(1) Except on a guaranteed benefit date, a policy may provide for the determination of cash surrender benefits in accordance with a market-value adjustment formula, by applying the formula to the nonborrowed portion of the policy value before reduction for any surrender charge.

(2) The same market-value adjustment formula shall be applied during periods when its application would result in an increase in cash surrender value as is applied during periods when its application would result in a decrease in cash surrender value; unless the company can demonstrate, to the satisfaction of the superintendent, that equity to terminating and continuing policyholders and to the company is better served by use of a different formula in such circumstances.

(3) If a policy limits the amount by which cash surrender benefits may be increased by application of a market-value adjustment formula to a specific percentage of the policy value, the same or lower percentage limit shall apply during periods when the application of the market-value adjustment formula results in a decrease in cash surrender benefits (see example 2 in section 43.9[a][1] of this Part), unless the company can demonstrate, to the satisfaction of the superintendent, that equity to terminating and continuing policyholders and to the company is better served by using a different percentage limit in such circumstances.

(1) For single premium policies, a market-value adjustment formula may be based on (i) the difference between the guaranteed rate being credited on the policy value and the new guarantee rate; and (ii) the period from the date the policy is surrendered for its cash value to the expiry date applicable to the guaranteed rate being so credited. On and after such expiry date, any cash surrender benefits shall be made available without adjustment by the market-value adjustment formula until such time as a new guaranteed rate is established. (See examples 1 and 2 in section 43.9[a][1] of this Part.)

(2) Alternatively, a market-value adjustment formula for a single premium policy may be based on (i) the difference between the interest rate, at the time the premium is remitted, based on an appropriate index of publicly traded obligations for the specified time interval, and the interest rate at the time the policy is surrendered for its cash value, based on the same index, or if no longer available, on an appropriate substitute index of publicly traded obligations, for the period remaining under the policy until the guaranteed benefit date (i.e., the end of the specified time interval); and (ii) such remaining period. No index used under this paragraph may be based on publicly traded obligations that are owned or managed by the company. (See example 3 in section 43.9[a][2] of this Part.)

(1) Each premium or series of premiums may be subject to a separate guaranteed interest rate, with each rate running for a specified time interval, not to exceed 10 years, for each premium or first premium of a series of premiums such that each premium or series of premiums has a separate guaranteed benefit date.

(2) Each premium or series of premiums may be subject to a separate guaranteed interest rate, but with different specified time intervals (no one to exceed 10 years) such that there is a common guaranteed benefit date for all premiums.

(3) A guaranteed rate may be declared for all premiums to be received within a two-year period of time. A new guarantee rate must be declared for premiums to be received during each succeeding period not to exceed two years.

(4) A market-value adjustment formula may be applied separately to the part of the nonborrowed portion of the policy value resulting from each premium, or series of premiums, remitted based on the guaranteed rate applicable to such premium (or series of premiums), or the applicable rate based on an appropriate index of publicly traded obligations, and the period remaining until the guaranteed benefit date or dates. (See examples 4[i], 5[i], 5[ii], 6 and 7 in section 43.9[b] of this Part.)

(5) At its option, the company may base a market-value adjustment on the weighted average period remaining until the guaranteed benefit date, for all premiums previously remitted, as an approximation for adjustments based on each such period individually. (See example 5[iii[ in section 43.9[b[[1[ of this Part.)

(6) At its option, where there is a common guaranteed benefit date for all premiums remitted, the company may base a market-value adjustment on a blended interest rate based on the weighted average of the interest rates associated with premiums previously credited as an approximation for adjustments based on each such interest rate. (See example 4[ii[ in section 43.9[b[[1[ of this Part.)

(1) Under a market-value adjustment formula described in this subdivision:

(2) The company may reimpose a market-value adjustment after a guaranteed benefit date based on a new guaranteed benefit period, but if the policy provides for a different procedure for determining cash surrender benefits or a different specified time interval, or a different index of publicly traded obligations, or a different guaranteed rate, the new data shall be fully disclosed to the policyholder and the policyholder shall have a period of at least 30 days commencing after the date of such disclosures during which he or she may apply for a cash surrender benefit without a market-value adjustment. The data shall also indicate either the new guaranteed rate, or if such rate has not yet been determined, disclosure of this fact along with a notice as to guaranteed rates currently in effect. Where the effective date of the new guaranteed rate coincides with the date on which cash surrender is available without adjustment, this period of 30 days may be the same as that under subparagraph (1)(iii) of this subdivision.

(3) The company may, at its option, treat the election of a policyholder to transfer the nonborrowed portion of the policy value to another investment medium in the same manner as a surrender of the policy for its cash surrender benefits.

(4) In computing the amount of any market-value adjustment under paragraph (b)(1) of this section, the company, may, at its option, increase the new guaranteed rate by up to one quarter of one percent (.25%).

(5) The market-value adjustment formula must be stated in the policy and the formula must not pass any material risk of asset default or deterioration in asset quality from the company to the policyholder.

(6) On application of the company, the superintendent may authorize the use of any other market-value adjustment formula that is fair and equitable to all parties.

(7) A policy can permit a partial cash surrender option on (i) a first-in, first-out basis; (ii) a last-in, first-out basis; (iii) a pro rata basis from the portion of the policy value attributable to each premium; or (iv) any other specified basis that the superintendent believes is equitable. The amount withdrawn from the nonborrowed portion of the policy value attributable to each premium to provide the cash surrender benefit may be adjusted by the same market value adjustment formula that would apply to a full cash surrender election made on the same date in which event, the amount of the nonborrowed portion of the policy value attributable to each premium would be reduced as of that date by the amount so withdrawn (before any adjustment in accordance with the market value adjustment formula).