HAR §16-20-5. Existing agreements

Insurers subject to this chapter shall have until December 31, 1994, to reduce to zero any reserve credits or assets established for reinsurance agreements entered into before the effective date of this chapter which, under the provisions of this chapter, would not be entitled to recognition of the reserve credits or assets, so long as the reinsurance agreements comply with laws in existence immediately preceding the effective date of this chapter. [Eff 3/19/94] (Auth: HRS §§431:2-201, 431:4A-104) (Imp: HRS §431:4A-101) 20-6 EXHIBIT A Risk categories: (A) Morbidity; (B) Mortality; (C) Lapse. The risk that a policy will voluntarily terminate before the statutory surplus strain experienced at issue of the policy is recouped; (D) Credit Quality. 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. Credit quality risk excludes market value declines due to changes in interest rates. (E) Reinvestment. The risk that interest rates will fall and funds reinvested (coupon payments or monies received upon asset maturity or call) will earn less than expected. If asset durations are less than liability durations, the mismatch will increase. (F) Disintermediation. The risk of disintermediation, which is the risk that interest rates may rise and policy loans and surrenders increase or maturing contracts do not renew at anticipated rates or renewal. If asset durations are greater than 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. A-1 SIGNIFICANCE OF RISK: Risk Categories A B C D E F Health insurance, other than long-term care or long term disability + o + o o o Health insurance, including long-term care or long-term disability + o + + + o Immediate annuities o + o + + o Single premium deferred annuities o o + + + + Flexible premium deferred annuities o o o + + + Guaranteed interest contracts o o o + + + Other annuity deposit business o o + + + + Single premium whole life o + + + + + Traditional non-participating permanent o + + + + + Traditional non-participating term o + + o o o Traditional participating permanent o + + + + + Traditional participating term o + + o o o Adjustable premium permanent o + + + + + Indeterminate premium permanent o + + + + + Universal life flexible premium o + + + + + Universal life fixed premium with dump-in premiums allowed o + + + + + + - significant o - insignificant A-2 DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS Adoption of Chapter 16-20 Hawaii Administrative Rules December 20, 1993 SUMMARY Chapter 16-20, Hawaii Administrative Rules, entitled "Life and Health Reinsurance Agreements" is adopted. Effective 3/19/94 DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS The adoption of Chapter 16-20, Hawaii Administrative Rules, on the Summary page dated December 20, 1993, was adopted on December 20, 1993, following a public hearing held on December 20, 1993, after notices were given in the Honolulu Star-Bulletin, Honolulu Advertiser, Hawaii Tribune-Herald, West Hawaii Today, Maui News and Garden Isle on November 16, 1993. These rules shall take effect ten days after filing with the Office of the Lieutenant Governor. /s/ Linda Chu Takayama LINDA CHU TAKAYAMA Insurance Commissioner APPROVED AS TO FORM: Date 2/28/94 /s/ Rodney J. Tam Deputy Attorney General APPROVED: Date 3/3/94 /s/ Clifford K. Higa CLIFFORD K. HIGA, Director Commerce and Consumer Affairs APPROVED: Date 3/8/94 /s/ John Waihee JOHN D. WAIHEE GOVERNOR OF HAWAII March 9, 1994 Filed 20-7