the

effective date of KRS 304.15-342;

(b) All individual annuity and pure endowment contract s issued in a particular

calendar year on or after January 1, 1983;

(c) All annuities and pure endowments purchased in a particular calendar year on

or after January 1, 1983 under group annuity and pure endowment contracts;

and

(d) The net increase, if any , in a particular calendar year after January 1, 1983, in

amounts held under guaranteed interest contracts shall be the calendar year

statutory valuation interest rates as defined in this section.

(2) The calendar year statutory valuation interest rates, I, shall be determined as follows

and the results rounded to the nearer one-quarter of one percent (1/4 of 1%):

(a) For life insurance,

I = .03 + W (R1 - .03) + W/2 (R2 - .09);

(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 paragraph (b) above, the formula for life insurance stated in

paragraph (a) above shall appl y to annuities and guaranteed interest contracts,

with guarantee durations in excess of ten (10) years and the formula for single

premium immediate annuities stated in paragraph (b) above shall apply to

annuities and guaranteed interest contracts with guar antee duration of ten (10)

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 paragraph (b) above shall apply; and

(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 paragraph (b) above

shall apply.

However, if the calendar year statutory valuation interest rate for any life

insurance policies 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 (1/2 of 1%), the calendar year statutory valuation interest rate for such

life insurance policies shall be equal to the corresponding actual rate for the

immediately preceding calendar year. For purposes of applying the

immediately preceding sentence, the calendar year statutory valuation interest

rate for life insurance policies issued in a calendar year shall be determined for

1980 (using the reference interest rate defined for 1979) and sh all be

determined for each subsequent calendar year regardless of when KRS

304.15-342 becomes effective.

(3) The weighting factors referred to in the formulas stated above are given in the

following tables:

(a) Weighting Factors for Life Insurance:

Guarantee Duration Weighting Factors

(Years)

10 or less .50

More than 10, but not

more than 20 .45

More than 20 .35

For life insurance, the guarantee duration is the maximum number of years the

life insurance can remain in force on a b asis 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) 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:

.80

(c) Weighting factors for other annuities and for guaranteed interest contracts,

except as stated in (b) above, shall be as specified in tables 1., 2., and 3.

below, according to the rules and definitions in 4., 5., and 6. below:

1. For annuities and guaranteed interest contracts valued on an issue year

basis:

Guarantee Duration Weighting Factor for Plan Type

(Years) A B C

5 or less: .80 .60 .50

More than 5, but not

more than 10 .75 .60 .50

More than 10, but not

more than 20: .65 .50 .45

More than 20: .45 .35 .35

2. For annuities and guaranteed interest contracts valued on a change in

fund basis, the factors shown in 1. above increased by:

Plan Type

A B C

.15 .25 .05

3. For annuities and guaranteed interest contracts valued on an issue year

basis (o ther than those with no cash settlement options) which do not

guarantee interest on considerations received more than one (1) year

after issue or purchase and for annuities and guaranteed interest

contracts valued on a change in fund basis which do not gua rantee

interest rates on considerations received more than twelve (12) months

beyond the valuation date, the factors shown in 1. or derived in 2.

increased by:

Plan Type

A B C

.05 .05 .05

4. For other annuities with cash settlement optio ns 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 w ith guarantee duration in excess of twenty (20)

years. For other annuities with no cash settlement options and for

guaranteed interest contracts with no cash settlement options, the

guarantee 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. Plan type as used in the above tables is defined as follows:

Plan Type A: At any time policyholder may withdraw funds only with an

adjustment to reflect changes in interest rates or ass et values since

receipt of the funds by the insurer, or without such adjustment but

in installments over five (5) years or more, or as an immediate life

annuity, or no withdrawal permitted;

Plan Type B: Before expiration of the interest rate guarantee, 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, or without such adjustment but in installments over five

(5) years or more, or no withdrawal permitt ed. At the end of

interest rate guarantee, funds may be withdrawn without such

adjustment in a single sum or installments over less than five (5)

years; and

Plan Type C: Policyholder may withdraw funds before expiration of interest

rate guarantee in a single sum or installments over less than five

(5) 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 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 sub section (2) of this section shall be

defined as follows:

(a) For all life insurance, the lesser of the average over a period of thirty -six (36)

months and the average over a period of twelve (12) months, ending on June

30 of the calendar year next preceding the year of issue, of Moody's Corporate

Bond Yield Average - Monthly Average Corporates, as published by Moody's

Investors Service, Inc.;

(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 (12) months, ending on June 30 of the calendar year of

issue or year of purchase, of Moody's Corporate Bond Yield Ave rage -

Monthly Average Corporates, as published by Moody's Investors Service, Inc.;

(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 paragraph (b) above, with guarantee duration in excess of ten (10)

years, the lesser of the average over a period of thirty -six (36) months and the

average over a period of twelve (12) months, ending on June 30 of the

calendar year of issue or purchase, of Moody's Corporate Bond Yield Average

- Monthly Average Corporates, as published by Moody's Investors Service,

Inc.;

(d) For other annuities with cash settlement options and guaranteed interest

contracts with cash settlement options, valued on a year of issu e basis, except

as stated in paragraph (b) above, with guarantee duration of ten (10) years or

less, the average over a period of twelve (12) months, ending on June 30 of

the calendar year of issue or purchase, of Moody's Corporate Bond Yield

Average - Monthly Average Corporates, as published by Moody's Investors

Service, Inc.;

(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

(12) months, ending on June 30 of the calendar year of issue or purchase, of

Moody's Corporate Bond Yield Average - Monthly Average Corporates, as

published by Moody's Investors Service, Inc.; and

(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 paragraph (b) above, the average over a period of twelve

(12) months, ending on June 30 of the calendar year of the change in the fund,

of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as

published by Moody's Investors Service, Inc.

(5) In the event that Moody's Corporate Bond Yield Average - Monthly Average

Corporates is no longer published by Moody's Investors Service, Inc., or in the

event th at the National Association of Insurance Commissioners determines that

Moody's Corporate Bond Yield Average - Monthly Average Corporates as

published by Moody's Investors Service, Inc. is no longer appropriate for the

determination of the reference interes t rate, then an alternative method for

determination of the reference interest rate, which is adopted by the National

Association of Insurance Commissioners and approved by regulation promulgated

by the commissioner, may be substituted.