Ohio § 3903.724

§ 3903.724.

(A) This section shall determine the calendar year statutory valuation interest rates

(VIR) used in determining the minimum standard for the valuation of all of the following: (1) Life insurance policies issued on or after January 1, 1989; (2) Individual annuity and pure endowment contracts issued on or after January 1, 1989; (3) Annuities and pure endowments purchased on or after January 1, 1989, under group

annuity and pure endowment contracts; (4) The net increase, if any, in amounts held under a guaranteed interest contract in

a calendar year after January 1, 1989. (B) The calendar year statutory valuation interest rates shall be calculated as follows

and the results rounded to the nearest one-quarter of one per cent: (1)(a) For life insurance, by adding three per cent to the result of multiplying W (the

applicable weighting factor) by R(sub-1) minus three per cent (where R(sub-1) is the

lesser of the reference interest rate and nine per cent) and also adding the result

of multiplying one-half of the weighting factor by R(sub-2) minus nine per cent (where

R(sub-2) is the greater of the reference interest rate and nine per cent), expressed

as follows: VIR = .03 + W (R(sub-1) - .03) + W/2(R(sub-2) - .09). (b) Provided that if the calendar year statutory valuation interest rate for a life insurance

policy issued in any calendar year determined in accordance with this division does

not differ from the calendar year valuation interest rate for similar policies issued

in the preceding calendar year by at least one-half of one per cent, the calendar

year valuation interest rate for the policy shall be equal to the calendar year valuation

interest rate for the preceding calendar year.  The calendar year statutory valuation interest rate shall be determined for 1980

and for each subsequent year prior to the operative date of the valuation manual. (2) For all 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 by adding to three per cent the result

of multiplying W (the applicable weighting factor) by R minus three per cent (where

R is the reference interest rate), expressed as follows: VIR = .03 + W (R - .03). (3) Except as provided in division (B)(2) of this section, for other annuities with cash

settlement options and guaranteed interest contracts with cash settlement options,

valued on an issue year basis, the life insurance formula stated in division (B)(1)

of this section shall apply to all annuity and guaranteed interest contracts with

guarantee durations in excess of ten years and the formula for single premium immediate

annuities stated in division (B)(2) of this section shall apply to annuities and guaranteed

interest contracts with guarantee duration of ten years or less. (4) 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 division (B)(2) of this section shall apply. (5) 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 division (B)(2) of this section shall apply. (C) 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 an option

to convert to a plan of life insurance with premium rates or nonforfeiture values,

or both, guaranteed in the policy. (D) The weighting factors for the formulas prescribed in division (B) of this section

are shown in the following table: Weighting Factors for Life Insurance Guarantee Duration (Years) Weighting Factors 10 or less .50 More than 10, but not more than 20 .45 More than 20 .35 (E) The weighting factor for single premium immediate annuities and for annuity benefits

involving life contingencies arising from other annuity and guaranteed interest contracts

with cash settlement options is .80. (F) Weighting factors for all other annuity and guaranteed interest contracts vary with

the type of plan and guarantee duration.  The types of plans are as follows: (1) A plan type A is one in which funds may not be withdrawn or may be withdrawn in only

one of three ways: (a) With an adjustment to reflect changes in interest rates or asset values since receipt

of the funds by the company; (b) Without such adjustment but in installments over five or more years; (c) As an immediate life annuity. (2) A plan type B is one in which the funds may not be withdrawn before the expiration

of the interest rate guarantee unless an adjustment is made to reflect changes in

interest rates or asset values since receipt of the funds by the company or unless

they are withdrawn in installments over five or more years.  At the end of the interest rate guarantee, funds may be withdrawn in a single sum

or in installments over less than five years without adjustment. (3) A plan type C is one in which the funds may be withdrawn before the end of the interest

rate guarantee in a single sum or in installments over less than five years without

adjustment to reflect changes in interest rates or asset values since receipt of the

funds by the company or subject only to a fixed surrender charge stipulated in the

contract as a percentage of the fund. (4) The guarantee duration for an annuity or guaranteed interest contract with cash settlement

options is the number of years for which the contract guarantees interest rates in

excess of the calendar year valuation interest rate for life insurance policies with

guarantee duration in excess of twenty years.  The guarantee duration for annuity and guaranteed interest contracts without cash

settlement options is the number of years from the date of issue or date of purchase

to the date annuity benefits are scheduled to commence. (5) Annuity and guaranteed interest contracts with cash settlement options may be valued

on an issue year basis or on a change in fund basis.  Annuity and guaranteed interest contracts without cash settlement options must be

valued on an issue year basis.  As used in this division, 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, and the 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. (6) Weighting factors for other annuities and for guaranteed interest contracts, except

as stated in division (E) of this section, are specified below. (a) For annuity and guaranteed interest contracts valued on an issue year basis: Weighting Factors for Annuities and Guaranteed Interest Contracts Weighting Factor for Plan Type Guarantee Duration (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 (b) For annuities and guaranteed interest contracts valued on a change in fund basis,

the factors shown in division (F)(6)(a) of this section increased by the following

amounts: (i) For plan type A, .15; (ii) For plan type B, .25; (iii) For plan type C, .05. (c) For annuities and guaranteed interest contracts valued on an issue year basis, other

than those with no cash settlement options, that 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 that do not guarantee interest

rates on considerations received more than twelve months beyond the valuation date,

the factors shown in item (F)(6)(a) or derived in item (F)(6)(b) increased by .05

for all plan types. (G) The reference interest rate is determined by comparing the monthly average of the

composite yield of the monthly average on seasoned corporate bonds, as published by

Moody's investors service, inc. for the applicable time period, as prescribed below: (1) The reference interest rate for all life insurance is the lesser of such average

over the thirty-six month period and such average over the twelve-month period ending

on the thirtieth day of June of the calendar year preceding the year of issue. (2) The reference interest rate for annuity and guaranteed interest contracts with cash

settlement options, except single premium immediate annuities and annuity benefits

involving life contingencies arising from other annuity and guaranteed interest contracts

with cash settlement options, valued on an issue year basis with guarantee durations

in excess of ten years, is the lesser of such average over the thirty-six month period

and such average over the twelve-month period ending on the thirtieth day of June

of the calendar year of issue or purchase. (3) The reference interest rate 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 division (G)(6) of this section, with guarantee duration

of ten years or less, such average over the twelve-month period ending on the thirtieth

day of June of the calendar year of issue or purchase. (4) The reference interest rate for other annuities with no cash settlement options and

for guaranteed interest contracts with no cash settlement options, such average over

the twelve-month period ending on the thirtieth day of June of the calendar year of

issue or purchase. (5) The reference interest rate for all other annuity and guaranteed interest contracts

with cash settlement options valued on a change in fund basis is such average over

the twelve-month period ending on the thirtieth day of June of the calendar year in

which a change in the fund occurs. (6) The reference interest rate for all single premium immediate annuities and annuity

benefits involving life contingencies arising from other annuity and guaranteed interest

contracts with cash settlement options is such average over the twelve-month period

ending on the thirtieth day of June of the calendar year of issue or purchase. (7) If such corporate bond rate average is no longer published or the national association

of insurance commissioners determines that such average is no longer appropriate,

the superintendent may by rule approve the use of any alternative method for the determination

of the reference interest rate adopted by the commissioners.