Recent revisions to Actuarial Guideline 38 (AG-38) have focused on the way companies have structured their universal life no-lapse guarantee provisions to minimize potential premium deficiency reserves. In particular, the calculation to derive the minimum premiums from which potential deficiencies may arise has been redesigned to take into account multiple charge structures and premium payment patterns, and requires the actuary to select the charge structure or premium pattern that would tend to maximize premium deficiency reserves. For companies that wish to continue to offer strong secondary guarantee protection on their products, it will be difficult to avoid holding premium deficiency reserves.

This paper examines the impact on the reserves for a universal life secondary guarantee (ULSG) policy design with a multiple charge structure under the pre-2013 valuation of Section 8C relative to the requirements specified for 2013 and later business under Section 8E.