KRS 304.6-150: Commissioners reserve valuation method defined.

(1) Except as otherwise provided in KRS 304.6 -141, 304.6 -155, and 304.6 -180,

reserves according to the commissioners reserve valuation method, for the life

insurance and endowment benefits of policies providing for a uniform amount of

insurance and requiring t he payment of uniform premiums shall be the excess, if

any, of the present value, at the date of valuation, of such future guaranteed benefits

provided for by such policies, over the then present value of any future modified net

premiums therefor. The modi fied net premiums for any such policy shall be such

uniform percentage of the respective contract premiums for such benefits that the

present value, at the date of issue of the policy, of all such modified net premiums

shall be equal to the sum of the then present value of such benefits provided for by

the policy and the excess of (a) over (b), as follows:

(a) Net level annual premium. A net level annual premium equal to the present

value, at the date of issue, of such benefits provided for after the first policy

year, divided by the present value, at the date of issue, of an annuity of one (1)

per annum payable on the first and each subsequent anniversary of such policy

on which a premium falls due. Such net level annual premium shall not

exceed the net level annual premium on the nineteen (19) year premium whole

life plan for insurance of the same amount at an age one (1) year higher than

the age at issue of such policy.

(b) Net one (1) year term premium. A net one (1) year term premium for such

benefits provided for in the first policy year.

Provided that for any life insurance policy issued on or after January 1, 1986, for

which the contract 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 thereof in an amount greater than such excess premium, the reserve

according to the commissioners reserve valuation method as of a ny policy

anniversary occurring on or before the assumed ending date defined herein as the

first policy anniversary on which the sum of any endowment benefit and any cash

surrender value then available is greater than such excess premium shall, except as

otherwise provided in KRS 304.6 -180, be the greater of the reserve as of such

policy anniversary calculated as described in the preceding subsection and the

reserve as of such policy anniversary calculated as described in that subsection, but

with the value defined in paragraph (a) of that subsection being reduced by fifteen

percent (15%) of the amount of such excess first year premium, all present values of

benefits and premiums being determined without reference to premiums or benefits

provided for by the policy after the assumed ending date, the policy being assumed

to mature on such date as an endowment, and the cash surrender value provided on

such date being considered as an endowment benefit. In making the above

comparison the mortality and interest bases stated in KRS 304.6-140 and 304.6-145

shall be used.

(2) Reserves according to the commissioners reserve valuation method for:

(a) Life insurance policies providing for a varying amount of insurance or

requiring the payment of varying premiums,

(b) Group annuity and pure endowment contracts purchased under a retirement

plan or plan of deferred compensation, established or maintained by an

employer (including a partnership or sole proprietorship) or by an employee

organization, or by both, other than a p lan providing individual retirement

accounts or individual retirement annuities under Section 408 of the Internal

Revenue Code, as now or hereafter amended,

(c) Disability and accidental death benefits in all policies and contracts, and

(d) All other benef its, except life insurance and endowment benefits in life

insurance policies and benefits provided by all other annuity and pure

endowment contracts, shall be calculated by a method consistent with the

provisions of this section, except that any extra prem iums charged because of

impairments or special hazards shall be disregarded in the determination of

modified net premiums.