Ill. Admin. Code tit. 50, pt. 1103, exh. A

Current through Register Vol. 48, No. 49, December 6, 2024

Exhibit A - Risk Category

Risk Categories:

a) Morbidity

b) Mortality

c) Lapse

This is the risk that a policy will voluntarily terminate prior to the recoupment of a statutory surplus strain experienced at issue of the policy.

d) Credit Quality (C1)

This is the risk that invested assets supporting the reinsured business will decrease in value. The main hazards are that assets will default or that there will be a decrease in earning power. It excludes market value declines due to changes in interest rate.

e) Reinvestment (C3)

This is the risk that interest rates will fall and funds reinvested (coupon payments or monies received upon asset maturity or call) will, therefore, earn less than expected. If asset durations are less than liability durations, the mismatch will increase.

f) Disintermediation (C3)

This is the risk that interest rates rise and policy loans and surrenders increase or maturing contracts do not renew at anticipated rates of renewal. If asset durations are greater than the liability durations, the mismatch will increase. Policyholders will move their funds into new products offering higher rates. The company may have to sell assets at a loss to provide for these withdrawals.

Risk Category

Health Insurance - other than LTC/LTD

Health Insurance - LTC/LTD

Immediate Annuities

Single Premium Deferred Annuities

Flexible Premium Deferred Annuities

Guaranteed Interest Contracts

Other Annuity Deposit Business

Single Premium Whole Life

Traditional Non-Par Permanent

Traditional Non-Par Term

Traditional Par Permanent

Traditional Par Term

Adjustable Premium Permanent

Indeterminate Premium Permanent

Universal Life Flexible Premium

Universal Life Fixed Premium

dump-in premiums allowed

+ = Significant

0 = Insignificant

LTC = Long-Term Care Insurance

LTD = Long-Term Disability Insurance

Ill. Admin. Code tit. 50, pt. 1103, exh. A

Amended at 30 Ill. Reg. 7766, effective April 6, 2006