1202 Life Insurance Policy Loans, Maximum Rate of Interest [Formerly Regulation 19]
1.1 18 Del.C. §314 of the Delaware Insurance Code authorizes the Insurance Commissioner to "... make reasonable Rules and Regulations necessary for or as an aid to the administration or effectuation of any provision of this Title." 18 Del.C. §2911 provides that the maximum rate of interest which may be charged by insurance companies on life insurance policy loans written after September 6, 1975 shall not exceed 8% per annum, or if payable in advance such interest shall not exceed the rate of 7.4% per annum.
1.2 18 Del.C. §2911 also contains the following new language:
1.2.1 "Before approving any policy provision providing for a rate of interest in excess of 6%, the Commissioner may require assurances by the insurer that the holders of such policies will benefit from the increased earnings of the insurer resulting from the use of such higher rates, through the use of higher dividends or lower premiums, or both."
This regulation is promulgated to designate the method by which all life insurance companies doing business in this State shall assure the Commissioner that the holders of life insurance policies employing higher interest rates will benefit from increased earnings resulting therefrom.
3.1 Consistent with the foregoing discussion, actuarial assumptions and rate making methods shall be outlined in detail. The following guidelines shall be followed by an insurer when filing policy forms providing for a maximum policy loan interest rate in excess of 6%:
3.1.1 The minimum standard for the valuation of all policies and contracts shall be a change in the reserve value interest assumption of not less than one-half of 1%, and a comparison indicating a benefit for the insured/owner using the NAIC surrender cost index, or any other comparison such as the traditional net cost approach.
4.0 Effective Date
This Regulation shall become effective this 30th day of March, 1976.