<html> <head> <title>Rule 20:06:30:05 Table of risk categories.</title> <META NAME="Keywords" Content="Administrative Rules 20:06:30:05"> <META NAME="Description" Content="Administrative Rules 20:06:30:05 Table of risk categories."> <meta name=Generator content="Microsoft Office HTML Filter 2.0"> <meta http-equiv=Content-Type content="text/html; charset=windows-1252"> <meta name=Originator content="Microsoft Word 10"> <style> <!-- --> </style> </head> <body lang=EN-US> <div> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>20:06:30:05.&nbsp;&nbsp;Table of risk categories.</b> The following is a table of risk categories that are considered to be significant for purposes of considering the transfer of risk. The categories of risk are as follows:</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1)&nbsp;&nbsp;Morbidity;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2)&nbsp;&nbsp;Mortality;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3)&nbsp;&nbsp;Lapse - The risk that a policy will voluntarily terminate before the recoupment of a statutory surplus strain experienced at issue of the policy;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (4)&nbsp;&nbsp;Credit quality (C1) - 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;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (5)&nbsp;&nbsp;Reinvestment (C3) - 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;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (6)&nbsp;&nbsp;Disintermediation (C3) - 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.</p> <p align=center>TABLE OF RISK CATEGORIES</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; + = Significant&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0 = Insignificant</p> <table border=0 cellspacing=0 cellpadding=0> <tr> <td width=433 valign=top> <p>&nbsp;</p> </td> <td width=33 valign=top> <p align=center>1</p> </td> <td width=33 valign=top> <p align=center>2</p> </td> <td width=33 valign=top> <p align=center>3</p> </td> <td width=31 valign=top> <p align=center>4</p> </td> <td width=29 valign=top> <p align=center>5</p> </td> <td width=32 valign=top> <p align=center>6</p> </td> </tr> </table> <table border=1 cellspacing=0 cellpadding=0> <tr> <td width=408 valign=top> <p>Health insurance - other than LTC/LTD*</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> </tr> <tr> <td width=408 valign=top> <p>Health insurance - LTC/LTD*</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> </tr> <tr> <td width=408 valign=top> <p>Immediate annuities</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> </tr> <tr> <td width=408 valign=top> <p>Single premium deferred annuities</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Flexible premium deferred annuities</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Guaranteed interest contracts</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Other annuity deposit business</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Single premium whole life</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Traditional nonpar permanent</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Traditional nonpar term</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> </tr> <tr> <td width=408 valign=top> <p>Traditional par permanent</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Traditional par term</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> </tr> <tr> <td width=408 valign=top> <p>Adjustable premium permanent</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Indeterminate premium permanent</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Universal life flexible premium</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Universal life fixed premium</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>Universal life fixed premium - dump</p> </td> <td width=32 valign=top> <p align=center>0</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> <td width=32 valign=top> <p align=center>+</p> </td> </tr> <tr> <td width=408 valign=top> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; in premiums allowed</p> </td> <td width=32 valign=top> <p align=center>&nbsp;</p> </td> <td width=32 valign=top> <p align=center>&nbsp;</p> </td> <td width=32 valign=top> <p align=center>&nbsp;</p> </td> <td width=32 valign=top> <p align=center>&nbsp;</p> </td> <td width=32 valign=top> <p align=center>&nbsp;</p> </td> <td width=32 valign=top> <p align=center>&nbsp;</p> </td> </tr> </table> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *LTC = long term care insurance</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *LTD = long term disability insurance</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Source:</b> 22 SDR 52, effective October 25, 1995.</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>General Authority:</b> SDCL <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-14-17">58-14-17.</A></p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Law Implemented:</b> SDCL <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-14-17">58-14-17.</A></p> </div> </body> </html>