Pennsylvania Consolidated & Unconsolidated Statutes
Chapter 71 - Reserve Liabilities
Section 7118 - Reserve valuation method for life insurance and endowment benefits

(a) Uniform insurance amount and premiums.--Except as otherwise provided in sections 7119 (relating to reserve valuation method for annuity and pure endowment benefits), 7122 (relating to reserve calculation for valuation net premium exceeding gross premium charged) and 7124 (relating to minimum standard for accident and health insurance contracts), for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, reserves according to the commissioners reserve valuation method shall be the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided for by those policies, over the then present value of any future modified net premiums therefor. The modified net premiums for a policy shall be the uniform percentage of the respective gross premiums for the benefits so that the present value, at the date of issue of the policy, of all modified net premiums shall be equal to the sum of the then present value of the benefits provided for by the policy and the excess of paragraph (1) over paragraph (2), as follows:
(1) A net level annual premium equal to the present value, at the date of issue, of the benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per year payable on the first and each subsequent anniversary of the policy on which a premium falls due. However, the net level annual premium shall not exceed the net level annual premium on the 19-year premium whole life plan for insurance of the same amount at an age one year greater than the age at issue of the policy.
(2) A net one-year term premium for the benefits provided for in the first policy year.
(b) First-year excess.--For a life insurance policy issued on or after January 1, 1985, for which the gross 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 the excess and which provides an endowment benefit or a cash surrender value or a combination in an amount greater than the excess premium, reserves according to the commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined under this subsection as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than the excess premium shall, except as otherwise provided in section 7122, be the greater of the reserve as of the policy anniversary calculated as described in subsection (a) and the reserve as of the policy anniversary calculated as described in subsection (a), but with:
(1) The value defined in subsection (a) being reduced by 15% of the amount of this excess first year premium.
(2) 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.
(3) The policy being assumed to mature on that date as an endowment.
(4) The cash surrender value provided on that date being considered as an endowment benefit.
In making the comparison under this subsection, the mortality and interest bases stated in sections 7115 (relating to computation of minimum standard) and 7117 (relating to computation of minimum standard by calendar year of issue) shall be used.
(c) Consistent method.--Reserves according to the commissioners reserve valuation method shall be calculated by a method consistent with the principles of this section, except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums, for:
(1) Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums.
(2) 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 plan providing individual retirement accounts or individual retirement annuities under section 408 of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 408).
(3) Disability and accidental death benefits in all policies and contracts.
(4) All other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts.

Cross References. Section 7118 is referred to in sections 7103, 7115, 7116, 7120, 7122, 7123 of this title.